sorry, "cash-strapped" may not be the right term. There is more to the story here. Company has a substantial accounts receivable position as of June 30th which even outweighs wc deficit. Interesting! Guidance would be welcome as to when these are due eventually. Last's year's receivables were similarly high.
So, looks like they are facing 3 different challenges
- cost of revenues and overhead is too expensive. Problematic for a service-oriented business.
During the six months ended June 30, 2011 and 2010 the Company incurred net losses of $845,000 and $2,557,000 respectively. The Company continues to operate with a working capital deficiency (approximately $3,588,000 at June 30, 2011) and has limited financial resources available to pay ongoing financial obligations as they become due. The negative working capital at June 30, 2011 includes convertible notes and derivative liabilities of approximately $628,000. The Company also used cash from its operations of $115,000 during the six month ended June 30, 2011.
The Company's current source of funding, in addition to cash on hand is any cash derived from operations and an operating line of credit of approximately $793,000. The Company plans to use its operating line of credit to finance a portion of its operations over the next twelve months. However, the Company will require additional financing to conduct its business in accordance with its plan of operations on a long term basis.
Based on the Company’s current forecast it anticipates that cash flow from operations will be sufficient to cover i) its current on-going operating expenses for the next 12 months and ii) the majority of the working capital deficit at June 30, 2011. The Company estimates that it will require approximately $1,948,000 over the next twelve months in order to sustain its current obligations and to fully satisfy its working capital deficiency.
The Company’s acquisition strategy is based primarily on share-for-share agreements with limited cash requirements which mean that the need for additional financing in order to expand the business is limited on a short term basis.
The Company also entered into an agreement with an investment bank with the objective of securing additional financing, but the Company does not have any commitment from the investment bank to complete any financing. There is no assurance that the Company will raise any additional financing from either this investment bank or any other investors or on acceptable terms. There is also a risk that cash used in operations will be greater than anticipated in the event that projected revenues are not achieved.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. These unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
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