Looks like things are getting worse....that's quite a hole Barksdale is digging!
2. Going Concern
......
Subsequent to the closing of the Credit Agreement, the outstanding principal amount of the Company’s debt was $22.0 million, net of an aggregate discount of $0.7 million, and the Company had a working capital deficit of $24.3 million at February 28, 2013. Of the outstanding debt, $0.5 million is due July 31, 2013 under a subordinated note payable to Hyman Belzberg, William Belzberg, Caddo Management, Inc. and RMS Advisors, Inc. (collectively, the “Note Lender”), and an aggregate of $3.75 million is due on convertible promissory notes of which $1.0 million is due on July 30, 2013 and $2.75 million is due on November 25, 2013. In addition, the Company was not in compliance with the financial covenants in the Credit Agreement for the three months ended February 28, 2013 and is seeking a waiver from the Lender or an amendment to the Credit Agreement to cure the non-compliance. Under the terms of the Credit Agreement, the Lender may refuse to advance additional funds to the borrowers under the credit facility and may seek to accelerate the Company’s repayment obligations. As of the date hereof, the Lender had not taken either of these actions. As a result of the non-compliance, the entire amount of indebtedness owed under the credit facility has been classified as a current liability on the consolidated balance sheet at February 28, 2013. The Company also incurred a net loss of $10.0 million during the nine months ended February 28, 2013. The Company currently does not have sufficient funds to repay these debt obligations. The Company is exploring available financing options, including the sale of debt or equity. If the Company is unable to finance its operations on acceptable terms or at all, its business, financial condition and results of operations may be materially and adversely affected. As a result of the recurring losses from operations and a working capital deficiency, there is substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
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