The very tight financial situation is detailed in the Annual Accounts released this afternoon.From Note 2 to the Accounts.
"2. Basis of preparation (Cont.)
(e) Going concern (Cont.)
The deficiency in net assets of $564,165 is partly due to the impairment of the Group’s intangible asset relating to a USA override royalty, as a result of decreases in oil and gas prices (refer Note 10).
As at 31 December 2016, the Group has $663,424 of trade and other payables, of which $585,980 is owing to directors and their related parties. The directors and related parties have agreed to defer the payment of all amounts owing to them until such time that the Group is in a position to repay amounts owing without impacting the financial viability of the Group.
At 31 December 2016, the total amount owing on the conditional debt facility with Macquarie Bank Limited is US$3,079,220 (including interest), with US$150,000 principal repayments payable annually on the anniversary date of the drawdown amount on February 2017 to February 2020 with a final instalment of US$2,450,000 payable in February 2020. Interest is payable quarterly on the outstanding balance of the loan.
The Group has not complied with certain financial covenants under the loan facility and has obtained waivers from Macquarie Bank Limited for the period to 15 April 2017. The Directors are currently evaluating their options in relation to the non-compliance with the financial covenants of the loan facility prior to the expiry of the waiver on 15 April 2017 (refer Note 12). These options may include sale of certain assets to repay debt, renegotiation of the existing debt facility or extension of financial covenant waiver beyond 15 April 2017. As a result of the expected non-compliance with financial covenants the Group has reclassified the loan facility to current liabilities at year end.
The Directors have prepared cash flow projections for the coming 12 months that support the ability of the Group to continue as a going concern. These cash flow projections assume the Group generates revenue from the USA override royalty interest to meet the ongoing operational expenditure and contractual debt repayments. In addition, the cash flow projections assume no additional payments are required in relation to the Macquarie Bank Limited facility beyond interest repayments and annual principal repayments, and that no amounts will be paid to directors and their related entities in the forecast period.
In the event that cash inflows from the USA override royalty interest are not sufficient to meet ongoing operational expenditure and contractual debt repayments, the Group will need to raise additional funding from shareholders or other parties.
Accordingly, given the options available to address the Group’s funding needs are uncertain until executed, there is a material uncertainty which may cast significant doubt on the ability of the Group to continue as a going concern.
In the event that the Group does not resolve the debt covenant issues through the strategies outlined above, obtain additional funding and reduce cash outflows in line with available funding, it may not be able to continue its operations as a going concern and therefore may not be able to realise its assets and extinguish its liabilities in the ordinary course of operations and at the amounts stated in the consolidated financial statements. "
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