RE:Re: MD&A May 2014
Going Concern Assessment These consolidated financial statements for the three month periods ended March 31, 2014 and 2013 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) on a going concern basis, which contemplates that assets will be realized and liabilities discharged in the normal course of business as they come due. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. As at March 31, 2014, the Company had a working capital deficit, excluding bank indebtedness, of $1.3 million. The Company was in compliance with the working capital covenant at March 31, 2014 but was not in compliance at December 31, 2013 and the violation has not been waived by the bank. The credit facility technically expired on April 30, 2013 and while the bank has not informed the Company that it intends to demand the loan, the bank's annual review of the credit facility is ongoing. Although the bank has indicated that it will extend the facility in 2014, the amount of the facility will be significantly less than the current $36 million and at different terms (see Note 17). The proposed asset disposition outlined in Note 17 will allow for the immediate reduction of the credit facility as required by the bank; however the Company will need to consider other forms of financing and strategic alternatives to help the Company advance its overall business plan. This represents a material uncertainty that raises significant doubts as to the Company’s ability to continue as a going concern. As at May 13, 2014, the Company was in discussions with the bank and other potential lenders in regards to ongoing debt financing and is considering asset dispositions and other strategic alternatives to help the Company advance its overall business plan. The Company will continue to adjust the scope of its development plans and anticipated expenditures in light of its working capital position.