2.4.0.81020 - Disclosure - GOING CONCERNtruefalsefalse1false falsefalseD2013Q2YTDhttp://www.sec.gov/CIK0001086319duration2013-01-01T00:00:002013-06-30T00:00:001true 1gsxn_GoingConcernDisclosureAbstractgsxn_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0GOING CONCERN2false 2gsxn_GoingConcernDisclosureTextBlockgsxn_falsenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00<div style="font-size:10.0pt;font-family:Times New Roman;"> NOTE 2 — GOING CONCERN   The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these consolidated financial statements.  As such, the accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern.   Due to the extended decline in the natural gas market and low natural gas prices in recent years caused primarily by excess production, the Company has not been able to recover its exploration and development costs as anticipated.  As such, there is substantial doubt regarding the Company’s ability to generate sufficient cash flows from operations to fund its ongoing operations, and the Company currently anticipates that cash on hand and forecasted cash flows from operations will only be sufficient to fund cash requirements for working capital through September 2013. This expectation has been revised from management’s previous estimate included in the Form 10-Q for the quarter ended March 31, 2013 due to the implementation of cost savings measures and cash management strategies. This estimate is based on various assumptions, including those related to future natural gas and oil prices, production results and the effectiveness of the Company’s cash management strategy discussed below, some or all of which may not prove to be correct and may result in the Company’s inability to meet cash requirements prior to the end of September 2013.   As a result of these factors, there is substantial doubt about the Company’s ability to continue as a going concern.   In late 2012 and early 2013, the Company received notices from the NYSE MKT LLC (the “Exchange”) notifying the Company that it did not satisfy certain continued listing standards set forth in the NYSE MKT LLC Company Guide (the “Company Guide”). Specifically, on December 6, 2012, the Company received a notice from the Exchange indicating that it did not satisfy the continued listing standards of the Exchange set forth in Section 1003(f)(v) of the Company Guide because the Company’s common stock had traded at a low price per share for a substantial period of time.  In the notice, the Exchange predicated the Company’s continued listing on the Exchange on the Company effecting a reverse stock split of its common stock by June 6, 2013. On January 11, 2013, the Company received a notice from the Exchange indicating that it did not satisfy the continued listing standards of the Exchange set forth in Section 1003(a)(iv) of the Company Guide, which applies if a listed company has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, as to whether such company will be able to continue operations and/or meet its obligations as they mature. In order to maintain its listing, the Company was required to submit a plan of compliance (a “Plan”) addressing how it intended to regain compliance with Section 1003(a)(iv) of the Company Guide by June 30, 2013.  The Company submitted a Plan to the Exchange on February 11, 2013.  The Plan indicated that the Company intended to lower costs, rationalize assets, refocus its development program toward oil and liquids, especially in the Green River Formation, and continue its California program with the potential goal of expanding the California model.  The Plan also discussed the fact that the Company was considering certain strategic alternatives, including debt restructuring and sales of assets.   On March 27, 2013, the Company received notice from the Exchange indicating that after a careful review of the Plan and publicly available information, the Exchange had determined that the Company had not made a reasonable demonstration of its ability to regain compliance with Section 1003(a)(iv) of the Company Guide by June 30, 2013 and that the Exchange intended to initiate delisting proceedings against the Company by filing a delisting application with the SEC pursuant to Section 1009(d) of the Company Guide.  The Company originally intended to appeal the Exchange’s determination, but subsequently determined not to proceed with such an appeal and notified the Exchange of its decision on April 23, 2013.  Accordingly, trading of the Company’s common stock on the Exchange was suspended at the opening of business on April 26, 2013 and the Exchange has delisted the Company’s common stock.  The Company’s common stock immediately became eligible to trade on the OTCQB Marketplace on April 26, 2013, and is currently trading thereon under the ticker symbol “GSXN.”   The Company’s prior revolving credit facility matured on June 29, 2012, and as of the date of this Form 10-Q, the Company has been unable to obtain a replacement facility on acceptable terms and is no longer actively in discussions to obtain a replacement facility.  Furthermore, the Company may not achieve profitability from operations in the near future or at all and it may continue to experience significant losses.  The Company had net losses for the six months ended June 30, 2013 and has had negative cash flow from operations for the year ended December 31, 2012, and at June 30, 2013 had an accumulated deficit of $249,506,604.   As of June 30, 2013, the Company had $45,168,000 aggregate principal amount of its 5.5% Convertible Senior Notes due 2015 (the “2015 Notes”) outstanding.  The 2015 Notes bear interest at a rate of 5.50% per annum, payable in cash semi-annually in arrears on April 5th and October 5th of each year.  The Company elected not to make the $1,242,120 semi-annual interest payment due on April 5, 2013 on its outstanding 2015 Notes.  The 2015 Notes require the Company to pay interest on overdue interest payments at a rate of 7.5% per annum.  As of July 30, 2013, total accumulated interest on the 2015 Notes (including default interest) equaled $2,065,455.   The Indenture, dated as of June 25, 2010, and the First Supplemental Indenture thereto, dated as of September 22, 2010, between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”), governing the 2015 Notes (collectively, the “Indenture”) provide that the failure to make an interest payment when due constitutes an event of default after a 30-day cure period. Because the Company did not make the April 5, 2013 interest payment prior to the expiration of the 30-day cure period, an event of default has occurred under the Indenture.  As a result of the event of default, the Trustee or the holders of at least 25% in aggregate principal amount of the 2015 Notes have the right to declare the 2015 Notes immediately due and payable at their principal amount together with accrued interest. As of July 30, 2013, total accumulated principal and interest on the 2015 Notes (including default interest) equaled $47,233,455.  The Company has not received any notice of acceleration of the 2015 Notes as of July 30, 2013 and is engaged in discussions with the holders of the 2015 Notes in connection with the interest payment and/or a modification of the Indenture. The 2015 Notes are classified as a current obligation in the accompanying unaudited condensed consolidated financial statements.   The Company also has firm commitment delivery obligations under its gas transportation and processing agreements.  If these commitments are not met, unless suspended pursuant to the terms of such agreements or waived, the Company may be required to make periodic deficiency payments for any shortfalls from the specified minimum volume commitments as discussed further in Note 7 — Gas Processing Agreements, herein.   Failure to generate operating cash flow or to obtain additional financing for the development of the Company’s properties could result in substantial dilution of its property interests or delay or cause indefinite postponement of further exploration and development of its prospects resulting in the possible loss of its properties. This has caused the Company to alter its business plans, and the Company may be required to further reduce its exploration and development plans.  For example, the Company has not allocated any amounts to its 2013 capital budget.  In particular, the Company faces uncertainties relating to its ability to fund the level of capital expenditures required for oil and gas exploration and production activities. The Company intends to fund its anticipated cash requirements through September 2013 primarily through cash on hand and cash inflows from operations, although the Company cannot provide assurances that cash on hand and cash flows from operations will be sufficient to fund such requirements. If they are not, the Company’s ability to execute its operations will be significantly limited, and its liquidity and results of operations will be materially adversely affected.   To continue as a going concern, the Company must generate sufficient operating cash flows, secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transaction to provide it with additional liquidity.  The Company’s ability to do so will depend on numerous factors, some of which are beyond its control.  For example, the urgency of the Company’s liquidity situation may require it to pursue such a transaction at an inopportune time when the Company has little or no negotiating leverage.  Moreover, the Company’s ability to successfully implement, and the cost of, any such transaction will depend on numerous factors, including:   ·                  demand and prices for natural gas and oil; ·                  general economic conditions; ·                  strength of the credit and capital markets; ·                  the Company’s ability to successfully execute its operational strategies, and its operating and financial performance; ·                  the Company’s ability to comply with its debt and equity instruments and to cure or obtain a waiver of any non-compliance; ·                  the Company’s stock price, and the ability of its common stock to remain traded on the OTCQB Marketplace; ·                  the Company’s ability to remain in compliance with its operational agreements, including its gas processing, gathering and transportation agreements; ·                  the Company’s counterparties refraining from exercising any remedies available as a result of the determination that the Company is insolvent or unable to perform in accordance with the contract; ·                  the Company’s ability to maintain relationships with its suppliers, customers, employees, stockholders and other third parties; and ·                  market uncertainty in connection with the Company’s ability to continue as a going concern as well as investor confidence in the Company.   The Company has engaged Stephens, Inc., a financial advisor, to assist it in evaluating potential strategic alternatives, including a sale of the Company or all of its assets. It is possible these strategic alternatives will require the Company to make a pre-packaged, pre-arranged or other type of filing for protection under Chapter 11 of the U.S. Bankruptcy Code.  If the Company is unable to generate sufficient operating cash flows, secure additional capital or otherwise restructure or refinance the business before September 30, 2013, it will not have adequate liquidity to fund its operations and meet its obligations (including its debt payment obligations), the Company will not be able to continue as a going concern, and could potentially be forced to seek relief through a filing under Chapter 11 of the U.S. Bankruptcy Code. In addition, the Company is in default on its outstanding 2015 Notes under the Indenture, which could result in the filing of an involuntary petition for bankruptcy against the Company.   A bankruptcy filing by or against the Company would subject its business and operations to various risks, including but not limited to, the following:   ·                  a bankruptcy filing by or against the Company may adversely affect its business prospects, including its ability to continue to obtain and maintain the contracts necessary to operate its business on competitive terms; ·                  subject to the automatic stay and other applicable provisions of the Bankruptcy Code, a bankruptcy filing by or against the Company could cause a party to attempt to declare an additional event of default under the Indenture; ·                  subject to the automatic stay and other applicable provisions of the Bankruptcy Code, certain provisions in the Company’s operating agreements may be triggered such that  a party could attempt to assert that the Company is deemed to have resigned as operator or the agreements may be terminated by the other party; ·                  the Company may be unable to retain and motivate key executives and employees through the process of reorganization, and it may have difficulty attracting new employees; ·      there can be no assurance as to the Company’s ability to maintain or obtain sufficient financing sources for operations or to fund any reorganization plan and meet future obligations; ·                  there can be no assurance that the Company will be able to successfully develop, prosecute, confirm and consummate one or more plans of reorganization that are acceptable to the bankruptcy court and its creditors, equity holders and other parties in interest; and ·                  the value of the Company’s common stock could be reduced to zero.   In order to address the Company’s liquidity constraints and in addition to its ongoing efforts to secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transaction to provide it with additional liquidity, the Company has embarked on a cash management strategy to enhance and preserve as much liquidity as possible. This plan contemplates the Company, among other things:   ·                  reducing expenditures by eliminating, delaying or curtailing discretionary and non-essential spending, and not designating any capital budget for 2013; ·                  managing working capital; ·                  delaying certain drilling projects; ·                  pursuing farm-out and other similar types of transactions to fund working capital needs; ·                  evaluating its options for the divestiture of certain assets; ·                  investigating merger opportunities; and ·                  restructuring and reengineering the Company’s organization and processes to reduce operating costs and increase efficiency.   The Company cannot provide any assurances that it will be successful in accomplishing any of these plans or that any of these actions can be effected on a timely basis, on satisfactory terms or maintained once initiated. Furthermore, the Company’s cash management strategy, if successful, may limit certain of its initiatives, including its ability to successfully execute its strategic alternatives. </div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date).No definition available.false0GOING CONCERNfalseGOING CONCERNUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://www.gascoenergy.com/role/DisclosureGoingConcern12