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Long-Term Debt
3 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Long-Term Debt

7. Long-Term Debt

 

The loan agreement requires a financial covenant to be measured at September 30, 2012. Due to the losses incurred during 2011 that debt covenant was violated at September 30, 2012. The default on the financing loan agreement also caused a default on the convertible note agreements. The Company did not receive a waiver from the bank for a violation of the debt covenants. Additionally, the Company was under-collateralized for the borrowing base calculation related to the line of credit at September 30, 2012.

 

For these reasons the long-term debt was reclassified to current liabilities and a reduction in working capital. Additionally, if the bank demanded repayment of the debt, the Company may not have sufficient capital to operate and there would be substantial doubt about its ability to continue as a going concern.