Liquidity and Working Capital
As at December 31, 2011, the Company had cash and cash equivalents of $2,488,000. In addition to the cash balance, the Company has an unused line of credit of $1.5 million from a Canadian Bank.
Bank Line of Credit Financing
In September 2011, the Company obtained a $7 million revolving operating demand loan (“line of credit”), including a letter of credit facility to a maximum of $700,000 for a maximum one year term, from a Canadian Bank to refinance the bridge loan and to provide operating funds. The line of credit is at an interest rate of Prime + 1% (total 4% p.a. currently) and collateralized by a $10,000,000 debenture over all assets of DEAL and a $10,000,000 guarantee from Dejour Energy Inc. In December 2011, the Company renewed the line of credit with the Canadian Bank. The next review date is scheduled on or before May 1, 2012. As at December 31, 2011, a total of $5.5 million of this facility was utilized.
Working Capital Position
As at December 31, 2011, the Company had a working capital deficit of $7,756,000. Excluding the non-cash warrant liability of $2,245,000 related to the fair value of US$ denominated warrants issued in previous equity financings, the working capital deficit mainly consisted of $5.5 million used demand line of credit with a $7 million credit limit. As at December 31, 2011, $1.5 million remains unused.
Subsequent to December 31, 2011, the Company received $1.2 million from the exercise of warrants and options. The Independent Auditor’s Report of the financial statements for the fiscal year-ended Dec 31, 2011 contained disclosure of a going concern in the 'Emphasis of Matter' paragraph. Dejour expects the cash receipt subsequent to Dec 31, 2011, together with revenue from oil & gas operations, are sufficient to maintain operations throughout 2012.