Problems with a reorganization plan the company entered into to get Hidden Splendor, the subsidiary that owns its sole producing asset, out of Chapter 11 could add further to its woes.
The company’s report for the three months to June 30 showed the loss from operations was $US13.7 million, up considerably on the $2 million it posted for the same period last year.
In a note to its 10Q filing with the Securities and Exchange Commission, America West says it has incurred continual losses, leaving it with an accumulated deficit of $79.4 million.
“At June 30, 2012, current liabilities exceed current assets by $32,243,455,” it says.
For the six months to June 30 the company used $646,199 cash in its operations.
“These conditions raise substantial doubt as to America West’s ability to continue as a going concern,” the company says.
“Management is attempting to raise additional capital through sales of stock and to enhance the operations of Hidden Splendor to achieve cash-positive operations.”
Horizon is America West’s sole producing asset. The mine, about 11 miles west of Helper, Utah in Carbon County, turns out low-sulfur steaming coal.
Hidden Splendor was put into Chapter 11 in 2007. It emerged from bankruptcy protection the following year thanks to a reorganization plan.
Obligations under that plan still remaining include a secured creditor loan with a balance of about $2.9 million still owed to Zions Bank.
Hidden Splendor also owes the Internal Revenue Service and certain State of Utah tax authorities $878,964 under the reorganization plan. It has been delinquent on all quarterly payments since March 31, 2010.
Thanks to the delinquencies and on other loans to third parties, Hidden Splendor is in default of its secured creditor loan.
However, the company reports it has received no notice of default in this regard and is working to remedy the defaults.
Should the company be called on its defaults, it could be forced to sell its assets.
Hidden Splendor also has to make monthly payments to the Howard Kent Inc profit sharing plan under the terms of the reorganization plan due to a $242,777 debt. The company says it is on track with those payments.
It also has paid in full the balance owed to unsecured creditors under the plan.
During the six months to June 30, America West borrowed $1.37 million from a major shareholder. The notes bear 8% interest per annum and are secured by the company’s assets.
Of those notes, $970,000 matured on March 31 and $400,000 matured on June 30. America West has defaulted on those loans.
The company issued 1.37 million shares in connection with the debt, allocating $318,716 of the proceeds to the common shares issued based on their relative fair value.
It resulted in that amount being removed from the debt.
During the three months ended March 31, America West issued a $29,516 promissory note and 29,516 shares to chairman Alexander Walker III as reimbursement for settling $29,516 of liabilities on the company’s behalf.
The note is unsecured on demand and draws 8%pa per annum interest.
In December 2010 the company agreed to serve as guarantor on $250,000 of debt payments owed by Wild West Trucking. The trucking company is owned by America West chief executive officer Dan R Baker.