Liquidity and Capital Resources
As at December 31, 2012, Matrix had total assets of $25.4 million, a decrease of $2.7 million from $28.1 million at December 31, 2011. During the year, current assets decreased by $1.3 million while long term assets decreased by $1.4 million. Total liabilities of $24.1 million as of December 31, 2012 increased by $2.8 million compared to $21.3 million as at December 31, 2011. Current liabilities increased by $5.0 million while long term liabilities decreased by $2.1 million year-over-year. Significant changes in financial position during the 2012 year resulted primarily from a $4.0 million third party loan financing to Matrix, the proceeds of which were used to fund a loan in the same amount to GrowthWorks Canadian Fund Ltd. ("the Canadian Fund Loan"), repayment of term loans, the change from long-term to current liabilities of $1.2 million of subordinated debentures, additional $0.6 million and $0.8 million in new term loans advanced from related parties and third parties, respectively, and $1.8 million of employment related obligations.
As at December 31, 2012, Matrix had a working capital deficiency of $6.0 million, comprised of $8.5 million current assets and $14.4 million in current liabilities. Matrix's retained earnings deficit as at December 31, 2012 was $23.1 million and the net loss for the period was $4.9 million. Significant items contributing to the working capital deficit are: (1) $1.8 million of employment related obligations, primarily non-recurring lump sum payments due in April 2013; (2) $1.2 million of payments on account of a subordinated debenture due in July 2013; and (3) $6.8 million in internally-financed retail mutual fund commissions, which management aims to re-finance.
Matrix has not recorded contingent current assets of $1.7 million on the balance sheet, consisting of incentive participation revenues of $776 thousand, which have been confirmed as earned in 2012 but are paid in the form of dividends which have not yet been declared, and tax refunds receivable of $953 thousand, comprised of taxes paid in a prior year by a subsidiary, which refunds are dependent upon filing and processing of tax returns in 2013. During 2012 similar refunds of $953 thousand were received in the third quarter. Matrix's working capital deficit after deducting these contingent amounts would be $4.2 million. There can be no assurance as to whether or when contingent assets will be realized.
The financial statements and MD&A for the year ended December 31, 2012 were prepared on a going concern basis, which assumes that Matrix will continue to realize its assets and discharge its liabilities as they become due into the foreseeable future.
Management's cash flow forecasts indicate that the Company is expected to have resources available to continue to operate as a going concern into the foreseeable future, however the forecasts are based on a number of assumptions with respect to future cash flows. Uncertainties surrounding these assumptions may cast significant doubt on the ability of Matrix to discharge its liabilities in the normal course and continue as a going concern. There is material uncertainty surrounding future profitability, the realization of savings from cost reduction programs, the Company's ability to re-pay, re-finance or re-structure debt obligations, timely collection of fund management fees and incentive participation dividends from managed funds with poor liquidity, the outcome of regulatory filings and reviews, collection of tax refunds and the timing and completion of any previously announced and future strategic transactions, including possible acquisition or disposition transactions. Further information is contained in Matrix's MD&A and Annual Information Form for the year ended December 31, 2012. See "Forward-Looking Statements" below.
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