5.2 Conflicts of interest
Certain officers and directors of the Company are officers and/or directors of, or are associated with, other natural resource companies that acquire interests in mineral properties. Such associations may give rise to conflicts of interest from time to time. The directors are required by law, however, to act honestly and in good faith with a view to the best interests of the Company and its shareholders and to disclose any personal interest which they may have in any material transaction which is proposed to be entered into with the Company and to abstain from voting as a director for the approval of any such transaction.
5.3 Limited operating history: losses
In common with most other exploration and development stage companies, the Company has experienced losses in all years of its operations. There can be no assurance that the Company will operate profitably in the future, if at all. As at March 31, 2013, the Company's deficit was $40,838,550.
5.4 Price fluctuations: share price volatility
Over the past year, securities markets worldwide have experienced high price and volume volatility. The price of the Company's shares has fluctuated similarly. It is not possible to forecast future volatility and fluctuations in price based on past experience of the Company's shares.
6 Liquidity and Capital Resources
The Company is focused on Verticalnaya located in the Donbass Region of Ukraine. Verticalnaya is an advanced anthracite coal project in the construction phase. Recovery of the carrying value of the Verticalnaya assets depends on the attainment of profitable production on time and within budget, its profitable disposition or the introduction of a joint venture partner.
The Company also owns the Menzhinsky Mine and wash plant, but due to operational failure and ongoing technical challenges the Board of Directors resolved on May 22, 2013 to place Inter-Invest, the wholly owned subsidiary that owns the Menzhinsky operations, into administration and/or liquidation.
The Company has experienced recurring operating losses and has accumulated a deficit of $40,838,550 at March 31, 2013. For the period ended March 31, 2013 the Company incurred a loss of $18,054,609 and used cash in operating activities totaling $4,430,592. The Company had cash and cash equivalents and short-term investments of $1,228,367 and a working capital deficit of $7,782,265 at March 31, 2013. Working capital is defined as current assets less current liabilities and provides a measure of the Company's ability to settle liabilities that are due within one year with assets that are also expected to be converted into cash within one year. The Company is presently in the final stages of completing an equity fundraising, principally with institutional investors and expects, very shortly, to be able make a further announcement in this regard. The Board is confident that the completion of that fundraising, combined with the closure of the Menzhinsky operations, is expected to provide the Company with sufficient working capital for a 12 month period.
To date the Company's primary source of funding has been the issuance of equity securities for cash, primarily through private placements to sophisticated investors and institutions. The Company has issued common shares in each of the past few years, pursuant to private placement financings and the exercise of warrants or stock options. There can be no assurance that equity financings in the future will be timely and in the amounts necessary to fund the Company's activities. There are many conditions beyond the Company's control which have a direct bearing on the level of investor interest in the purchase of Company securities.
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