Ausam Energy Corporation advises that its financial position has continued to materially deteriorate and there is now a serious risk that it will be unable to continue as a going concern. Ausam continues to face significant liquidity concerns and does not currently have sufficient cash on hand or generate sufficient cash flow from operations to fund all of its operating, exploration and development activities.
The Company has been unable to secure equity financing due to a number of factors including current market conditions and the unwillingness of the Company's primary lender to consent to financing on terms acceptable to market participants.
On December 15, 2008, the Company received notice from Petroleum Exploration Australia Limited that it would not proceed to close on the acquisition of all of the outstanding shares of Ausam Resources Pty Ltd, the Company's wholly-owned subsidiary in Australia. The Company is reviewing its options and is contacting those parties who had previously expressed an interest in the assets owned by Ausam Resources Pty Ltd.
On December 16, 2008, Barry Borak resigned from the board of directors of the Company. Borak had served as the representative of The Huff Energy Fund L.P. as provided under the terms of the Company's outstanding Senior Secured Convertible Debenture due July 3, 2012. Huff has reserved the right to designate a new individual to be appointed to the Board, but has not yet named an individual to replace Borak.
In accordance with the regulations of the Securities and Exchange Commission, as, to the knowledge of the Company's executive officers there exists no disagreement between Borak and the Company on any matter relating to the Company's operations, policies or practices, the Company will not file a Form 8-K relating to Borak's resignation.
At a meeting on December 17, 2008, the Board formed a Special Committee to conduct negotiations with Huff in relation to the Debenture, assess and examine any proposed transaction in connection therewith and advise and report to the Board as to the results of its negotiations and independent assessments. The mandate of the Special Committee includes the ability to retain professional advisors to assist the Special Committee. There can be no assurance that a transaction of any kind will result. The Special Committee will consist of Robert Eriksson as the director independent of management and Huff.
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