Staring into a hole of continued losses and lingering negative cash flow, Wilsons the Leather Experts Inc. on Monday raised the specter of bankruptcy.

The company's independent accounting firm said it has "substantial doubt" about the company's ability to stay in business, Wilsons said in its annual report filed with the Securities and Exchange Commission.

The Brooklyn Park-based retail chain recorded a net loss of $77.5 million in 2007, widening a $33 million deficit from the prior year. Wilsons had $7.4 million cash on hand as of Feb. 2, compared with $19 million a year earlier.

Wilsons already is closing and liquidating half of its mall-based stores, and it's laying off about 1,000 employees. The company plans to turn the remaining stores into accessory boutiques called Studio.

The annual report also said that as part of revised credit terms, Wilsons will not be able to borrow from its revolving line of credit until it provides an acceptable business plan and projections to its lender.

Wilsons also was warned a second time that it faces Nasdaq delisting. Shareholder equity has fallen to $5 million, according to an April 15 letter, below the $10 million minimum. The company was told in March that its stock was trading below the $1 minimum. Shares closed Monday at 17 cents.

The retailer said it plans to respond to Nasdaq by the April 30 deadline.