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Outgoing chairman Aran Bailey said in his annual report the association did not have the funds to pay its creditors, which were owed more than $35,000.
The association reported a $33,171 deficit for the financial year ending May 31, 2017 at its annual meeting on Tuesday night.
It follows a loss of $18,067 during the previous year, leaving the organisation equity of $64,418.
Bailey, who stepped down at the meeting and was replaced by Sandy Wallace, described it as a ''very serious financial problem'' in his chairman's report.
He said the situation was ''urgent'' and had come as a result of a lack of revenue sources. Funding had fallen from $39,000 the previous period to $25,500 and accounted for the difference between this year's and last year's losses.
Wallace told the Otago Daily Times she was determined to turn the situation around.
''It's not going to be easy, no it's not,'' she said.
''That was made quite clear at the meeting [on Tuesday] night.
''But the good thing is that we've got some really good strong people that have come back to the sport.
''I'm included in one of those because we're passionate about the sport and we don't want it to fall over in Otago.
''There's good kids coming through that are in the sport that are in the national programmes. There's a lot to fight for.
''We could all put our hands up in the air and say we're in drastic [trouble], but we've got to fight and that's the role I've been tasked to lead.
''But it's not going to be easy and we realise that.''
Wallace said it would take time to develop a plan and it would take more than the efforts of a few people.
Alongside the 10 people on the executive, 25 to 30 people had signalled their willingness to help at Tuesday's meeting which was a major positive, she said.
The three major creditors are the Dunedin City Council, Softball New Zealand and development manager Doug Hill.
The council and Softball New Zealand were not seeking immediate payment.
Hill declined to comment when contacted by the Otago Daily Times, although he was acknowledged in the report for his patience over the past few months, while the association was unable to pay him.
Softball was not the first sport in the region to fall on tough times financially.
Rugby and basketball have been the two most high-profile of those to have problems in recent years.
Both had found ways to recover, leaving Wallace confident softball could do the same.
She was hopeful softball would go ahead in the coming season, although admitted it was not as easy as simply saying so.
''Well ideally, yes,'' she said when asked of the upcoming season.
''But there are legalities that you have to work through when you hit the financial issues that we have and that's what I've got to get over with our new executive as quickly as possible, because currently we've got creditors and we can't pay them.''
Over the coming days and weeks a plan would be put together for how the association could get through the crisis.
In the meantime anyone who wished to help could contact her on email@example.com.