One likely cause is Hibernate sees a different, empty database that has no tables.
The line below connects to a relative path. Change it to an absolute path here and anywhere else you connect to the database and it should work.
<property name="url" value="jdbc:hsqldb:file:initdata" />
The other problem is you have set up files_readonly in the .properties file. Do not create a properties file and let the engine create the database when you first connect. Delete any existing database.