In light of Packet 8's loss of $5.4 million in the second quarter ending June 30, the Management Discussion section of the Report sounds like a major reality check.
The Discussion is so downcast, it really appears the best way out for Packet 8's award-winning service is to be sold off to a technology hungry carrier out to expand or inaugurate VoIP service.
OK, here's the scoop:
"Although we believe that our current cash and cash equivalents will satisfy our expected working capital and capital expenditure requirements through at least the next twelve months, our business may change in ways we do not currently anticipate, which could require us to raise additional funds to support our operations earlier than otherwise expected," the Discussion says. "Unless we achieve and maintain profitability, we will need to raise additional capital to support our business."
As is not uncommon in such scenarios, the language used by 8x8 to detail the road ahead is quite frank.
"We may not be able to obtain additional financing as needed on acceptable terms, or at all, which may require us to reduce our operating costs and other expenditures by making reductions in personnel and capital expenditures," the Discussion says. "Alternatively, or in addition to such potential measures, we may elect to implement other cost reduction actions as we may determine are necessary and in our best interests. Any such actions undertaken might limit our opportunities to realize plans for revenue growth and we might not be able to reduce our costs in amounts sufficient to achieve break-even or profitable operations."
It would appear that 8x8 execs do not envision becoming profitable any time in the short to mid-term.
"We have a history of losses and we are uncertain as to our future profitability," company executives note.
"We recorded an operating loss of approximately $5.4 million for the quarter ended June 30, 2005, and we ended the period with an accumulated deficit of $176 million. In addition, we recorded operating losses of $20 million and $4 million for the fiscal years ended March 31, 2005 and 2004, respectively," the report adds. "We expect that we will continue to incur operating losses for the foreseeable future, and such losses may be substantial. We will need to generate significant revenue growth to achieve an operating profit. Given our history of fluctuating revenues and operating losses, we cannot be certain that we will be able to achieve profitability on either a quarterly or annual basis in the future."
Sometimes, companies can raise funds by selling stock. But from a read of 8x8's woes, this dosn't seem like a sure bet.
"The market price of the shares of our common stock has been and is likely to be highly volatile," x8 execs say.