[email protected] Corp. yesterday amended its annual report to include a statement by its auditor Ernst & Young LLP expressing doubt that the company has the financial reserves to survive past the end of the year.
In an amended filing with the Securities and Exchange Commission, [email protected] included a report from Ernst & Young that noted the company has been incurring operating losses for the past few years and it sees no evidence that situation will turn around soon.
The annual report points out that as one of the conditions of its $100 million convertible note, [email protected]'s Series A common stock must be listed on either the New York Stock Exchange, the Nasdaq National Market or the American Stock Exchange. If the company's stock is delisted, it will have to repay its note on an accelerated schedule. [email protected] currently does not meet Nasdaq listing requirements because its stock is trading below the minimum $3 bid price.
“These conditions raise substantial doubt about the company's ability to continue as a going concern,” Ernst & Young said in its audit report.
[email protected] said in its amended filing with the SEC that although it raised $185 million in June through third-party financing and with AT&T, its largest shareholder, it still needs to raise additional funding to survive past Dec. 31.
“Our existing cash and other liquid assets may not be sufficient to fund operations through the end of 2001,” the company said. “We cannot guarantee that we will be able to obtain additional funding on acceptable terms, if at all.”
Since its inception in 1995, [email protected] has never turned a profit. The company has racked up more than $1 billion in debt during the past six years. For the 12 months that ended June 30, the company reported sales of just $611 million.
Ironically, [email protected]'s broadband Internet business has been the one bright spot for the company. Demand for its residential broadband service is strong. The company said it added 474,000 subscribers in the second quarter, up 62 percent from last year. The company's worldwide subscriber base grew to 3.7 million in the second quarter, up 115 percent from a year ago.