"The company believes that there is a doubt about its ability to continue its operations as a going concern, statedOrckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT) in a filing with the US Securities and Exchange Commission (SEC). Orckit cited recurring losses, negative cash flow, and shareholders' equity deficit.
Orckit previously published a draft prospectus for raising capital. To keep this prospective valid, the company's management is required to issue updates about its financials. The updates are not audited, and the warning in the SEC filing is not a going concern warning appended to the company's financial report by its auditor.
Orckit, a producer of communications equipment, is in poor shape. Revenue totaled $6.8 million in the first half of 2012, 28.4% less than in the first half of 2011. Net loss was almost halved to $5.9 million from $11 million in the corresponding half, partly due to sharply reduced expenses.
Two months ago, Orckit's bondholders approved the company's debt settlement, which allows them to convert the debt into equity. The response was limited, and the company redeemed $9.5 million of the debt in August, and it is now due to repay a further $2.7 million. The repayments will reduce the company's cash reserves to $6-7 million.
Orckit said that as a result of lower than expected conversion of bonds and difficulties in effecting an equity financing, it implemented a plan to reduce expenses by approximately $6 million per fiscal year, which included 65 layoffs, in order to achieve breakeven operating results in 2013. "With our lower staffing levels, we are currently not able to respond to new tenders published by Tier 1 customers. We are concentrating our efforts on advancing our relationships with global original equipment manufacturers, or OEMs, and servicing existing customers," it said.
Orckit's share price closed at $0.21 on Nasdaq yesterday, giving a market cap of $4.8 million, and the share price was unchanged on the TASE today at NIS 0.77.
Published by Globes [online], Israel business news - www.globes-online.com - on October 3, 2012
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