Download as PDFTo Our Shareholders -
2007 was another very difficult year for the Company although intense efforts were made to establish a viable business in directory assistance. During 2007, the Company successfully completed a $10 million PIPE financing with two of its largest shareholders that provided essential operating capital for continued operations. Despite landing several new contracts, our losses continued to mount, and we ended the 2007 disappointed, with a $14.4 million net loss.
In the first half of 2008, we made several fundamental changes in direction that we believe have the best potential to reposition our Company as a viable and growing company. On January 17, 2008, we appointed Jim Hensel as our CEO. Following a rigorous financial and strategic review of the Company's operations and future prospects led by Jim and with full participation by our Board, we made the gut-wrenching decision to exit the directory assistance business in March 2008, and we physically completed that exit by the end of May 2008. Our analysis concluded that, in spite of our best efforts, our operating losses would use all of our cash before turning cash flow positive. This was not an acceptable outcome. Moreover, the current economic environment did not provide the potential to deliver an acceptable long-term return on any future investment in that market.
Simultaneously with the decision to exit our legacy directory assistance business, we began intense efforts to sell our complicated and diverse, but now surplus, intellectual property portfolio of patents, trademarks and domain names associated with the directory assistance division. We successfully sold this entire portfolio for $8.0 million in cash in May 2008, an unexpectedly short time period and at a price we believed to be consistent with realizing shareholder value.
In January 2008, we also launched a contact services business that attempts to leverage our long experience running call centers for our directory assistance division. Contact services includes inbound and outbound call center activity and other business process outsourcing. We have hired sales personnel and are actively growing the contact services business. We also have undertaken a new strategic review of our M1 Data and Analytics division and are developing programs and products designed to build on our perceived strategic advantages and result in new revenue opportunities.
The rest of 2008 is expected to provide no relief in the challenges we face. We continue to address the contractual and other repercussions of the decision to exit directory assistance. We continue to pay real estate costs related to some of our closed call centers, although by the end of this year, we will have only one such obligation outside of our Portland headquarters. These legacy costs adversely impact our operating results. We have received two delisting notices from Nasdaq and face the realistic possibility that our shares soon will trade on the over-the- counter market, either the bulletin board or the pink sheets. A company in our position also faces inevitable challenges in hiring and retaining experienced employees and management. Further, we are attempting to grow new businesses in an economically challenged economy, making our efforts fraught with additional risks and uncertainties.
Our current vision is to continue actively growing our contact services and data divisions and to make strategic investments to support that growth and possibly add other offerings. We believe our contact services division can offer customized high-touch customer service to mid-tier clients. We remain optimistic that on-shore business process outsourcing will grow as customer dissatisfaction with near or off-shore solutions rises and that our skill-set developed in operating call centers in directory assistance eventually will provide us competitive and sustainable advantages over our peers. Our data division also has several unique products in the pipeline that offer the opportunity to differentiate our services in the marketplace and provide us higher- margin pricing correlative to the value-added nature of our products. We will continue to strive to make our data more relevant to provide optimum, customized solutions to our customers.
We recognize that these also have been extremely challenging times for our shareholders. Your Board and Management are actively focused on creating a sustainable business. We also are aware that the market will determine whether our businesses are viable. You can be assured, however, that we will strive to earn your continued support.
James F. Hensel
President and Chief Executive Officer
Kenneth D. Peterson, Jr.
Chairman of the Board