Troubled data storage company Iceweb Inc. plans to offer equity securities as a way to raise capital and continue operations.
Iceweb provides wireless and fiber broadband services, data storage and related services, which it says are designed to provide customers with improved reliability and streamlined connectivity, while reducing costs.
Kansas City, Mo.-based Iceweb had an accumulated deficit of $47.9 million as of Sept. 30. It also had net losses of $7.1 million and $6.5 million for the fiscal years ended Sept. 30 and Sept. 30, 2012, respectively.
The company’s accounting firm raised substantial doubt about its ability to continue as a going concern, or without the threat of liquidation, because of the losses, according to a Jan. 14 filing with the U.S. Securities and Exchange Commission.
In order to continue operating, Iceweb’s management team plans to increase sales of products and services, but also to seek new capital from equity securities offerings.
Although Iceweb spent about $1.2 million in 2013 on research and development, the company expects to switch gears to sales and marketing in the future, causing that amount to decrease.
The company experienced a decrease in sales after Iceweb CEO John Signorello passed away in May 2012. Iceweb says the sales decrease came as customers, vendors and partners put purchasing decisions on hold until the company was able to reassure them it would be able to continue operations. On Jan. 14, Iceweb’s CEO Robert Howe resigned. The company’s chairman of the board, Hal Compoton, will serve as interim CEO.
The company’s revenue comes from relationships with resellers and distribution partners. In order to increase revenue, the company needs to expand arrangements with new partners. Iceweb could potentially be harmed because it goes through the partners and has less contact with the product users, the company says in SEC filings. The company doesn’t have minimum purchase commitments from its partners, and the contracts with partners don’t prohibit them from offering competing products.
In November 2012, the company entered into a loan agreement with IWeb Growth Fund LLC, a company controlled by the directors of Iceweb. Iweb agreed to give the company one or more loans for $1.5 million. Iceweb has borrowed $186,000 under that agreement, according to SEC filings.
Iceweb says in the SEC filing that it faces competition from NetApp Inc. (Nasdaq: NTAP), Dell and IBM Corp. (NYSE: IBM) and says many competitors have better name recognition, financial and sales resources, but that it believes “some customers are searching for alternatives from the high costs and hardware replacement upgrades often required by the larger tier 1 storage providers, who push expensive upgrades.”
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