Critical Path in critical condition
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Last modified: December 25, 2003, 5:37 AM PST
By Reuters
The auditor for Critical Path, once one of San Francisco's most celebrated Internet start-ups, said on Wednesday the survival of the digital communications software company is in question.
Critical Path, which earlier this year laid off 30 percent of its employees, disclosed the warning by auditor PricewaterhouseCoopers, in a U.S. Securities and Exchange Commission filing.
"The company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern," the auditor said in the filing.
Last month, Critical Path said it raised $10 million by selling convertible notes and that investors led by Cheung Kong Group and affiliates agreed to swap $32.8 million of convertible subordinated notes for new Series E convertible preferred shares.
It also said it planned to raise $36 million from additional issuance of the Series E shares, including $21 million through a rights offering and $15 million to private investors. It said that raising this capital by March "will be necessary for the company to continue operations."
Critical Path ended September with $18.2 million of cash and equivalents but just $4.3 million readily available in the United States, the filing showed.
In the third quarter, the company lost $18.6 million, or 92 cents per share, on revenue of $16.2 million, which was down 16 percent from a year earlier. Several former executives last year pleaded guilty to stock fraud.
Critical Path shares, which traded above $150 soon after its initial public offering in 1999, closed Wednesday on Nasdaq at $1.68, up 3 cents.
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