Worldwide Xceed Group, a New York-based i-shop currently facing delisting from the Nasdaq National Market, said this week that having borrowed all the money it can under a $5 million credit facility and facing payment demands from its other creditors, its "ability to continue to fund current operations is uncertain at this time."
In a filing with the Securities and Exchange Commission, Xceed said it has spent the past two quarters restructuring: In the first quarter, Xceed estimated it would cost $3.7 million to downsize, relocate and close various offices. In the second quarter, however, Xceed said it would need an additional $2.2 million this year to terminate leases, pay severance and benefit costs and write off certain fixed assets.
Meanwhile, the company, whose clients include CBS, said second-quarter revenues fell nearly 56 percent against a year ago, to $11.3 million, while losses more than doubled to $11.7 million.
In February, the i-shop and some of its former officers were named as defendants in class action lawsuits, which claim that Xceed filed SEC reports that were "materially false and misleading." Xceed said it believes the suits are without merit and will defend itself vigorously.
Also in February, Xceed said it won by default a motion to dismiss a $14 million countersuit by former client Drinks.com. According to Xceed, the suit charged that Xceed's "poor performance caused Drinks.com to lose projected revenue." Xceed had originally sued Drinks.com, however, claiming the wine and beer site did not pay $1.5 million for Xceed's services. Xceed has since withdrawn its claim without prejudice.
Overall, though, Xceed said such outstanding bills, along with its restructuring costs and accumulated debt, have hurt its current cash position. For now, the company stated, "management intends to continue to implement the restructuring plan to further reduce and restructure unprofitable operations and to implement additional cost-cutting measures."