Razorfish Proposes IRS Payment Plan

NEW YORK — Razorfish has submitted a proposal to the Internal Revenue Service outlining a five-year payment plan for $7 million owed in back taxes, a company representative said Thursday. The New York-based i-shop is expected to hear a decision within a month.

“We strongly believe they’ll approve the proposal,” said the company representative.

The back taxes, which date back to early 2000, relate to a series of errors made in remitting holding taxes to the government for four employees. The finance team discovered the errors within the last four months and alerted the IRS, the representative said.

Earlier this week, the i-shop raised $5.35 million, before fees and expenses, through the sale of about 16.7 million shares of common stock to several institutional investors at a price of 32 cents per share. The company also issued about 2.5 million warrants to purchase common stock at a price of 45 cents per share. If exercised, the warrants would generate about $1.13 million in additional proceeds to the company.

As a result of the new financing, Arthur Andersen has withdrawn its “going concern” opinion of Razorfish which is reflected in an amended 10-K annual report, filed with the Securities and Exchange Commission late Wednesday.

In the original 10-K, filed April 15, the auditor expressed doubts about Razorfish’s ability to continue as a “going concern,” citing the company’s recurring operating losses, negative operating cash flow and net working-capital deficiency. The initial opinion was issued primarily due to the back taxes owed, said the Razorfish representative, adding that the infusion of cash has alleviated the “going concern.”

At the news, Razorfish stock [RAZF] was up 7 cents to 41 cents Thursday. Its 52-week high is 48 cents and 52-week low is 28 cents.