Burning cash, LV Internet firm delays Nasdaq effort

David Strow

Wednesday, June 14, 2000 | 11:21 a.m.

A Las Vegas Internet firm called off plans to move its shares to the Nasdaq exchange, saying market conditions make the move too difficult at this time.

Preference Technologies Inc., formerly known as StockUp.com Inc., withdrew its application with Nasdaq Tuesday. The company said it will "look to refile later in the year when market conditions are more favorable."

Company spokesman Clinton Pope said the application was withdrawn because Preference would have been unable to meet the exchange's minimum listing requirements.

"That was due to the (stock) market (downward) turn," Pope said. "Rather than risk having it denied, we withdrew it. That allows us to be able to reapply later this year."

Preference shares fell 75 cents to $2.66 this morning, a 22 percent decline. The stock currently trades over-the-counter, with a market capitalization of about $60 million.

The announcement comes during a period of financial struggles for the young Internet firm, which is trying to raise enough cash to make it through a difficult start-up period. To cut back on costs, the company laid off 25 of its 200 employees May 31. Though Pope said no further layoffs are pending, he said the company is continuing to examine cost-cutting opportunities.

As of March 31, the company had just over $2 million in cash. However, the company took a $3.4 million loss during the quarter ending March 31, and had yet to record any revenues from the sale of its products. The company, however, began recording revenues in May, Pope said.

The company is designing software that "fetches" sports and financial information and news from across the Internet and delivers it to customers' computers. Revenues are derived from website operators, who distribute the software to end users in an attempt to increase visitor traffic and retention.

Though it's common for young Internet companies to absorb significant losses during their early stages, "cash burn" is starting to put a dent in Preference's balance sheet. The company recorded negative cash flow of $2.94 million over the first three months of 2000, but was able to raise $2.9 million though a private placement with investors.

"These factors raise substantial doubt about the company's ability to continue as a going concern," the company's May 15 quarterly report with the Securities and Exchange Commission said.

Currently, the company is trying to raise $6 million to $10 million from private investors, with a long-term goal of raising up to $12 million.

"That would certainly get us to the point where we're cash flow positive, with some safety margin as well," said Bill Louden, president and chief operating officer. "It's clearly difficult today for Internet companies (to raise funds) ... it's made it more of a challenge, and delayed our efforts a bit."

The Nevada Development Authority has been one of the company's biggest backers, scheduling a lunch between Preference officials and local investors and executives June 9 in an effort to help the company raise funds. That lunch was canceled, however, a move Preference officials say they made because investors wanted private meetings.

Those meetings have been occurring over the last two weeks, and company officials say they're pleased with the interest they've received so far.