Information Advantage (IA) has made a loss every quarter since it was set up and urgently needs the proceeds from its initial public offering (IPO) to continue financing its operations, according to its S1 filing with the Securities and Exchange Commission (SEC).
The online analytical processing (Olap) supplier is hoping to float 3.3 million shares at between $7-8 per share in the first quarter of next year, in a transaction estimated to be worth between $20 and 30 million.
The deal is being underwritten by BancAmerica Robertson Stephens, NationsBanc Montgomery Securities, Piper Jaffray and First Albany Corp, but according to the S1 document, the amount raised will barely cover IA?s debts, let alone supply it with much working capital.
It states: ?The Company has incurred net operating losses in each quarter since inception and it is possible that the Company will not generate sufficient net income to fully utilize its net operating loss carryforwards before they begin to expire in 2007. As of 31 October, 1997, the Company had an accumulated deficit of $26.4 million. The Company expects to incur additional net losses.?
Even more worryingly, one $3 million line of credit will terminate either 10 days after IA?s IPO closes or 20 May, 1998, whichever is sooner.
The document states that these losses occurred because the supplier needed to invest heavily in technical support, research and development and sales and marketing infrastructure, but expects this scenario to continue into the forseeable future.
It also admits that IA is reliant on a limited number of orders placed by large organisations, which makes it vulnerable should one of these customers not offer it repeat business or a deal falls through, while its success depends to ?a significant degree? on key management and other personnel, which could adversely affect its business if they quit.
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