The financial future of struggling Internet delivery company Webvan (Nasdaq:WBVN) appeared more clouded than ever after statements released Monday by the company’s auditor, Deloitte & Touche, in Webvan’s annual report.
“There can be no assurance that [Webvan] will be successful in its efforts to achieve future profitable operations, generate sufficient cash from operations or obtain additional funding sources,” the auditor said in the report.
Webvan also remains in imminent danger of being delisted from the Nasdaq because it has not been able to elevate its share price above US$1.Webvan shares closed at 13 cents Tuesday, with no change from the previous day’s trading.
No Legal Ease
On top of the bleak financial future painted by Webvan’s auditor, the company faces legal challenges, including a lawsuit from Amazon.com against Homegrocer.com, which was purchased by Webvan last year. The lawsuit alleges that Webvan breached its advertising agreement by failing to make quarterly payments to Amazon.
Amazon is seeking $6.25 million, plus attorneys’ fees and expenses. Webvan said it intends to “vigorously pursue its case against Amazon.”
Webvan is also under attack from the United Food & Commercial Workers International Union (UCW), which filed a complaint with the National Labor Relations Board alleging that Webvan maintains illegal rules restricting employee rights to organize, support and join a union.
Webvan executives said that the company denies the charges and will defend its case against the UCW.
Although Webvan has been able to survive the dot-com shakeout so far, its time may be running out. Since its inception, Webvan has incurred significant losses, and as of December 31st, had an accumulated deficit of $612.7 million.
“Webvan may continue to suffer significant net losses and a negative cash flow from operations,” the auditor said in the report. “These matters raise substantial doubt about Webvan’s ability to continue as a going concern. Webvan’s continued existence is dependent upon several factors, including its ability to increase revenue levels and reduce costs of operations to generate positive cash flows.”
Webvan attempted to move forward by cutting back throughout the first quarter of 2001 — redesigning its site, providing online coupons and launching frequent shopper programs.
Webvan also launched a new marketing campaign aimed at building its brand and reaching additional target customers.
Since September, Webvan has reduced its workforce by approximately 1,300 employees, or 27 percent. Other cost reduction measures have included minimizing how much infrastructure is required to process orders, raising the minimum order size required for free delivery, extending the delivery window in certain markets from a 30-minute to a 60-minute duration, and outsourcing certain operations to third parties.