It was quite a week for CyberDefender Corp., a downtown L.A. security software company.
First, co-founder and Chief Executive Gary Guseinov resigned. Then, the company announced it had cut a large portion of its staff and had defaulted on loan agreements with GR Match LLC.
CyberDefender and GR Match, a division of Santa Monica marketing company Guthy-Renker, have agreed to extend payment until the end of September.
CyberDefender is looking to raise money to help pay off the debt. It has already raised $1.5 million in a private offering of convertible promissory notes to a small group of investors.
Kevin Harris, chief financial officer, said during the company’s second quarter earnings call last week that CyberDefender is raising more cash, because the $1.5 million won’t cover payment of the debt and costs of completing the company’s transition to a new business model: It is no longer developing software, but will continue providing live tech support.
Harris warned that finding the capital the company needs won’t be easy.
“Although the company is exploring a number of sources for the additional financing, the company cannot ensure that it will be able to secure the necessary financing,” he said.
CyberDefender announced Aug. 2 that it will no longer develop security software products and will now license software from other companies. The company instead will focus on the LiveTech support service introduced last year.
As part of the transition, the company laid off employees in its software development division, but did not say how many.
Guseinov, who co-founded the company in 2003, quit Aug. 1. The reason for the resignation was not disclosed. A company spokeswoman said executives were not available to comment, and no further explanation was provided in the earnings call.
Howard Bain, an independent board member, has been elected chairman. The board is negotiating with Greg Thomas, an adviser to the company since late May, to serve as interim chief executive.
Shares of CyberDefender fell nearly 14 percent to 70 cents Aug. 3 on the news of Guseinov’s resignation. The company’s stock has been steadily falling since late last year, and shares could be delisted from Nasdaq if the price stays below $1 for 30 days.
The company last week reported a narrower second quarter loss on higher revenue. Net loss narrowed to $6.6 million, compared with a $12 million loss the year before. Revenue rose 31 percent to $12.7 million.
Thomas acknowledged during the investor call that CyberDefender faces a number of challenges. He said his three objectives as interim chief executive would be to find capital, reduce costs and put the company on a path to profitability.
“For years, this company has operated at a net loss,” he said. “This is no longer an acceptable financial model for CyberDefender.”
Adding Apps
Downloading new programs and games to Apple computers and iPhones is as simple as a click on the company’s app store, but it has been more challenging to do the same on Windows-based PCs.
Now, a Woodland Hills startup is looking to be the app store equivalent for computers that run the Windows operating system.
Nevolution LLC launched its software marketplace for PC computers in late June. Called Avenue, it can be downloaded for free to any PC that runs Windows and works similar to Apple’s app store, offering different software programs, such as Microsoft Office or web browser Google Chrome.
Matt Smith, chief executive of the six-person company, said Nevolution wants to make it as easy for PC users to download software as it is on Apple devices.
“People are buying PCs, but can’t install software from a DVD anymore,” he said. “There are existing websites that make free software available, but nobody has taken the approach (for the PC) like the Apple app store.”
Avenue currently offers about 300 programs for download, and Nevolution takes a 25 percent cut of revenue from all software sales.
Smith said the company is looking to add more software programs to Avenue and wants to have 1,000 available for download by the end of summer.
Better Money
Santa Monica startup BetterWorks has raised $8 million in funding from Menlo Park venture capital firm Redpoint Ventures.
BetterWorks, which has developed an online employee benefits system, will use the financing to hire more staff, expand into new markets and further develop its technology.
“We invested in the BetterWorks team because of their big vision to build a technology-based solution for the country’s 6 million small and medium-sized businesses who need perks programs to create better work environments,” Satish Dharmaraj, general partner at Redpoint who has joined BetterWorks’ board, said in a statement.
The company was founded last year by L.A. angel investor Paige Craig; “Farmville” creator Zao Yang; and George Ishii, who also founded L.A.-based genealogy website Geni.
BetterWorks has started with sales to L.A. businesses, and plans on expanding into San Francisco and New York later this year.
Staff reporter Natalie Jarvey can be reached at [email protected] or at (323) 549-5225, ext. 230.
