"Right now the (Red Gorilla) system is offline, all the employees were let go, and there's no money in the bank," said chief executive John Witchel. "Officetool.com has agreed to continue operating the Web site so that our customers can continue to use our software."
Red Gorilla, a privately held company founded last year, is an ASP that manages Web-based and wireless applications such as its time tracking and expense application, Gorilla Time. The company's customers include Adobe Systems, AdForce and NBCi's AllBusiness.com.
Officetool, based in San Diego, operates a similar business.
Less than two weeks ago, Red Gorilla laid off about 90 employees, according to Witchel, who said the layoffs were made necessary by insolvency.
Two weeks ago, Red Gorilla had been close to raising $10 million to $20 million in a third round of funding, but the investor backed out at the last minute, Witchel said. A last-minute attempt to secure a bridge loan also failed, and that's when the company pulled the plug.
"The problem wasn't the business; the problem is the capital markets," Witchel said.
Red Gorilla's primary investor was Utah Ventures, Witchel said.
Under today's agreement, Officetool has agreed to get the Red Gorilla site up by the end of the week; the site was taken down Thursday. The company has not purchased any Red Gorilla assets and does not assume any liabilities for the company, Witchel said.
"We've licensed Red Gorilla's products and plan to get their site running again as quickly as possible," said Scott Yale, CEO of Officetool, which is paying a fee to Red Gorilla. Officetool, which offers companies a suite of applications including group collaboration and calendaring, plans to integrate both products.
The physical assets of San Francisco-based Red Gorilla will be auctioned off next week, according to David Charyn, founder of Milpitas, Calif.-based Charyn Auctions, which is handling the auction.
The merchandise belongs to leasing company Dominion Ventures Financing, which hopes to recoup some loses on the equipment, Charyn said.
But many Red Gorilla customers may be miffed that the company's system won't be operational for a week--Yale's estimated time to get the site running again.
Several Red Gorilla customers including OfficeMax heard rumors that the company went out of business.
"We are aware of the rumors but as of right now, we don't know for sure," Steve Baisden, a spokesman for OfficeMax, said Monday. "They are a service provider to us. It's not going to have any effect on our business."
Said Yale: "You're going to have some unhappy customers. But their data will have been safe."
News.com's Melanie Austria Farmer contributed to this report.