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Burned by the private equity market's impatience with unprofitable dot-coms, ICanBuy.com told atNewYork that investors are not buying into its three-year plan to reach profitability.

As a result, the free service that enables parents to use credit cards to fund prepaid spending accounts for their children said a shutdown is likely. The site's co-founder, Paul Herman, said money and gift certificates already deposited would be refunded.

Herman also said ICanBuy has run out of cash and is "preparing to wind down." The company gave about 35 employees layoff notices this week.

A note on the site read: "We're very sorry, but the iCanBuy site is closing. Don't worry! Any money or gift certificates deposited in your account will be fully refunded."

Herman co-founded the company in March of 1999. He said the business was burned by the financial market's insistence that Internet companies turn a profit in a short time.

"Unfortunately, investors who a year ago didn't care about profitability, now want us to be profitable yesterday. It is an impossible situation," Herman told atNewYork.com. "We were operating in gross mode which meant we weren't able to be profitable for another year, according to our original three-year plan."

Herman said the company launched last year with a solid three-year plan to make a profit, including breaking even next year, had the funding come through. "But in this environment, it doesn't look good. "We are preparing for the worst but we are hoping for the best."

He said ICanBuy is negotiating a possible sale or merger with several interested parties and is trying to "avoid bankruptcy" at all costs.

"To be fair to customers, partners and employees, we're preparing a professional wind-down. We are refunding prepayments to customers and making sure our partners are paid. We are intent on avoiding bankruptcy," he declared.

Earlier this year, ICanBuy merged with mainXchange.com in a stock swap deal and Herman said a decision has not yet been reached regarding mainXchange's future.

MainXchange.com operates online stock-market games and other money-management activities for a Generation-Y audience. Between the two companies, some $10 million was used up in two separate funding rounds. ICan buy was funded primarily by angel investors while mainXchange received financing from Wit Capital and unidentified Israeli venture capitalists.

Herman said it was particularly painful to be facing closure during the holiday shopping season. "The Christmas season was very good to us in 1999 and it figures to be bigger this year. Unfortunately, the investors do not have the patience."

ICanBuy is not the only company in the prepayment space to cut back. Competitors doughNet and PocketCard have both announced layoffs recently, citing cash flow problems.

"The space is an active space but the investors are still whipping on us. It seems that first-to-market is not such a good thing this year. Last year, it was a very different environment."

* Ryan Naraine is assistant editor of atNewYork.com