LuxeYard reports $3.6 million operating loss, fires ceo
Kristine Ellis -- Casual Living, November 26, 2012
Los Angles- Online retailer LuxeYard, which sells home furnishings and décor through online "flash sales," reported third-quarter revenue of $574,381, but had an operating loss of more than $3.6 million.
The publicly traded company said it had net income of $3.53 million for the quarter due to a $6.05 million gain on derivatives that was triggered by a decrease in the market value of its common stock. However, the company had negative operating cash flow and included a "going concern" qualification in a filing with the Securities and Exchange Commission.
LuxeYard was launched on April 20, 2011, and the company provided no comparative numbers for the third quarter of 2011.
For the nine months ended this Sept. 30, revenues totaled $1.44 million and the operating loss was $13.3 million.
Net income was $5.04 million due to a $19.6 million gain on derivatives.
Shortly after the quarter ended, LuxeYard fired ceo Bradon Richter and filed suit against Richter, his wife, Victoria Richter, and a furniture store they own, Jaxon International.
The suit stems from a management agreement the company signed with Jaxon on May 1, but was terminated before Richter was fired on Oct. 23. It accuses Richter of breach of fiduciary duties and seeks repayment of a $308,000 loan LuxeYard made to Jaxon. It also accuses Richter of conspiring with other LuxeYard shareholders who were defendants in a separate lawsuit filed by the company in August.
The SEC filing says LuxeYard received $1.5 million from the defendants to settle that lawsuit.
In 2012, the company has funded its operations largely from $5.81 million in proceeds from the sale of debentures and preferred stock warrants.
In addition, it was noted in the SEC filing that the company received three advances totaling $50,000 from an unnamed shareholder, as well as a $575,000 loan from Amir Mireskandari, chairman of the board. The loan had an outstanding balance of $350,000 as of Sept. 30.
In its SEC filing, the company said there was "substantial doubt about our ability to continue as a going concern" because it may not be able to obtain additional capital to continue operations.
In a press release announcing the third-quarter results, the company said it is continuing to focus on improving internal efficiencies "while continuing to provide customers with access to a deep product mix and a robust shopping experience."
"We are confident LuxeYard will continue to attract customer sales within a saturated landscape by offering retail consumers high-quality, customizable items at competitive prices, along with our standard flash-sale events," said Jerry Wilkerson, chief operating officer.
After Richter was fired, Mireskandari was given the additional title of interim ceo.
The company's most recent chief financial officer, Bryan Semmens, began work Sept. 7 but resigned Oct. 3. Wilkerson has been named interim cfo until a replacement is hired.