Because it has yet to file its annual report form 10-K, San Francisco-based Design Within Reach received notification that its stock symbol may be delisted from the Nasdaq Stock Market. Officials for Design Within Reach said they intend to file its 2005 Form 10-K by April 14 after receiving two extensions.
But the Nasdaq Stock Market indicated that the company’s securities are subject to potential delisting as of April 12, due to its failure to file its annual report on Form 10-K for the fiscal year ended Dec. 31, 2005 on a timely basis.
The modern furnishings cataloger/retailer, which went public in June 2004, announced on March 14 and March 30 a delay in the filing of its 2005 Form 10-K due to continued delays in completing year-end procedures as a result of difficulties encountered related to the company’s information technology system conversion, and the increased reporting requirements under Section 404 of the Sarbanes-Oxley Act.
“The delinquency is related to complex systems issues,” Design Within Reach spokeswoman Jordan Benjamin said. Benjamin declined further comment on the potential delisting.
In addition, the company’s independent public accounting firm has not yet completed its audit. In its Form 8-K filed March 31, the company disclosed it is not in compliance with Nasdaq Marketplace Rule 4310(c)(14), which requires the timely filing with Nasdaq of all reports and other documents filed or required to be filed with the Securities and Exchange Commission.
If necessary, the company plans to request a hearing before a Nasdaq Listing Qualifications Panel to review the notice and request continued listing on Nasdaq until it files the 2005 Form 10-K. In its notification letter, the Nasdaq staff informed the company that the potential delisting would be postponed, pending the panel’s decision. But the company cannot guarantee that the panel will grant its request for continued listing.
Last month, company officials predicted a loss in its fourth-quarter and fiscal 2005 earnings, as the quarter was weighed down by heavy stock-based compensation charges and administrative expenses. In a release, Design Within Reach said its expects a fourth-quarter loss of between $4.2 million and $4.5 million, or 30 cents to 32 cents per diluted share, compared to earnings of $1.5 million, or 10 cents per share, last year. Also, the company predicts an increase in fourth-quarter revenue to $41.4 million, compared to $39.7 million a year ago.
For 2005, the company predicts a loss ranging from $2.4 million to $2.7 million, or 18 cents to 20 cents per share, compared to net earnings of $3.7 million, or 29 cents per share, in the prior year. The results include $1 million of stock-based compensation charges and about $700,000 of charges related to the information technology system conversion. For all of 2005, revenue increased to $158.2 million, from $120.6 million a year earlier.
In 2004, Design Within Reach posted net income of $3.74 million, a 26% increase from the year before. Sales in 2004 — almost half of which come from its catalogs and Website — rose an impressive 49%, to $120.6 million.