Polished.com Announces Internal Investigation Results, Corporate Updates and the Board of Directors’ Remedial Actions
December 22 2022 - 8:00AM
Business Wire
Polished.com Inc. (NYSE: POL) (formerly known as 1847 Goedeker
Inc.) (“Polished” or the “Company”), a content-driven and
technology-enabled shopping destination for appliances, furniture
and home goods in the U.S. household appliances market, today made
several announcements.
Internal Investigation
Results
The Company’s Board of Directors (the “Board”) has completed its
assessment of the results of the Audit Committee’s previously
disclosed internal investigation. The investigation, which was
supported by independent legal counsel and advisors, produced the
following key findings pertaining to the Company’s business
operations under former management during the 2021-2022 period:
- The Company was charged by its former Chief Executive Officer
approximately $800,000 for expenses unrelated to the Company and
its operations.
- The Company appears to not have had in place all the necessary
documentation for all of its employees and, in turn, may have
failed to comply with certain legal requirements. As elaborated on
below, the Company has subsequently put in place enhanced controls
to remedy any labor issues and believes it is now in full
compliance with legal requirements.
- The Company’s controls, software and procedures for managing
and tracking inventory, including damaged inventory, were
insufficient. As elaborated on below, the Company has subsequently
put in place enhanced controls to remedy such issues.
Corporate Updates
At the Board’s direction, the Company’s new management has
undertaken its own review of prior management’s practices and
representations. Based on a preliminary review and presently
available information, the Company does not expect any material
restatement of its fiscal year 2021 financial results. The Company
does, however, expect to restate the first quarter of fiscal year
2022, reflecting a reduction in revenue of $6 million to $8 million
and a related reduction in cost of goods sold of $5 million to $7
million. The likely result for the quarter is a decline in gross
margin and a reduction in income from operations (before income
taxes) of $1 million to $2 million.
Earlier this week, Polished received a resignation letter from
its auditor. As a result, the Company has been engaging with
qualified replacements and is in advanced discussions with a new
potential auditor. The Company expects that its new auditor will
re-audit fiscal year 2021 while also reviewing financials for the
second quarter of fiscal year 2021, the third quarter of fiscal
year 2021 and the first quarter of fiscal year 2022. The Company
plans to work with its new auditor to prepare and file all delayed
and restated financial statements as soon as reasonably
practicable.
In terms of outlook, the Company no longer expects to hit the
top-line and bottom-line guidance set forth by former management in
prior statements.1 In addition to challenges associated with this
year's management change and internal investigation, the Company
has been impacted by the same economic headwinds and margin
pressures facing other high-ticket consumer discretionary
companies. With this context in mind, the Board and new management
retain high conviction in Polished's go-forward ability to grow
profitability and seize on unique positioning in the robust U.S.
home appliances market.
Remedial Actions
In terms of remedial actions pertaining to the internal
investigation, the Board has reached an agreement with its former
Chief Executive Officer to, among other things, be reimbursed for
substantially all of (i) the non-Company related expenses that were
charged to the Company and (ii) the costs pertaining to the Audit
Committee’s investigation. The Board has also taken the following
steps to address issues identified during the internal
investigation and new management’s initial business assessment:
- Hired a controller with significant relevant experience.
- Hired a new human resources director, who is leading an
overhaul of certain employee policies.
- Initiated the installation of enhanced payroll software that
requires all new employees to provide I-9 information and verifies
the validity of key information.
- Initiated the installation of enhanced software and systems for
inventory management.
- Ensured the implementation of standardized policies for the
handling and sale of damaged inventory.
- Developed a plan to convert the Company to a new ERP and system
for accounting.
- Maintained frequent and transparent communication with the
Company’s lending institution in order to retain the
relationship.
- Nominated a slate of director candidates at the 2022 Annual
Meeting of Stockholders that does not include any member of the
prior management team.
- Started working with new management to ensure delayed and any
revised quarterly financial statements are filed as soon as
reasonably practicable.
The Board is committed to continually strengthening the Company
and exploring all paths to maximizing value for stockholders.
ABOUT POLISHED
Polished is raising the bar, delivering a world-class,
white-glove shopping experience for home appliances. From the best
product selections from top brands to exceptional customer service,
we are simplifying the purchasing process and empowering consumers
as we provide a polished experience, from inspiration to
installation. A product expert helps customers get inspired and
imagine the space they want, then shares fresh ideas, unbiased
recommendations and excellent deals to suit the project's budget
and style. The goal is peace of mind when it comes to new
appliances. Polished perks include its "Love-It-Or-Return-It"
30-day policy, extended warranties, the ability to arrange for
delivery and installation at your convenience and other special
offers. Learn more at www.Polished.com.
FORWARD LOOKING STATEMENTS
This press release contains "forward-looking statements" that
are subject to substantial risks and uncertainties. All statements,
other than statements of historical fact, contained in this press
release are forward-looking statements. Forward-looking statements
contained in this press release may be identified by the use of
words such as "anticipate," "believe," "contemplate," "could,"
"estimate," "expect," "intend," "seek," "may," "might," "plan,"
"potential," "predict," "project," "target," "aim," "should,"
"will", "would," or the negative of these words or other similar
expressions, although not all forward-looking statements contain
these words. Forward-looking statements are based on the Company's
current expectations and are subject to inherent uncertainties,
risks and assumptions that are difficult to predict. Further,
certain forward-looking statements are based on assumptions as to
future events that may not prove to be accurate. You should not
place undue reliance on forward-looking statements because they
involve known and unknown risks, uncertainties and other factors,
which are, in some cases, beyond the Company’s control and which
could materially affect results. Factors that may cause actual
results to differ materially from current expectations include,
among other things, those described more fully in the section
titled "Risk Factors" of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2021, and Quarterly Report on Form
10-Q for the quarter ended March 31, 2022, filed with the
Securities and Exchange Commission. Forward-looking statements
contained in this announcement are made as of this date, and the
Company undertakes no duty to update such information except as
required under applicable law.
___________________________ 1 The Company provided fiscal year
2022 guidance on March 31, 2022 (link here) and provided updated
fiscal year 2022 guidance on August 15, 2022 (link here).
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version on businesswire.com: https://www.businesswire.com/news/home/20221222005114/en/
Ashley Areopagita ir@polished.com
PolyOne (NYSE:POL)
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