Cymax Stores Inc., a Canadian online furniture seller, has reduced its work force after auditors warned mounting losses were in danger of dragging the company under.
An audit by accounting firm Deloitte in May and previously undisclosed warned that the company's financial statements "indicate the existence of a material uncertainty that may cast doubt about Cymax Stores' ability to continue as a going concern."
Deloitte suggested the company rein in costs and boost margins and sales in order to remain viable.
Cymax, based in the Vancouver area, is one of the Canada's better-known startups. It raised $25-million last year from prominent investors including Markus Frind, founder of dating website Plenty of Fish, and the venture capital arm of the Business Development Bank of Canada. Chief executive officer Arash Fasihi started the firm in 2004 with the vision of building an Amazon-like online furniture retailer.
The audit shows Cymax had losses of $17.4-million over the two-year period ended December, 2015, an accumulated deficit of $31.2-million and a working capital deficiency of $7.1-million.
The company has existed over the past 10 years by using free cash flow from sales financed by "generous terms" from vendors and some debt financing, according to the audit. In the past year, Cymax replaced debt with equity financing from several investors, including "sophisticated e-business investors" who are on the company's board.
Mr. Fasihi didn't respond to e-mail, phone and text message requests for comment.