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YogaWorks Q2 Photo courtesy YogaWorks.
YogaWorks' delisting from the NASDAQ Global Market (YOGA) was fully completed on Aug. 1, 2019, according to a new filing with the United States Securities and Exchange Commission (SEC).

YogaWorks Reports Q2 Decline Amid Lawsuit Alleging IPO Misconduct

Despite recently delisting from NASDAQ, YogaWorks still filed its form with the SEC to report its second quarter earnings, noting a 6.7 percent quarterly revenue decrease, in addition to outlining its declining stock price. Additionally, the filing addresses a pending class action lawsuit alleging that YogaWorks did not disclose critical financial issues prior to its 2017 initial public offering.

YogaWorks, Culver City, California, recently delisted from the NASDAQ Global Market (YOGA), but the company still reported its second quarter 2019 performance via an Aug. 14 filing with the United States Securities and Exchange Commission (SEC).

The company's quarterly revenue decreased by 6.7 percent to $13.9 million, according to the filing.

It reported $4.36 million in net losses (a positive decrease of 34.4 percent) while also reporting a loss of $2.19 million in adjusted EBITDA (a negative increase of 58.6 percent).

The company claimed 68 studios as of June 30, 2019, versus 71 during the same period last year.

Additionally, the filing detailed the company’s recent stock performance and noted a quarterly loss of 19 cents per share, a negative increase of 13.6 percent.

YogaWorks' last closing price was approximately 14 cents per share, according to NASDAQ. This marked a 97.4 percent decrease from the company's value of $5.50 per share at the time of its initial public offering (IPO) in August 2017.

The filing addressed a class action lawsuit filed against the company in California federal court in December 2018. The suit, filed by shareholder Craig Cohen, claimed YogaWorks did not disclose critical financial issues prior to its 2017 IPO, ultimately misleading stakeholders.

The complaint stated: "What [the company's IPO] offering materials failed to disclose, however, was that YogaWorks’ net loss for the quarter ended June 30, 2017, which was complete before the IPO, but its financial statements were not disclosed until after, had increased by more than 57 percent over the same quarter of the prior year. ... The declines were part of a quarter-over-quarter trend known by YogaWorks management at the time of the IPO but undisclosed in the offering materials.

"Thus, there existed a trend known to YogaWorks that was likely, and did, impact its financial performance going forward at the time of the IPO, as evidenced by the delayed offering date and downsized IPO that the defendants [were] required to include in its disclosures in the offering materials for the benefit of investors, which they did not do," the complaint continued.

On July 23, YogaWorks requested a dismissal of the case, and a hearing on the matter is slated for Dec. 9, 2019.

The dismissal request counter-argued the validity of Cohen’s claims and questioned the time lapse between YogaWorks’ IPO and the filing of this lawsuit.

“In analyzing whether the [IPO] offering materials contained any material misrepresentation or omission, the relevant inquiry is not whether the statement later turned out to be correct, but rather whether the defendant knew or had reason to know, at the time the offering documents were filed, that the statement was untrue,” the dismissal motion stated. “[A] plaintiff cannot use the benefit of 20/20 hindsight to turn management’s business judgment into a securities violation. The court, in assessing plaintiff’s allegations, must consider the full text of the [offering materials], including portions which were not mentioned in the complaint.”

In its SEC filing, YogaWorks only stated it would“vigorously defend the claims asserted against it.”

YogaWorks ranked No. 24 on Club Industry's Top 100 Health Clubs of 2019 list with $59.6 million in 2018 revenue.

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