Homestore Lowers 2000 Revenue $41.4M
The company said the audit revealed that some barter deals had been booked as cash transactions worth $36.4 million.
"It was also determined that there was insufficient support to establish the fair value of these barter exchanges and the related revenue has been reversed," a statement from the company said.
Homestore also reported that about $5 million in software revenue was improperly booked and should have been deferred.
The news comes as L90 Inc. has said it hired an accountant to review its books in relation to its dealings with Homestore, Westlake Village, CA. L90's move came one day after L90 fired its chief financial officer, its chief executive officer resigned and its merger with eUniverse Inc. was called off.
L90 said the accountant would look into two transactions conducted with Homestore in the second and third quarters of 2001. The company also said the accountant would look into any barter transactions involving L90 to determine whether its revenues may have been overstated or misstated during the two quarters.
Meanwhile, Homestore was once considered a rare dot-com success story but has had a string of bad press lately.
Earlier this month it was announced that Richard Smith, chairman and chief executive of the Cendant Corp. real estate unit, stepped down from Homestore's board. This came a day after club membership direct marketer MemberWorks Inc. said it was suing Homestore.
Cendant is the largest shareholder in Homestore. The resignation reduced the number of directors to seven and signaled a lack of confidence in the company's efforts to survive its many troubles, among them, MemberWorks' lawsuit.
MemberWorks accuses Homestore of securities fraud, common law fraud, negligent misrepresentation, unjust enrichment, violation of the Connecticut Unfair Trade Practices Act and breach of contract.
MemberWorks seeks unspecified damages from Homestore and a court order to prevent Homestore from selling any of iPlace's assets, a property Homestore bought from MemberWorks in August. IPlace, Langhorne, PA, provides credit and neighborhood information to real estate professionals and consumers.
According to MemberWorks, it watched Homestore's stock plummet 95 percent in the months since it sold iPlace to Homestore in a cash and stock transaction, and has been prevented from selling the stock because Homestore failed to register the deal with the Securities and Exchange Commission.
A "substantial" portion of what Homestore paid for iPlace was in stock, which was valued at $22 per share, or $36 million, on Aug. 24 when the deal was done, according to a statement from MemberWorks, Stamford, CT.
Homestore was supposed to register the transaction with the SEC before Dec. 22, MemberWorks claims. On Dec. 21, however, Homestore announced it would have to restate some of its earnings and, according to MemberWorks, never made the required filing. As a result, MemberWorks has been unable to sell its shares in Homestore, the company said.
Homestore in January said it overstated ad revenue from January to September 2001 by $54 million to $95 million, according to preliminary results of an internal accounting audit. At that time, it also said that it might have to restate earnings for 2000 as well.
Last month, the company narrowed its original estimation of overstated ad revenue for the first three quarters of 2001 to between $76 million and $82 million. However, Homestore stated that non-advertising revenue has been overstated by $28 million to $31 million for that period, but that $7 million to $23 million of the non-advertising revenue, primarily in software and services, may be booked as deferred revenue for future periods.
Homestore also had said last month that it would reduce its revenue for 2000 by $39 million to $45 million.