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Bombay Company's Future In Doubt, Says Audit Report

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The Bombay Company, Inc. reported that it has filed its Form 10-K with the Securities and Exchange Commission. As a result of the Company's recent operating performance and expected loss for Fiscal 2007, the unqualified audit report issued by its independent registered public accounting firm includes an explanatory paragraph indicating that these matters raise substantial doubt about the Company's ability to continue as a going concern. The Company had disclosed the possibility of such an opinion in an April 20 filing with the SEC. The Company's plans in regard to these matters are described below. In the second quarter of Fiscal 2006, the Company undertook a program to reduce expenses, increase revenue, and improve liquidity. While we have been successful in reducing expenses since undertaking the program, we have had difficulty reversing the declining sales trend, we believe in part because of a very difficult business climate in the furniture and home accessories sector. Management has identified a series of additional activities that it believes will be critical to achieving the Company's long-term goals of returning to profitability and positive cash flow, by among other things, reducing inventory levels and returning to historical levels of inventory turnover, exiting its dedicated BombayKIDS business and improving the productivity of the square footage previously dedicated to it, closing selected underperforming stores, enhancing its merchandise assortment, allocation and presentation and other initiatives, some of which would require capital over the next three to five years. The Company is currently in negotiations with potential lenders on a supplemental facility that would provide additional liquidity. In light of these challenges and as previously announced, the Board of Directors engaged William Blair & Company, an investment banking firm, and is evaluating a range of strategic alternatives to include pursuing our current strategy as an independent public company, seeking a strategic partner or acquirer, seeking a financial partner to make a substantial equity investment, or some combination of the foregoing. In April 2007, a confidential descriptive memorandum was distributed to potentially interested investors and the Company is aggressively pursuing options. This process is in its early stages, and there can be no assurance of any particular outcome. The Company does not expect to disclose further developments regarding the process until the review of strategic alternatives has been completed. The Bombay Company, Inc. designs, sources and markets a unique line of home accessories, wall dОcor and furniture through over 400 retail outlets and through our direct to customer channel at http://www.bombaycompany.com/ in the U.S. and internationally.

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