The brave face The Sharper Image put on has crumbled.

Since August, the ailing electronics and specialty gifts retailer has been dismissing rumors that it was on the verge of bankruptcy. On Wednesday, it filed for reorganization under Chapter 11 of the bankruptcy code.

Sharper Image (nasdaq: SHRP - news - people ) shares plummeted 71.3%, or 41 cents, to $1.03 at the close on Wednesday.

Sharper Image’s sales have been declining since 2004, but its straits have worsened of late with the declining dollar and a slowdown on consumer spending. The company said it has suffered from increased competition, narrowing margins, lower consumer and market confidence, tighter credit from suppliers and poorly performing stores. It also has been stung by negative publicity because of a class-action law suit filed by consumers who claimed Sharper Image's Ionic Breeze air purifier didn't remove dust, pollen or other particles as advertised. (See: “ Sharper Image Makes Clear Gains”)

In a filing with the Bankruptcy Court for the District of Delaware, the San Francisco-based company said it had $251.5 million in assets and $199 million in debt as of Jan. 31, but just $700,000 of cash on hand. Under Chapter 11, a company is given time to restructure its debts and fulfill obligations.

The news comes one week after the latest move in the game of musical chairs in the company's executive suite: the appointment of crisis management expert Ron Conway, who runs a New York-based management consultancy firm, as chief executive, replacing direct-marketing veteran Steven Lightman who came on board less than a year ago to stem sinking sales. Lightman replaced Sharper Image Chairman Jerry Levin, who temporarily stepped in as CEO after the company ousted founder Richard Thalheimer from the job.

Sharper Image gave no reason for Lightman's departure in a statement announcing Conway as its new CEO.

Sharper Image's stock price has fallen 85.0% since Lightman was appointed CEO last April.

Catalog merchant Lillian Vernon, which sells gifts, housewares and children's products, also announced it filed for Chapter 11 bankruptcy protection on Wednesday because of falling sales and worsening credit market conditions.

In the two weeks leading up to Lightman's departure, three of Sharper Image's 11 board members resigned as directors. Sharper Image said the directors' resignations weren't because of disagreements about the company's operations or policies.

Meanwhile, the company is seeking a $60 million loan arranged by Wells Fargo Retail Finance.

In a separate filing, Chief Financial Officer Rebecca L. Roedell said the company plans to close 90 of its 184 stores as soon as possible after it sells their inventories.

Sharper Image has lost a total of $136 million since January 2005 while its annual sales have plummeted from $776 million to under $400 million. In its most recent fiscal year, Sharper Image said its sales dropped 26.0%.

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