Luvu Brands, Inc 10-Q for FY2025 Q1
Luvu Brands, Inc. (LUVU)
About this 10-Q
Luvu Brands, Inc filed this 10-Q on November 14, 2024, covering the quarter ended September 30, 2024 (FY2025 Q1).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.76M
- down 6.0% from $6.13M a year earlier
- Net loss
- $210K
- compared with a net loss of $126K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE QUARTERLY PERIOD ENDED
| OR |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission File Number
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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None |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 14, 2024, there were
LUVU BRANDS, INC.
TABLE OF CONTENTS
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| Consolidated Balance Sheets – At September 30, 2024 (unaudited) and June 30, 2024 | 4 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | |
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Unless the context otherwise indicates, when used in this report, the terms the “Company,” “LUVU”, “we,” “us, “our” and similar terms refer to LUVU Brands, Inc. and the Company’s wholly owned subsidiaries, OneUp Innovations, Inc. (“OneUp”), and Foam Labs, Inc. (“Foam Labs”). The Company’s corporate website is www.LuvuBrands.com. Certain of the Company’s documents, its news releases and the Company’s filings with the U.S. Securities and Exchange Commission including financial statements are available on the Company’s corporate website.
Unless specifically set forth to the contrary, the information that appears on the Company’s websites or its various social media platforms is not part of this report.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This report may contain forward-looking statements, which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “expects,” “anticipates,” “intends,” “plan,” “believes,” “predicts”, “estimates” or similar expressions. In addition, any statement concerning future financial performance, ongoing business strategies or prospects and possible future actions are also forward-looking statements. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning the Company, the performance of the industry in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of this report. Except to the extent required by federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LUVU BRANDS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
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Assets: |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $ |
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Inventories, net of allowance for inventory reserve of $ |
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Other current assets |
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Total current assets |
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Equipment, property and leasehold improvements, net |
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Finance lease assets |
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Operating lease assets |
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Other assets |
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Total assets |
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Liabilities and stockholders’ equity: |
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Current liabilities: |
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Accounts payable |
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Current debt |
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Other accrued liabilities |
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Operating lease liability |
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Total current liabilities |
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Noncurrent liabilities: |
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Deferred Tax Liability |
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Long-term debt |
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Long-term operating lease liability |
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Total noncurrent liabilities |
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Total liabilities |
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Commitments and contingencies (See Note 12) |
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Stockholders’ equity (deficit): |
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Preferred stock, |
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Series A Convertible Preferred stock, |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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See accompanying notes to unaudited consolidated financial statements.
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| Table of Contents |
LUVU BRANDS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
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Net Sales |
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Cost of goods sold (excluding depreciation expense presented below) |
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Gross profit |
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Operating expenses: |
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Advertising and promotion |
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Other selling and marketing |
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General and administrative |
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Depreciation |
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Total operating expenses |
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Operating loss |
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Other income (expense): |
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Interest expense and financing costs, net |
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Loss from operations before income taxes |
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Provision for income taxes |
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Net loss per share: |
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Basic |
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Diluted |
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Shares used in calculation of net loss per share: |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated financial statements.
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| Table of Contents |
Luvu Brands, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the Three Months ended September 30, 2024 and September 30, 2023 (unaudited)
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Balance, June 30, 2023 |
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Stock-based compensation expense |
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Stock option exercises |
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Net loss |
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Balance, September 30, 2023 |
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Balance, June 30, 2024 |
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Stock-based compensation expense |
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Stock option exercises |
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Net loss |
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Balance, September 30, 2024 |
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See accompanying notes to unaudited consolidated financial statements.
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| Table of Contents |
LUVU BRANDS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
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OPERATING ACTIVITIES: |
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Net loss |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Provision for bad debt |
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Change in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses and interest |
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Operating lease liability |
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Operating lease asset |
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Net cash provided by operating activities |
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INVESTING ACTIVITIES: |
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Investment in equipment, software and leasehold improvements |
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Net cash used in investing activities |
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FINANCING ACTIVITIES: |
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Borrowing under revolving line of credit |
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Repayment of unsecured line of credit |
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Proceeds from unsecured notes payable |
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Repayment of unsecured notes payable |
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Payments on equipment notes |
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Principal payments on capital leases |
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Net cash used in financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of year |
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Supplemental Disclosure of Cash Flow Information: |
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Cash paid during the year for: |
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Interest |
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See accompanying notes to unaudited consolidated financial statements.
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| Table of Contents |
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Luvu Brands, Inc. (the “Company” or “Luvu”) was incorporated in the State of Florida on February 25, 1999. References to the Company in these notes include the Company and its wholly owned subsidiaries, OneUp Innovations, Inc. (“OneUp”), and Foam Labs, Inc. (“Foam Labs”). All operations of the Company are currently conducted by OneUp.
The Company is an Atlanta, Georgia based designer, manufacturer and marketer of a portfolio of consumer lifestyle brands including: Liberator®, a brand category of iconic products for enhancing sexual performance; Avana®, Top-of-Bed Comfort products and inclined bed therapy products, assistive in relieving medical conditions associated with acid reflux, surgery recovery, and chronic pain; and Jaxx®, a diverse range of casual fashion daybeds, sofas and beanbags made from polyurethane foam and repurposed polyurethane foam trim. These products are sold through the Company’s websites, online mass merchants and retail stores worldwide. Many of the Company’s products are offered flat-packed and either roll or vacuum compressed to save on shipping and reduce the Company’s carbon footprint.
Sales are generated through internet and print advertisements and social marketing. The Company has a diversified customer base with only one customer accounting for
The accompanying unaudited consolidated financial statements of the Company and all of its wholly-owned subsidiaries included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") have been or omitted pursuant to applicable rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included. The year-end balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the three months ended September 30, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2024 as filed with the Securities and Exchange Commission (the “SEC”) on September 30, 2024 (the “2024 10-K”).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements include the accounts and operations of the Company’s wholly owned operating subsidiaries, OneUp and Foam Labs. Intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.
The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These consolidated financial statements and notes should be read in conjunction with the Company’s consolidated financial statements contained in the Company’s 2024 10-K.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates in these consolidated financial statements include estimates of: income taxes; tax valuation reserves; allowances for doubtful accounts; inventory valuation and reserves; share-based compensation; and useful lives for depreciation and amortization. Actual results could differ materially from these estimates.
| 8 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
The Company records revenue based on the five-step model which includes: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when the performance obligations are satisfied. Substantially all of the Company’s revenue is generated by fulfilling orders for the purchase of manufactured products and product purchased for resale to retailers, wholesalers, or direct to consumers via online channels, with each order considered to be a distinct performance obligation. These orders may be formal purchase orders, verbal phone orders, e-mail orders or orders received online. Shipping and handling activities for which the Company is responsible under the terms and conditions of the order are not accounted for as performance obligations but as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the goods and are expensed when revenue is recognized. The impact of this policy election is insignificant as it aligns with the Company’s current practice.
Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling a performance obligation. The Company has elected to exclude sales, use and similar taxes from the measurement of the transaction price. The impact of this policy election is insignificant, as it aligns with the Company’s current practice. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, which includes costs for trade promotion programs, coupons, returns and early payment discounts. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. The Company reviews and updates these estimates at the end of each reporting period and the impact of any adjustments are recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, the Company considers the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, typically 30 days from the invoice date, which occurs on the date of transfer of control of the products to the customer. Revenue is recognized at the point in time that control of the ordered products is transferred to the customer. Generally, this occurs when the product is shipped from the distribution center, or in some cases, picked up from one of the Company’s distribution centers by the customer.
Deferred revenues
Deferred revenues are recorded when the Company has received consideration (i.e. advance payment) before satisfying its performance obligations. Deferred revenues primarily relate to gift cards purchased, but not used, prior to the end of the fiscal period.
The Company’s total deferred revenue as of September 30, 2024 was $
Cost of Goods Sold
Cost of goods sold includes raw materials, labor, manufacturing overhead, and royalty expense.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
| 9 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects management's best estimate of probable credit losses inherent in the accounts receivable balance. The Company determines the allowance based on historical experience, specifically identified nonpaying accounts, and other currently available evidence. The Company reviews its allowance for doubtful accounts monthly, focusing on significant individual past due balances over 90 days. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.
The following is a summary of Accounts Receivable as of September 30, 2024 and June 30, 2024.
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Accounts receivable |
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Allowance for doubtful accounts |
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Allowance for discounts and returns |
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Total accounts receivable, net |
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Inventories and Inventory Reserves
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Net realizable value is defined as sales price less cost to dispose and a normal profit margin. Inventory costs include materials, labor, depreciation and overhead. The Company establishes reserves for excess and obsolete inventory, based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions.
Concentration of Credit Risk
The Company maintains its cash accounts with banks located in Georgia. The Federal Deposit Insurance Corporation (“FDIC”) insures the total cash balances up to $
During the three months ended September 30, 2024, the Company purchased
During the three months ended September 30, 2023, the Company purchased
As of September 30, 2024, two of the Company’s customers represents
| 10 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
At September 30, 2024 and June 30, 2024, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.
The fair values of these financial instruments approximated their carrying values based on either their short maturity or current terms for similar instruments.
The Company measures the fair value of its assets and liabilities under the guidance of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.
ASC 820 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly such as quoted prices for similar assets or liabilities or market-corroborated inputs; and
Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities.
The valuation techniques that may be used to measure fair value are as follows:
A. Market approach- Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
B. Income approach- Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method.
C. Cost approach- Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
Advertising Costs
Advertising costs are expensed in the period when the advertisements are first aired or distributed to the public. There were $
Research and Development
Research and development expenses for new products are expensed as they are incurred. Expenses for new product development totaled $
| 11 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over estimated service lives for financial reporting purposes of
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the respective accounts, and any gain or loss is recognized currently.
Impairment or Disposal of Long Lived Assets
Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by Financial Accounting Standards Board (“FASB”) ASC Topic No. 360, Property, Plant, and Equipment. The Company has determined that there was no impairment at September 30, 2024.
Operating Leases
On November 2, 2020, the Company entered into an agreement with its landlord on a new lease for the current facilities for six years and two months, beginning January 1, 2021. The new lease includes two months of rent abatement totaling $
Under ASC 842, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company elected not to recognize leases with a term less than one year on its balance sheet. Operating lease right-of-use (ROU) assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.) Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, the Company elected the practical expedient to not separate lease and non-lease components. The lease component results in an operating right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense. See Note 12 for details.
| 12 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Segment Information
The Company have identified three reportable sales channels: Direct, Wholesale and Other. Direct includes product sales through the Company’s four e-commerce sites. Wholesale includes Liberator, Jaxx, and Avana branded products sold to distributors and retailers, purchased products sold to retailers, and private label items sold to other resellers. The Wholesale category also includes contract manufacturing services, which consists of specialty items that are manufactured in small quantities for certain customers, and which, to date, has not been a material part of the Company’s business. Other consists principally of shipping and handling fees and costs derived from the Company’s Direct business.
The following is a summary of sales results for the Direct, Wholesale, and Other channels.
|
| Three Months Ended September 30, 2024 |
|
| Three Months Ended September 30, 2023 |
|
| % Change |
| |||
|
| (in thousands) |
|
|
| |||||||
Net Sales by Channel: |
|
|
|
|
|
|
|
|
| |||
Direct |
| $ |
|
| $ |
|
|
| % | |||
Wholesale |
| $ |
|
| $ |
|
|
| - | % | ||
Other |
| $ |
|
| $ |
|
|
| - | % | ||
Total Net Sales |
| $ |
|
| $ |
|
|
| - | % | ||
|
| Three Months Ended |
|
| Margin |
|
| Three Months Ended |
|
| Margin |
|
| % |
| |||||
|
| September 30, 2024 |
|
| % |
|
| September 30, 2023 |
|
| % |
|
| Change |
| |||||
|
| (in thousands) |
|
|
|
| (in thousands) |
|
|
|
|
| ||||||||
Gross Profit by Channel: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Direct |
| $ |
|
|
| % |
| $ |
|
|
| % |
|
| - | % | ||||
Wholesale |
| $ |
|
|
| % |
| $ |
|
|
| % |
|
| % | |||||
Other |
| $ | ( | ) |
|
| - | % |
| $ | ( | ) |
|
| - | % |
|
| - | % |
Total Gross Profit |
| $ |
|
|
| % |
| $ |
|
|
| % |
|
| - | % | ||||
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.
In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses. ASU 2023-07 requires the Company to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. ASU 2023-07 also requires that the Company disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic 280 during interim periods. The Company must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. For public entities with a single reportable segment, the entity must provide all the disclosures required pursuant to ASU 2023-07 and all existing segment disclosures under Topic 280. The amendments of ASU 2023-07 are effective for the Company for annual periods beginning July 1, 2024, and effective for interim periods beginning January 1, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023-07 on its financial statements.
All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.
| 13 |
| Table of Contents |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Loss Per Share
In accordance with ASC 260, “Earnings Per Share”, basic net income per share is computed by dividing the net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income available to common stockholders by the weighted average number of common and common equivalent shares outstanding during the period plus the effect of stock options using the treasury stock method. As of September 30, 2024 and 2023, the common stock equivalents did not have any effect on net loss per share.
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Common stock options – 2015 Plan |
|
|
|
|
|
| ||
Convertible preferred stock |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
Income Taxes
The Company utilizes the asset and liability method of accounting for income taxes. The Company recognizes deferred tax liabilities or assets for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. The Company regularly assesses the likelihood that its deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies in assessing the amount of the valuation allowance necessary to offset the Company’s deferred tax assets that will not be recoverable. The Company has recorded and continues to carry a full valuation allowance against its gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period. If the Company determines in the future that it is more likely than not that it will realize all or a portion of its deferred tax assets, the Company will adjust its valuation allowance in the period it makes the determination. The Company expects to provide a full valuation allowance on its future tax benefits until it can sustain a level of profitability that demonstrates the Company’s ability to realize these assets.
Stock Based Compensation
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. The Company measures the cost of each stock option and restricted stock award at its fair value on the grant date. Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as an expense in the financial statements over the respective vesting period.
NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows FASB ASC 360, Property, Plant, and Equipment, regarding impairment of the Company’s other long-lived assets (property, plant and equipment). The Company’s policy is to assess the Company’s long-lived assets for impairment annually in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.
An impairment loss is recognized only if the carrying value of a long-lived asset is not recoverable and is measured as the excess of its carrying value over its fair value. The carrying amount of a long-lived asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of a long-lived asset.
Assets to be disposed of and related liabilities would be separately presented in the consolidated balance sheet. Assets to be disposed of would be reported at the lower of the carrying value or fair value less costs to sell and would not be depreciated. There was no impairment as of September 30, 2024 or June 30, 2024.
| 14 |
| Table of Contents |
NOTE 4. INVENTORIES, NET
Inventories are stated at the lower of cost (which approximates first-in, first-out) or net realizable value. Net realizable value is defined as sales price less cost to dispose and a normal profit margin. Inventories consisted of the following:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
|
| (unaudited) |
| |||||
|
| (in thousands) |
| |||||
Raw materials |
| $ |
|
| $ |
| ||
Work in process |
|
|
|
|
|
| ||
Finished goods |
|
|
|
|
|
| ||
Total inventories |
|
|
|
|
|
| ||
Allowance for inventory reserves |
|
| ( | ) |
|
| ( | ) |
| Total inventories, net of allowance |
| $ |
|
| $ |
| ||
NOTE 5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment, property and leasehold improvements at September 30, 2024 and June 30, 2024 consisted of the following:
|
| September 30, 2024 |
|
| June 30, 2024 |
|
| Estimated Useful Life | |||
|
| (unaudited) |
|
|
| ||||||
|
| (in thousands) |
|
|
| ||||||
Factory equipment |
| $ |
|
| $ |
|
| ||||
Computer equipment and software |
|
|
|
|
|
|
| ||||
Office equipment and furniture |
|
|
|
|
|
|
| ||||
Leasehold improvements |
|
|
|
|
|
|
| ||||
Subtotal |
|
|
|
|
|
|
|
| |||
Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
|
| |
Equipment and leasehold improvements, net |
| $ |
|
| $ |
|
|
| |||
Depreciation expense was $
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amount to forecasted undiscounted future cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future cash flows, then an impairment charge is recognized to the extent that the carrying amount exceeds the asset’s fair value. Management has determined no asset impairment occurred during the three months ended September 30, 2024.
NOTE 6. OTHER ACCRUED LIABILITIES
Other accrued liabilities at September 30, 2024 and June 30, 2024:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
|
| (unaudited) |
|
|
| |||
|
| (in thousands) |
| |||||
|
|
|
|
| ||||
Accrued compensation |
| $ |
|
| $ |
| ||
Accrued expenses and interest |
|
|
|
|
|
| ||
Other accrued liabilities |
| $ |
|
| $ |
| ||
| 15 |
| Table of Contents |
NOTE 7. CURRENT AND LONG-TERM DEBT SUMMARY
Current and long-term debt at September 30, 2024 and June 30, 2024 consisted of the following:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
|
| (unaudited) |
|
|
| |||
Current debt: |
| (in thousands) |
| |||||
Unsecured lines of credit (Note 11) |
| $ |
|
| $ |
| ||
Line of credit (Note 10) |
|
|
|
|
|
| ||
Short-term unsecured notes payable (Note 8) |
|
|
|
|
|
| ||
Current portion of equipment notes payable (Note 12) |
|
|
|
|
|
| ||
Notes payable – related party |
|
|
|
|
|
| ||
Current portion of finance leases payable (Note 12) |
|
|
|
|
|
| ||
Total current debt |
|
|
|
|
|
| ||
Long-term debt: |
|
|
|
|
|
|
|
|
Unsecured notes payable (Note 8) |
|
|
|
|
|
| ||
Finance leases payable (Note 12) |
|
|
|
|
|
| ||
Equipment notes payable (Note 12) |
|
|
|
|
|
| ||
Notes payable – related party |
|
|
|
|
|
| ||
Total long-term debt |
| $ |
|
| $ |
| ||
| 16 |
| Table of Contents |
NOTE 8. UNSECURED NOTES PAYABLE
Unsecured notes payable at September 30, 2024 and June 30, 2024 consisted of the following:
|
| September 30, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2024 |
| ||
Current debt: |
| (in thousands) |
| |||||
|
|
|
|
|
|
| ||
13.5% Unsecured note, interest only, due May 1, 2025 (2) |
| $ |
|
| $ |
| ||
13.5% Unsecured note, interest only, due July 31, 2025(3) |
|
|
|
|
|
| ||
Total current debt |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Long-term debt: |
|
|
|
|
|
|
|
|
13.5% Unsecured note, interest only, due July 31, 2025(3) |
| $ |
|
| $ |
| ||
13.5% Unsecured note, interest only, due October 31, 2025(1) |
|
|
|
|
|
| ||
Total long-term debt |
|
|
|
|
|
| ||
Total unsecured notes payable |
| $ |
|
| $ |
| ||
(1) Unsecured note payable for $
(2) Unsecured note payable for $
(3) Unsecured note payable for $
| 17 |
| Table of Contents |
NOTE 9. NOTES PAYABLE - RELATED PARTY
Related party notes payable at September 30, 2024 and June 30, 2024 consisted of the following:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
|
| (unaudited) |
| |||||
|
| (in thousands) |
| |||||
|
|
|
|
|
|
| ||
Unsecured note payable to an officer, with interest at 8.50%, due on July 1, 2025 |
| $ |
|
| $ |
| ||
Unsecured note payable to an officer, with interest at 8.50%, due on July 1, 2025 |
|
|
|
|
|
| ||
Total unsecured notes payable |
|
|
|
|
|
| ||
Less: current portion |
|
| ( | ) |
|
|
| |
Long-term unsecured notes payable |
| $ |
|
| $ |
| ||
NOTE 10. LINE OF CREDIT
The Company’s wholly owned subsidiary, OneUp and OneUp’s wholly owned subsidiary, Foam Labs, has entered into a credit facility with a finance company, Advance Financial Corporation dated May 24, 2011, as amended, to provide it with an asset based line of credit of up to $
The Company’s President, Chief Executive Officer (CEO), and majority shareholder, Louis Friedman, has personally guaranteed the repayment of the facility. In addition, the Company has provided its corporate guarantee of the credit facility (see Note 13). On September 30, 2024, the balance owed under this line of credit was $
Management believes cash flows generated from operations, along with current cash and investments as well as borrowing capacity under the line of credit should be sufficient to finance capital requirements required by operations. If new business opportunities do arise, additional outside funding may be required.
| 18 |
| Table of Contents |
NOTE 11. UNSECURED LINE OF CREDIT
The Company has drawn a cash advance on one unsecured line of credit that is in the name of the Company and Louis Friedman. The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at
NOTE 12. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases its facilities under a non-cancelable operating lease which now expires February 28, 2027. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and liabilities for the lease renewal were recognized at the inception date which is November 2, 2020 based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate based on the information available. At September 30, 2024, the weighted average remaining lease term for the lease renewal is
Operating leases |
| Balance Sheet Classification |
| (in thousands) |
| |
Right-of-use assets |
| Operating lease right-of-use assets, net |
| $ |
| |
|
|
|
|
|
|
|
Current lease liabilities |
| Operating lease liabilities |
| $ |
| |
Non-current lease liabilities |
| Long-term operating lease liabilities |
|
|
| |
Total lease liabilities |
|
|
| $ |
| |
Maturities of lease liabilities at September 30, 2024 are as follows:
Payments |
| (in thousands) |
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
Total undiscounted lease payment |
| $ |
| |
Less: Present value discount |
|
| ( | ) |
Total lease liability balance |
| $ |
| |
| 19 |
| Table of Contents |
NOTE 12. COMMITMENTS AND CONTINGENCIES (continued)
Equipment Notes Payable
The Company has acquired equipment under the provisions of long-term equipment notes. For financial reporting purposes, minimum note payments relating to the equipment have been capitalized. The equipment acquired with these equipment notes has a total cost of $
The following is an analysis of the minimum future equipment note payable payments subsequent to September 30, 2024:
Years ending September 30, |
| (in thousands) |
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Future Minimum Note Payable Payments |
| $ |
| |
Less Current Portion |
|
| ( | ) |
Long-Term Obligations under Equipment Notes Payable |
| $ |
| |
Finance Leases Payable
The Company has lease obligations for equipment under the provisions of long-term finance leases. For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized. The equipment acquired with these leases has a total cost of approximately $
On July 1, 2020 the Company entered into finance lease agreement in the amount of $
On January 5, 2022 the Company entered into finance lease agreement in the amount of $
On March 15, 2024, the Company entered into a finance lease agreement in the amount of $
On June 3, 2024, the Company entered into a finance lease agreement in the amount of $
At September 30, 2024, the weighted average remaining lease term is
| 20 |
| Table of Contents |
NOTE 12. COMMITMENTS AND CONTINGENCIES (continued)
The following is an analysis of the minimum finance lease payable payments subsequent to September 30, 2024:
Year ending September 30, |
| (in thousands) |
| |
2025 |
| $ |
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
2029 and thereafter |
|
|
| |
Future Minimum Finance Lease Payable Payments |
| $ |
| |
Less Amount Representing Interest |
|
| ( | ) |
Present Value of Minimum Finance Lease Payable Payments |
|
|
| |
Less Current Portion |
|
| ( | ) |
Long-Term Obligations under Finance Lease Payable |
| $ |
| |
Employment Agreements
The Company has entered into an employment agreement with Louis Friedman, President and CEO of the Company. The agreement provides for an annual base salary of $
On January 15, 2024, the Company, through OneUp, engaged Chris Knauf to serve as Chief Financial Officer and Controller of the Company. The Company shall pay Mr. Knauf an annual salary of $
Legal Proceedings
As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to the Company or properties to which the Company is a party, and to the Company’s knowledge there are no material proceedings to which any of the Company’s directors, executive officers or affiliates are a party adverse to the Company or which have a material interest adverse to the Company.
NOTE 13. RELATED PARTY TRANSACTIONS
The Company has a subordinated note payable to an officer of the Company who is also the wife of the Company’s CEO and principal shareholder in the amount of $
On October 30, 2010, The Company’s CEO, loaned the Company $
The Company’s CEO, has personally guaranteed the repayment of the loan obligation to Advance Financial Corporation (see Note 10 – Line of Credit). In addition, Luvu Brands has provided its corporate guarantees of the credit facility. On September 30, 2024, the balance owed under this line of credit was $
| 21 |
| Table of Contents |
On July 20, 2011, the Company issued an unsecured promissory note to an individual for $
On October 31, 2013, the Company issued an unsecured promissory note to an individual for $
On May 1, 2012, an individual loaned the Company $
The Company has drawn a cash advance on one unsecured lines of credit that is in the name of the Company and Louis S. Friedman. The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at
NOTE 15. STOCKHOLDERS’ EQUITY
Options
At September 30, 2024, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is shareholder-approved and under which
Under the 2015 Plan, eligible employees and certain independent consultants may be granted options to purchase shares of the Company’s common stock. The shares issuable under the 2015 Plan will either be shares of the Company’s authorized but previously unissued common stock or shares reacquired by the Company, including shares purchased on the open market. As of September 30, 2024, the number of shares available for issuance under the 2015 Plan was
The following table summarizes the Company’s stock option activities during the three months ended September 30, 2024:
|
| Number of shares of underlying outstanding option |
|
| Weighted Average Remaining Contract Life |
|
| Weighted Average Exercise Price |
|
| Aggregated Intrinsic Value |
| ||||
Option Outstanding as of June 30, 2024 |
|
|
|
|
|
|
| $ |
|
| $ |
| ||||
Granted |
|
|
|
|
| - |
|
|
|
|
|
|
|
| ||
Exercised |
|
| ( | ) |
|
| - |
|
|
|
|
|
| ( | ) | |
Forfeited or expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
Options Outstanding as of September 30, 2024 |
|
|
|
|
|
|
| $ |
|
| $ |
| ||||
Options Exercisable as of September 30, 2024 |
|
|
|
|
|
|
| $ |
|
| $ |
| ||||
| 22 |
| Table of Contents |
The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price of $
There were
There were
The following table summarizes the weighted average characteristics of outstanding stock options as of September 30, 2024:
|
|
| Outstanding Options |
|
| Exercisable |
| |||||||||||||||
Exercise Prices |
|
| Number of Shares |
|
| Remaining Life (Years) |
|
| Weighted Average Price |
|
| Options Number of Shares |
|
| Weighted Average Price |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$0.02 to $0.03 |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
$0.05 to $0.10 |
|
|
|
|
|
|
|
| $ |
|
|
| - |
|
|
| - |
| ||||
$0.15 to $0.20 |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
$0.30 |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
Total stock options |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
Stock-based compensation
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. The Company measures the cost of each stock option and at its fair value on the grant date. Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as expense in the financial statements over the respective vesting period.
Stock option-based compensation expense recognized in the consolidated statements of operations for the three months ended September 30, 2024 and 2023 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.
The following table summarizes stock option-based compensation expense by line item in the Consolidated Statements of Operations, all relating to the Plans:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
| ($ in thousands) |
| |||||
Cost of Goods Sold |
| $ |
|
| $ |
| ||
Other Selling and Marketing |
|
|
|
|
|
| ||
General and Administrative |
|
|
|
|
| ( | ) | |
Total Stock-based Compensation Expense |
| $ |
|
| $ | ( | ) | |
As of September 30, 2024, the Company’s total unrecognized compensation cost was $
Warrants
As of September 30, 2024 and 2023, there were no warrants outstanding.
| 23 |
| Table of Contents |
Common Stock
The Company’s authorized common stock was
|
| September 30, |
| |
|
| 2024 |
| |
Shares of common stock reserved for issuance under the 2015 Plan |
|
| 1,250,000 |
|
Shares of common stock issuable upon conversion of the Preferred Stock |
|
|
| |
Total shares of common stock equivalents |
|
|
| |
Preferred Stock
On February 18, 2011, the Company filed an amendment to its Articles of Incorporation, effective February 9, 2011, authorizing the issuance of preferred stock and the Company now has
| 24 |
| Table of Contents |
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, information derived from the Company’s Interim Unaudited Consolidated Financial Statements, expressed as a percentage of net sales. The discussion that follows the table should be read in conjunction with the Company’s Interim Unaudited Consolidated Financial Statements.
|
| Three Months Ended |
| |||||
|
| (unaudited) |
| |||||
|
| September 30, 2024 |
| September 30, 2023 | ||||
Net sales |
|
| 100 | % |
|
| 100 | % |
Cost of goods sold |
|
| 74 | % |
|
| 74 | % |
Gross profit |
|
| 26 | % |
|
| 26 | % |
Operating Expenses |
|
| 28 | % |
|
| 26 | % |
Income from operations |
|
| (2 | )% |
|
| 0 | % |
The following table represents the net sales and percentage of net sales by product type:
|
| Three Months Ended (unaudited) |
| |||||||||||||
(Dollars in thousands) |
| September 30, 2024 |
|
| September 30, 2023 |
| ||||||||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liberator |
| $ | 3,110 |
|
|
| 54 | % |
| $ | 3,324 |
|
|
| 54 | % |
Jaxx |
|
| 1,820 |
|
|
| 32 | % |
|
| 1,799 |
|
|
| 29 | % |
Avana |
|
| 485 |
|
|
| 8 | % |
|
| 531 |
|
|
| 9 | % |
Products purchased for resale |
|
| 210 |
|
|
| 4 | % |
|
| 249 |
|
|
| 4 | % |
Other |
|
| 131 |
|
|
| 2 | % |
|
| 224 |
|
|
| 4 | % |
Total Net Sales |
| $ | 5,756 |
|
|
| 100 | % |
| $ | 6,126 |
|
|
| 100 | % |
| 25 |
| Table of Contents |
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
Net sales. Sales for the three months ended September 30, 2024, were approximately $5,756,000, a 6% decrease from the comparable prior year period. The major components of net sales, by product, are as follows:
| · | Liberator sales - Sales of Liberator branded products decreased $214,000, or 6%, during the quarter from the comparable prior year period, due primarily to lower sales through our wholesale channels. Weaker consumer sentiment continues to drag the sector. |
| · | Jaxx sales – Jaxx product sales increased 1% from the prior year first quarter to $1,820,000. We continue to develop our marketing efforts into the special education market, which offsets the decline in the competitive online market place. |
| · | Avana sales – Net sales of Avana products decreased 9% during the quarter from the comparable prior year quarter to $485,000. Sales of this product line have been impacted by lower-priced competitive products in the marketplace, production constraints which resulted in longer delivery lead times which resulted in lower sales through drop ship channels including Amazon, Overstock and Wayfair. |
| · | Products purchased for resale – This product category decreased by 16%, or $39,000, from the prior year first quarter due to lower sales of certain products through our e-commerce website, Liberator.com. We believe our focus on expanding our online third party drop ship business will return this channel to growth. |
Gross margin. Gross profit, derived from net sales less the cost of goods sold, includes the cost of materials, direct labor, manufacturing overhead, freight costs, royalties and depreciation. Gross profit margin, as a percentage of sales, increased to 26% from 26% in the prior year first quarter. Gross profit decreased to $1,517,000 from $1,582,000 in the prior year first quarter.
Operating expenses. Total operating expenses for the three months ended September 30, 2024 were approximately 28% of net sales, or approximately $1,639,000, compared to 26% of net sales, or approximately $1,614,000, for the same period in the prior year.
Other income (expense). Interest expense during the first quarter decreased from approximately ($96,000) in the first quarter of fiscal 2024 to approximately ($89,000) in the first quarter of fiscal 2025. The decrease was primarily due to the reduction in notes payable.
Net Loss. For the three months ended September 30, 2024, we had a net loss of $210,000 as compared to a net loss of $126,000 for the three months ended September 30, 2023. The increase in net loss was primarily due to the decrease in Liberator product sales.
| 26 |
| Table of Contents |
Variability of Results
The Company has experienced significant quarterly fluctuations in operating results and anticipate that these fluctuations may continue in future periods. Operating results have fluctuated as a result of changes in sales levels to consumers and wholesalers, competition, seasonality costs associated with new product introductions, and increases in raw material costs. In addition, future operating results may fluctuate as a result of factors beyond the Company’s control such as foreign exchange fluctuation, changes in government regulations, and economic changes in the regions in which it operates and sells. A portion of the Company’s operating expenses are relatively fixed and the timing of increases in expense levels is based in large part on forecasts of future sales. Therefore, if net sales are below expectations in any given period, the adverse impact on results of operations may be magnified by the Company’s inability to meaningfully adjust spending in certain areas, or the inability to adjust spending quickly enough, as in personnel and administrative costs, to compensate for a sales shortfall. The Company may also choose to increase spending in response to market conditions, and these decisions may have a material adverse effect on financial condition and results of operations.
Liquidity and Capital Resources
The following table summarizes the Company’s cash flows:
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
Cash flow data: |
| 2024 |
|
|
| 2023 |
| |
|
| (Unaudited) |
| |||||
|
| (Dollars in thousands) |
| |||||
Cash provided by operating activities |
| $ | 132 |
|
| $ | 171 |
|
Cash used in investing activities |
| $ | (1 | ) |
| $ | (32 | ) |
Cash provided by financing activities |
| $ | (91 | ) |
| $ | (43 | ) |
As of September 30, 2024, the Company’s cash and cash equivalents totaled $1,067,862, compared to $1,132,317 in cash and cash equivalents as of September 30, 2023.
For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company’s principal sources of liquidity are the Company’s cash flow that the Company generates from its operations, availability of borrowings under its line of credit and cash raised through debt financings.
Operating Activities
Net cash provided by operating activities was $132,000 during the three months ended September 30, 2024 compared to $171,000 net cash provided by operating activities in the three months ended September 30, 2023. The primary components of the cash provided by operating activities in the current year is the decrease in Inventory of $283,000 offset in part by an increase in accounts receivable of $137,000.
Investing Activities
Cash used in investing activities in the three months ended September 30, 2024 and September 30, 2023 was $1,000 and $32,000, respectively, related to the purchase of computer equipment and the installation of certain production equipment during the periods.
Financing Activities
Cash used by financing activities during the three months ended September 30, 2024 and September 30, 2023 of $91,000 and $43,000 respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes.
| 27 |
| Table of Contents |
Non-GAAP Financial Measures
Reconciliation of net income to Adjusted EBITDA for the three months ended September 30, 2024 and 2023:
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
| (in thousands) |
| |||||
Net loss |
| $ | (210 | ) |
| $ | (126 | ) |
Plus interest expense, financing costs and income tax |
|
| 89 |
|
|
| 96 |
|
Plus depreciation and amortization expense |
|
| 109 |
|
|
| 99 |
|
Plus stock-based compensation expense |
|
| 9 |
|
|
| (6 | ) |
Adjusted EBITDA |
| $ | (3 | ) |
| $ | 63 |
|
As used herein, Adjusted EBITDA represents net income before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense. The Company has excluded the non-cash expenses and stock-based compensation, as they do not reflect the cash-based operations of the Company. Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income of the Company or net cash provided by operating activities.
Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company’s net income or net loss as determined in accordance with GAAP and are not a substitute for or a measure of the Company’s profitability or net earnings. Adjusted EBITDA is presented because the Company believes it is useful to investors as a measure of comparative operating performance and liquidity, and because it is less susceptible to variances in actual performance resulting from depreciation and non-cash charges for stock-based compensation expense.
Off-Balance Sheet Arrangements
The Company does not use off-balance sheet arrangements with unconsolidated entities or related parties, nor does it use other forms of off-balance sheet arrangements. Accordingly, the Company’s liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities. As of September 30, 2024, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical accounting policies
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances and impairment of long-lived assets. The Company also has adopted other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding the Company’s results, which are described in Note 2 to its unaudited consolidated financial statements appearing in this report.
Recent accounting pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the unaudited consolidated accompanying financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not enter into any transactions using derivative financial instruments or derivative commodity instruments and believe that the Company’s exposure to market risk associated with other financial instruments is not material.
| 28 |
| Table of Contents |
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosures. As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its principal executive officer (Chief Executive Officer) and principal financial officer (Chief Financial Officer), of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s CEO and CFO concluded that its disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the management, including CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 29 |
| Table of Contents |
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently subject to any material legal proceedings, nor, to its knowledge, is there any legal proceeding threatened against us. However, from time to time, the Company may become a party to certain legal proceedings in the ordinary course of business.
ITEM 1A. RISK FACTORS
This item is not required for a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
| 30 |
| Table of Contents |
ITEM 6. EXHIBITS
|
|
|
|
|
|
|
|
|
| Filed or |
|
|
|
| Incorporated by Reference |
| Furnished | ||||
No. |
| Description |
| Form |
| Date Filed |
| Number |
| Herewith |
|
| 8-K
|
| 10/22/09 |
| 2.1 |
|
| ||
|
| 8-K/A |
| 3/24/10 |
| 2.2 |
|
| ||
| Amendment No. 1 to Stock Purchase and Recapitalization Agreement, dated June 22, 2009 |
| 8-K/A |
| 3/24/10 |
| 2.3 |
|
| |
|
| SB-2 |
| 3/2/07 |
| 3i |
|
| ||
|
| SB-2 |
| 3/2/07 |
| 3ii |
|
| ||
| Articles of Amendment to the Amended and Restated Articles of Incorporation |
| 8-K |
| 2/23/11 |
| 3.1 |
|
| |
|
| 8-K |
| 3/3/11 |
| 3.1 |
|
| ||
|
| 8-K |
| 11/5/15 |
| 3.5 |
|
| ||
| Designation of Rights and Preferences of Series A Convertible Preferred Stock. |
| 8-K |
| 2/23/11 |
| 4.1 |
|
| |
|
|
|
|
|
| Filed |
|
| ||
|
|
|
|
|
| Filed |
|
| ||
|
|
|
|
|
| Filed |
|
| ||
|
|
|
|
|
| Filed |
|
| ||
|
|
|
|
|
| *Furnished |
|
| ||
|
|
|
|
|
| *Furnished |
|
| ||
101.INS |
| XBRL Instance Document |
|
|
|
|
| Filed |
|
|
101.SCH |
| XBRL Taxonomy Extension Schema Document |
|
|
|
|
| Filed |
|
|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
| Filed |
|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
| Filed |
|
|
101.LAB |
| XBRL Taxonomy Extension Labels Linkbase Document |
|
|
|
|
| Filed |
|
|
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
| Filed |
|
|
*This Exhibit is being Furnished rather than Filed and shall not be deemed incorporated by reference into any Filing, in accordance with Item 601 of Regulation S-K.
| 31 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
| LUVU BRANDS, INC. |
|
|
|
| (Registrant) |
|
|
|
|
|
|
November 14, 2024 |
| By: | /s/ Louis S. Friedman |
|
(Date) |
|
| Louis S. Friedman |
|
|
|
| President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
November 14, 2024 |
| By: | /s/ Christopher Knauf |
|
(Date) |
|
| Christopher Knauf |
|
|
|
| Chief Financial Officer (Principal Financial & Accounting Officer) |
|
| 32 |
EXHIBIT 14.1
Luvu Brands, Inc.
Code of Ethics
Introduction
This Code of Ethics (the “Code”) of Luvu Brands, Inc. (the “Company”) covers a wide spectrum of business practices and procedures. They do not cover every issue that may arise, but they set out some basic principles to guide all directors, officers, employees and certain selected consultants of the Company1. We expect all of our directors, officers, employees and those consultants to comply with them and to seek to avoid even the appearance of improper behavior. This Code should also be provided to and followed by the Company’s agents and representatives, including consultants.
If a law conflicts with a policy in this Code, you must comply with the law. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation. Those who violate this Code may be subject to disciplinary action. Depending on the nature of the violation, the disciplinary action may include termination of employment. If you are in a situation, which you believe may violate or lead to a violation of this Code, follow the recommendations described below.
Compliance with Laws, Rules and Regulations
Obeying the law, both in letter and in spirit, is the foundation on which the Company’s ethical standards and our reputation are built. All employees must respect and obey the laws of the cities, states and nations in which we operate. Although not all employees are expected to know the details of these laws, it is important to know enough to determine when to seek advice from supervisors, managers, the Company’s legal counsel or other appropriate personnel. If requested, the Company will hold information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.
Conflicts of Interest
A “conflict of interest” exists when a person’s private interest interferes in any way with the interests of the Company. A conflict may arise when an employee takes actions or has interests that may make it difficult to perform duties for the Company objectively and effectively. Conflicts of interest arise whenever a family member of an employee provides goods or services (including as an employee) or otherwise engages in business with the Company. All of these relationships require prior approval of our Board of Directors. Conflicts of interest may also arise when an employee, or members of his or her family, receives improper personal benefits as a result of his or her position with the Company. For example, loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest. By law, the Company cannot make any loans to its executive officers and directors. It is almost always a conflict of interest for a Company employee to work simultaneously for a competitor, client or supplier. You are not allowed to provide services for a competitor as a consultant or act as a board member. The best policy is to avoid any direct or indirect business connection with our clients, suppliers or competitors, except on our behalf. Conflicts of interest are prohibited as a matter of company policy, except under specific guidelines approved by the Company’s board of directors (the “Board”). Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management or the Company’s legal counsel. Any employee who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or consult the procedures described below. Our executive officers and directors and certain other persons must also comply with our Insider Trading Policy.
_______________
1 When the Code discusses employees, it also should be understood to include all officers and directors and certain consultants who are officers are subject to the Code.
| A-1 |
Insider Trading
Employees who have access to confidential information are not permitted to use or share that information for trading purposes or for any other purpose except the conduct of our business. All non-public information about the Company should be considered confidential information. To use non-public information for personal benefit (financial or otherwise) or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal under the federal securities laws. In order to comply with the securities laws against insider trading, the Company has adopted a specific policy governing employees’ trading in securities of the Company. The Company is required to provide you with a copy of our Insider Trading Policy. If you have not received this Policy, please notify your supervisor.
Corporate Opportunities
Employees are prohibited from taking for themselves personally, opportunities that are discovered through the use of the Company’s property, information or from their position with the Company without the consent of the Board. No employee may use the Company’s property, information, or their position with the Company, for improper personal gain. Under no circumstances may an employee compete with the Company directly or indirectly. Employees owe a duty of loyalty to the Company to advance its legitimate interests when the opportunity to do so arises.
Competition and Fair Dealing
We seek to outperform our competition fairly and honestly. Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of and deal fairly with the Company’s clients, suppliers, competitors and other employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair dealing practice. The purpose of business entertainment and gifts in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with clients. No gift or entertainment should be offered, given, provided or accepted by any employee, family member of an employee, or agent unless it: (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff and (5) does not violate any laws or regulations. Please discuss with your supervisor any gifts or proposed gifts which you are not certain are appropriate.
| 2 |
Discrimination and Harassment
The diversity of the Company’s employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment. Examples may include derogatory comments based on racial, religious, sexual identity, disability, or ethnic characteristics and unwelcome sexual advances. If you believe that any type of discrimination or harassment has occurred, the Company has a Whistleblower Policy which provides for an anonymous procedure. See “Reporting Any Illegal or Unethical Behavior” at page 4 of the Code.
Health and Safety
The Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions. Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of alcohol or illegal drugs (or the use of legal prescriptions contrary to a physician’s advice) in the workplace will not be tolerated.
Record-Keeping
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported. Some employees are authorized to use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or our Chief Financial Officer. All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s system of internal controls. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation. Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood. “Side” letters with suppliers or customers are forbidden unless approved by our legal counsel. This applies equally to e-mail, internal memos, and formal reports. Records should always be retained or destroyed according to the Company’s record retention policies. In accordance with those policies, in the event of litigation or governmental investigation please consult the Company’s legal counsel.
| 3 |
Emails, Texts and Social Media
Before you send an email or text, think. Will you be embarrassed or will the Company be subject to liability if the email or text becomes public or is obtained by a party that is antagonistic to the Company? Nobody is authorized to use social media, email or text messaging for the business of the Company, except as expressly authorized by the Chief Executive Officer.
Confidentiality
Employees must maintain the confidentiality of confidential information entrusted to them by the Company or its clients except when disclosure is authorized by the Company’s legal counsel or required by laws or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its clients if disclosed. It also includes information that suppliers and clients have entrusted to us. The obligation to preserve confidential information continues even after employment ends.
Protection and Proper Use of the Company’s Assets
All employees should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness, and waste have a direct impact on the Company’s profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. The Company’s equipment should not be used for non-Company business, though incidental personal use may be permitted. The obligation of employees to protect the Company’s assets includes its proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business, marketing and service plans, ideas, designs, databases, records, salary information and any unpublished financial data and reports. While unauthorized use or distribution of this information would violate company policy, it could also be illegal and result in civil or even criminal penalties.
Payments to Government Personnel
The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country. This also applies to the making of improper payments to obtain business from commercial clients in the United States. In addition, the U.S. government has a number of laws and regulations regarding business gratuities which may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gift, favor or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. Our legal counsel can provide guidance to you in this area.
| 4 |
Reporting Any Illegal or Unethical Behavior
Employees are encouraged to talk to supervisors, managers or other appropriate personnel about observed illegal or unethical behavior and when in doubt about the best course of action in a particular situation. It is the policy of the Company not to allow retaliation for reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct. Any employee may submit a good faith concern regarding questionable accounting or auditing matters or other matters without fear of dismissal or retaliation of any kind to the Chief Financial Officer or the Company’s legal counsel who are listed on the last page of this Code. A full statement of the Company’s Whistleblower Policy for Reporting Violations, Complaints or Concerns is attached as Appendix A to this Code.
Compliance Procedures
We must all work to ensure prompt and consistent action against violations of this Code. However, in some situations it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that will arise, it is important that we have a way to approach a new question or problem. These are the steps to keep in mind:
|
| · | Make sure you have all the facts in order to reach the right solutions; we must be as fully informed as possible. |
|
|
|
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| · | Ask yourself: What specifically am I being asked to do? Does it seem unethical or improper? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is. |
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| · | Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem. |
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| · | Discuss the problem with your supervisor. |
This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question, and will appreciate being brought into the decision-making process. Remember that it is your supervisor’s responsibility to help solve problems.
Seek help from Company resources. In the rare case where it may not be appropriate to discuss an issue with your supervisor, or where you do not feel comfortable approaching your supervisor with your question, discuss it with your office manager or with a human resources officer.
You may report ethical violations in confidence and without fear of retaliation. Additionally, if your situation requires that your identity be kept confidential, your anonymity will be protected. Further, you may speak with the Company’s legal counsel on any of these matters. Under no circumstances does the Company permit or tolerate any form of retaliation against employees for good faith reports of potential ethical violations.
| 5 |
Always ask first, act later. If you are unsure of what to do in any situation, seek guidance before you act.
Special Policies with Respect to Certain Officers
The Chief Executive Officer (“CEO”) and all financial officers, including the Chief Financial Officer (“CFO”) and principal accounting officer, are bound by the provisions set forth above including those relating to ethical conduct, conflicts of interest and compliance with law. In addition, the CEO, CFO and any other financial officers and employees are subject to the following additional specific policies:
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| · | The CEO, CFO and all financial officers and employees are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the Company with the Securities and Exchange Commission. Accordingly, it is the responsibility of the CEO, CFO and each financial officer or employee promptly to bring to the attention of the Board any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Board, in fulfilling their responsibilities. |
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| · | The CEO, CFO and each financial officer or employee shall promptly bring to the attention of the Board, any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls. |
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| · | The CEO, CFO and each financial officer and employee shall promptly bring to the attention of our legal counsel or the CEO any information he or she may have concerning any violation of this Code, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls. |
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| · | The CEO, CFO and each financial officer and employee shall promptly bring to the attention of the Company’s legal counsel or the CEO any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of this Code or of these additional special policies and procedures. |
| 6 |
The Board shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of this Code or these additional special procedures by the CEO, CFO and the Company’s financial officers and employees. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to this Code and to these additional special procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual’s employment. In determining what action is appropriate in a particular case, the Board or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past.
To insure your confidentiality, we have supplied the phone numbers of our Chief Executive Officer, Chief Financial Officer and legal counsel including their personal email addresses.
Chief Executive Officer:
Louis Friedman
Office: XXX-XXX-XXXX
Email: louis@luvubrands.com
Chief Financial Officer:
Martin Scott
Office: XXX-XXX-XXXX
Email: MSCOTTCFO@aol.com
Outside Legal Counsel:
Brian A. Pearlman, Esq.
Nason, Yeager, Gerson, Harris & Fumero, P.A.
Office: 954-880-9484
Email: bpearlman@nasonyeager.com
[Signature page follows]
| 7 |
I acknowledge that I have read and understand and agree to abide by this Code of Ethics of the Company.
| Dated: ________ ___, 2023 | |||
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| 8 |
Appendix A
LUVU BRANDS, INC.
________________________
Whistleblower Policy for Reporting Violations, Complaints or Concerns
| I. | Policy Statement |
Luvu Brands, Inc. (the “Company”) has established a Code of Ethics (the “Code”) to help our employees comply with the law and regulations applicable to our business and to maintain the highest standards of ethical conduct. This Whistleblower Policy for Reporting Violations, Complaints or Concerns (this “Policy”) is meant to supplement the Code by encouraging employees to report any suspected violations or concerns as to compliance with laws, regulations, the Code or other Company policies, or any complaints or concerns regarding the Company’s accounting, internal accounting controls, or auditing matters, or any concerns regarding any questionable accounting or auditing matters.
| II. | Obligation to Report Suspected or Actual Violations; Anonymous Reporting |
| A. | Reporting Generally |
It is every employee’s obligation to report suspected or actual violations of laws, government rules and regulations, or the Code or other Company policies. Employees must report any suspected violations of the laws and rules that govern the reporting of the Company’s financial performance, and any complaint or concern regarding the Company’s accounting, internal accounting controls, or auditing matters, or any concerns regarding any questionable accounting or auditing matters.
Employees can report any such matters directly to his or her supervisor or manager or by the procedures set forth below. As noted below, supervisors and managers are required to report to the Chief Executive Officer, the Chief Financial Officer and/or our Board of Directors (the “Board”) (who are identified in the Code) any time they receive a report of a concern about our compliance with laws, the Code or other Company policy, any notice of any suspected wrong-doing by any Company employee, officer or director, any complaint or concern about the Company’s accounting, internal accounting controls, or auditing matters, or any concerns regarding any questionable accounting or auditing matters.
| B. | Anonymous Reporting |
Alternatively, if you wish to report any such matters anonymously, you may do so as follows: mail a description of the suspected violation or other complaint or concern to our outside legal counsel:
Brian A. Pearlman, Esq.
Nason, Yeager, Gerson, Harris & Fumero, P.A.
3001 PGA Boulevard, Ste. 305
Palm Beach Gardens, FL 33410
Email: bpearlman@nasonyeager.com
| III. | Treatment and Retention of Complaints and Reports |
Each supervisor and manager shall report any suspected violation, concern or complaint reported to such person by employees or other sources to the Chief Executive Officer, the Chief Financial Officer and/or the Board to assure proper treatment and retention of complaints, concerns or notices of potential violations. In addition, employees should take note that persons outside the Company may report complaints or concerns about suspected violations, or concerns regarding internal accounting controls, accounting or auditing matters. These concerns and complaints should be reported immediately on receipt to the Chief Executive Officer, the Chief Financial Officer and/or the Board.
Supervisors and managers as well as the Chief Executive Officer, the Chief Financial Officer and the Board shall promptly consider the information, reports or notices received by them under this Policy or otherwise. Each person shall take appropriate action, including investigation as appropriate, in accordance with the law, governmental rules and regulations, the Code and otherwise consistent with good business practice.
Upon a report to the Chief Executive Officer, the Chief Financial Officer and/or the Board, all notices or reports of suspected violations, complaints or concerns received pursuant to this Policy shall be recorded in a log, indicating the description of the matter reported, the date of the report and the disposition thereof, and the log shall be retained with the Company’s documents. This log shall be maintained by the Chief Executive Officer.
| IV. | Statement of Non-Retaliation |
It is a federal crime for anyone to retaliate intentionally against any person who provides truthful information to a law enforcement official concerning a possible violation of any federal law. Moreover, the Company will not permit any form of intimidation or retaliation by any officer, employee, contractor, subcontractor or agent of the Company against any employee because of any lawful act done by that employee to:
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| · | provide information or assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of laws, rules, regulations, the Code, or any Company policies; or |
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| · | file, testify, participate in, or otherwise assist in a proceeding relating to a violation of any law, rule or regulation. |
Any such action is a violation of Company policy and should be reported immediately under this Policy.
| V. | Statement of Confidentiality |
The Company will, to the extent reasonably possible, keep confidential both the information and concerns reported under this Policy, and its discussions and actions in response to these reports and concerns. In the course of its investigation, however, the Company may find it necessary to share information with others on a “need to know” basis.
| VI. | Notice of Immunity under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016. |
An employee will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(a) is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or
(b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.
If an employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, such employee may disclose the Company’s trade secrets to the employee’s attorney and use the trade secret information in the court proceeding if the employee:
(a) files any document containing the trade secret under seal; and
(b) does not disclose the trade secret, except pursuant to court order.
| 3 |
EXHIBIT 19.1
MEMORANDUM
| TO: | Luvu Brands, Inc. |
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| FROM: | Nason Yeager Gerson Harris & Fumero, P.A. |
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| DATE: | August 1, 2023 |
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| RE: | Insider Trading Policy |
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We believe that the best way to protect Luvu Brands, Inc. (the “Company”) and its executive officers, directors and employees from potential liability from the insider trading under the federal securities laws is to adopt and implement and enforce a clear policy that defines insider trading and prohibits all employees, officers, directors and other individuals who are aware of Material Non-Public Information (as defined beginning at page 5) from trading in the Company’s securities or providing Material Non-Public Information to other persons who may trade on the basis of that information.
Engaging in securities transactions on the basis of Material Non-Public Information or the communication of such information to others who use it in securities trading violates the federal securities laws. Such violations are likely to result in harsh consequences for the individuals involved including exposure to investigations by the Securities and Exchange Commission (“SEC”), criminal and civil prosecution, and disgorgement of any profits realized or losses avoided and penalties three times any profits gained or losses avoided. Insider trading violations expose the Company, its management, and other personnel acting in supervisory capacities to potential civil liabilities and penalties for the actions of employees under their control who engage in insider trading violations.
This Memorandum constitutes the Company’s implementation and the requirements of the Policy and sets forth procedures to assure that Material Non-Public Information will not be used by Insiders (as defined below) in securities transactions and that the confidentiality of such information will be maintained. Strict compliance with these policies and procedures is expected of all Insiders, including members of their households, and any infringement thereof may result in sanctions, including termination of office or employment.
| I. | The Statement of Policy |
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| A. | Who Does This Policy Apply To? |
“Insiders” are directors, officers and all employees of the Company. Additionally, the following persons may also be subject to the restrictions contained in this Policy (i) members of any subsidiary’s Board of Directors; (ii) the Company’s independent contractors and consultants; and (iii) other persons associated with the Company and its subsidiaries who receive or have access to Material Non-Public Information. As an Insider this Policy applies to you. The same restrictions that apply to you, also apply to your family members who reside with you, anyone else who lives in your household and any family members who do not live in your household but whose transactions in Company securities are directed by you or are subject to your influence or control. You are responsible for making sure that the purchase or sale of any security covered by this Policy by any such person complies with this Policy.
All Directors, Officers and Employees
August 1, 2023
Page 2
Please note that certain restrictions and requirements under this Policy are applicable to only certain individuals. The Blackout Periods apply to officers, directors, consultants in the finance/accounting department and any other employee at the vice president level or above who are notified by the Compliance Officer. The Event-Specific Trading Restriction Periods apply to all directors, officers and the persons designated by the Chief Executive Officer or the Compliance Officer. Additionally, the pre-clearance requirements apply to our officers, directors, and employees in the finance/accounting department, any other employee at the vice president level or above and others who are uniquely situated to know of material financial or other information and are given notice in writing from an officer. If you have any doubt regarding whether you fall within these category, please contact the Compliance Officer. For purposes of this Policy, our Compliance Officer is the Chairman or in his absence the Chief Executive Officer.
All Insiders are expected to maintain the confidentiality of Non-Public Material Information. Disclosure of such information to any individual outside of the Company, whether or not in the form of a recommendation to purchase or sell the securities of the Company, is prohibited and may be criminal. If anyone becomes aware of a leak of Material Non-Public Information, whether inadvertent or otherwise, they should immediately be reported to our Compliance Officer. This duty of confidentiality does not preclude an Insider from using Non-Public Material Information in connection with such person’s duties to the Company.
As a general policy, the Company and all Insiders shall follow all laws, rules and regulations relating to Insider trading. This includes Regulation FD which provides that selective disclosure of Material Non-Public Information is generally illegal.
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| B. | What are the Prohibited Activities? |
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| · | No Trading Based on Material Non-Public Information. The Policy prohibits trading based on Material Non-Public Information. The SEC will presume that if you are in possession of Material Non-Public Information, your trading is based on it. |
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| · | No Trading in Other Corporations. You may not trade in the securities of any other company if you are aware of Material Non-Public Information about that company which you obtained in the course of your employment with the Company. |
All Directors, Officers and Employees
August 1, 2023
Page 3
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| · | No Tipping. You may not pass Material Non-Public Information on to others or recommend to anyone the purchase or sale of any securities when you are aware of such information. This practice known as “tipping,” also violates the securities laws and can result in the same civil and criminal penalties that apply to insider trading, even though you did not trade and did not gain any benefit from another’s trading. While the law is developing in this area, the Policy prohibits the disclosure of Material Non-Public Information in the same manner as other Company policies protect its confidential information. |
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| · | Social Media. Social Media including Facebook, Twitter and Instagram are public communications. The prohibition against using Material Non-Public Information in this Memorandum applies to using any form of social media. Further, without approval from our Chief Executive Officer or Compliance Officer, no one shall use social media on behalf of the Company. |
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| · | Expert Networks. A new phenomenon called Expert Networks has developed over the last number of years. Essentially Expert Networks are consulting companies formed for the purpose of gathering information from employees of public companies and then selling the information to hedge funds. The law is evolving and the line between immaterial and material information is often blurred. However, it is the Company’s policy that Insiders may not speak or otherwise communicate with third parties about the Company’s business unless it is part of their duties as an Insider. For example, our officers may discuss information about the Company that is not Material Non-Public Information in order to generate business or develop partnerships. |
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| · | No Dissemination of Material Non-Public Information. You should not discuss any confidential information within the hearing range of outsiders, including friends and relatives. It is particularly important to exercise care and refrain from discussing Material Non-Public Information in public places such as elevators, trains, taxis, airplanes, lavatories, restaurants, or other places where the discussions might be overheard. |
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| · | No Short-Term Trading. No Insider who purchases Company securities in the open market may sell any Company securities of the same class during the 30 days following the purchase. Executive officers and directors must wait more than six months to buy or sell after an offsetting or opposite way transaction. |
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| · | Short Sale Transactions. No Insider may engage in short sales of the Company’s securities. Short sales are the sale of securities which the seller does not own. The seller is speculating that the price will fall, in the hope of later purchasing the same number of securities at a lower price, thereby making a profit. An Insider who bets against the Company sends an alarming signal to his or her broker. In addition, Section 16(c) of the Securities Exchange Act of 1934 prohibits officers and directors from engaging in short sales. |
All Directors, Officers and Employees
August 1, 2023
Page 4
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| · | Hedging Transactions. No Insider may enter into a hedging transaction. When an Insider engages in this type of transaction, this Insider may no longer have the same objectives as the Company’s other stockholders. |
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| · | Margin Accounts and Pledges. No Insider may hold Company securities in a margin account or pledge Company securities as collateral for a loan. |
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| C. | What Transactions Does this Policy Apply To? |
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| · | Personal Transactions. This Policy applies to your personal transactions and those indirectly through a spouse, friend, corporation or other entity. |
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| · | Types of Securities. Purchases and sales of stock, derivative securities such as put and call options and convertible notes or preferred stock. |
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| · | Stock Options/Warrants. This Policy applies to: (i) any sale of stock as part of a broker-assisted cashless exercise of options or warrants, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option or warrants and (ii) any sale of common stock received upon exercise of options or warrants. |
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| · | Former Insiders. This Policy continues to apply to former Insiders in possession of Material Non-Public Information at the time their status as an Insider terminates. No former Insider may trade Company securities until that information has become public or is no longer material. |
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| D. | Rule 10b5-1 Plans as an Exception |
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| The restrictions outlined above shall not prohibit transfers of Company securities made pursuant to a written contract, letter of instruction or plan that (a) complies with the requirements of Rule 10b5-1 (a “Plan”) and (b) complies with all of the following: |
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| · | Review and Approve the Proposed Arrangement in Advance. The Company will require all Plans to be in writing and submitted to the Company for approval prior to any transactions under the Plan. This will allow the Company to ensure that each Plan is in compliance with the requirements of Rule 10b5-1 and Company policies with regard to lock-up agreements, among other items, allowing the individual to conduct transactions under the Plan without preclearance by the Company. Because of recent concerns arising from possible abuses of Plans, the Company may require evidence that the party exercising trading authority has no personal or substantial business relationship with the Insider. The Blackout Periods and Event-Specific Trading Restrictions do not apply to transactions conducted pursuant to a Plan. If you are subject to and within either a Blackout Period or Event Specific Trading Restriction period, you may not enter into, modify or terminate a Plan. |
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All Directors, Officers and Employees
August 1, 2023
Page 5
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| · | Add Additional Safeguards. It is essential that the Company ensure that there is no Material Non-Public Information that the Insider has knowledge of that has not been publicly disclosed at the time the Plan is adopted. In addition, if the Plan is going to be modified or terminated, notice must immediately be given to the Company and all transactions effected pursuant to the Plan must cease. Any change to an approved Plan will necessitate submission of the revised Plan to the Company for review and approval before transactions may resume. |
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| · | Consider a Public Announcement. On a case by case basis, the Company will consider whether a public announcement in connection with each Plan under Rule 10b5-1 is appropriate. |
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| · | Establish Procedures with Third Parties. In order to ensure that a Plan complies with Rule 10b5-1 in all respects, the Company will set up procedures with the parties handling the transactions under the Plan, including reminding them of the need to file Form 144s and Form 4s (where applicable). |
Any involvement by the Company and its counsel in reviewing a 10b5-1 Plan does not constitute approval or legal advice.
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| E. | What is Material Non-Public Information? |
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| Material Information |
What is “material” is often difficult to evaluate and is always judged in hindsight. Generally, information is material if there is a substantial likelihood that a reasonable investor would consider it important in deciding whether to buy, hold or sell a security. Both positive and negative information can be considered material. While it is not possible to define all categories of material information, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information include:
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All Directors, Officers and Employees
August 1, 2023
Page 6
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| · | Stock splits |
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Non-Public Information
Non-public information is information that has not been disclosed to the general public and is not available to the general public. For most companies including the Company, disclosure on its website is still not considered public by the SEC. One common misconception is that material information loses its “non-public” status as soon as a press release is issued. Non-public information will generally be deemed to be public when (i) it is filed with the SEC or a press release is issued and the public has had a period of time (as much as 24 hours) to fully absorb the information.
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| F. | Blackout Periods/Event-Specific Trading Restriction Periods |
Blackout Periods for All Employees and Insiders
All officers, directors, employees and certain consultants in the finance/accounting department are prohibited from trading in the Company’s securities during certain “Blackout Periods.” The Company will notify consultants if they are subject to the Blackout Periods.
The four Blackout Periods begin on the 16th day of the last month of each fiscal quarter and end one day following the Company’s issuance of its quarterly (or annual) earnings release or the filing of the Company’s financial statements with the SEC if no earnings release is issued (an “Earnings Announcement”).
Example: If the quarter ends on June 30th, the Blackout Period begins after the market closes on June 15th (or prior trading day if the 15th is not a trading day) and all trading of the Company’s securities by Insiders must cease until an Earnings Announcement is released. If the Earnings Announcement is made after the market close on August 14th, the Blackout Period would end at the market opening on August 16th. Therefore, your Trading Window (when you can trade) for a quarter ending June 30th, in this example, would begin August 16th (or the next trading day) and would end after the market close on September 15th (or the prior trading day as explained above).
The Company reserves the right to shorten or close the Trading Window without prior notice.
All Directors, Officers and Employees
August 1, 2023
Page 7
Event Specific Blackout Periods
From time to time, an event may occur that is material to the Company and is known by only a few directors, officers and/or employees. So long as the event remains material and nonpublic, all directors, officers and the persons designated by the Chief Executive Officer or the Compliance Officer may not trade Company common stock. In addition, the Company’s financial results may be sufficiently material in a particular fiscal quarter that, in the judgment of the Compliance Officer, designated persons should refrain from trading in Company common stock even sooner than the typical Blackout Period described above. In that situation, the Compliance Officer may notify these persons that they should not trade in the Company’s common stock, without disclosing the reason for the restriction. During a Blackout period, gifts to family members and trust controlled by the Insider are permissible since such parties are subject to the Policy.
The existence of an event-specific trading restriction period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to any other person. Even if the Compliance Officer has not designated you as a person who should not trade due to an event-specific restriction, you should not trade while aware of Material Non-Public Information. Exceptions will not be granted during an event-specific trading restriction period.
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| G. | Preclearance |
Due to the Company’s size, preclearance is required for all Insiders. Of course, family members of any of these people require preclearance. A request for preclearance must be submitted to the Compliance Officer on the form attached to this Policy as Exhibit A at least two days in advance of the proposed transaction. Preclearance requires the approval of the Compliance Officer and/or our SEC counsel. If your trade is pre-cleared by the Compliance Officer, the transaction must be effected within five trading days. If the transaction is not effected within that time period will be subject to pre-clearance again.
The responsibility for determining whether the Insider has Material Non-Public Information rests with the Insider, and preclearance of the transaction does not constitute legal advice and does not in any way insulate the Insider from liability under the securities laws. For executive officers and directors, preclearance permits our legal counsel to review the proposed trade to ascertain if there is any possible violation of the short-swing trading rules.
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| H. | Compliance and Company Assistance |
The Company is indebted to all Insiders who have helped to make the Company successful and is appreciative of all efforts on its behalf. To protect the Company and its shareholders, it is necessary to implement the foregoing Policy. The Company appreciates your continued cooperation and support in this effort.
You should remember that the ultimate responsibility for adhering to this Policy and avoiding improper trading rests with you. If you violate this Policy, the Company may take disciplinary action, including dismissal for cause. Each of you should sign one copy of this Policy and return it to the Company acknowledging that you have read and understand it. If anyone has any questions or wants to have an office conference concerning the issues raised by this Policy, please contact the Compliance Officer.
All Directors, Officers and Employees
August 1, 2023
Page 8
| I. | Transactions with the Company |
While there can be no anti-fraud issues with transactions with an issuer since there is no deception or breach of duty, because of optics, transactions of an Insider with the Company may be permitted if precleared. An examples is the cashless exercise of an option granted by the Company.
| J. | Annual Update |
On annual basis (as well as initially with all new employees or significant consultants), this Policy will be distributed to all recipients who will be asked to acknowledge receipt in writing.
All Directors, Officers and Employees
August __, 2023
Page 9
I acknowledge that I have read and understand this Memorandum and to abide by the Company’s Policy on stock trading.
| Dated: ______________ ___, 2023 |
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Exhibit A
REQUEST FOR PRECLEARANCE OF
PURCHASE OR SALE OF SECURITIES
Name:
Date:
| Proposed Transaction: | ☐ | Purchase of Stock |
| ☐ | Incentive Stock Options |
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| ☐ | Sale of Stock |
| ☐ | Non-Qualified Options |
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| ☐ | Exercise of Options |
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| ☐ | Exercise of Warrants |
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| Date of Grant of Options, Warrants or Other Securities: |
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| ☐ | Other [Please explain]___________________________ |
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Number of Shares/Options: ________________________
Date of Proposed Transaction: ________________________
1. Have you made purchase(s) of Luvu Brands, Inc. (the “Company”) stock within the last six months?
| ☐ | Yes |
| ☐ | No |
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| Date(s) of Purchase(s): |
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| No. of Shares: |
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2. Have you made sales of the Company’s stock within the last six months?
| ☐ | Yes |
| ☐ | No |
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| Date(s) of Sale(s): |
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3. Have you made exercises or conversions of the Company’s options/warrants or other securities of the Company within the last six months?
| ☐ | Yes |
| ☐ | No |
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| Date(s) of Exercise(s): |
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4. Have you received grants of the Company’s options/warrants or other securities of the Company within the last six months?
| ☐ | Yes |
| ☐ | No |
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| Date(s) of Grant(s): |
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In consideration of this approval, I affirm that I am not in possession of Material Non-Public Information.
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| Request Approved: | ☐ | Yes |
| ☐ | No |
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| If Denied, Reason: |
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| Date: |
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| Louis Friedman, Chief Executive Officer |
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| _______________, Esq. |
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EXHIBIT 31.1
CERTIFICATION
I, Louis S. Friedman, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Luvu Brands, Inc.; | ||
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | ||
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | ||
| Date: November 14, 2024 |
| /s/ Louis S. Friedman |
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| Louis S. Friedman |
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| Chief Executive Officer (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION
I, Christopher A Knauf, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Luvu Brands, Inc.; | ||||
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||||
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||||
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | ||||
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |||
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |||
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |||
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |||
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. | |||
| Date: November 14, 2024 |
| /s/ Christopher A Knauf |
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| Christopher A Knauf |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION
In connection with the quarterly report of Luvu Brands, Inc. (the Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission (the Report”), I, Louis S. Friedman, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Date: November 14, 2024 | /s/ Louis S. Friedman | ||
| Louis S. Friedman | |||
| Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION
In connection with the quarterly report of Luvu Brands, Inc. (the Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission (the Report”), I, Christopher A Knauf, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
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| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
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| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Date: November 14, 2024 | /s/ Christopher A Knauf | ||
| Christopher A Knauf | |||
| Chief Financial Officer (Principal Financial and Accounting Officer) |