Luvu Brands, Inc 10-Q for FY2022 Q1

Luvu Brands, Inc. (LUVU)

10-Q 2021-11-15 For: 2021-09-30

Added on April 06, 2026

About this 10-Q

Luvu Brands, Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.22M; up 16.0% from $5.37M a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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Florida		59-3581576
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2745 Bankers Industrial Drive, Atlanta, GA		30360
(Address of principal executive offices)		(Zip code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

		Page Number
PART I – FINANCIAL INFORMATION

ITEM 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets – At September 30, 2021 (unaudited) and June 30, 2021	4

	Condensed Consolidated Statements of Operations – For the Three Months Ended September 30, 2021 and September 30, 2020 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity – For the Three Months Ended September 30, 2021 and September 30, 2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows – For the Three Months Ended September 30, 2021 and September 30, 2020 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	28

ITEM 4.	Controls and Procedures	28

PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	29

ITEM 1A.	Risk Factors	29

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

ITEM 3.	Defaults Upon Senior Securities	29

ITEM 4.	Mine Safety Disclosures	29

ITEM 5.	Other Information	29

ITEM 6.	Exhibits	30

SIGNATURES		31

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	September 30,
	2021			June 30,
	(unaudited)			2021
Assets:	(in thousands, except share data)
Current assets:
Cash and cash equivalents	$	961		$	977
Accounts receivable, net		1,087			1,134
Inventories, net		3,503			3,391
Prepaid expenses		159			145
Total current assets		5,710			5,647

Equipment, property and leasehold improvements, net		1,915			1,934
Finance lease assets		25			27
Operating lease assets		2,482			2,554
Other assets		95			84
Total assets	$	10,227		$	10,246

Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	2,725		$	2,669
Current debt		1,426			1,599
Other accrued liabilities		584			694
Operating lease liability		270			250
Total current liabilities		5,005			5,212

Noncurrent liabilities:
Long-term debt		1,327			1,288
Long-term operating lease liability		2,341			2,423
Total noncurrent liabilities		3,668			3,711
Total liabilities		8,673			8,923
Commitments and contingencies (See Note 15)		-			-
Stockholders’ equity:
Preferred stock, 5,700,000 shares authorized, $0.0001 par value none issued and outstanding		-			-
Series A Convertible Preferred stock, 4,300,000 shares authorized $0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $1,000 at September 30, 2021 and June 30, 2021		-			-
Common stock, $0.01 par value, 175,000,000 shares authorized, 75,037,890 shares issued and outstanding at September 30, 2021 and June 30, 2021		750			750
Additional paid-in capital		6,170			6,166
Accumulated deficit		(5,366	)		(5,593	)
Total stockholders’ equity		1,554			1,323
Total liabilities and stockholders’ equity	$	10,227		$	10,246

	Three Months Ended September 30,
	2021			2020
	(in thousands, except share data)
Net Sales	$	6,224		$	5,367
Cost of goods sold		4,725			3,879
Gross profit		1,499			1,488
Operating expenses:
Advertising and promotion		132			69
Other selling and marketing		261			267
General and administrative		712			664
Depreciation and amortization		71			52
Total operating expenses		1,176			1,052
Operating income		323			436
Other expense:
Interest expense and financing costs		(96	)		(107	)
Total other expense		(96	)		(107	)
Income from operations before income taxes		227			329
Provision for income taxes		-			-
Net income	$	227		$	329
Net income per share:
Basic	$	0.00		$	0.00
Diluted	$	0.00		$	0.00
Shares used in calculation of net income per share:
Basic		75,037,890			73,452,596
Diluted		76,584,978			76,034,134

	Series A Preferred								Additional					Total Stockholders’
	Stock				Common Stock				Paid-in		Accumulated			Equity
	Shares		Amount		Shares		Amount		Capital		Deficit			(Deficit)
	(in thousands, except share data)
Balance, June 30, 2020		4,300,000	$	-		73,452,596	$	735	$	6,147	$	(8,156	)	$	(1,274	)

Stock-based compensation expense		-		-		-		-		6		-			6
Net income		-		-		-		-		-		329			329
Balance September 30, 2020 (unaudited)		4,300,000	$	-		73,452,596	$	735	$	6,153	$	(7,827	)	$	(939	)

Balance, June 30, 2021		4,300,000	$	-		75,037,890	$	750	$	6,166	$	(5,593	)	$	1,323

Stock-based compensation expense		-		-		-		-		4		-			4
Net income		-		-		-		-		-		227			227
Balance September 30, 2021 (unaudited)		4,300,000	$	-		75,037,890	$	750	$	6,170	$	(5,366	)	$	1,554

	Three Months Ended
	September 30,
	2021			2020
OPERATING ACTIVITIES:	(in thousands)
Net income	$	227		$	329
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		71			52
Stock based compensation expense		4			6
Provision for bad debt		-			(1	)
Amortization of operating lease asset		71			80
Changes in operating assets and liabilities:
Accounts receivable		47			97
Inventories		(113	)		(201	)
Prepaid expenses and other assets		(23	)		(35	)
Accounts payable		58			(13	)
Accrued compensation		(105	)		(93	)
Accrued expenses and interest		(5	)		6
Operating lease liability		(63	)		(97	)
Net cash provided by operating activities		169			130

INVESTING ACTIVITIES:
Investment in equipment and leasehold improvements		(50	)		(27	)
Net cash used in investing activities		(50	)		(27	)

FINANCING ACTIVITIES:
Repayment of unsecured notes payable		(200	)		(154	)
Proceeds from unsecured notes payable		200			-
Net cash provided by (repaid to) line of credit		(3	)		45
Repayment of credit card advance		-			(56	)
Repayments of secured notes payable		(66	)		(125	)
Repayment of unsecured line of credit		(3	)		(3	)
Payments on equipment notes		(61	)		(28	)
Principal payments on leases payable		(2	)		(2	)
Net cash used in financing activities		(135	)		(323	)
Net decrease in cash and cash equivalents		(16	)		(220	)
Cash and cash equivalents at beginning of period		977			1,152
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	961		$	932

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non cash item:
Purchases of equipment with equipment notes	$	-		$	35
Cash paid during the period for:
Interest	$	85		$	106
Income taxes	$	-			-

	September 30, 2021			June 30, 2021
	(unaudited)
	(in thousands)
Accounts receivable	$	1,133		$	1,189
Allowance for doubtful accounts		(1	)		(1	)
Allowance for discounts and returns		(45	)		(54	)
Total accounts receivable, net	$	1,087		$	1,134

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		% Change
	(in thousands)
Net Sales by Channel:
Direct	$	1,746	$	1,458		20	%
Wholesale	$	4,317	$	3,783		14	%
Other	$	161	$	126		28	%
Total Net Sales	$	6,224	$	5,367		16	%

	Three Months Ended						Three Months Ended
	September 30, 2021			Margin %			September 30, 2020			Margin %			$ % Change
	(in thousands)						(in thousands)
Gross Profit by Channel:
Direct	$	826			47	%	$	760			52	%		9	%
Wholesale	$	976			23	%	$	982			26	%		(1	)%
Other	$	(303	)		(188	)%	$	(254	)		(202	)%		19	%
Total Gross Profit	$	1,499			24	%	$	1,488			28	%		1	%

	September 30, 2021			June 30, 2021
	(unaudited)
	(in thousands)
Raw materials	$	1,768		$	1,637
Work in process		468			396
Finished goods		1,440			1,531
Total inventories		3,676			3,564
Allowance for inventory reserves		(173	)		(173	)
Total inventories, net of allowance	$	3,503		$	3,391

	September 30, 2021			June 30, 2021			Estimated Useful Life
	(unaudited)
	(in thousands)
Factory equipment	$	3,821		$	3,567		2-10 years
Computer equipment and software		1,166			1,146		5-7 years
Office equipment and furniture		205			205		5-7 years
Leasehold improvements		480			480		6 years
Project in process		-			222
Subtotal		5,672			5,620
Accumulated depreciation		(3,757	)		(3,686	)
Equipment and leasehold improvements, net	$	1,915		$	1,934

	September 30,
	2021		2020
Common stock options – 2015 Plan		2,350,000		4,400,000
Convertible preferred stock		4,300,000		4,300,000
Total		6,650,000		8,700,000

	September 30, 2021		June 30, 2021
	(unaudited)
	(in thousands)
Current unsecured notes payable:
20% Unsecured note, interest only, due October 31, 2021 (1)	$	-	$	100
Total current unsecured notes payable		-		100
Long-term unsecured notes payable:
13.5% Unsecured note, interest only, due May 1, 2023 (2)		200		200
20% Unsecured note, interest only, due July 31, 2021 (3)		-		100
20% Unsecured note, interest only, due October 31, 2023 (1)		100
13.5% Unsecured note, interest only, due July 31, 2023 (3)		100		-
Total long-term unsecured notes payable		400		300
Total unsecured notes payable	$	400	$	400

Operating leases	Balance Sheet Classification	(in thousands)
Right-of-use assets	Operating lease right-of-use assets, net	$	2,482

Current lease liabilities	Operating lease liabilities	$	270
Non-current lease liabilities	Long-term operating lease liabilities		2,341
Total lease liabilities		$	2,611

Payments	(in thousands)
2022	$	614
2023		642
2024		680
2025		721
2026 and thereafter		1,290
Total undiscounted lease payments		3,947
Less: Present value discount		(1,336	)
Total lease liability balance	$	2,611

Years ending June 30,	*(in thousands)*
2022	$	237
2023		303
2024		282
2025		236
2026		124
Future Minimum Note Payable Payments		1,182
Less Amount Representing Interest		(170	)
Present Value of Minimum Note Payable Payments		1,012
Less Current Portion		(218	)
Long-Term Obligations under Equipment Notes Payable	$	794

	Number of Shares Underlying Outstanding Options			Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value
Options outstanding as of June 30, 2021		2,500,000			1.9	$	.04	$	974,300
Granted	̶			̶		̶		̶
Exercised	̶			̶		̶		̶
Forfeited or expired		(150,000	)		3.4	$	.03		̶
Options outstanding as of September 30, 2021		2,350,000			1.5	$	.04	$	796,800
Options exercisable as of September 30, 2021		1,687,500			1.0	$	.03	$	589,200

	Three Months Ended September 30, 2020
Exercise Price:	$	.15- $.17
Volatility:		469%-470	%
Risk Free Rate:		.25	%
Vesting Period:	4 years
Forfeiture Rate:		0	%
Expected Life	4.1 years
Dividend Rate		0	%

		Outstanding Options						Exercisable Options
Exercise Prices		Number of Shares		Remaining Life (Years)		Weighted Average Price		Number of Shares		Weighted Average Price
$	.028 to $.03		1,950,000		1.2	$	.03		1,537,500	$	.03
$	.05		200,000		1.8	$	.05		150,000	$	.05
$	.13to.17		200,000		4.5	$	.15		-	$	-
Total stock options			2,350,000		1.5	$	.04		1,687,500	$	.03

	Three Months Ended September 30,
	2021		2020
	(in thousands)
Other Selling and Marketing	$	2	$	1
General and Administrative		2		5
Total	$	4	$	6

	September 30,
	2021
Shares of common stock reserved for issuance under the 2015 Plan		3,400,000
Shares of common stock issuable upon conversion of the Preferred Stock		4,300,000
Total shares of common stock equivalents		7,700,000

	Three Months Ended (unaudited)
(Dollars in thousands)	September 30, 2021				September 30, 2020
Net Sales:
Liberator	$	2,741	44	%	$	2,013	38	%
Jaxx		1,880	30	%		1,713	32	%
Avana		744	12	%		960	18	%
Products purchased for resale		428	7	%		337	6	%
Other		431	7	%		344	6	%
Total Net Sales	$	6,224	100	%	$	5,367	100	%

	·	Liberator sales - Sales of Liberator branded products increased $728,000, or 36%, during the quarter from the comparable prior year period, due primarily to higher sales through the Company’s e-commerce site, Liberator.com and higher sales through Amazon and brick-and-mortar retail customers.
	·	Jaxx sales – Jaxx product sales increased 10% from the prior year first quarter, primarily due to an expanded product offering and greater sales through e-merchants, including Amazon and Wayfair.
	·	Avana sales – Net sales of Avana products decreased 23% during the quarter from the comparable prior year quarter to $744,000 and is due largely to increased competition of these products, including lower priced “copycat” products from China.
	·	Intimacy products purchased for resale – This product category increased by $91,000, or 27%, from the prior year first quarter due to higher sales of certain products through our e-commerce website, Liberator.com.

(Dollars in thousands)	Three months ended September 30,
	2021		2020
Net income	$	227	$	329
Plus interest expense, net		96		107
Plus depreciation and amortization expense		71		52
Plus stock-based compensation		4		6
Adjusted EBITDA	$	398	$	494

		Incorporated by Reference			Filed or Furnished
No.	Exhibit Description	Form	Date Filed	Number	Herewith
2.1	Merger and Capitalization Agreement	8-K	10/22/09	2.1
2.2	Stock Purchase and Recapitalization Agreement	8-K/A	3/24/10	2.2
2.3	Amendment No. 1 to the Stock Purchase and Recapitalization Agreement	8-K/A	3/24/10	2.3
3.1	Amended and Restated Articles of Incorporation	SB-2	3/2/07	3(i)
3.2	Articles of Amendment to the Amended and Restated Articles of Incorporation	8-K	2/23/11	3.1
3.3	Designation of Rights and Preferences of Series A Convertible Preferred Stock	8-K	2/23/11	4.1
3.4	Articles of Amendment to the Amended and Restated Articles of Incorporation	8-K	3/3/11	3.1
3.5	Articles of Amendment to the Amended and Restated Articles of Incorporation	8-K	11/5/15	3.5
3.6	Bylaws	SB-2	3/2/07	3(ii)
31.1	Section 302 Certification by the Corporation’s Principal Executive Officer				Filed
31.2	Section 302 Certification by the Corporation’s Principal Financial and Accounting Officer				Filed
32.1	Section 906 Certification by the Corporation’s Principal Executive Officer				Filed
32.2	Section 906 Certification by the Corporation’s Principal Financial and Accounting Officer				Filed
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

	LUVU BRANDS, INC.
	(Registrant)

November 12, 2021	By:	/s/ Louis S. Friedman
(Date)		Louis S. Friedman
		President and Chief Executive Officer (Principal Executive Officer)

November 12, 2021	By:	/s/ Ronald P. Scott
(Date)		Ronald P. Scott
		Chief Financial Officer and Secretary (Principal Financial & Accounting Officer)