LUVU 8-K
Luvu Brands, Inc. (LUVU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
(Exact name of registrant as specified in Charter)
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(State or other jurisdiction of incorporation) |
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(Address of Principal Executive Offices)
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(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On February 18, 2022, Luvu Brands, Inc. (“Luvu” or “the Company”) issued a press release announcing its financial results for the second fiscal quarter and six months ended December 31, 2021. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The information included in this Item 2.02, as well as Exhibits 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
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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 hereunto duly authorized.
| Luvu Brands, Inc. (Registrant) |
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Date: February 18, 2022 | By: | /s/ Ronald P. Scott |
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| Ronald P. Scott Chief Financial Officer |
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EXHIBIT 99.1
Luvu Brands Reports Fiscal 2022 Second Quarter and First Half Results
Reports Record First Half Net Sales of $13.4 million; record Second Quarter Net Sales of $7.2 million
Atlanta, Georgia, February 18, 2022 – Luvu Brands, Inc. (OTCQB: LUVU), a designer, manufacturer and marketer of a portfolio of consumer lifestyle brands, today reported fiscal 2022 second quarter and first half results.
Fiscal Second Quarter 2022 Highlights
Three months ended December 31, 2021 as compared to the three months ended December 31, 2020
● Net sales increased 26% to a record $7.2 million from $5.7 million.
● Total gross profit of $1.6 million, up slightly from the prior year.
● Gross profit as a percentage of net sales was 22% versus 27% in 2020.
● Operating expenses increased 20% to $1,326,000 from $1,109,000.
● Income from operations was $251,000, down 45% from $457,000 in 2020.
● Net income of $167,000, or $0.00 per share, compared to a net income of $1,465,000, or $0.02 per share, in the prior year.
First Half Fiscal 2022 Highlights
Six months ended December 31, 2021 as compared to the six months ended December 31, 2020
● Net sales increased 21% to a record $13.4 million from $11.1 million.
● Total gross profit of $3.1 million, up 1% from $3.1 million in the prior year.
● Gross profit as a percentage of net sales was 23% versus 28% in 2020.
● Operating expenses were $2.5 million, up 16% from the prior year.
● Income from operations was $574,000, versus $893,000 in 2020.
● Net income of $394,000, or $0.01 per share, compared to a net income of $1,794,000, or $0.02 per share, in the prior year.
● Adjusted EBITDA was $733,000 for the first half compared to $2,100,000 in the prior year first half.
Louis Friedman, Chairman and Chief Executive Officer, commented, “The company has a multi-faceted plan to increase sales, profitability and improve delivery times including 1) adding additional sewing and cutting automation, 2) increasing our orders from a sewing subcontractor in Mexico, and 3) re-sourcing and lowering costs of certain raw materials. The Company recently purchased a new unit production system from Eton Systems which will increase our sewing conveyor system capacity by 50%, we have expanded our relationship with our Mexican sewing subcontractor, and we recently signed web-sales contracts with Ashley Furniture, Frontgate, Indigo (Canada), and Raymour & Flanigan Furniture.”
Fiscal Second Quarter 2022 Results
Net sales increased 26% to $7.2 million, compared to $5.7 million in the same year-ago quarter. Sales of Liberator products increased 33% to $3.3 million from $2.5 million in the prior year. Jaxx product sales totaled $2.3 million, up 37% from $1.7 million in the second quarter of the prior fiscal year. Avana products decreased 6% to $787,000 from $833,000 million in the prior year.
Gross profit for the second quarter totaled $1.6 million, compared to $1.6 million in the prior year second quarter. The Company continued to experience labor and raw material cost increases during the second quarter; gross profit as a percentage of net sales fell to 22% from 27% in the prior year second quarter.
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Operating expenses were approximately 19% of net sales, or approximately $1,326,000, compared to 19% of net sales, or approximately $1,109,000, for the same period in the prior year.
Income from operations was $251,000 compared to $457,000 in the prior year.
Net income for the quarter was $167,000, or $0.00 per share, compared to net income of $1,465,000, or $0.02 per share in the prior year second quarter. The prior year results include $1,096,000 in income from the forgiveness of the PPP loan.
Secured and unsecured debt decreased from $2.8 million on June 30, 2021 to $2.6 million on December 31, 2021 and working capital increased from $435,000 at June 30, 2021 to $849,000 at December 31, 2021. Cash and cash equivalents increased from $977,000 at June 30, 2021 to $1,081,000 at December 31, 2021.
Forward-Looking Statements
Certain matters discussed in this press release may be forward-looking statements. Such forward-looking statements can be identified by the use of words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 as filed with the Securities and Exchange Commission (the "SEC") on September 28, 2021 and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of Luvu Brands, Inc. and are difficult to predict. Luvu Brands, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms is not part of this press release.
Use of Non-GAAP Financial Measures
Luvu Brands’ management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. As used herein, Adjusted EBITDA represents net income before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense. Management believes that this non-GAAP measures provide useful information about the Company's operating results. Adjusted EBITDA has not been prepared in accordance with GAAP. This non-GAAP financial measure should not be considered as alternative to, or more meaningful than, net income as indicators of the Company’s operating performance. Further, this non-GAAP financial measure, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this press release a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure.
About Luvu Brands
Luvu Brands, Inc. designs, manufactures and markets a portfolio of consumer lifestyle brands through the Company’s websites, online mass / drug merchants and specialty retail stores worldwide. Brands include: Liberator®, a brand category of iconic products for enhancing sensuality and intimacy; Avana®, 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 virgin and our re-purposed polyurethane foam trim. Headquartered in Atlanta, Georgia, the Company occupies a 140,000 square foot vertically-integrated manufacturing facility and employs over 200 people. The Company's brand sites include: www.liberator.com, www.jaxxliving.com, www.avanacomfort.com plus other global e-commerce sites. For more information about Luvu Brands, please visit www.luvubrands.com.
Company Contact:
Luvu Brands, Inc.
Ronald Scott
Chief Financial Officer
770-246-6426
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Fiscal 2022 Second Quarter and First Half Results
LUVU BRANDS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
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| Three Months Ended |
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| Six Months Ended |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| (in thousands, except share data) |
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| Net Sales |
| $ | 7,186 |
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| $ | 5,714 |
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| $ | 13,411 |
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| $ | 11,081 |
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| Cost of goods sold |
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| 5,609 |
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| 4,148 |
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| 10,335 |
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| 8,027 |
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| Gross profit |
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| 1,577 |
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| 1,566 |
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| 3,076 |
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| 3,054 |
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| Operating expenses |
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| Advertising and promotion |
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| 155 |
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| 120 |
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| 287 |
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| 189 |
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| Other selling and marketing |
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| 321 |
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| 270 |
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| 581 |
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| 537 |
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| General and administrative |
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| 772 |
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| 668 |
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| 1,485 |
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| 1,332 |
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| Depreciation and amortization |
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| 78 |
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| 51 |
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| 149 |
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| 103 |
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| Total operating expenses |
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| 1,326 |
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| 1,109 |
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| 2,502 |
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| 2,161 |
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| Income from operations |
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| 251 |
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| 457 |
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| 574 |
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| 893 |
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| Other Income (Expense): |
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| Gain on forgiveness of SBA loan |
| − |
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| 1,096 |
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| 1,096 |
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| Interest expense and financing costs |
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| (84 | ) |
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| (88 | ) |
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| (180 | ) |
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| (195 | ) |
| Total Other Income (Expense) |
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| (84 | ) |
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| 1,008 |
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| (180 | ) |
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| 901 |
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| Income before income taxes |
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| 167 |
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| 1,465 |
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| 394 |
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| 1,794 |
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| Provision for income taxes |
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| − |
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| − |
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| − |
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| Net income |
| $ | 167 |
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| $ | 1,465 |
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| $ | 394 |
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| $ | 1,794 |
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| Net income per share: |
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| Basic |
| $ | .00 |
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| $ | .02 |
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| $ | .01 |
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| $ | .02 |
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| Diluted |
| $ | .00 |
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| $ | .02 |
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| $ | .01 |
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| $ | .02 |
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| Shares used in computing net income per share: |
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| Basic |
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| 75,139,516 |
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| 73,682,551 |
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| 75,088,425 |
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| 73,567,574 |
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| Diluted |
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| 76,613,472 |
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| 74,050,847 |
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| 76,594,991 |
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| 74,550,249 |
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LUVU BRANDS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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| December 31, |
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| June 30, |
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| 2021 |
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| Assets: |
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| Current assets: |
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| Cash and cash equivalents |
| $ | 1,081 |
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| $ | 977 |
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| Accounts receivable, net |
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| 920 |
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| 1,134 |
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| Inventories, net |
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| 3,456 |
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| 3,391 |
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| Prepaid expenses |
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| 168 |
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| 145 |
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| Total current assets |
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| 5,625 |
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| 5,647 |
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| Equipment, property and leasehold improvements, net |
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| 1,863 |
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| 1,934 |
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| Finance lease assets |
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| 23 |
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| 27 |
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| Operating lease assets |
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| 2,409 |
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| 2,554 |
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| Other assets |
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| 100 |
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| 84 |
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| Total assets |
| $ | 10,020 |
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| $ | 10,246 |
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| Liabilities and stockholders’ equity: |
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| Current liabilities: |
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| Accounts payable |
| $ | 2,597 |
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| $ | 2,669 |
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| Current debt |
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| 1,361 |
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| 1,599 |
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| Other accrued liabilities |
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| 528 |
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| 694 |
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| Operating lease liability |
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| 290 |
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| 250 |
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| Total current liabilities |
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| 4,776 |
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| 5,212 |
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| Noncurrent liabilities: |
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| Long-term debt |
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| 1,258 |
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| 1,288 |
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| Long-term operating lease liability |
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| 2,256 |
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| 2,423 |
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| Total noncurrent liabilities |
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| 3,514 |
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| 3,711 |
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| Total liabilities |
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| 8,290 |
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| 8,923 |
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| Commitments and contingencies (See Note 15) |
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| — |
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| — |
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| Stockholders’ equity: |
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| Preferred stock, 5,700,000 shares authorized, $0.0001 par value none issued and outstanding |
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| — |
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| — |
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| 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 December 31, 2021 and June 30, 2021 |
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| — |
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| Common stock, $0.01 par value, 175,000,000 shares authorized, 75,260,433 and 75,037,890 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively |
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| 752 |
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| 750 |
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| Additional paid-in capital |
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| 6,177 |
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| 6,166 |
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| Accumulated deficit |
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| (5,199 | ) |
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| (5,593 | ) |
| Total stockholders’ equity |
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| 1,730 |
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| 1,323 |
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| Total liabilities and stockholders’ equity |
| $ | 10,020 |
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| $ | 10,246 |
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SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Reconciliation of net income to Adjusted EBITDA for the six months ended December 31, 2021 and 2020:
| (Dollars in thousands) |
| Six months ended December 31, |
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| 2021 |
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| 2020 |
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| Net income |
| $ | 394 |
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| $ | 1,794 |
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| Plus interest expense, net |
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| 180 |
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| 195 |
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| Plus depreciation and amortization expense |
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| 149 |
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| 103 |
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| Plus stock-based compensation |
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| 10 |
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| 8 |
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| Adjusted EBITDA |
| $ | 733 |
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| $ | 2,100 |
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| 5 |