Luvu Brands, Inc 10-Q for FY2023 Q3

Luvu Brands, Inc. (LUVU)

10-Q 2023-05-22 For: 2023-03-31

Added on April 06, 2026

About this 10-Q

Luvu Brands, Inc filed this 10-Q on May 22, 2023, covering the quarter ended March 31, 2023 (FY2023 Q3).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.9M; up 2.2% from $6.75M a year earlier
Net income: $293K; down 35.2% from net income of $452K a year earlier
Diluted EPS: $0.00; compared with $0.01 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	☐

	PART I – FINANCIAL INFORMATION

ITEM 1.	Financial Statements	Page Number

	Consolidated Balance Sheets – At March 31, 2023 (unaudited) and June 30, 2022	4

	Consolidated Statements of Operations – For the Three and Nine Months Ended March 31, 2023 and March 31, 2022 (unaudited)	5

	Consolidated Statements of Stockholders’ Equity – For the Nine Months Ended March 31, 2023 and March 31, 2022 (unaudited) For the Three Months Ended March 31, 2023 and March 31, 2022 (unaudited)	6

	Consolidated Statements of Cash Flows – For the Nine Months Ended March 31, 2023 and March 31, 2022 (unaudited)	7

	Condensed Notes to 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	29

ITEM 4.	Controls and Procedures	29

	PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	30

ITEM 1A.	Risk Factors	30

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

ITEM 3.	Defaults Upon Senior Securities	30

ITEM 4.	Mine Safety Disclosures	30

ITEM 5.	Other Information	30

ITEM 6.	Exhibits	31

SIGNATURES		32

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

	March 31,
	2023			June 30,
	(unaudited)			2022
Assets:	(in thousands, except share data)
Current assets:
Cash and cash equivalents	$	1,353		$	859
Accounts receivable, net (1)		1,367			1,192
Inventories, net		4,442			3,817
Prepaid expenses		108			165
Total current assets		7,270			6,033

Property, plant and equipment, net		2,270			2,029
Finance lease assets		28			47
Equipment and leasehold improvements, net		2,298			2,076
Operating lease right-of-use assets, net		2,003			2,255
Other assets		100			100
Total assets	$	11,671		$	10,464
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	2,336		$	2,680
Current debt		1,940			1,618
Other accrued liabilities (1)		828			630
Operating lease liabilities		381			331
Total current liabilities		5,485			5,259

Noncurrent liabilities:
Long-term debt		933			1,183
Long-term operating lease liabilities		1,773			2,068
Total noncurrent liabilities		2,706			3,251
Total liabilities		8,191			8,510
Commitments and contingencies (See Note 13)
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 March 31, 2023 and June 30, 2022		—			—
Common stock, $0.01 par value, 175,000,000 shares authorized, 76,547,672 and 76,046,249 shares issued and outstanding at March 31, 2023 and June 30, 2022, respectively		765			760
Additional paid-in capital		6,223			6,183
Accumulated deficit		(3,508	)		(4,989	)
Total stockholders’ equity		3,480			1,954
Total liabilities and stockholders’ equity	$	11,671		$	10,464

	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
	(in thousands, except share data)
Net Sales	$	6,903		$	6,753		$	23,098		$	20,164
Cost of goods sold (excl. of depreciation shown separately Below)		5,134			4,959			17,097			15,294
Gross profit		1,769			1,794			6,001			4,870
Operating expenses
Advertising and promotion		171			132			557			419
Other selling and marketing		342			299			1,050			880
General and administrative		784			751			2,388			2,237
Depreciation and amortization		89			79			264			227
Total operating expenses		1,386			1,261			4,259			3,763
Income from operations		383			533			1,742			1,107
Other Income (Expense):
Interest expense and financing costs		(90	)		(81	)		(262	)		(261	)
Total Other Income (Expense)		(90	)		(81	)		(262	)		(261	)
Income before income taxes		293			452			1,480			846
Provision for income taxes		-			-			-			-
Net income	$	293		$	452		$	1,480		$	846
Net income per share:
Basic	$	0.00		$	0.01		$	0.02		$	0.01
Diluted	$	0.00		$	0.01		$	0.02		$	0.01

Shares used in computing net income per share:
Basic		76,514,264			75,639,004			76,262,350			75,269,935
Diluted		76,740,653			76,383,078			76,471,988			76,047,099

	Series A Preferred								Additional						Total
	Stocks				Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital			Deficit			Equity
	(in thousands, except share data)

Balance, June 30, 2021		4,300,000	$	—		75,037,890	$	750	$	6,166		$	(5,593	)	$	1,323
Stock-based compensation expense		—		—		—		—		14			—			14
Stock option exercises		—		—		903,970		9		(6	)		—			3
Net income for the nine months ended March 31, 2022		—		—		—		—		—			846			846
Balance, March 31, 2022		4,300,000	$	—		75,941,860	$	759	$	6,174		$	(4,747	)	$	2,186

Balance, June 30, 2022		4,300,000	$	—		76,046,249	$	760	$	6,183		$	(4,989	)	$	1,954
Stock-based compensation expense		—		—		—		—		34			—			34
Stock option exercises		—		—		501,423		5		6			—			11
Net income for the nine months ended March 31, 2023		—		—		—		—		—			1,480			1,480
Balance, March 31, 2023		4,300,000	$	—		76,547,672	$	765	$	6,223		$	(3,508	)	$	3,480

	Nine Months Ended
	March 31,
	2023			2022
OPERATING ACTIVITIES:	(in thousands)
Net income	$	1,480		$	846
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		264			227
Stock based compensation expense		34			14
Provision for bad debt		1			1
Amortization of operating lease right-of-use assets		252			220
Changes in operating assets and liabilities:
Accounts receivable (1)		(262	)		(218	)
Inventories		(624	)		(417	)
Prepaid expenses and other assets		57			(45	)
Accounts payable		(344	)		(89	)
Accrued compensation		133			(90	)
Accrued expenses and interest (1)		160			14
Operating leases liability		(245	)		(200	)
Net cash provided by operating activities		906			263

INVESTING ACTIVITIES:
Investment in equipment and leasehold improvements		(113	)		(50	)
Net cash used in investing activities		(113	)		(50	)

FINANCING ACTIVITIES:
Repayment of unsecured notes payable		(200	)		(200	)
Proceeds from unsecured notes payable		200			200
Net cash provided by (repaid to) line of credit		(71	)		103
Repayments of secured notes payable		-			(152	)
Repayment of unsecured line of credit		(9	)		(9	)
Proceeds from exercise of stock options		2			3
Payments on equipment notes		(210	)		(192	)
Principal payments on leases payable		(11	)		(8	)
Net cash used in financing activities		(299	)		(255	)
Net increase (decrease) in cash and cash equivalents		494			(42	)
Cash and cash equivalents at beginning of period		859			977
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,353		$	935

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non cash item:
Purchases of equipment with equipment notes	$	373		$	326
Finance lease asset obligation in exchange for lease payable	$	—		$	23
Cash paid during the period for:
Interest	$	261		$	259
Income taxes	$	—		$	—

	March 31, 2023			June 30, 2022
	(unaudited)
	(in thousands)
Accounts receivable (1)	$	1,408		$	1,199
Allowance for doubtful accounts		(1	)		(1	)
Allowance for discounts and returns		(40	)		(6	)
Total accounts receivable, net	$	1,367		$	1,192

	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022		% Change
	(in thousands)
Net Sales by Channel:
Direct	$	1,913	$	1,755		9	%
Wholesale	$	4,819	$	4,832		0	%
Other	$	171	$	166		2	%
Total Net Sales	$	6,903	$	6,753		2	%

	Three Months Ended			Margin			Three Months Ended			Margin			$ %
	March 31, 2023			%			March31,2022			%			Change
	(in thousands)						(in thousands)
Gross Profit by Channel:
Direct	$	923			48	%		823			47	%		12	%
Wholesale	$	1,216			25	%	$	1,261			26	%		(4	)%
Other	$	(369	)		—	%	$	(290	)		—	%		(27	)%
Total Gross Profit	$	1,769			26	%	$	1,794			27	%		(1	)%

	Nine Months Ended March 31, 2023		Nine Months Ended March 31, 2022		% Change
	(in thousands)
Net Sales by Channel:
Direct	$	6,824	$	5,675		20	%
Wholesale	$	15,705	$	13,976		12	%
Other	$	569	$	513		11	%
Total Net Sales	$	23,098	$	20,164		15	%

	March 31, 2023			June 30, 2022
	(unaudited)
	(in thousands)
Raw materials	$	2,213		$	1,893
Work in process		650			440
Finished goods		1,755			1,660
Total inventories		4,618			3,993
Allowance for slow moving inventory		(176	)		(176	)
Total inventories, net of allowance	$	4,442		$	3,817

	March 31, 2023			June 30, 2022			Estimated Useful Life
	(unaudited)
	(in thousands)
Factory equipment	$	4,326		$	3,898		2-10 years
Computer equipment and software		1,170			1,167		5-7 years
Office equipment and furniture		205			205		5-7 years
Leasehold improvements		480			480		6 years
Project in process		373			318
Subtotal		6,554			6,068
Accumulated depreciation and amortization		(4,256	)		(3,992	)
Equipment and leasehold improvements, net	$	2,298		$	2,076

Operating leases	Balance Sheet Classification	(in thousands)
Right-of-use assets	Operating lease right-of-use assets, net	$	2,003

Current lease liabilities	Operating lease liabilities	$	381
Non-current lease liabilities	Long-term operating lease liabilities		1,773
Total lease liabilities		$	2,154

Payments	(in thousands)
2023	$	165
2024		680
2025		721
2026		762
2027 and thereafter		528
Total undiscounted lease payments		2,856
Less: Present value discount		(702	)
Total lease liabilities balance	$	2,154

Years ending June 30,	*(in thousands)*
2023	$	122
2024		473
2025		427
2026		309
2027		130
2028		39
Future Minimum Note Payable Payments		1,500
Less Amount Representing Interest		(187	)
Present Value of Minimum Note Payable Payments		1,313
Less Current Portion		(393	)
Long-Term Obligations under Equipment Notes Payable	$	920

Year ending June 30,	(in thousands)
2023		4
2024		16
2025		6
2026		3
Future Minimum Finance Lease Payable Payments	$	30
Less Amount Representing Interest		(2	)
Present Value of Minimum Finance Lease Payable Payments		28
Less Current Portion		(15	)
Long-Term Obligations under Finance Lease Payable	$	13

	Number of Shares Underlying Outstanding Options			Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value
Options outstanding as of June 30, 2022		1,975,000			3.0	$	0.10	$	107,500
Granted		-			-		-	̶
Exercised		(525,000	)		0.0	$	0.03	̶
Forfeited or expired		(50,000	)		0.0	$	0.03	̶
Options outstanding as of March 31, 2023		1,400,000			3.3	$	0.14	$	63,000
Options exercisable as of March 31, 2023		312,500			1.7	$	0.05	$	39,250

		Outstanding Options						Exercisable Options
Exercise Prices		Number of Shares		Remaining Life (Years)		Weighted Average Price		Number of Shares		Weighted Average Price
$	.02 to $.03		400,000		1.5	$	0.03		275,000	$	0.03
$	.16 to $.20		950,000		2.9	$	0.17		25,000	$	0.17
$	.30		50,000		3.4	$	0.30		12,500	$	0.30
Total stock options			1,400,000		2.5	$	0.14		312,500	$	0.05

	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	($ in thousands)
Cost of Goods Sold	$	1	$	1	$	3	$	2
Other Selling and Marketing		4		2		11		6
General and Administrative		7		1		20		6
Total Stock-based Compensation Expense	$	12	$	4	$	34	$	14

	March 31,
	2023
Shares of common stock reserved for issuance under the 2015 Plan		1,400,000
Shares of common stock issuable upon conversion of the Preferred Stock		4,300,000
Total Shares of common stock equivalents		5,700,000

	Three Months Ended (unaudited)
(Dollars in thousands)	March 31, 2023				March 31, 2022
Net Sales:
Liberator	$	4,488	65	%	$	3,257	48	%
Jaxx		1,220	18	%		1,906	28	%
Avana		646	9	%		735	11	%
Products purchased for resale		272	4	%		431	7	%
Other		276	4	%		424	6	%
Total Net Sales	$	6,903	100	%	$	6,753	100	%

	Nine Months Ended (unaudited)
(Dollars in thousands)	March 31, 2023						March 31, 2022
Net Sales:
Liberator	$	14,452	63	%	$	9,254		46	%
Jaxx		5,089	22	%		6,132		30	%
Avana		1,742	7	%		2,266		11	%
Products purchased for resale		957	4	%		1,349		7	%
Other		858	4	%		1,163		6	%
Total Net Sales	$	23,098	100	%	$	20,164		100	%

	Nine Months Ended
	March 31,
(Dollars in thousands)	2023			2022
	(Unaudited)
Cash flow data:
Cash provided by operating activities	$	906		$	263
Cash used in investing activities	$	(113	)	$	(50	)
Cash used in financing activities	$	(299	)	$	(255	)

(Dollars in thousands)	Nine months ended March 31,
	2023		2022
Net income	$	1,480	$	846
Plus interest expense, net		262		261
Plus depreciation and amortization expense		264		227
Plus stock-based compensation		34		14
Adjusted EBITDA	$	2,040	$	1,348

		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)

May 22, 2023	By:	/s/ Louis S. Friedman
(Date)		Louis S. Friedman
		President and Chief Executive Officer (Principal Executive Officer)

May 22, 2023	By:	/s/ Alexander A. Sannikov
(Date)		Alexander A. Sannikov
		Chief Financial Officer and Secretary (Principal Financial & Accounting Officer)

1.		I have reviewed this quarterly report on Form 10-Q of Luvu Brands, Inc.;
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;
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;
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:

	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;
	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;
	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
	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

Date: May 22, 2023		/s/ Alexander A. Sannikov
		Alexander A. Sannikov
		Chief Financial Officer (Principal Financial and Accounting Officer)

	(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

	(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.