Luvu Brands, Inc 10-Q for FY2024 Q1

Luvu Brands, Inc. (LUVU)

10-Q 2023-11-20 For: 2023-09-30

Added on April 06, 2026

About this 10-Q

Luvu Brands, Inc filed this 10-Q on November 20, 2023, covering the quarter ended September 30, 2023 (FY2024 Q1).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.13M; down 24.0% from $8.06M a year earlier
Net loss: $126K; compared with net income of $492K 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 September 30, 2023 (unaudited) and June 30, 2023	4

	Consolidated Statements of Operations – For the Three Months Ended September 30, 2023 and September 30, 2022 (unaudited	5

	Consolidated Statements of Stockholders’ Equity – For the Three Months Ended September 30, 2023 and September 30, 2022 (unaudited)	6

	Consolidated Statements of Cash Flows – For the Three Months Ended September 30, 2023 and September 30, 2022 (unaudited)	7

	Condensed Notes Consolidated Financial Statements (unaudited)	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	27

ITEM 4.	Controls and Procedures	27

	PART II – OTHER INFORMATION

ITEM 1.	Legal Proceedings	28

ITEM 1A.	Risk Factors	28

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,
	2023			June 30,
	(unaudited)			2023
Assets:	(in thousands, except share data)
Current assets:
Cash and cash equivalents	$	1,138		$	1,041
Accounts receivable, net		1,169			1,051
Inventories, net		4,055			4,202
Prepaid expenses		122			84
Total current assets		6,484			6,378

Equipment and leasehold improvements, net		2,142			2,186
Finance lease assets		21			24
Right of use assets		1,820			1,913
Deferred Tax asset, net		10			10
Other assets		76			100
Total assets	$	10,553		$	10,611

Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	2,178		$	2,114
Current debt		1,512			1,659
Other accrued liabilities		565			416
Operating lease liability		411			396
Total current liabilities		4,666			4,585

Noncurrent liabilities:
Long-term debt		1,253			1,148
Long-term operating lease liability		1,557			1,667
Total noncurrent liabilities		2,810			2,815
Total liabilities		7,476			7,400
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Preferred stock, 0.0001 par value, 5,700,000 shares authorized 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, 2023 and June 30, 2023		—			—
Common stock, $0.01 par value, 175,000,000 shares authorized, 76,547,672 and 76,547,672 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively		765			765
Additional paid-in capital		6,228			6,234
Accumulated deficit		(3,916	)		(3,790	)
Total stockholders’ equity		3,077			3,211
Total liabilities and stockholders’ equity	$	10,553		$	10,611

	Three Months Ended September 30,
	2023			2022
	(in thousands, except share data)
Net Sales	$	6,126		$	8,059
Cost of goods sold		4,643			6,173
Gross profit		1,483			1,886
Operating expenses
Advertising and promotion		269			187
Other selling and marketing		427			365
General and administrative		819			758
Total operating expenses		1,515			1,310
Income / (loss) from operations		(32	)		576
Other Income (Expense):
Interest expense and financing costs		(94	)		(84	)
Total Other Income (Expense)		(94	)		(84	)
Income before income taxes		(126	)		492
Provision for income taxes		—			—
Net (loss) income	$	(126	)	$	492
Net income / (loss) per share:
Basic	$	(0.00	)	$	0.01
Diluted	$	(0.00	)	$	0.01

Shares used in computing net (loss) income per share:
Basic		76,547,672			76,046,249
Diluted		76,547,672			76,632,738

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

Balance, June 30, 2022 (unaudited)		4,300,000	$	—		76,046,249	$	760	$	6,183		$	(4,989	)	$	1,954
Stock-based compensation expense		—		—		—		—		12			—			12
Net income for the three months ended September 30, 2022		—		—		—		—		—			492			492
Balance, September 30, 2022 (unaudited)		4,300,000	$	—		76,046,249	$	760	$	6,195		$	(4,497	)	$	2,458

Balance, June 30, 2023 (unaudited)		4,300,000	$	—		76,547,672	$	765	$	6,234		$	(3,790	)	$	3,211
Stock-based compensation expense		—		—		—		—		(6	)		—			(6	)
Net loss for the three months ended September 30, 2023		—		—		—		—		—			(126	)		(126	)
Balance, September 30, 2023 (unaudited)		4,300,000	$	—		76,547,672	$	765	$	6,228		$	(3,916	)	$	3,077

	Three Months Ended
	September 30,
	2023			2022
OPERATING ACTIVITIES:	(in thousands)
Net (loss) income	$	(126	)	$	492
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		99			87
Stock based compensation expense		(6	)		12
Bad debt expense		2			1
Amortization of operating lease asset		93			81
Changes in operating assets and liabilities:
Accounts receivable		(119	)		(290	)
Inventories		147			158
Prepaid expenses and other assets		(36	)		(25	)
Accounts payable		64			20
Accrued compensation		155			110
Accrued expenses and interest		(7	)		48
Operating lease liability		(94	)		(77	)
Net cash provided by operating activities		172			617

INVESTING ACTIVITIES:
Investment in purchase of equipment and leasehold improvements		(32	)		(21	)
Net cash used in investing activities		(32	)		(21	)

FINANCING ACTIVITIES:
Proceeds from unsecured notes payable		200			—
Repayment of unsecured notes payable		(200	)		—
Proceeds from secured notes payable		—			—
Net cash provided by (repaid to) line of credit		63			(25	)
Repayment of unsecured line of credit		(3	)		(3	)
Payments on equipment notes		(99	)		(76	)
Principal payments on leases payable		(4	)		(3	)
Net cash used in financing activities		(43	)		(107	)
Net increase in cash and cash equivalents		97			489
Cash and cash equivalents at beginning of period		1,041			859
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,138		$	1,348

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	94		$	83
Income taxes	$	—		$	—

	September 30, 2023			June 30, 2023
	(unaudited)
	(in thousands)
Accounts receivable	$	1,177		$	1,107
Allowance for doubtful accounts		(2	)		(1	)
Allowance for discounts and returns		(6	)		(55	)
Total accounts receivable, net	$	1,169		$	1,051

	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		% Change
	(in thousands)
Net Sales by Channel:
Direct	$	1,527	$	2,267		-33	%
Wholesale	$	4,473	$	5,598		-20	%
Other	$	125	$	195		-36	%
Total Net Sales	$	6,126	$	8,059		-24	%

	Three Months Ended						Three Months Ended
	September 30, 2023			Margin %			September 30, 2022			Margin %			% Change
	(in thousands)						(in thousands)
Gross Profit by Channel:
Direct	$	720			47	%	$	1,014			45	%		-29	%
Wholesale	$	1,114			25	%	$	1,313			23	%		-15	%
Other	$	(251	)		-199	%	$	(353	)	-%				29	%
Total Gross Profit	$	1,582			26	%	$	1,973			24	%		-20	%

	September 30, 2023			June 30, 2023			Estimated Useful Life
	(unaudited)
	(in thousands)
Factory equipment	$	4,730		$	4,356		2-10 years
Computer equipment and software		1,172			1,171		5-7 years
Office equipment and furniture		205			205		5-7 years
Leasehold improvements		480			480		6 years
Project in process		-			320
Subtotal		6,587			6,532
Accumulated depreciation and amortization		(4,445	)		(4,346	)
Equipment and leasehold improvements, net	$	2,142		$	2,186

	September 30, 2023		June 30, 2023
	(unaudited)
	(in thousands)

Unsecured note payable to an officer, with interest at 8.50%, due on July 1, 2025	$	40	$	40
Unsecured note payable to an officer, with interest at 8.50%, due on July 1, 2025		76		76
Total unsecured notes payable		116		116
Less: current portion		-		-
Long-term unsecured notes payable	$	116	$	116

	September 30,
	2023		2022
Common stock options – 2015 Plan		1,350,000		1,975,000
Convertible preferred stock		4,300,000		4,300,000
Total		5,650,000		6,275,000

	September 30, 2023			June 30, 2023
	(unaudited)
	(in thousands)
Raw materials	$	1,777		$	1,926
Work in process		550			507
Finished goods		1,980			2,021
Total inventories		4,307			4,454
Allowance for excess and obsolete inventory		(252	)		(252	)
Total inventories, net of allowance	$	4,055		$	4,202

Operating leases	Balance Sheet Classification	(in thousands)
Right-of-use assets	Operating lease right-of-use assets, net	$	1,820

Current lease liabilities	Operating lease liabilities	$	411
Non-current lease liabilities	Long-term operating lease liabilities		1,557
Total lease liabilities		$	1,968

Payments	(in thousands)
2024	$	515
2025		721
2026		762
2027 and thereafter		528
Total undiscounted lease payments		2,526
Less: Present value discount		(558	)
Total lease liability balance	$	1,968

Years ending June 30,	*(in* *thousands)*
2024		351
2025		427
2026		309
2027		130
2028		39
Future Minimum Note Payable Payments		1,256
Less Amount Representing Interest		(140	)
Present Value of Minimum Note Payable Payments		1,116
Less Current Portion		(387	)
Long-Term Obligations under Equipment Notes Payable	$	729

Year ending June 30,	(in thousands)
2024		12
2025		6
2026		3
Future Minimum Finance Lease Payable Payments	$	21
Less Amount Representing Interest		(1	)
Present Value of Minimum Finance Lease Payable Payments		20
Less Current Portion		(13	)
Long-Term Obligations under Finance Lease Payable	$	8

	Number of Shares Underlying Outstanding Options			Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Intrinsic Value
Options outstanding as of June 30, 2023		1,400,000			3.0	$	0.14	$	29,000
Granted		200,000					-		3,760
Exercised		-					-		-
Forfeited or expired		(250,000	)				-		-
Options outstanding as of September 30, 2023		1,350,000			2.2	$	0.10	$	32,760
Options exercisable as of September 30, 2023		550,000			1.9	$	0.09	$	23,500

		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		1.0	$	0.03		325,000	$	0.03
$	.05 to $.10		200,000		4.9	$	0.08		-	$	-
$	.15 to $.20		700,000		3.4	$	0.16		200,000	$	0.16
$	.30		50,000		2.9	$	0.30		25,000		0.30
Total stock options			1,350,000		2.9	$	0.12		550,000	$	0.09

	Three Months Ended September 30,
	2023			2022
	($ in thousands)
Cost of Goods Sold	$	1		$	1
Other Selling and Marketing		3			7
General and Administrative (1)		(10	)		4
Total Stock-based Compensation Expense	$	(6	)	$	12

	September 30,
	2023
Shares of common stock reserved for issuance under the 2015 Plan		1,450,000
Shares of common stock issuable upon conversion of the Preferred Stock		4,300,000
Total shares of common stock equivalents		5,750,000

	Three Months Ended (unaudited)
(Dollars in thousands)	September 30, 2023				September 30, 2022
Net Sales:
Liberator	$	3,324	54	%	$	5,107	63	%
Jaxx		1,799	29	%		1,781	22	%
Avana		531	9	%		554	7	%
Products purchased for resale		249	4	%		315	4	%
Other		224	4	%		302	4	%
Total Net Sales	$	6,126	100	%	$	8,059	100	%

The following table summarizes our cash flows:
	Three Months Ended
	September 30,
(Dollars in thousands)	2023			2022
	(Unaudited)
Cash flow data:
Cash provided by operating activities	$	172		$	617
Cash used in investing activities	$	(32	)	$	(21	)
Cash provided by financing activities	$	(43	)	$	(107	)

		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 20, 2023	By:	/s/ Louis S. Friedman
(Date)		Louis S. Friedman
		President and Chief Executive Officer (Principal Executive Officer)

November 20, 2023	By:	/s/ Martin Scott
(Date)		Martin Scott
		Chief Financial Officer (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

	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

	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 20, 2023		/s/ Martin Scott
		Martin Scott
		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.