What changed in this filing

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Item 9A. Controls and Procedures

2025-04-10 compared with 2024-04-11 · 236 added, 252 removed, 757 unchanged (39% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual

Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation, that our disclosure controls and procedures were effective as of February 2, 2025.

9 unchanged sentences

The effectiveness of our internal control over financial reporting as of February 2, 2025 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report, included within this Item 9A of this Annual Report on Form 10-K.

Remediation of Previously Identified Material Weaknesses

As previously disclosed in Part II, "Item 9A - Controls and Procedures" of our fiscal 2023 Annual Report on Form 10-K, as amended by Amendment No.

1 and Amendment No.

2 on Form 10-K/A filed on November 2, 2023 and November 30, 2023, respectively (the "2023 Form 10-K/A"), we identified material weaknesses in our internal control over financial reporting relating to an ineffective control environment.

The Company lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and did not maintain appropriate oversight and monitoring activities over accounting processes related to certain accruals and estimates.

During the year ended February 4, 2024, we undertook a series of activities to remediate the material weakness, with the following actions designed to improve the financial reporting control environment and control activities:

• Enhanced the accounting and financial reporting functions with additional experienced hires with public company experience to expand the knowledge of GAAP and SEC accounting rules and regulations.

This included a new Executive Vice President and Chief Financial Officer.

The Company updated its accounting and financial reporting structure, establishing clear lines of authority and communication protocols, and has made changes to align the skills and competencies of accounting and financial reporting personnel to be commensurate with their roles and responsibilities.

The Company also provided relevant training on internal controls over financial reporting to control owners and control preparers.

• Developed and maintained appropriate oversight and monitoring activities over accounting processes that resulted in adding and revising control activities.

The Company added layers of review in accounting processes and increased the use of workflow automation, both of which reduce the reliance on manual processes and risk of errors.

Changes at the control activity level specifically addressed enhancements to our policy on recording manual journal entries, including clarification of review and approval of authorization matrices, as well as enhancing, designing and implementing controls over the transportation accrual and estimation process.

The enhanced control activities have operated for a sufficient period of time in order for us to conclude, through testing, that the controls are designed and are operating effectively.

As such, we concluded that the previously reported material weaknesses have been remediated as of February 4, 2024.

Changes in our Internal Control over Financial Reporting

Other than as described above in connection with the remediation to the material weakness, there were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter of the fiscal year ended February 4, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter of the fiscal year ended February 2, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

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Trading Arrangements

On December 12, 2023 , Shawn D.

On January 10, 2025 , Shawn D.

Nelson , CEO , adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 24,000 shares of the Company’s common stock.

Nelson's plan will expire on December 11, 2024, subject to early termination for certain specified events set forth in the plan.

Nelson's plan will expire on January 10, 2026 , subject to early termination for certain specified events set forth in the plan.

No other director or officer of the Company (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non- Rule 10b5-1 trading arrangement (each as defined in Item 408 (a) and (c) of Regulation S-K) during the thirteen weeks ended February 2, 2025.

Transactions by Section 16 directors and officers will be disclosed publicly through Form 4 filings with the SEC to the extent required by law.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

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Keith Siegner

49 Executive Vice President and Chief Financial Officer

Keith Siegner is Executive Vice President and Chief Financial Officer of The Lovesac Company.

50 Executive Vice President, Chief Financial Officer and Treasurer

Keith Siegner is Executive Vice President, Chief Financial Officer and Treasurer of The Lovesac Company.

From April 2021 to February 2023, he served as Chief Financial Officer of Vindex, LLC, a leading global esports technology and infrastructure company that was sold to Savvy Games Group in February 2023.

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of February 4, 2024, about the securities which are either already issued, or authorized for future issuance, under our Second Amended and Restated 2017 Equity Incentive Plan (the “2017 Equity Plan”).

Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (1)

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

Equity compensation plans approved by shareholders (2)(3)

1,567,306 $ 38.10 996,749

Equity compensation plans not approved by shareholders — — —

Total 1,567,306 $ 38.10 996,749

(1) The weighted average exercise price is calculated based solely on outstanding stock options.

It does not take into account the shares of our common stock underlying restricted stock units or performance units, which have no exercise price.

(2) Calculations based on 2017 Equity Plan.

(3) Awards of equity are made pursuant to our 2017 Equity Plan which was approved by our Board of Directors and our stockholders on August 26, 2017.

In fiscal 2019, the 2017 Equity Plan was amended to increase the shares of our common stock authorized and reserved for issuance to 615,066 shares.

In fiscal 2020, the 2017 Equity Plan was amended and restated to, among other things, increase the shares of our common stock authorized and reserved for issuance to 1,414,889 shares.

In fiscal 2021, the 2017 Equity Plan was amended and restated to increase the shares of our common stock authorized and reserved for issuance by 690,000 shares.

In fiscal 2023, the 2017 Equity Plan was amended and restated to, among other things, increase the shares of our common stock authorized and reserved for issuance by 550,000 shares.

In fiscal 2024, the 2017 Equity Plan was amended and restated to increase the shares of our common stock authorized and reserved for issuance by 225,000 shares, which increased the number of shares of common stock reserved for issuance under the 2017 Equity Plan to 2,879,889 shares of common stock.

The remaining information required by this Item will appear in the 2024 Proxy Statement and is incorporated by reference herein.

The information required by this Item will appear in the 2025 Proxy Statement and is incorporated by reference herein.

Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will appear in the 2025 Proxy Statement and is incorporated by reference herein.

Principal Accounting Fees and Services.

Principal Accountant Fees and Services.

The information required by this Item will appear in the 2025 Proxy Statement and is incorporated by reference herein.

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Financial Statements and Supplementary Data )

Reports of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Reports of Independent Registered Public Accounting Firm (PCAOB ID 688 )

Balance Sheets – As of February 4, 2024 and January 29, 2023

Statements of Operations – Years Ended February 4, 2024, January 29, 2023, and January 30, 2022

Statements of Changes in Stockholders’ Equity - Years Ended February 4, 2024, January 29, 2023, and January 30, 2022

Statements of Cash Flows - Years Ended February 4, 2024, January 29, 2023, and January 30, 2022

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Balance Sheets – As of February 2, 2025 and February 4, 2024

Statements of Operations – Years Ended February 2, 2025, February 4, 2024, and January 29, 2023

Statements of Changes in Stockholders’ Equity - Years Ended February 2, 2025, February 4, 2024, and January 29, 2023

Statements of Cash Flows - Years Ended February 2, 2025, February 4, 2024, and January 29, 2023

Notes to Financial Statements

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4.5 Description of the Company’s securities registered pursuant to Section 12 of the Exchange Act of 1934

Filed herewith.

10-K 4.5 4/11/2024

10.1† Wells Fargo Credit Agreement

14 unchanged sentences

S-1 10.6 4/20/2018

Employment Agreement dated October 26, 2017, by and between The Lovesac Company and Jack Krause

S-1 10.7 4/20/2018

Employment Agreement dated October 26, 2017, by and between The Lovesac Company and Donna Dellomo

S-1 10.8 4/20/2018

First Amendment to Employment Agreement dated October 2, 2019, by and between The Lovesac Company and Shawn Nelson

10-K 10.8 4/14/2021

First Amendment to Employment Agreement dated October 2, 2019, by and between The Lovesac Company and Jack Krause

10-K 10.9 4/14/2021

First Amendment to Employment Agreement dated October 2, 2019, by and between The Lovesac Company and Donna Dellomo

10-K 10.1 4/14/2021

Second Amendment to Employment Agreement dated November 9, 2021, by and between The Lovesac Company and Jack A.

8-K 10.2 11/12/2021

Employment Agreement between The Lovesac Company and Mary Fox, dated September 30, 2021

8-K 10.1 11/12/2021

Second Amendment to Employment Agreement dated March 24, 2022, by and between The Lovesac Company and Shawn Nelson

10-K 10.14 3/30/2022

Second Amendment to Employment Agreement dated March 24, 2022, by and between The Lovesac Company and Donna Dellomo

10-K 10.15 3/30/2022

Amended and Restated Employment Agreement dated March 23, 2023, by and between The Lovesac Company and Shawn Nelson

10-K 10.16 3/29/2023

Employment Agreement between The Lovesac Company and Mary Fox, dated September 30, 2021

8-K 10.1 11/12/2021

Offer Letter between The Lovesac Company and Mary Fox, dated September 30, 2021

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8-K 10.4 11/12/2021

Number Description of Exhibit Filed / Incorporated by Reference from Form ** Incorporated by Reference from Exhibit Number Dated Filed

Form of Stock Option Award Agreement

2 unchanged sentences

10-Q 10.1 12/9/2021

The Lovesac Company Director Compensation Policy

10.21 3/29/2023

The Lovesac Company Director Compensation Policy , as amended, dated February 2, 2025

Filed herewith.

Amendment No.

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Employment Agreement between the Company and Keith Siegner, dated June 1, 2023

Filed herewith.

10-K 10.24 4/11/2024

Offer Letter between the Company and Keith Siegner, dated May 12, 2023

Filed herewith.

Senior Strategic Advisor Agreement between the Company and Donna Dellomo, dated June 30, 2023

10.4 11/03/2023

10-K 10.25 4/11/2024

10.20 Retailer Program Agreement between Synchrony Bank (formerly GE Capital Retail Bank) and the Company (formerly SAC Acquisition LLC), dated April 1, 2013

Filed herewith.

10.28 First Amendment to R etailer Program Agreement between Synchrony Bank (formerly GE Capital Retail Bank) and the Company (formerly SAC Acquisition LLC) , dated September 1, 2014

Filed herewith.

10.29 Second Amendment to Retailer Program Agreement between Synchrony Bank (formerly SAC Acquisition LLC), dated M ay 11, 2018, and effective as of January 1, 2018

Filed herewith.

10-K 10.27 4/11/2024

Number Description of Exhibit Filed / Incorporated by Reference from Form ** Incorporated by Reference from Exhibit Number Dated Filed

10.21 First Amendment to Retailer Program Agreement between Synchrony Bank (formerly GE Capital Retail Bank) and the Company (formerly SAC Acquisition LLC), dated September 1, 2014

10-K 10.28 4/11/2024

10.22 Second Amendment to Retailer Program Agreement between Synchrony Bank (formerly SAC Acquisition LLC), dated May 11, 2018, and effective as of January 1, 2018

10-K 10.29 4/11/2024

10.23 Third Amendment to Retailer Program Agreement between Synchrony Bank and the Company (formerly SAC Acquisition LLC), dated March 24, 2023, and effective as of January 1, 2023

10-K 10.30 4/11/2024

Ei ghth Amendment to Credit Agreement, dated as of Sept ember 7, 2023 , by and among The Lovesac Company, Wells Fargo Bank, National Association, as agent, swing line lender and L/C issuer, and the other lenders party thereto.

Filed herewith.

Ninth Amendment to Credit Agreement, dated as of July 29, 2024, by and among The Lovesac Company, Wells Fargo Bank, National Association, as agent, swing line lender and L/C issuer, and the other lenders party thereto.

8-K 10.1 7/31/2024

Amendment No.

2 to the Second Amended and Restated 2017 Equity Incentive Plan

8-K 10.1 6/14/2024

19.1 The Loves ac Company I nsider Trading Policy , as amended

Filed herewith.

21.1 List of Subsidiaries

2 unchanged sentences

Filed herewith.

23.2 Consent of Marcum LLP

Filed herewith.

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

6 unchanged sentences

Filed herewith.

The L ovesac Dodd-Frank Clawback Policy

Filed herewith.

The Lovesac Dodd-Frank Clawback Policy

10-K 97.1 4/11/2024

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

Number Description of Exhibit Filed / Incorporated by Reference from Form ** Incorporated by Reference from Exhibit Number Dated Filed

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

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101.LAB XBRL Taxonomy Extension Label Linkbase Document

Number Description of Exhibit Filed / Incorporated by Reference from Form ** Incorporated by Reference from Exhibit Number Dated Filed

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

± Indicates a management contract or compensatory plan.

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FINANCIAL STATEMENTS

AS OF FEBRUARY 4, 2024 AND JANUARY 29, 2023 AND FOR THE YEARS ENDED FEBRUARY 4, 2024, JANUARY 29, 2023, AND JANUARY 30, 2022

AS OF FEBRUARY 2, 2025 AND FEBRUARY 4, 2024 AND FOR THE YEARS ENDED FEBRUARY 2, 2025, FEBRUARY 4, 2024, AND JANUARY 29, 2023

THE LOVESAC COMPANY

Report of Independent Registered Public Accounting Firm as of and for the years ended February 4, 2024 and January 29, 2023 (PCAOB ID 34 )

Report of Independent Registered Public Accounting Firm as of and for the year ended January 30, 2022 (PCAOB ID 688 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 34 )

Financial Statements

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Statements of Changes in Stockholders’ Equity

S ta tement s of Cash Flows

S tatement s of Cash Flows

Notes to the Financial Statements

2 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying balance sheets of The Lovesac Company (the "Company") as of February 4, 2024 and January 29, 2023, the related statements of operations, changes in stockholders' equity, and cash flows, for each of the two years in the period ended February 4, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 4, 2024 and January 29, 2023, and the results of its operations and its cash flows for each of the two years in the period ended February 4, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of The Lovesac Company (the "Company") as of February 2, 2025 and February 4, 2024, the related statements of operations, changes in stockholders' equity, and cash flows, for each of the three years in the period ended February 2, 2025, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 2, 2025 and February 4, 2024, and the results of its operations and its cash flows for each of the three years in the period ended February 2, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of February 2, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 10, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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For the year ended February 2, 2025, the Company recognized $9.0 million of barter sales in exchange for media credits.

The Company recognizes an asset for media credits which is subsequently evaluated for impairment at each reporting period for any changes in circumstances.

The Company recognizes an asset for media credits which is subsequently evaluated for impairment at each reporting period for

any changes in circumstances.

As of February 2, 2025, the Company had $36.7 million of unused media credits and did not recognize any impairment.

received in exchange for the media credits.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimate of the fair value of the sale transaction price.

We identified the barter arrangement as a critical audit matter because of the significant estimate and assumptions management makes to determine the transaction price based on the estimated fair value of the non-cash consideration received in exchange for the media credits and of forecasted media spend used to evaluate the unused media credits for potential impairment.

How the Critical Audit Matter Was Addressed in the Audit

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We have served as the Company’s auditor since fiscal 2023.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of The Lovesac Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of The Lovesac Company (the “Company”) as of January 30, 2022, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended January 30, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 30, 2022, and the results of its operations and its cash flows for each of the two years in the period ended January 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of January 30, 2022, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 30, 2022, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for leases in accordance with ASC 842

Description of the Matter

As described in Note 1 to the financial statements, the Company changed its method of accounting for leases in 2021 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (ASC 842), and the related amendments.

The adoption of ASC 842 resulted in the recognition of right-of-use operating lease assets of $90 million and operating lease liabilities of approximately $97 million, and the reclassification of deferred rent of $6.7 million as a reduction of the right-of-use assets as of February 1, 2022.

There was no cumulative effect of adopting the standard to retained earnings.

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term discounted using the incremental borrowing rate.

Auditing the Company’s adoption of ASC 842 was complex and involved subjective auditor judgment because the Company is a party to a significant number of lease contracts and certain aspects of adopting ASC 842 required management to exercise judgment in applying the new standard to its portfolio of lease contracts.

In particular, the estimates of the incremental borrowing rate were complex due to the significant management estimates required to determine the appropriate incremental borrowing rate and the resulting impact on the financial statements.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for the adoption of ASC 842.

This included testing controls over management’s review of the incremental borrowing rate and models used to estimate the fair value of the right-of-use asset, including the related data and assumption.

To test the adoption of ASC 842, we performed audit procedures that included, among others, selecting a sample of lease contracts from the overall population to evaluate the completeness, accuracy, and proper application of the accounting standard, testing the accuracy of lease terms within the lease IT system by comparison of the data for a sample of leases to the underlying lease contract, and testing the accuracy of the Company’s system calculations of initial operating lease right-of use-assets and operating lease liabilities.

Additionally, we evaluated management’s methodology and model for developing the incremental borrowing rate by performing comparative independent calculations.

We have served as the Company’s auditor from 2017-2022

/s/ Marcum LLP

March 30, 2022, except for Note 2 and the revised disclosures in Notes 5, 6, 7 and 8, for which the date is November 2, 2023.

THE LOVESAC COMPANY

BALANCE SHEETS

(amounts in thousands, except share and per share amounts) February 4, 2024 January 29, 2023

(amounts in thousands, except share and per share amounts) February 2, 2025 February 4, 2024

Current Assets

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Stockholders’ Equity

Preferred stock $ 0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of February 4, 2024 and January 29, 2023.

Common stock $ 0.00001 par value, 40,000,000 shares authorized, 15,489,364 shares issued and outstanding as of February 4, 2024 and 15,195,698 shares issued and outstanding as of January 29, 2023.

Preferred stock $ 0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of February 2, 2025 and February 4, 2024.

Common stock $ 0.00001 par value, 40,000,000 shares authorized, 14,786,934 shares issued and outstanding as of February 2, 2025 and 15,489,364 shares issued and outstanding as of February 4, 2024.

Additional paid-in capital 190,510 183,095

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STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED FEBRUARY 4, 2024, JANUARY 29, 2023, AND JANUARY 30, 2022

FOR THE YEARS ENDED FEBRUARY 2, 2025, FEBRUARY 4, 2024, AND JANUARY 29, 2023

(amounts in thousands, except per share data and share amounts) 2025 2024 2023

3 unchanged sentences

Operating expenses:

Selling, general and administration expenses 264,314 215,979 160,017

Selling, general and administrative expenses 281,450 264,314 215,979

Advertising and marketing 88,027 94,050 79,864

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Operating income 13,648 30,076 36,966

Interest income (expense), net 1,747 ( 117 ) ( 179 )

Interest and other income (expense), net 2,801 1,747 ( 117 )

Net income before taxes 16,449 31,823 36,849

(Provision for) benefit from income taxes ( 7,962 ) ( 10,361 ) 7,089

Income tax expense 4,893 7,962 10,361

Net income $ 11,556 $ 23,861 $ 26,488

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STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED FEBRUARY 4, 2024, JANUARY 29, 2023, AND JANUARY 30, 2022

Common Additional Paid-in Capital Accumulated (Deficit) Earnings Total Shareholders' Equity

FOR THE YEARS ENDED FEBRUARY 2, 2025, FEBRUARY 4, 2024, AND JANUARY 29, 2023

Common Additional Paid-in Capital Accumulated Earnings

(Deficit) Total Shareholders' Equity

(amounts in thousands, except share amounts) Shares Amount

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Taxes paid for net share settlement of equity awards — — ( 1,658 ) — ( 1,658 )

Exercise of warrants 10,956 — 104 — 104

Balance - January 29, 2023 15,195,698 — 182,554 10,540 193,094

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Taxes paid for net share settlement of equity awards — — ( 3,675 ) — ( 3,675 )

Balance - January 29, 2023 15,195,698 $ — $ 182,554 $ 10,540 $ 193,094

Exercise of warrants 74,592 — — — —

Balance - February 4, 2024 15,489,364 $ — $ 183,095 $ 34,401 $ 217,496

Net income — — — 11,556 11,556

1 unchanged sentence

Vested restricted stock units 75,283 — — — —

Repurchases of common stock ( 777,713 ) — — ( 20,112 ) ( 20,112 )

Taxes paid for net share settlement of equity awards — — ( 530 ) — ( 530 )

Exercise of warrants 74,592 — — — —

Balance - February 2, 2025 14,786,934 $ — $ 190,510 $ 25,845 $ 216,355

2 unchanged sentences

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED FEBRUARY 4, 2024, JANUARY 29, 2023, AND JANUARY 30, 2022

FOR THE YEARS ENDED FEBRUARY 2, 2025, FEBRUARY 4, 2024, AND JANUARY 29, 2023

(amounts in thousands) 2025 2024 2023

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Gain on lease termination — ( 131 ) —

Impairment of long-lived assets — — 554

Equity based compensation 7,945 4,216 10,450

1 unchanged sentence

Deferred income taxes ( 4,474 ) ( 2,126 ) 1,044

Gain on recovery of insurance proceeds - lost profit margin — — ( 632 )

Change in operating assets and liabilities:

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Other assets ( 4,241 ) ( 6,301 ) ( 20,913 )

Accounts payable and accrued expenses 16,689 ( 31,338 ) 38,187

Accounts payable 22,392 2,669 ( 12,774 )

Accrued expenses and other payables 17,507 14,020 ( 18,564 )

Operating lease liabilities ( 19,546 ) ( 14,007 ) ( 22,263 )

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Taxes paid for net share settlement of equity awards ( 530 ) ( 3,675 ) ( 1,658 )

Repurchases of common stock ( 19,929 ) — —

Proceeds from the line of credit — 255 —

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Payment of deferred financing costs ( 303 ) ( 52 ) ( 277 )

Proceeds from the exercise of warrants — — 104

Net cash used in financing activities ( 20,762 ) ( 3,727 ) ( 1,935 )

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Cash paid for interest $ 112 $ 146 $ 192

Non-cash investing activities:

Non-cash investing and financing activities:

Asset acquisitions not yet paid for at period end $ 1,240 $ 1,576 $ 4,103

Excise tax on share repurchases, accrued but not paid $ 183 $ — $ —

The accompanying notes are an integral part of these financial statements

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The Lovesac Company (the “Company”, “we”, “us” or “our”) is a technology driven company that designs, manufactures and sells unique, high quality furniture derived through its proprietary "Designed for Life" approach which results in products that are built to last a lifetime and designed to evolve as our customers’ lives do.

The Company markets and sells its products through modern and efficient showrooms and, increasingly, through online sales directly at www.lovesac.com, supported by direct-to-consumer touch points in the form of our own showrooms, which include our newly created mobile concierge and kiosks, as well as through shop-in-shops and online pop-up-shops with third party retailers.

The Company markets and sells its products through modern and efficient showrooms and, increasingly, through online sales directly at www.lovesac.com, supported by direct-to-consumer touch points in the form of our own showrooms, which include our mobile concierge and kiosks, as well as through shop-in-shops and online pop-up-shops with third party retailers.

As of February 2, 2025, the Company operated 257 showrooms including kiosks and mobile concierges located throughout the United States.

1 unchanged sentence

Basis of Presentation

The financial statements of the Company as of February 4, 2024 and January 29, 2023 and for the years ended February 4, 2024, January 29, 2023 and January 30, 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The financial statements of the Company as of February 2, 2025 and February 4, 2024 and for the years ended February 2, 2025, February 4, 2024 and January 29, 2023 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission.

The Company’s fiscal year is determined on a 52/53 week basis ending on the Sunday closest to February 1.

Hereinafter, fiscal years ended February 4, 2024, January 29, 2023 and January 30, 2022 are referred to as fiscal 2024, 2023 and 2022, respectively.

Fiscal 2024 was a 53-week fiscal year, and 2023 and 2022 were 52-week fiscal years.

Hereinafter, fiscal years ended February 2, 2025, February 4, 2024 and January 29, 2023 are referred to as fiscal 2025, 2024 and 2023, respectively.

Fiscal 2025, 2024 and 2023 were 52-week, 53-week and 52-week fiscal years, respectively.

Use of Estimates

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The Company records estimated refunds for net sales returns on a monthly basis as a reduction of net sales and cost of sales on the statement of operations and an increase in inventory and customers returns liability on the balance sheet.

As of February 4, 2024 and January 29, 2023, there was a returns allowance recorded on the balance sheet in the

amount of $ 5.6 million and $ 4.5 million, respectively, which was included in accrued expenses, and sales returns of $ 1.3 million and $ 1.0 million, respectively, included in merchandise inventories.

As of February 2, 2025 and February 4, 2024, there was a returns allowance recorded on the balance sheet in the amount of $ 9.2 million and $ 5.6 million, respectively, which was included in accrued expenses, and sales returns of $ 2.4 million and $ 1.3 million, respectively, included in merchandise inventories.

In some cases, deposits are received before the Company transfers control, resulting in contract liabilities.

These contract liabilities are reported as customer deposits on the Company's balance sheet.

As of February 4, 2024, and January 29, 2023, the Company recorded customer deposit liabilities in the amount of $ 8.3 million and $ 6.8 million, respectively.

As of February 2, 2025, and February 4, 2024, the Company recorded customer deposit liabilities in the amount of $ 11.3 million and $ 8.3 million, respectively.

During fiscal 2025, 2024 and 2023, the Company recognized $ 8.3 million, $ 6.8 million and $ 13.3 million, respectively, related to customer deposits from fiscal 2024, 2023 and 2022, respectively.

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For fiscal 2025, 2024, and 2023, the Company recognized $ 9.0 million, $ 12.3 million, and $ 21.3 million, respectively, of barter sales in exchange for media credits.

As of February 4, 2024, and January 29, 2023, the Company had $ 5.1 million and $ 3.8 million, respectively, of unused media credits expected to be utilized in the next fiscal year classified as current, and the remaining balance of $ 27.7 million and $ 21.4 million, respectively, classified as non-current.

The credits expire January 1, 2034 and the Company expects to utilize all credits prior to expiration.

As of February 2, 2025, and February 4, 2024, the Company had $ 5.3 million and $ 5.1 million, respectively, of unused media credits expected to be utilized in the next fiscal year classified as current, and the remaining balance of $ 31.4 million and $ 27.7 million, respectively, classified as non-current.

The credits expire from January through October 2034 and the Company expects to utilize all credits prior to expiration.

The Company did not recognize any impairment for fiscal 2025, 2024, and 2023.

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Historically, collection losses have been immaterial as a significant portion of the Company’s receivables are related to individual credit card transactions and two wholesale customers.

The Company recognized $ 1.0 million related to bad debt write-offs for fiscal 2024, and recognized $ 0.4 million for fiscal 2023 and 2022, respectively.

For fiscal 2025, 2024, and 2023, the Company recognized $ 0.4 million, $ 1.0 million, and $ 0.4 million , respectively, related to bad debt write-offs.

Breakdown of trade accounts receivable is as follows:

(in thousands) February 4, 2024 January 29, 2023

(in thousands) February 2, 2025 February 4, 2024

Credit card receivables $ 11,121 $ 10,963

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Total trade accounts receivable, net $ 16,781 $ 13,463

The Company had two wholesale customers that comprised 100 % of wholesale receivables at February 4, 2024 and January 29, 2023, respectively.

The Company had two wholesale customers that comprised 100 % of wholesale receivables at February 2, 2025 and February 4, 2024, respectively.

Prepaid Expenses

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There were no impairments during fiscal 2025, 2024, or 2023.

Intangible assets, net as of February 4, 2024 and January 29, 2023 consists of (in thousands):

February 4, 2024 January 29, 2023

Intangible assets, net as of February 2, 2025 and February 4, 2024 consists of (in thousands):

February 2, 2025 February 4, 2024

Weighted-Average Remaining Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-Average Remaining Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount

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Total $ 6,475 $ ( 4,889 ) $ 1,586 $ 5,928 $ ( 4,471 ) $ 1,457

Amortization expense was $ 0.4 million, $ 0.4 million, and $ 0.7 million in fiscal 2024, 2023, and 2022, respectively.

Amortization expense was $ 0.4 million in fiscal 2025, 2024, and 2023.

The following table presents the future expected amortization expense as of February 2, 2025 (in thousands):

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In fiscal 2025, 2024, and 2023, the Company did not recognize any impairment charges associated with showroom-level right of use lease assets.

Durin g fiscal 2022 , the Company recorded impairment charges of $ 0.6 million, associated with the assets of underperforming retail locations.

The impairments were recorded in selling, general and administrative in the Company’s Statements of Operations.

Product Warranty

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Product warranty expense, without any reserve adjustments, was approximately $ 2.5 million, $ 2.0 million, and $ 0.7 million in fiscal 2025, 2024, and 2023.

The increase in fiscal 2024 is related to an increase in warranty claims related to an increase in net sales.

Warranty reserve was $ 1.4 million and $ 0.7 million as of February 4, 2024 and January 29, 2023, respectively.

The Company leases its office, warehouse facilities and retail showrooms under operating lease agreements which expire at various dates through January 2035.

Leases with an initial term of twelve months or less are not recorded on the balance sheet and are expensed on a straight-line basis over the lease term in the Statements of Operations.

Warranty reserve was $ 2.4 million and $ 1.4 million as of February 2, 2025 and February 4, 2024, respectively, which was included in accrued expenses.

The Company leases its office, warehouse facilities and retail showrooms under operating lease agreements which expire at various dates through April 2035.

Leases with an initial term of twelve months or less are not recorded on the balance sheet and are expensed as incurred over the lease term in the Statements of Operations.

The Company determines if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset.

Operating right-of-use assets represents the right to use an underlying asset pursuant to the lease for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease, both of which are recognized based on the present value of future minimum lease payments over the lease term at the commencement date.

Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

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The lease payments are discounted at the Company's incremental borrowing rate as the implicit rate in the lease is not readily determinable for most of the Company's leases, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We determine incremental borrowing rates as of the first day of each fiscal year and analyze changes in interest rates and the Company's credit profile to determine if the rates need to be updated during the fiscal year.

We determine incremental borrowing rates quarterly as of the last day of each prior fiscal quarter provided by a third party valuation specialist.

We recognize operating lease cost over the estimated term of the lease, which includes options to extend lease terms that are reasonably certain of being exercised, starting when possession of the property is taken from the landlord, which normally includes a construction period prior to the showroom opening.

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In addition, certain of our lease agreements include variable lease payments, such as payments based on a percentage of net sales that are in excess of a predetermined level and/or increases based on a change in the consumer price index or fair market value.

These variable lease payments are excluded from minimum lease payments and are included in the determination of net lease cost when it is probable that the expense has been incurred and the amount can be reasonably

If an operating lease asset is impaired, the remaining operating lease asset will be amortized on a straight-line basis over the remaining lease term.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses include all operating costs, other than advertising and marketing expense, not included in cost of merchandise sold.

Selling, general and administrative expenses include all operating costs, other than advertising and marketing expense and depreciation and amortization, not included in cost of merchandise sold.

These expenses include all payroll and payroll-related expenses;

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Selling, general and administrative expenses as a percentage of net sales is usually higher in lower volume quarters and lower in higher volume quarters because a significant portion of the costs are relatively fixed.

Research and Development Expenses

Research and development costs are charged to expense in the period incurred.

Research and development expense were $ 8.4 million, $ 7.7 million, and $ 8.4 million in fiscal years 2025, 2024, and 2023, respectively.

Employee Benefit Plan

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Employer contributions to the 401(k) Plan for fiscal years 2025, 2024, and 2024 were approximately $ 2.1 million, $ 1.6 million, and $ 1.3 million, respectively.

Advertising and Marketing Expenses

Advertising and marketing expense include digital, social, and traditional advertising and marketing initiatives, that cover all of our business channels.

Advertising Expenses

Advertising expense include digital, social, and traditional advertising that covers all of our business channels.

All advertising costs are expensed as incurred, or upon the release of the initial advertisement.

Total advertising and marketing expenses were $ 94.1 million, $ 79.9 million, and $ 65.1 million in fiscal years 2024, 2023, and 2022, respectively.

Total advertising expenses were $ 77.4 million, $ 82.3 million, and $ 71.4 million in fiscal years 2025, 2024, and 2023, respectively.

Showroom Preopening and Closing Costs

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The Company has considered all recent accounting pronouncements issued by the Financial Accounting Standards Board and they were considered to be not applicable or the adoption of such pronouncements will not have a material impact on the financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Adopted

Segment Reporting.

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The amendments in this ASU are to be applied retrospectively and are effective for our annual financial statements starting in fiscal 2025 and interim periods starting in fiscal 2026, with early adoption permitted.

The Company expects this ASU to only impact its disclosures with no impacts to its results of operations, cash flows or financial condition.

On February 5, 2024, the Company adopted ASU 2023-07 with impact to its disclosures only and no impacts to its results of operations, cash flows or financial condition.

Recent Accounting Pronouncements Not Yet Adopted

Income Taxes.

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The Company expects this ASU to only impact its disclosures with no impacts to its results of operations, cash flows or financial condition.

Disaggregation of income statement expenses.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disclosure of certain costs and expenses within the notes to the financial statements.

This accounting standards update will be effective for us for fiscal year 2028 and interim periods beginning in the first quarter of fiscal 2029, with early adoption permitted.

The Company expects this ASU to only impact its disclosures with no impacts to its results of operations, cash flows or financial condition.

Climate-Related Disclosures.

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The rules require disclosure of greenhouse gas (GHG) emissions in annual reports and registration statements Additionally, all registrants would be required to provide numerous climate-related disclosures within their financial statements and elsewhere in their filings.

The Company is currently evaluating the impact of the rule changes.

This accounting standards update will be effective for us for fiscal year 2027.

In April 2024, the SEC released an order staying this final rule pending judicial review of all the petitions challenging the rule.

The Company is currently evaluating the impact of the potential rule change.

This accounting standards update would be effective for us for fiscal year 2027.

Property and Equipment, net

Property and equipment, net as of February 4, 2024 and January 29, 2023 consists of (in thousands):

Estimated Life February 4, 2024 January 29, 2023

Property and equipment, net as of February 2, 2025 and February 4, 2024 consists of (in thousands):

Estimated Life February 2, 2025 February 4, 2024

Office and store furniture, and equipment 5 Years $ 15,410 $ 13,089

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The following table presents the components of accrued expenses (in thousands):

February 4, 2024 January 29, 2023

February 2, 2025 February 4, 2024

Accrued warehouse, freight, and inventory $ 17,837 $ 13,348

Accrued income taxes 7,675 687

Customer return liability 10,042 5,606

Accrued advertising fees 3,373 739

Accrued income taxes 8,259 7,675

Accrued advertising and marketing 6,707 3,373

Warranty liability 2,391 1,359

Accrued professional fees 1,304 2,167

Accrued occupancy 1,094 1,278

Other accrued expenses (1)

Total Accrued Expenses $ 51,986 $ 38,622

(1) Other accrued expenses consists primarily of credit card fees, property and equipment, insurance, property taxes, and other operating costs.

(1) Other accrued expenses consists primarily of professional fees, credit card fees, rent, property and equipment, and other operating costs.

The Company is subject to federal, state and local corporate income taxes.

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Total deferred tax (benefit) expense ( 4,474 ) ( 2,126 ) 1,044

Total tax provision $ 7,962 $ 10,361 $ ( 7,089 )

Total income tax expense $ 4,893 $ 7,962 $ 10,361

A reconciliation of income taxes at the federal statutory corporate rate to the effective rate for fiscal 2025, 2024, and 2023 is as follows:

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Permanent adjustments 0.2 % 0.1 % 0.2 %

Penalties 1.9 % — % — %

Equity-based compensation 2.7 % 0.5 % 0.1 %

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Uncertain tax benefits ( 0.2 ) % 1.4 % — %

Change in valuation allowance — % — % ( 40.4 ) %

Income tax provision 25.0 % 28.1 % ( 17.5 ) %

Effective tax rate 29.7 % 25.0 % 28.1 %

Significant components of the Company's deferred tax assets are as follows (in thousands):

February 4, 2024 January 29, 2023

February 2, 2025 February 4, 2024

Deferred Income Tax Assets

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Net Deferred Income Tax Asset $ 15,277 $ 10,803

At February 4, 2024 and January 29, 2023, the Company did no t have any net operating loss carryforwards available for federal income tax purposes.

The Company has approximately $ 5.7 million and $ 7.1 million of state net operating loss carryforwards as of February 4, 2024 and January 29, 2023, respectively.

At February 2, 2025 and February 4, 2024, the Company did no t have any net operating loss carryforwards available for federal income tax purposes.

The Company has approximately $ 4.8 million and $ 5.7 million of state net operating loss carryforwards as of February 2, 2025 and February 4, 2024, respectively.

The state net operating losses expire at various times between 2032 and 2040.

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However, the net operating losses generated on the Company's federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities.

Prior to the fiscal 2022 year-end, the Company recorded a full valuation allowance on its net deferred tax assets, as it did not meet the more likely than not threshold required under ASC 740-10-30.

For the year ended January 30, 2022, the Company reversed its full valuation allowance of $ 16.4 million, as it assessed and concluded that it met the more likely than not threshold of realizing its net deferred tax assets.

The main forms of positive evidence to support the valuation allowance release were the substantial realization of its net operating loss carryforwards and cumulative three years of income.

As of February 4, 2024 and January 29, 2023, the Company did not record a valuation allowance against its net deferred tax assets, due to its assessment and conclusion that it is more likely than not that it would realize its net deferred tax assets.

As of February 2, 2025 and February 4, 2024, the Company did not record a valuation allowance against its net deferred tax assets, due to its assessment and conclusion that it is more likely than not that it would realize its net deferred tax assets.

A reconciliation of beginning and ending amounts of unrecognized tax benefits for fiscal 2025, 2024, and 2023 is as follows:

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The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold.

As of February 4, 2024, the Company has unrecognized tax benefits of $ 0.5 million.

As of January 29, 2023, the Company assessed and concluded that it did not have any unrecognized tax benefits.

As of February 2, 2025 and February 4, 2024, the Company has unrecognized tax benefits of $ 0.4 million and $ 0.5 million, respectively.

The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months;

however, the ultimate outcome of tax matters is uncertain and unforeseen results can occur.

We had no interest or penalties during fiscal 2024, 2023, and 2022.

We had no material interest or penalties during fiscal 2025, 2024, and 2023.

To the extent these unrecognized tax benefits are ultimately recognized, approximately $ 0.4 million will impact the Company’s effective tax rate.

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The Internal Revenue Service (IRS) has concluded the audit of the Company's fiscal 2019 federal income tax return as of February 4, 2024.

The IRS has proposed immaterial adjustments, with the Company in the process of amending federal and state income tax returns for fiscal 2022 and 2023 as a result of the IRS audit settlement.

During fiscal 2025, the Company filed amended federal and state income tax returns for fiscal 2022 and 2023 as a result of the IRS audit settlement.

The amended returns did not have a material impact to the financial statements.

On August 16, 2022, the Inflation Reduction Act was signed into law.

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For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022.

For the years ended February 4, 2024 and January 29, 2023, due to the capitalization of research and development expenditures, the Company’s current federal taxable income increased by approximately $ 9.0 million and $ 7.7 million, respectively, with a corresponding increase in the Company’s deferred tax assets.

These changes in tax laws did not have a material impact on the Company’s results of operations for the year ended January 30, 2022.

For fiscal 2025, 2024, and 2023, due to the capitalization of research and development expenditures, the Company’s current federal taxable income increased by approximately $ 7.5 million, $ 9.0 million, and $ 7.7 million , respectively, with a corresponding increase in the Company’s deferred tax assets.

The Company will continue to monitor the impact of changes in tax legislation.

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Operating lease expense $ 34,469 $ 30,305 $ 24,173

Variable lease expense 11,820 16,082 10,489

Short term lease expense 1,470 721 336

Variable and short term lease expense 7,465 13,290 16,803

Total lease expense $ 41,934 $ 43,595 $ 40,976

Variable lease expense includes index-based changes in rent, maintenance, real estate taxes, insurance and other variable charges included in the lease as well as rental expenses related to short term leases.

Variable lease expense includes percentage rent, maintenance, sales tax on rent, insurance and other variable charges included in the lease as well as rental expenses related to short term leases.

During fiscal 2025, 2024, and 2023, we did not recognize any impairment charges associated with showroom-level right-of-use assets.

During fiscal 2022, we recognized impairment charges totaling $ 0.6 million associated with showroom-level ROU assets that were included as part of selling, general and administrative expenses.

Future minimum lease payments under non-cancelable leases as of February 2, 2025 were as follows (in thousands):

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Net additions to right-of-use assets obtained in exchange for lease obligations $ 22,639 $ 42,064 $ 53,239

Weighted average remaining lease term - operating leases 7.47 7.40 6.29

Weighted average remaining lease term - operating leases 6.9 years 7.5 years 7.4 years

Weighted average discount rate - operating leases 5.23 % 4.97 % 4.10 %

Commitments, Contingencies and Related Parties

Recovery of Insurance Proceeds

During fiscal year 2022, a warehouse the Company had inventory in was damaged by fire and qualified for a loss recovery claim.

The Company disposed of inventory of approximately $ 0.6 million.

The Company reached an agreement with its insurance carrier and the Company received a cash insurance recovery of approximately $ 1.2 million for the reimbursement of lost inventory and profit margin.

Accordingly, the Company recognized a gain of approximately $ 0.6 million related to the recovery of lost profit margin and is included in the accompanying statements of operations as a reduction to cost of goods sold.

No other insurance proceeds were received during the periods presented.

Legal Proceedings

The Company is involved in various legal proceedings in the ordinary course of business.

Where appropriate, the Company has made accruals with respect to these matters, however, for cases where liability is not probable or the amount cannot be reasonably estimated, accruals have not been made.

Management cannot presently predict the outcome of these matters, although management believes, based in part on the advice of counsel, that the ultimate resolution of these matters will not have a materially adverse effect on the Company’s financial position, results of operations or cash flows.

The Company has voluntarily self-reported to the SEC information concerning the internal investigation of the accounting matters that led to the restatement of its previously issued audited financial statements as of and for the year ended January 29, 2023 and our unaudited condensed financial statements for the quarterly periods ended April 30, 2023, October 30, 2022, July 31, 2022 and May 1, 2022.

As a result of self-reporting, the Company is the subject of an ongoing, non-public investigation by the SEC.

The Company is cooperating fully with the SEC in its investigation and continues to respond to requests in connection with this matter.

The investigation could result in the SEC seeking various penalties and relief including, without limitation, civil injunctive relief and/or civil monetary penalties or administrative relief.

The nature of the relief or remedies the SEC may seek with respect to the Company, if any, cannot be predicted at this time.

We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and investigations, as described below.

We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated.

If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome;

if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, we disclose such an estimate, if material.

If such a loss or range of losses is not reasonably estimable, we disclose that fact.

We review any such loss contingency provisions at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.

We recognize insurance recoveries, if any, when they are probable of receipt.

All associated costs due to third-party service providers and consultants, including legal fees, are expensed as incurred.

Legal proceedings are inherently unpredictable.

It is possible that our financial position, results of operations or cash flows could be materially negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings.

As previously disclosed, the Company voluntarily self-reported to the SEC information concerning the internal investigation of the accounting matters that led to the restatement of its previously issued audited financial statements as of and for the year ended January 29, 2023 and our unaudited condensed financial statements for the quarterly periods ended April 30, 2023, October 30, 2022, July 31, 2022 and May 1, 2022.

As a result of self-reporting, the Company was the subject of a non-public investigation by the SEC.

The Company cooperated fully with the SEC in its investigation, and on October 29, 2024, the Company agreed to a settlement to resolve the claims against it.

Without admitting or denying the SEC’s allegations, Lovesac agreed to the entry of a final judgment ordering it to pay a $ 1.5 million civil penalty and imposing a permanent injunction against future violations of Section 17(a)(3) of the Securities Act of 1933 and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and the associated rules thereunder.

fiscal 2025, t he penalties were recognized within selling, general and administrative expense in the Statements of Operations and paid in full.

On December 19, 2023, a putative securities class action was filed against the Company and certain of its current and former officers related to the restatement of certain of the Company’s financial statements.

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The Lovesac Company , No.

3:23-cv-1640, was filed in the United States District Court for the District of Connecticut and alleges that all defendants violated Sections 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by the SEC, and that the individual defendants violated Section 20(a) of the Exchange Act.

3:23-cv-1640, was filed in the United States District Court for the District of Connecticut and alleges that all defendants violated Sections 10(b) of the Exchange Act and SEC Rule 10b-5 and that the individual defendants violated Section 20(a) of the Exchange Act.

The complaint generally alleges that the Company made certain misrepresentations or failed to disclose certain accounting errors related to the restatement of its financial statements and that the Company’s disclosure controls and procedures and internal controls over financial reporting were deficient.

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as Lead Counsel.

The court’s scheduling order provides for Lead Plaintiff to file an Amended Complaint by May 10, 2024.

The litigation is in its early stages, and management is unable to assess a likely outcome or the amount or range of potential losses at this time .

On May 29, 2024, the parties entered into a term sheet to settle the action, subject to various conditions, including execution of a definitive settlement agreement, filing of the definitive agreement with the court, and court approval.

The parties executed the definitive settlement agreement on July 30, 2024.

The court preliminarily approved the proposed settlement on August 1, 2024, authorized dissemination of notice to the class, and scheduled a fairness hearing.

On December 9, 2024, the Court entered an order approving final settlement of the litigation, including dismissing the lawsuit and releasing all claims in exchange for a settlement payment by the Company (the “Approval Order”).

On December 10, 2024, the Court entered judgment dismissing the litigation on the merits and with prejudice according to the terms of the parties’ settlement agreement and the Approval Order.

During fiscal 2025, the settlement was recognized within selling, general and administrative expense in the Statements of Operations and paid in full.

On July 29, 2024, a putative shareholder derivative action captioned Getz v.

3:24-cv-1260, was filed in the United States District Court for the District of Connecticut on behalf of the Company against certain of its current and former officers and directors.

Two similar shareholder derivative actions, captioned Valle v.

Dellomo , No.

3:24-cv-1327, and McKinnon v.

3:24-cv-1343, were filed in the same court against the same defendants on August 19, 2024, and August 21, 2024, respectively.

The cases assert claims on behalf of the Company for breach of fiduciary duty, violations of the Exchange Act, unjust enrichment, corporate waste, and aiding and abetting primary violations.

The factual allegations underlying those claims are similar to those alleged in the securities class action.

The plaintiffs seek, among other things, an unspecified amount of damages and attorneys’ fees, expert fees, and other costs.

On September 20, 2024, the Court consolidated the three lawsuits under the caption In re The Lovesac Company Derivative Litigation , Lead Case No.

3:24-cv-01260-VAB (i.e., the “Derivative Action”).

The parties have reached an agreement in principle to settle the Derivative Action, which is subject to execution of a definitive agreement and, among other conditions, approval by the Court.

If the contemplated settlement is ultimately concluded as agreed in principle, the Company believes the resolution will not have a material impact to the financial statements.

On March 21, 2024, a putative class action complaint related to the Company’s pricing was filed against the Company.

The lawsuit, captioned Nguyen v.

The Lovesac Company , was filed in the Superior Court of California, County of Sacramento, and was removed to the United States District Court for the Eastern District of California.

The complaint generally alleges that the Company falsely advertised discounts on certain products.

The plaintiff seeks, among other things, an unspecified amount of monetary damages, including treble damages, punitive damages, injunctive relief related to the Company’s sales practices, and attorneys’ fees, expert fees, and other expenses.

On June 24, 2024, the Company filed a motion to dismiss.

On July 15, 2024, the plaintiff filed an amended complaint.

On August 12, 2024, the Company filed a motion to dismiss the plaintiff’s amended complaint.

On November 26, 2024, the court entered an order to stay all proceedings in the case in light of a mediation of the dispute scheduled for January 23, 2025.

The parties were unable to come to an agreement at the January 23, 2025 mediation.

On February 7, 2025, the court unstayed the proceedings in the case for the purpose of ruling on the Company's pending motion to dismiss.

On March 28, 2025, the court granted the Company's motion to dismiss with leave to amend, but dismissed Plaintiff's request for injunctive relief without leave to amend.

The court provided the plaintiff 30 days to file another amended complaint.

If the plaintiff amends his complaint, the Company will have 21 days to file a responsive pleading.

At this time, we are unable to reasonably estimate the possible loss or range of loss from this proceeding.

Financing Arrangements

On February 6, 2018, the Company established a $ 25.0 million line of credit with Wells Fargo Bank.

On February 6, 2018, the Company established a $ 25.0 million line of credit with Wells Fargo Bank, National Association ("Wells").

On March 25, 2022, the Company amended the credit agreement to extend the maturity date to March 25, 2024, and among other things, increase the maximum revolver commitment from $ 25.0 million to $ 40.0 million, subject to borrowing base and availability restrictions.

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The amended agreement contains a financial covenant that requires us to maintain undrawn availability under the credit facility of at least 10 % of the lesser of (i) the aggregate commitments in the amount of $ 40.0 million and (ii) the amounts available under the credit facility based on eligible accounts receivable and inventory.

Our credit agreement includes a $ 1.0 million sublimit for the issuance of letters of credit and a $ 4.0 million sublimit for swing line loans.

Under the amended line of credit, the Company may elect that revolving loans bear interest at either a base rate or a term SOFR based rate, plus, in either case, a margin determined by reference to our quarterly average excess availability under the line of credit and ranging from 0.50 % to 0.75 % for borrowings accruing interest at a base rate and from 1.625 % to 1.850 % for borrowings accruing interest at term SOFR.

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On March 24, 2023, the Company amended the credit agreement to extend the maturity date to September 30, 2024.

All other terms of the credit agreement remain unchanged.

As of February 4, 2024 and January 29, 2023, the Company’s borrowing availability under the line of credit was $ 36.0 million, there were no borrowings outstanding on this line of credit, and the Company was in compliance with required covenants.

On July 29, 2024, the Company amended the credit agreement to, among other things, add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, increase the size of the revolving credit facility by $ 10.0 million and extend the maturity date of the loans made under the credit agreement from September 30, 2024 to July 29, 2029.

As of February 2, 2025 and February 4, 2024, the Company’s borrowing availability under the line of credit with Wells was $ 32.6 million and $ 36.0 million, respectively, there were no borrowings outstanding on this line of credit, and the Company was in compliance with required covenants.

Stockholders' Equity

Common Stock Warrants

On June 29, 2018, the Company issued 281,750 warrants with a five-year term to Roth Capital Partners, LLC as part of the underwriting agreement in connection with the Company's IPO.

On June 29, 2018, the Company issued 281,750 warrants with a five-year term and an average exercise price of $ 19.20 to Roth Capital Partners, LLC as part of the underwriting agreement in connection with the Company's IPO.

Warrants may be exercised on a cashless basis, where the holders receive fewer shares of common stock in lieu of a cash payment to the Company.

In fiscal 2022, 12,125 warrants were exercised, with 5,625 warrants exercised on a cashless basis, which resulted in the issuance of 10,956 common shares.

There were 98 warrants that expired as of January 30, 2022.

There were no warrants issued, exercised, or expired and canceled in fiscal 2023.

As of January 30, 2022, the weighted average contractual life of the 281,750 outstanding warrants was 1.4 years.

There were no warrants issued, exercised, or expired and canceled in fiscal 2023 and the weighted average remaining contractual life was 0.4 years as of January 29, 2023.

In fiscal 2024, Roth Capital Partners, LLC performed a cashless exercise of all 281,750 remaining outstanding warrants resulting in 74,592 net shares issued.

As of February 2, 2025, no warrants remain outstanding.

The following represents warrant activity during fiscal 2024, 2023, and 2022:

Average exercise price Number of warrants Weighted average remaining contractual life (in years)

Outstanding at January 31, 2021 $ 19.07 293,973 2.57

Expired and canceled 9.83 ( 98 ) —

Exercised 16.00 ( 12,125 ) 0.09

Outstanding at January 30, 2022 19.20 281,750 1.41

Expired and canceled — — —

Exercised — — —

Outstanding at January 29, 2023 19.20 281,750 0.41

Expired and canceled — — —

Exercised 19.20 ( 281,750 ) —

Outstanding at February 4, 2024 $ — — —

Equity Incentive Plans

The Company adopted the Amended and Restated 2017 Equity Incentive Plan (the "2017 Equity Plan") which provides for awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards.

The Company adopted the Second Amended and Restated 2017 Equity Incentive Plan (the "2017 Equity Plan") which provides for awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance based restricted stock units, cash-based awards and other stock-based awards.

All awards shall be granted within 10 years from the effective date of the 2017 Equity Plan.

In fiscal 2025, the 2017 Equity Plan was amended to increase the shares of our common stock authorized and reserved for issuance by 1,100,000 shares, which increased the number of shares of common stock reserved for issuance under the 2017 Equity Plan to 3,979,889 shares of common stock.

Time-Based Restricted Stock Units

Time-based restricted stock units ("RSU awards") granted under the 2017 Equity Plan are generally subject to only a service-based vesting condition.

RSU awards vest equally over three years on the anniversary date of the grant date if employed at the time of vesting.

The valuation of these RSU awards is based solely on the fair value of the Company’s stock on the date of grant.

Performance Based Restricted Stock Units

Performance based restricted stock units ("PSU awards") granted under the 2017 Equity Plan are generally subject to both a service-based vesting condition and a performance-based vesting condition.

PSU awards will vest upon the achievement of specified performance targets and subject to continued service through the applicable vesting dates.

The stock-based compensation expense relating to PSU awards is recognized over the requisite service period when it is probable that the performance condition will be satisfied.

Stock Options

16 unchanged sentences

Exercised — —

Outstanding at January 29, 2023 495,366 38.10 1.35 —

Outstanding at February 4, 2024 495,366 38.10 5.34 —

Canceled and forfeited — —

2 unchanged sentences

Time and Performance Based Restricted Stock Units

The following table summarizes the activity for the Company's unvested restricted stock units activity during fiscal 2024, 2023, and 2022:

The following table summarizes the Company's RSU and PSU awards activity during fiscal 2025, 2024, and 2023:

Number of shares Weighted average grant date fair value

7 unchanged sentences

Vested ( 381,228 ) 25.24

Unvested at January 29, 2023 640,256 34.50

Unvested at February 4, 2024 1,032,408 31.41

Granted 847,634 21.47

13 unchanged sentences

Equity-based compensation expense was approximately $ 7.9 million, $ 4.2 million, and $ 10.5 million for fiscal 2025, 2024, and 2023 respectively.

In fiscal 2023, the Company recognized $ 4.3 million related to performance stock units granted in fiscal 2021 with a three year term, which met the performance target of $ 550 million in net sales and $ 50 million in Adjusted EBITDA for fiscal 2023.

The total unrecognized equity based compensation cost related to unvested restricted stock unit awards was approximately $ 8.5 million as of February 4, 2024 and will be recognized in operations over a weighted average period of 3.76 years.

The total unrecognized equity based compensation cost related to unvested RSU and PSU awards was approximately $ 16.7 million as of February 2, 2025 and will be recognized in operations over a weighted average period of 2.7 years.

Share Repurchase Program

On June 11, 2024, our Board of Directors approved a $ 40.0 million share repurchase program.

Under the share repurchase program, we may repurchase shares from time to time in the open market, privately negotiated transactions and accelerated share repurchase.

The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors.

We may suspend or discontinue the share repurchase program at any time.

The exact number of shares to be repurchased by the Company, if any, is not guaranteed.

Depending on market conditions and other factors, these repurchases may be commenced or suspended at any time or periodically without prior notice.

During fiscal 2025, we repurchased and subsequently retired 777,713 shares of common stock for $ 19.9 million, including broker commissions and fees.

The Inflation Reduction Act imposed a nondeductible 1% excise tax on the net value of stock repurchases.

During fiscal 2025, the excise tax on net share repurchases was not material.

As of February 2, 2025, we had $ 20.1 million available to repurchase shares pursuant to the share repurchase program.

Segment Information

Segments are reflective of how the chief operating decision maker ("CODM") reviews operating results for the purpose of allocating resources and assessing performance.

The CODM group of the Company are the Chief Executive Officer and the President and Chief Operating Officer.

The Company's operating segments are the sales channels, which share similar economic and other qualitative characteristics, and are aggregated together as one reportable segment.

The Company’s sales by product which are considered one segment are as follows:

The CODM group of the Company is comprised of the Chief Executive Officer and the President/Chief Operating Officer.

The Company markets and sells its products through an omni-channel platform that provides a seamless and meaningful experience to its customers across multiple channel.

The Company has one operating segment which aligns with the way our CODM group evaluates performance and allocates resources within the Company.

As the Company's products and sales channels are complementary and analyzed in the same manner, the Company operates its business as one operating segment and therefore it has one reportable segment.

The CODM group regularly receives financial information presented on an entity-wide basis.

The CODM group uses net sales and net income as reported on the statements of operations to allocate resources, assess performance of our business, and evaluate earnings generated in deciding where to reinvest profits into its single reportable segment.

Net sales and net income are used to monitor budget versus actual results.

The significant expenses considered by the CODM group in evaluating the performance of our business are consistent with the financial information included on the Company's statements of operations.

There are no additional expense categories and amounts that meet the definition of significant expense items that are regularly provided to the CODM group and included in net income.

The CODM group may also evaluate financial performance based on net income adjusted for certain items that are unusual and non-recurring.

While management uses these additional adjusted metrics in assessing and allocating resources to our business, management recognizes that US GAAP principles are the basis of our performance.

The Company’s net sales by product which are considered one segment are as follows:

2025 2024 2023

3 unchanged sentences

Total net sales $ 680,628 $ 700,265 $ 651,179

Interest income (expense), net is as follows:

2025 2024 2023

Interest income (expense), net (1)

2,800 1,747 ( 117 )

(1) Interest income (expense), net is included in Interest and other income (expense), net on the statements of operations.

As the Company discloses a single reportable segment, total net sales is reported in the statements of operations, segment assets are reported in the balance sheets, and capital expenditures are reported in the statements of cash flows.

The Company has material long-lived assets, as stated on the balance sheet, with immaterial long-lived assets located in foreign countries.

The accounting policies of the reported segment are the same as those described in Note 1.

Basis of Presentation, and Summary of Significant Accounting Policies.

Refer to Revenue Recognition in Note 1.

Basis of Presentation, and Summary of Significant Accounting Policies for additional information on our sales channels, geographic areas, and major customers.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures