What changed in this filing

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Item 1. Financial Statements

2022-02-18 compared with 2021-11-15 · 145 added, 117 removed, 575 unchanged (31% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(in thousands, except share data)

22 unchanged sentences

Preferred stock, 5,700,000 shares authorized, $ 0.0001 par value none issued and outstanding

Series A Convertible Preferred stock, 4,300,000 shares authorized $ 0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $1,000 at September 30, 2021 and June 30, 2021

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 75,037,890 shares issued and outstanding at September 30, 2021 and June 30, 2021

Series A Convertible Preferred stock, 4,300,000 shares authorized $ 0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $ 1,000 at December 31, 2021 and June 30, 2021

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 75,260,433 and 75,037,890 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

(in thousands, except share data)

6 unchanged sentences

Total operating expenses

Operating income

Other expense:

Income from operations

Other Income (Expense):

Gain on forgiveness of SBA loan

Interest expense and financing costs

Total other expense

Income from operations before income taxes

Total Other Income (Expense)

Income before income taxes

Provision for income taxes

Net income per share:

Shares used in calculation of net income per share:

Shares used in computing net income per share:

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months ended September 30, 2021 and September 30, 2020 (unaudited)

For the Six Months ended December 31, 2021 and December 31, 2020 (unaudited)

Series A Preferred

1 unchanged sentence

(in thousands, except share data)

Balance, June 30, 2020

Balance, June 30, 2020 (unaudited)

Stock-based compensation expense

Stock option exercises

Net income for the six months ended December 31, 2020

Balance, December 31, 2020 (unaudited)

Balance, June 30, 2021 (unaudited)

Stock-based compensation expense

Stock option exercises

Net income for the six months ended December 31, 2021

Balance, December 31, 2021 (unaudited)

For the Three Months ended December 31, 2021 and December 31, 2020 (unaudited)

Series A Preferred

Stockholders’

(in thousands, except share data)

Balance, September 30, 2020 (unaudited)

Balance, June 30, 2021

Stock-based compensation expense

Stock option exercises

Net income for the three months ended December 31, 2020

Balance, December 31, 2020 (unaudited)

Balance, September 30, 2021 (unaudited)

Stock-based compensation expense

Stock option exercises

Net income for the three months ended December 31, 2021

Balance, December 31, 2021 (unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

September 30,

Six Months Ended

OPERATING ACTIVITIES:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Forgiveness of SBA Loan

Depreciation and amortization

20 unchanged sentences

Repayment of unsecured line of credit

Proceeds from exercise of stock options

Payments on equipment notes

1 unchanged sentence

Net cash used in financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

Purchases of equipment with equipment notes

Finance lease asset obligation in exchange for lease payable

Accrued interest converted for exercise of options

Operating lease asset obtained in exchange for operating lease liability

Cash paid during the period for:

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

ORGANIZATION AND NATURE OF BUSINESS

19 unchanged sentences

The year-end condensed balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP.

The results of operations for the three months ended September 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year.

The results of operations for the six months ended December 31, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021 as filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2021 (the “2021 10-K”).

20 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

26 unchanged sentences

Our total deferred revenue as of June 30, 2021 was $ 16,965 and was included in “Other accrued liabilities” on our consolidated balance sheets.

The deferred revenue balance as of September 30, 2021 was $ 17,015 .

The deferred revenue balance as of December 31, 2021 was $ 17,665 .

Cost of Goods Sold

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

4 unchanged sentences

However, significant deterioration in the financial condition of our customers, resulting in an impairment of their ability to make payments, could materially change these expectations and an additional allowance may be required.

The following is a summary of Accounts Receivable as of September 30, 2021 and June 30, 2021.

September 30,

The following is a summary of Accounts Receivable as of December 31, 2021 and June 30, 2021.

(in thousands)

13 unchanged sentences

The total cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per bank.

The Company had bank balances on deposit at September 30, 2021 that exceeded the balance insured by the FDIC by $ 833,857 .

The Company had bank balances on deposit at December 31, 2021 that exceeded the balance insured by the FDIC by $ 1,134,840 .

Accounts receivable are typically unsecured and are derived from revenue earned from customers primarily located in North America and Europe.

During the three months ended September 30, 2021, we purchased 38 % of total inventory purchases from one vendor.

During the three and six months ended December 31, 2021, we purchased 35 % and 36 % respectively, of total inventory purchases from one vendor.

During the fiscal year ended June 30, 2021, we purchased 34 % of total inventory purchases from one vendor.

As of September 30, 2021, two of the Company’s customers represents 46 % and 14 % of the total accounts receivables, respectively.

As of December 31, 2021, two of the Company’s customers represents 30 % and 19 % of the total accounts receivables, respectively.

As of June 30, 2021, two of the Company’s customers represents 40 % and 14 % of the total accounts receivables, respectively.

For the three months ended September 30, 2021, sales to and through Amazon accounted for 29 % of our net sales, respectively.

For the three and six months ended December 31, 2021, sales to and through Amazon accounted for 32 % and 31 % of our net sales, respectively.

Fair Value of Financial Instruments

At September 30, 2021 and June 30, 2021, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.

At December 31, 2021 and June 30, 2021, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.

The fair values of these financial instruments approximated their carrying values based on either their short maturity or current terms for similar instruments.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

11 unchanged sentences

Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method.

Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Advertising Costs

Advertising costs are expensed in the period when the advertisements are first aired or distributed to the public.

Prepaid advertising (included in prepaid expenses) was $ 5,000 at September 30, 2021 and $ 5,000 at June 30, 2021.

Advertising expense for the three months ended September 30, 2021 and 2020 was $ 131,890 and $ 68,530 , respectively.

Prepaid advertising (included in prepaid expenses) was $ 1,050 at December 31, 2021 and $ 5,000 at June 30, 2021.

Advertising expense for the three months ended December 31, 2021 and 2020 was $ 154,876 and $ 120,455 , respectively.

Advertising expense for the six months ended December 31, 2021 and 2020 was $ 286,766 and $ 188,985 , respectively.

Research and Development

Research and development expenses for new products are expensed as they are incurred.

Expenses for new product development totaled $ 28,323 and $ 29,225 for the three months ended September 30, 2021 and 2020, respectively.

Expenses for new product development totaled $ 32,482 and $ 27,294 for the three months ended December 31, 2021 and 2020, respectively.

Expenses for new product development totaled $ 60,805 and $ 56,519 for the six months ended December 31, 2021 and 2020, respectively.

Research and development costs are included in general and administrative expense.

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3 unchanged sentences

360, Property, Plant, and Equipment .

The Company has determined that there was no impairment at September 30, 2021.

The Company has determined that there was no impairment at December 31, 2021.

Operating Leases

2 unchanged sentences

The agreement amended the lease to expire on December 31, 2020.

The rent expense under this lease for the three months ended September 30, 2020 was $ 88,120 .

The rent expense under this lease for the three months ended December 31, 2020 was $ 88,120 .

The rent expense under this lease for the six months ended December 31, 2020 was $ 176,239 .

On November 2, 2020, the Company entered into an agreement with its landlord on a new lease for the current facilities for six years and two months, beginning January 1, 2021.

2 unchanged sentences

In addition, the Company will pay the landlord a 2% property management fee.

The rent expense for the three months ended September 30, 2021 was $ 163,188 .

The rent expense for the three months ended December 31, 2021 was $ 163,188 .

The rent expense for the six months ended December 31, 2021 was $ 326,376 .

Under ASC 842, which was adopted July 1, 2019, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

17 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

7 unchanged sentences

The following is a summary of sales results for the Direct, Wholesale , and Other channels.

September 30,

Six Months Ended

December 31, 2021

Six Months Ended

December 31, 2020

(in thousands)

1 unchanged sentence

Total Net Sales

Three Months Ended

September 30,

(in thousands)

Net Sales by Channel:

Total Net Sales

(in thousands)

Gross Profit by Channel:

Total Gross Profit

(in thousands)

Gross Profit by Channel:

Total Gross Profit

LUVU BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent accounting pronouncements

6 unchanged sentences

The impact of adoption of this standard on our condensed consolidated financial statements was not material.

LUVU BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In December 2019, the FASB issued ASU No.

11 unchanged sentences

Diluted net income per share is computed by dividing net income available to common stockholders by the weighted average number of common and common equivalent shares outstanding during the period plus the effect of stock options using the treasury stock method.

As of September 30, 2021 and 2020, the common stock equivalents did not have any effect on net income per share.

September 30,

As of December 31, 2021 and 2020, the common stock equivalents did not have any effect on net income per share.

Common stock options – 2015 Plan

7 unchanged sentences

We expect to provide a full valuation allowance on our future tax benefits until we can sustain a level of profitability that demonstrates our ability to realize these assets.

LUVU BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock Based Compensation

3 unchanged sentences

The cost of each award is recognized as expense in the financial statements over the respective vesting period.

LUVU BRANDS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

IMPAIRMENT OF LONG-LIVED ASSETS

5 unchanged sentences

Assets to be disposed of would be reported at the lower of the carrying value or fair value less costs to sell and would not be depreciated.

There was no impairment as of September 30, 2021 or June 30, 2021.

There was no impairment as of December 31, 2021 or June 30, 2021.

INVENTORIES, NET

2 unchanged sentences

Inventories consisted of the following:

September 30,

(in thousands)

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

2 unchanged sentences

Equipment and leasehold improvements consisted of the following:

September 30,

(in thousands)

6 unchanged sentences

Equipment and leasehold improvements, net

Depreciation expense was $ 70,688 and $ 52,452 for the three months ended September 30, 2021 and 2020, respectively.

Depreciation expense was $ 77,825 and $ 51,024 for the three months ended December 31, 2021 and 2020, respectively.

For the six months ended December 31, 2021 and 2020, depreciation expense was $ 148,513 and $ 103,476 , respectively.

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

1 unchanged sentence

If the carrying amount exceeds its estimated future cash flows, then an impairment charge is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Management has determined no asset impairment occurred during the three months ended September 30, 2021.

Management has determined no asset impairment occurred during the six months ended December 31, 2021.

OTHER ACCRUED LIABILITIES

Other accrued liabilities at September 30, 2021 and June 30, 2021:

September 30,

Other accrued liabilities at December 31, 2021 and June 30, 2021:

(in thousands)

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

CURRENT AND LONG-TERM DEBT SUMMARY

Current and long-term debt at September 30, 2021 and June 30, 2021 consisted of the following:

September 30,

Current and long-term debt at December 31, 2021 and June 30, 2021 consisted of the following:

Current debt:

14 unchanged sentences

UNSECURED NOTES PAYABLE

Unsecured notes payable at September 30, 2021 and June 30, 2021 consisted of the following:

September 30,

(in thousands)

Unsecured notes payable at December 31, 2021 and June 30, 2021 consisted of the following:

Current unsecured notes payable:

(in thousands)

20% Unsecured note, interest only, due October 31, 2021 (1)

19 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

NOTES PAYABLE - RELATED PARTY

Related party notes payable at September 30, 2021 and June 30, 2021 consisted of the following:

September 30,

2021 June 30,

(in thousands)

Related party notes payable at December 31, 2021 and June 30, 2021 consisted of the following:

(in thousands)

23 unchanged sentences

On December 1, 2020, the credit agreement with Advance Financial Corporation was amended to reduce the interest calculation to prime rate plus 2 % and the Monthly Service Fee was unchanged at .5% per month.

As of September 30, 2021, the interest rate was 5.25 %.

As of December 31, 2021, the interest rate was 5.25 %.

All other terms of the credit facility remain the same.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

LINE OF CREDIT (continued)

1 unchanged sentence

In addition, the Company has provided its corporate guarantee of the credit facility (see Note 16).

On September 30, 2021, the balance owed under this line of credit was $ 1,080,498 .

As of September 30, 2021, we were current and in compliance with all terms and conditions of this line of credit.

On December 31, 2021, the balance owed under this line of credit was $ 1,034,072 .

As of December 31, 2021, we were current and in compliance with all terms and conditions of this line of credit.

Management believes cash flows generated from operations, along with current cash and investments as well as borrowing capacity under the line of credit should be sufficient to finance capital requirements required by operations.

3 unchanged sentences

The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 8 %.

The aggregate amount owed on the unsecured line of credit was $33,803 at September 30, 2021 and $36,680 at June 30, 2021.

The aggregate amount owed on the unsecured line of credit was $ 30,882 at December 31, 2021 and $ 36,680 at June 30, 2021.

SECURED NOTE PAYABLE

1 unchanged sentence

Repayment of this note is by 12 monthly payments of $ 17,675 , which includes interest at 10.99 %.

On September 30, 2021, the balance owed under this note payable was $ 86,000 .

On December 31, 2021, the balance owed under this note payable was $ 34,871 .

The Company has granted Amazon a security interest in certain assets of the Company.

14 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

Right-of-use assets and liabilities for the lease renewal were recognized at the inception date which is November 2, 2020 based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate based on the information available.

At September 30, 2021, the weighted average remaining lease term for the lease renewal is 6 years and the weighted average discount rate is 14.49 %.

Supplemental balance sheet information related to leases at September 30, 2021 is as follows:

At December 31, 2021, the weighted average remaining lease term for the lease renewal is 6 years and the weighted average discount rate is 14.49 %.

Supplemental balance sheet information related to leases at December 31, 2021 is as follows:

Operating leases

8 unchanged sentences

Total lease liabilities

Maturities of lease liabilities at September 30, 2021 are as follows:

Maturities of lease liabilities at December 31, 2021 are as follows:

(in thousands)

9 unchanged sentences

The equipment notes have stated or imputed interest rates ranging from 8.9 % to 11.3 %.

The following is an analysis of the minimum future equipment note payable payments subsequent to September 30, 2021:

The following is an analysis of the minimum future equipment note payable payments subsequent to December 31, 2021:

Years ending June 30,

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

COMMITMENTS AND CONTINGENCIES (continued)

8 unchanged sentences

The Company has a subordinated note payable to the wife of the Company’s CEO and majority shareholder in the amount of $ 76,000 .

Interest on the note during the three months ended September 30, 2021 was accrued by the Company at the prevailing prime rate (which is currently 3.25 %) and totaled $ 623 .

Interest on the note during the three months ended December 31, 2021 was accrued by the Company at the prevailing prime rate (which is currently 3.25 %) and totaled $ 623 .

On December 21, 2020, the note holder used $ 3,750 of the accrued interest to exercise stock options that were granted on December 29, 2015.

The accrued interest on the note as of September 30, 2021 was $ 30,771 .

The accrued interest on the note as of December 31, 2021 was $ 31,394 .

This note is subordinate to all other credit facilities currently in place.

On October 30, 2010, the Company’s CEO, loaned the Company $ 40,000 .

Interest on the note during the three months ended September 30, 2021 was accrued by the Company at the prevailing prime rate (which is currently 3.25 %) and totaled $ 328 .

Interest on the note during the three months ended December 31, 2021 was accrued by the Company at the prevailing prime rate (which is currently 3.25 %) and totaled $ 328 .

On December 21, 2020, the note holder used $ 6,875 of the accrued interest to exercise stock options that were granted on December 29, 2015.

The accrued interest on the note as of September 30, 2021 was $ 5,843 .

The accrued interest on the note as of December 31, 2021 was $ 6,170 .

This note is subordinate to all other credit facilities currently in place.

1 unchanged sentence

In addition, Luvu Brands has provided its corporate guarantees of the credit facility.

On September 30, 2021, the balance owed under this line of credit was $1,080,498.

On December 31, 2021, the balance owed under this line of credit was $ 1,034,072 .

On July 20, 2011, the Company issued an unsecured promissory note to an individual for $ 100,000 .

13 unchanged sentences

The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 8 %.

The aggregate amount owed on the unsecured line of credit was $ 33,803 at September 30, 2021 and $ 36,680 at June 30, 2021.

The aggregate amount owed on the unsecured line of credit was $ 30,882 at December 31, 2021 and $ 36,680 at June 30, 2021.

The loan is personally guaranteed by the Company’s CEO.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

STOCKHOLDERS’ EQUITY

At September 30, 2021, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is a shareholder-approved and under which 3,400,000 shares are reserved for issuance under the 2015 Plan until such Plan terminates on August 31, 2025.

At December 31, 2021, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is a shareholder-approved and under which 3,150,000 are reserved for issuance under the 2015 Plan until such Plan terminates on August 31, 2025.

Under the 2015 Plan, eligible employees and certain independent consultants may be granted options to purchase shares of the Company’s common stock.

The shares issuable under the 2015 Plan will either be shares of the Company’s authorized but previously unissued common stock or shares reacquired by the Company, including shares purchased on the open market.

As of September 30, 2021, the number of shares available for issuance under the 2015 Plan was 1,050,000 .

The following table summarizes the Company’s stock option activities during the three months ended September 30, 2021:

As of December 31, 2021, the number of shares available for issuance under the 2015 Plan was 1,000,000 .

The following table summarizes the Company’s stock option activities during the six months ended December 31, 2021:

Number of Shares

Options outstanding as of June 30, 2021

Forfeited or expired

Options outstanding as of September 30, 2021

Options exercisable as of September 30, 2021

Options outstanding as of December 31, 2021

Options exercisable as of December 31, 2021

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price of $ 0.31 for such day.

There were no stock options exercised during the three months ended September 30, 2021 or the three months ended September 30, 2020.

There were no stock options granted during the three months ended September 30, 2021 and 150,000 stock options granted during the three months ended September 30, 2020.

The value assumptions related to options granted during the three months ended September 30, 2020, were as follows:

September 30,

There were 250,000 stock options exercised during the six months ended December 31, 2021 and a total of 1,600,000 during the six months ended December 31, 2020 in exchange for various consideration including cash, accrued interest and on a cashless basis.

There were 50,000 stock options granted during the six months ended December 31, 2021 and 150,000 stock options granted during the six months ended December 31, 2020.

The value assumptions related to options granted during the six months ended December 31, 2020, were as follows:

Exercise Price:

$ .15 - $ .17

469 % - 470 %

Risk Free Rate:

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

STOCKHOLDERS’ EQUITY (continued)

The following table summarizes the weighted average characteristics of outstanding stock options as of September 30, 2021:

The following table summarizes the weighted average characteristics of outstanding stock options as of December 31, 2021:

Outstanding Options

2 unchanged sentences

$ .028 to $.03

$ .13 to $.17

Total stock options

4 unchanged sentences

The cost of each award is recognized as expense in the financial statements over the respective vesting period.

Stock option-based compensation expense recognized in the condensed consolidated statements of operations for the three month period ended September 30, 2021 and 2020 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.

Stock option-based compensation expense recognized in the condensed consolidated statements of operations for the three and six month periods ended December 31, 2021 and 2020 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.

The following table summarizes stock option-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to the Plans:

As of September 30, 2021, the Company’s total unrecognized compensation cost was $ 34,862 which will be recognized over the weighted average vesting period of approximately six months.

Ended September 30,

As of December 31, 2021, the Company’s total unrecognized compensation cost was $ 44,158 which will be recognized over the weighted average vesting period of approximately five months.

Ended December 31,

($ in thousands)

Cost of Goods Sold

Other Selling and Marketing

General and Administrative

Total Stock-based Compensation Expense

Share Purchase Warrants

As of September 30, 2021 and 2020, there were no share purchase warrants outstanding.

The Company’s authorized common stock was 175,000,000 shares at September 30, 2021 and June 30, 2021.

Common shareholders are entitled to dividends if and when declared by the Company’s Board of Directors, subject to preferred stockholder dividend rights.

At September 30, 2021, the Company had reserved the following shares of common stock for issuance:

September 30,

Shares of common stock reserved for issuance under the 2015 Plan

Shares of common stock issuable upon conversion of the Preferred Stock

Total shares of common stock equivalents

As of December 31, 2021 and 2020, there were no share purchase warrants outstanding.

LUVU BRANDS, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 (UNAUDITED)

FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 (UNAUDITED)

STOCKHOLDERS’ EQUITY (continued)

The Company’s authorized common stock was 175,000,000 shares at December 31, 2021 and June 30, 2021.

Common shareholders are entitled to dividends if and when declared by the Company’s Board of Directors, subject to preferred stockholder dividend rights.

At December 31, 2021, the Company had reserved the following shares of common stock for issuance:

Shares of common stock reserved for issuance under the 2015 Plan

Shares of common stock issuable upon conversion of the Preferred Stock

Preferred Stock

7 unchanged sentences

– SUBSEQUENT EVENTS

On October 1, 2021, the Company repaid the unsecured note payable for $ 100,000 to an individual with interest payable monthly at 20 %, principal due in full on October 31, 2021, and replaced it with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2023.

Subsequent to September 30, 2021, 100,000 stock options were exercised for cash at a price of $ .03 per share by a non-affiliate employee and the Company issued the non-affiliate employee 100,000 shares of common stock.

On February 10, 2022, 681,427 shares of common stock were issued for the exercise of 800,000 stock options by affiliates and a non-affiliate employee of the Company on a cashless basis at prices ranging from $ .03 per share to $ .033 per share.

These options were granted under the 2015 Plan on February 13, 2017 with an expiration date of February 12, 2022 .

Subsequent to December 31, 2021, the Company entered into an equipment finance agreement for the purchase of a new unit production system from a foreign supplier.

At a total cost of $ 297,500 , the equipment finance agreement calls for 60 payments of $ 5,915 to the finance company.

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-Q

Item 1. Financial Statements