What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2024-02-20 · 170 added, 210 removed, 468 unchanged (45% of the section changed)

28 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 December 31, 2023 and June 30, 2023

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 76,547,672 and 76,547,672 shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively

Series A Convertible Preferred stock, 4,300,000 shares authorized $ 0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $ 1,000 at March 31, 2024 and June 30, 2023

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 76,547,672 and 76,547,672 shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively

Additional paid-in capital

2 unchanged sentences

Total liabilities and stockholders’ equity

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

LUVU BRANDS, INC.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except share data)

15 unchanged sentences

Shares used in computing net income per share:

See accompanying notes to unaudited condensed consolidated financial statements.

See accompanying notes to unaudited consolidated financial statements.

Luvu Brands, Inc.

1 unchanged sentence

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Six Months ended December 31, 2023 and December 31, 2022 (unaudited)

For the Nine Months ended March 31, 2024 and March 31, 2023 (unaudited)

Series A Preferred

4 unchanged sentences

Stock option exercises

Net income for the six months ended December 31, 2022

Balance, December 31, 2022 (unaudited)

Net income for the nine months ended March 31, 2023

Balance, March 31, 2023 (unaudited)

Balance, June 30, 2023

Stock-based compensation expense

Net loss for the six months ended December 31, 2023

Balance, December 31, 2023 (unaudited)

For the Three Months ended December 31, 2022 and December 31, 2021 (unaudited)

Net loss for the nine months ended March 31, 2024

Balance, March 31, 2024 (unaudited)

For the Three Months ended March 31, 2024 and March 31, 2023 (unaudited)

Series A Preferred

1 unchanged sentence

(in thousands, except share data)

Balance, September 30, 2022 (unaudited)

Balance, December 31, 2022 (unaudited)

Stock-based compensation expense

Stock option exercises

Net income for the three months ended December 31, 2022

Net income for the three months ended March 31, 2023

Balance, March 31, 2023 (unaudited)

Balance, December 31, 2023 (unaudited)

Balance, September 30, 2023 (unaudited)

Stock-based compensation expense

Net income for the three months ended December 31, 2023

Balance, December 31, 2023 (unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Stock option exercises

Net loss for the three months ended March 31, 2024

Balance, March 31, 2024 (unaudited)

See accompanying notes to unaudited consolidated financial statements.

LUVU BRANDS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

OPERATING ACTIVITIES:

8 unchanged sentences

Accounts receivable

Inventories, net

Prepaid expenses and other assets

16 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Non cash item:

Purchases of equipment with equipment notes

Cash paid during the period for:

See accompanying notes to unaudited condensed consolidated financial statements.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

See accompanying notes to unaudited consolidated financial statements.

ORGANIZATION AND NATURE OF BUSINESS

6 unchanged sentences

The Company is an Atlanta, Georgia based designer, manufacturer and marketer of a portfolio of consumer lifestyle brands including:

Liberator ® , a brand category of iconic products for enhancing sexual performance;

Avana ® inclined bed therapy products, assistive in relieving medical conditions associated with acid reflux and surgery recovery;

and Jaxx ® , a diverse range of casual fashion daybeds, sofas and beanbags made from polyurethane foam and repurposed polyurethane foam trim.

JAXX-a diverse range of convertible daybeds, headboard panels, outdoor soft seating and bean bags made from repurposed polyurethane foam trim.

AVANA-products for yoga exercise, sleep comfort and inclined bed therapy.

LIBERATOR-transformable chaises and specially designed pillow and props for enhancing sexual performance.

FOAMLABS-private label Jaxx products and contract manufacturing for hospitality, school, furniture mass market and beyond.

These products are sold through the Company’s websites, online mass merchants and retail stores worldwide.

1 unchanged sentence

Sales are generated through internet and print advertisements and social marketing.

We have a diversified customer base with only one customer accounting for 10 % or more of consolidated net sales in the current and prior fiscal year and no particular concentration of credit risk in one economic sector.

The accompanying unaudited condensed consolidated financial statements of the Company and all of its wholly-owned subsidiaries included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") have been condensed or omitted pursuant to applicable rules and regulations.

We have a diversified customer base with only one customer accounting for 30 % or more of consolidated net sales in the current and prior fiscal year and no particular concentration of credit risk in one customer type.

The accompanying unaudited consolidated financial statements of the Company and all of its wholly-owned subsidiaries included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC").

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") have been omitted pursuant to applicable rules and regulations.

In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included.

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 and six months ended December 31, 2023 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, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2023 (the “2023 10-K”).

The year-end 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 and nine months ended March 31, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year.

These 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, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2023 (the “2023 10-K”).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

Intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated condensed financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X.

Certain prior period amounts have been reclassified to conform to the current year presentation.

The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

These consolidated condensed financial statements and notes should be read in conjunction with the Company’s consolidated financial statements contained in the Company’s 2023 10-K.

These consolidated financial statements and notes should be read in conjunction with the Company’s consolidated financial statements contained in the Company’s 2023 10-K.

Use of Estimates

4 unchanged sentences

allowances for doubtful accounts;

inventory valuation and reserves;

inventory valuation and allowances;

share-based compensation;

1 unchanged sentence

Actual results could differ materially from these estimates.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

25 unchanged sentences

Deferred revenues primarily relate to gift cards purchased, but not used, prior to the end of the fiscal period.

Our total deferred revenue as of December 31, 2023 was $ 19,054 and was included in “Other accrued liabilities” on our consolidated balance sheets.

The deferred revenue balance as of December 31, 2022 was $ 17,888 .

Our total deferred revenue as of March 31, 2024 was $ 19,254 and was included in “Other accrued liabilities” on our consolidated balance sheets.

The deferred revenue balance as of March 31, 2023 was $ 18,272 .

Cost of Goods Sold

2 unchanged sentences

For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for Credit Loss

We maintain an allowance for credit loss to reflect our estimate of current and past due receivable balances that may not be collected.

The allowance for credit loss is based upon our assessment of the collectability of specific customer accounts, the aging of accounts receivable and our history of bad debts.

We believe that the allowance for credit loss is adequate to cover anticipated losses in the receivable balance under current conditions.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts to reflect our estimate of current and past due receivable balances that may not be collected.

The allowance for doubtful accounts is based upon our assessment of the collectability of specific customer accounts, the aging of accounts receivable and our history of bad debts.

We believe that the allowance for doubtful accounts is adequate to cover anticipated losses in the receivable balance under current conditions.

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 December 31, 2023 and June 30, 2023.

The following is a summary of Accounts Receivable as of March 31, 2024 and June 30, 2023.

March 31, 2024

June 30, 2023

(in thousands)

Accounts receivable

Allowance for credit loss

Allowance for doubtful accounts

Allowance for discounts and returns

Total accounts receivable, net

During the six months ended December 31, 2023 and 2022 the Company recoded bad debt expense of $ 1 .

Inventories and Inventory Reserves

Inventories and Inventory Allowances

Inventories are stated at the lower of cost or net realizable value.

2 unchanged sentences

Inventory costs include materials, labor, depreciation and overhead.

The Company establishes reserves for excess and obsolete inventory, based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory.

The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions.

The Company establishes allowances for excess and obsolete inventory, based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory.

The allowances required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions.

Concentration of Credit Risk

1 unchanged sentence

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 December 31, 2023 that exceeded the balance insured by the FDIC by $ 957,833 .

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

During the six months ended December, 31 2023, we purchased 33 % of total inventory purchases from one vendor.

The Company had bank balances on deposit at March 31, 2024 that exceeded the balance insured by the FDIC by $ 822,772 .

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

During the three and nine months ended March, 31 2024, we purchased 24.6 % of total inventory purchases from one vendor.

During the fiscal year ended June 30, 2023, we purchased 35 % of total inventory purchases from one vendor.

As of December 31, 2023, two of the Company’s customers represents 40 % and 20 % of the total accounts receivables, respectively.

As of June 30, 2023, two of the Company’s customers represents 35 % and 12 % of the total accounts receivables, respectively.

For the three and six months ended December 31, 2023, sales to and through Amazon accounted for 35 % and 37 %, respectively of our net sales.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ENDED DECEMBER 31, 2023 (UNAUDITED)

As of March 31, 2024, one of the Company’s customers represent 44 % of the total accounts receivables.

As of June 30, 2023, two of the Company’s customers represent 35 % and 12 % of the total accounts receivables, respectively.

For the nine months ended March 31, 2024, sales to and through Amazon accounted for 39 % of our net sales.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

At December 31, 2023 and June 30, 2023, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.

At March 31, 2024 and June 30, 2023, 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.

14 unchanged sentences

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 $ 833 at December 31, 2023 and $ 687 at December 31, 2022.

Advertising expense for the three and six months ended December 31, 2023 and 2022 was $ 276,330 , $ 541,874 , $ 199,504 and $ 386,498 , respectively.

Prepaid Advertising (included in prepaid expenses) was $ 336 at March 31, 2024 and $ 525 at March 31, 2023.

Advertising expense for the nine months ended March 31, 2024 and 2023 was $ 785,081 and $ 557,114 , respectively.

Research and Development

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

Expenses for new product development totaled $ 3,501 and $ 5,525 for the six months ended December 31, 2023 and 2022, respectively.

Expenses for new product development totaled $ 115,467 and $ 100,326 for the nine months ended March 31, 2024 and 2023, respectively.

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

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

9 unchanged sentences

360, Property, Plant, and Equipment .

The Company has determined that there was no impairment at December 31, 2023.

The Company has determined that there was no impairment at March 31, 2024.

Operating Leases

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

Under the lease, the monthly rent on the facility is $ 51,615 with annual escalations of 3 % with the final two months of rent at $ 61,605 .

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.

The new lease includes two months of rent abatement totaling $ 103,230 .

Under the new lease, the monthly rent on the facility is $ 51,615 with annual escalations of 3 % with the final two months of rent at $ 61,605 .

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

The rent expense for the six months ended December 31, 2023 and 2022 was $ 328,338 and $ 326,376 , respectively.

The rent expense for the nine months ended March 31, 2024 and 2023 was $ 497,502 and $ 483,183 , respectively.

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.

14 unchanged sentences

The difference between rent expense recognized and rental payments was recorded as deferred rent in the accompanying consolidated balance sheets.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

8 unchanged sentences

Three Months Ended

March 31, 2024

Three Months Ended

March 31, 2023

(in thousands)

3 unchanged sentences

Three Months Ended

Gross Profit by Channel:

March 31, 2024

March 31, 2023

(in thousands)

Gross Profit by Channel:

Total Gross Profit

Nine Months Ended

March 31, 2024

Nine Months Ended

March 31, 2023

(in thousands)

1 unchanged sentence

Total Net Sales

Nine Months Ended

March 31, 2024

Nine Months Ended

Nine 31, 2023

(in thousands)

2 unchanged sentences

Total Gross Profit

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.

ASU 2016-13 Current Expected Credit Loss (ASC326)

In December 2021, the FASB issued an update to ASU No.

2016-13 the Current Expected Credit Losses (CECL) standard (ASC 326), which is designed to provide greater transparency and understanding of credit risk by incorporating estimated, forward-looking data when measuring lifetime Estimated Credit Losses (ECL) and requires enhanced financial statement disclosures.

This guidance was adopted on January 1, 2023, with no effect to the financial statements.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Income Per Share

1 unchanged sentence

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 December 31, 2023 and 2022, the common stock equivalents did not have any effect on net income per share.

As of March 31, 2024 and 2023, 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.

During the six months ended December 31, 2023 the Company received a notice from the Internal Revenue Service of Taxes and Penalties due of approximately $ 125,000 .

The Company believes once Net Operating Losses and tax credit are applied the penalties and interest will be reduced to approximately $ 38,000 therefore the Company has accrued $ 38,000 for estimated penalties and interests as of December 31, 2023.

During the six months ended December 31, 2023 the Company received a notice from the Georgia Department of Revenue of Taxes and Penalties due of approximately $ 102,000 .

The Company believes once Net Operating Losses and tax credit are applied the liability will be reduced to penalties and interest will reduced to approximately $ 6,000 therefore the Company has accrued $ 6,000 for estimated penalties and interest as of December 31, 2023.

On November 27, 2023 the Company received a notice from the Internal Revenue Service of Taxes and Penalties due of approximately $ 125,000 .

The Company believes once Net Operating Losses and tax credits are applied the penalties and interest will be reduced to approximately $ 38,000 therefore the Company has accrued $ 38,000 for estimated penalties and interest as of March 31, 2024.

On January 22, 2024, the Company received a notice from the Georgia Department of Revenue for Tax and Penalties due of approximately $ 104,000 .

The Company believes once Net Operating Losses and tax credit are applied the liability will be reduced to penalties and interest of approximately $ 6,000 .

Therefore, the Company has accrued $ 6,000 for estimated penalties and interest as of March 31, 2024.

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

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (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 December 31, 2023 or June 30, 2023.

There was no impairment as of March 31, 2024 or June 30, 2023.

INVENTORIES, NET

2 unchanged sentences

Inventories consisted of the following:

March 31, 2024

June 30, 2023

(in thousands)

3 unchanged sentences

Total inventories

Allowance for inventory reserves

Allowance for excess and obsolete inventory

Total inventories, net of allowance

3 unchanged sentences

Equipment and leasehold improvements consisted of the following:

March 31, 2024

June 30, 2023

Estimated Useful Life

7 unchanged sentences

Equipment and leasehold improvements, net

Depreciation expense was $ 202,992 and $ 174,873 for the six months ended December 31, 2023 and 2022, respectively.

Depreciation expense was $ 103,874 and $ 88,902 for the three months ended March 31, 2024 and 2023, respectively.

For the nine months ended March 31, 2024 and 2023, depreciation and amortization expense was $ 306,840 and $ 263,755 , respectively.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS (continued)

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 six months ended December 31, 2023.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

Management has determined no asset impairment occurred during the nine months ended March 31, 2024.

OTHER ACCRUED LIABILITIES

Other accrued liabilities at December 31, 2023 and June 30, 2023:

Other accrued liabilities at March 31, 2024 and June 30, 2023:

March 31, 2024

June 30, 2023

(in thousands)

3 unchanged sentences

CURRENT AND LONG-TERM DEBT SUMMARY

Current and long-term debt at December 31, 2023 and June 30, 2023 consisted of the following:

Current and long-term debt at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

Current debt:

10 unchanged sentences

Equipment notes payable (Note 12)

Notes payable – related party

Notes payable – related party (Note 9)

Total long-term debt

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

UNSECURED NOTES PAYABLE

Unsecured notes payable at December 31, 2023 and June 30, 2023 consisted of the following:

Unsecured notes payable at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

Current unsecured notes payable:

11 unchanged sentences

This note was repaid in full on October 1, 2021 and replaced 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 .

This note was repaid in full on October 1, 2023 and replaced 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, 2025.

Personally guaranteed by the Company’s President, Chief Executive Officer (CEO), and majority shareholder, Louis Friedman.

This note was extended in full on September 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on October 31, 2025.

Personally guaranteed by Louis Friedman, the Company’s SEC and principal stockholder.

(2) Unsecured note payable for $ 200,000 to an individual with interest payable monthly at 20 %, principal originally due in full on May 1, 2013, extended to May 1, 2019, then extended to May 1, 2021.

This note was repaid in full on April 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2023 .

This note was repaid in full on April 30, 2023 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2025.

Personally guaranteed by the Company’s President, CEO, and majority shareholder, Louis Friedman.

This note was extended in full on April 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2025.

Personally guaranteed by the Company’s CEO and principal stockholder.

(3) Unsecured note payable for $ 100,000 to an individual with interest payable monthly at 20 %, principal originally due in full on July 31, 2013, extended to July 31, 2019, then extended to July 31, 2021.

This note was repaid in full on July 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2023 .

This note was repaid in full on July 30, 2023 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2025.

Personally guaranteed by the Company’s President, CEO, and majority shareholder, Louis Friedman.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

This note was extended in full on July 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2025.

Personally guaranteed by the Company’s CEO and principal stockholder.

NOTES PAYABLE - RELATED PARTY

Related party notes payable at December 31, 2023 and June 30, 2023 consisted of the following:

Related party notes payable at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

(in thousands)

10 unchanged sentences

In addition, there is a Monthly Service Fee (as defined in the agreement) of currently 0.05 % per month.

The Company’s President, CEO, and majority shareholder, Louis Friedman, has personally guaranteed the repayment of the facility.

The Company’s President, Chief Executive Officer (CEO), and principal shareholder, Louis Friedman, has personally guaranteed the repayment of the facility.

In addition, the Company has provided its corporate guarantee of the credit facility (see Note 13).

On December 31, 2023, the balance owed under this line of credit was $ 1,090,884 .

As of December 31, 2023, we were current and in compliance with all terms and conditions of this line of credit.

On March 31, 2024, the balance owed under this line of credit was $ 1,103,049 .

As of March 31, 2024, 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 13.2 %.

The aggregate amount owed on the unsecured line of credit was $ 6,307 at December 31, 2023 and $ 12,806 at June 30, 2023.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

The credit line is for $ 55,000 .

The aggregate amount owed on the unsecured line of credit was $ 3,097 at March 31, 2024 and $ 12,806 at June 30, 2023.

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 December 31, 2023, the weighted average remaining lease term for the lease renewal is 4 years and the weighted average discount rate is 14.49 %.

Supplemental balance sheet information related to leases at December 31, 2023 is as follows:

At March 31, 2024, the weighted average remaining lease term for the lease renewal is 4 years and the weighted average discount rate is 14.49 %.

Supplemental balance sheet information related to leases at March 31, 2024 is as follows:

Operating leases

8 unchanged sentences

Total lease liabilities

Maturities of lease liabilities at December 31, 2023 are as follows:

COMMITMENTS AND CONTINGENCIES (continued)

Maturities of lease liabilities at March 31, 2024 are as follows:

(in thousands)

Remainder of 2024

2027 and thereafter

8 unchanged sentences

The equipment notes have stated or imputed interest rates ranging from 7.29 % to 11.3 %.

The following is an analysis of the minimum future equipment note payable payments subsequent to December 31, 2023:

The following is an analysis of the minimum future equipment note payable payments subsequent to March 31, 2024:

Years ending June 30,

(in thousands)

Remainder of 2024

Future Minimum Note Payable Payments

3 unchanged sentences

Long-Term Obligations under Equipment Notes Payable

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

COMMITMENTS AND CONTINGENCIES (continued)

Finance Leases Payable

The Company has lease obligations for equipment under the provisions of long-term finance leases.

The Company has a lease obligations for equipment under the provisions of long-term finance leases.

For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized.

1 unchanged sentence

These assets are included in the finance lease and include production equipment.

On June 22, 2020 the Company entered into finance lease agreement with Wells Fargo in the amount of $ 34,761 with monthly payment of $ 850 with 48 -month term at an imputed interest rate of 8.09 %.

On February 1, 2022 the Company entered into finance lease agreement with Raymond in the amount of $ 22,862 with monthly payment of $ 514 with 48 -month term at an imputed interest rate of 3.75 %.

The following is an analysis of the minimum finance lease payable payments subsequent to December 31, 2023:

On June 22, 2020 the Company entered into a finance lease agreement with Wells Fargo in the amount of $ 34,761 with monthly payment of $ 850 with 48 -month term at an imputed interest rate of 8.09 %.

On February 1, 2022 the Company entered into a finance lease agreement with Raymond in the amount of $ 22,862 with monthly payment of $ 514 with 48 -month term at an imputed interest rate of 3.75 %.

COMMITMENTS AND CONTINGENCIES (continued)

The following is an analysis of the minimum finance lease payable payments subsequent to March 31,2024:

Year ending June 30,

(in thousands)

Remainder of 2024

Future Minimum Finance Lease Payable Payments

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Friedman for up to nine months at his current salary.

As of December 31, 2023 the Company has not accrued a liability as it is not probable.

Legal Proceedings

1 unchanged sentence

RELATED PARTY TRANSACTIONS

The Company has a subordinated note payable to an officer of the Company who is also the wife of the Company’s CEO (Louis Friedman) and majority shareholder in the amount of $ 76,000 (see Note 9).

Interest on the note during the three months ended December 31, 2023 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 1,628 .

The accrued interest on the note as of December 31, 2023 was $ 37,839 .

The Company has a subordinated note payable to an officer of the Company who is also the wife of the Company’s CEO (Louis Friedman) and principal shareholder in the amount of $ 76,000 (see Note 9).

Interest on the note during the nine months ended March 31, 2024 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 4,406 .

The accrued interest on the note as of March 31, 2024 was $ 39,449 .

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

1 unchanged sentence

Friedman, loaned the Company $ 40,000 (see Note 9).

Interest on the note during the three months ended December 31, 2023 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 857 .

The accrued interest on the note as of December 31, 2023 was $ 5,805 .

Interest on the note during the nine months ended March 31, 2024 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 2,319 .

The accrued interest on the note as of March 31, 2024 was $ 6,652 .

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

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

RELATED PARTY TRANSACTIONS (continued)

The Company’s CEO, Louis Friedman, has personally guaranteed the repayment of the loan obligation to Advance Financial Corporation (see Note 10 – Line of Credit).

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

On December 31, 2023, the balance owed under this line of credit was $ 1,090,884 .

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

On March 31, 2024, the balance owed under this line of credit was $ 1,103,049 .

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

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This note was repaid in full on July 30, 2023 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2025.

This note was extended on July 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2025 .

Repayment of this promissory note is personally guaranteed by the Company’s CEO, Louis S.

On October 31, 2013, the Company issued an unsecured promissory note to an individual for $ 100,000 .

Terms of the promissory note call for monthly interest payments of $ 1,667 (equal to interest at 20 % per annum) beginning on November 30, 2013, with the principal amount due in full on or before October 31, 2014 extended by the holder to October 31, 2021 (see Note 8).

This note was repaid in full on October 31, 2021 and replaced 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.

This note was repaid in full on October 31, 2023 and replaced 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, 2025.

Repayment of the promissory note is personally guaranteed by the Company’s CEO, Louis S.

(see Note 8) This note was repaid in full on October 31, 2021 and replaced 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.

This note was extended in full on September 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on October 31, 2025 .

Repayment of the promissory note is personally guaranteed by the Company’s CEO, Louis Friedman.

On May 1, 2012, an individual loaned the Company $ 200,000 with an interest rate of 20 %.

1 unchanged sentence

then extended to May 1, 2021 (see Note 8).

This note was repaid in full on April 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2023.

This note was repaid in full on April 30, 2021 and extended with the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2023.

This note was repaid in full on April 30, 2023 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2025 .

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

Friedman has personally guaranteed the repayment of the loan obligation.

The Company has drawn a cash advance on one unsecured lines of credit that is in the name of the Company and Louis S.

The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 13.2 %.

The aggregate amount owed on the unsecured line of credit was $ 6,307 at December 31, 2023 (see Note 11).

The aggregate amount owed on the unsecured line of credit was $ 3,097 at March 31, 2024 (see Note 11).

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

STOCKHOLDERS’ EQUITY

At December 31, 2023, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is shareholder-approved and under which 1,450,000 shares are reserved for issuance under the 2015 Plan until such Plan terminates on August 31, 2025.

At March 31, 2024, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is shareholder-approved and under which 1,650,000 shares 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 December 31, 2023, the number of shares available for issuance under the 2015 Plan was 150,000 .

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

STOCKHOLDERS’ EQUITY (continued)

The following table summarizes the Company’s stock option activities during the nine months ended December 31, 2023:

As of March 31, 2024, the number of shares available for issuance under the 2015 Plan was 450,000 .

The following table summarizes the Company’s stock option activities during the nine months ended March 31, 2024:

Number of Shares

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Forfeited or expired

Options outstanding as of December 31, 2023

Options exercisable as of December 31, 2023

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price options 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 $ 0.10 for such day.

There were no stock options exercised during the six months ended December 31, 2023 and the six months ended December 31, 2022.

There were 200,000 stock options granted during the six months ended December 31, 2023.

There were no stock options granted during the six months ended December 31, 2022.

The following table summarizes the weighted average characteristics of outstanding stock options as of December 31, 2023:

Options outstanding as of March 31, 2024

Options exercisable as of March 31, 2024

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 $ 0.08 for such day.

There were no stock options exercised during the nine months ended March 31, 2024.

During the nine months ended March 31, 2023, 525,000 stock options were exercised.

There were 200,000 stock options granted during the nine months ended March 31, 2024.

There were no stock options granted during the nine months ended March 31, 2023.

The following table summarizes the weighted average characteristics of outstanding stock options as of March 31, 2024:

Outstanding Options

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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 six months ended December 31, 2023 and 2022 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

STOCKHOLDERS’ EQUITY (continued)

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

Ended December 31,

Stock option-based compensation expense recognized in the consolidated statements of operations for the nine months ended March 31, 2024 and 2023 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 Consolidated Statements of Operations, all relating to the Plans:

Ended March 31,

($ in thousands)

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Total Stock-based Compensation Expense

As of December 31, 2023, the Company’s total unrecognized compensation cost was $ 78,388 which will be recognized over the weighted average vesting period of approximately twenty-seven months.

As of December 31, 2023 and 2022, there were no warrants outstanding.

The Company’s authorized common stock was 175,000,000 shares at December 31, 2023 and June 30, 2023.

As of March 31, 2024, the Company’s total unrecognized compensation cost was $ 58,115 which will be recognized over the weighted average vesting period of approximately twenty-three months.

As of March 31, 2024 and 2023, there were no warrants outstanding.

The Company’s authorized common stock was 175,000,000 shares at March 31, 2024 and June 30, 2023.

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, 2023, the Company had reserved the following shares of common stock for issuance:

At March 31, 2024, the Company had reserved the following shares of common stock for issuance:

Shares of common stock reserved for issuance under the 2015 Plan

2 unchanged sentences

Preferred Stock

0001 per share, of which 4,300,000 shares have been designated and issued as Series A Convertible Preferred Stock.

Each share of Series A Convertible Preferred Stock is convertible into one share of common stock and has a liquidation preference of $.

2325 ($ 1,000,000 in the aggregate).

On February 18, 2011, the Company filed an amendment to its Articles of Incorporation, effective February 9, 2011, authorizing the issuance of preferred stock and the Company now has 10,000,000 authorized shares of preferred stock, par value $.0001 per share, of which 4,300,000 shares have been designated and issued as Series A Convertible Preferred Stock.

Each share of Series A Convertible Preferred Stock is convertible into one share of common stock and has a liquidation preference of $.2325 ($ 1,000,000 in the aggregate).

Liquidation payments to the preferred holders have priority and are made in preference to any payments to the holders of common stock.

3 unchanged sentences

At each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors, holders of Series A Convertible Preferred Shares shall vote together with the holders of common shares as a single class.

LUVU BRANDS, INC.

AND SUBSIDIARIES

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 (UNAUDITED)

SUBSEQUENT EVENTS

On January 15, 2024, the Company notified Martin Scott, Chief Financial Officer of the Company, that the Company would retain a full time on site Chief Financial Officer effective following the filing of the Company’s Form 10-Q Quarterly Report for the period ended December 31, 2023 (the “Effective Date”).

On January 15, 2024, the Company engaged Chris Knauf to serve as Chief Financial Officer and Controller of the Company commencing on the Effective Date.

Knauf receives an annual salary of $ 150,000 increasing to $ 160,000 upon the Effective Date.

Knauf with receive 200,000 stock option will be granted on April 1, 2024 and an additional 200,000 will be granted on July 1,2024.

On April 1, 2024, the Company issued Christopher Knauf, the Chief Financial Officer and Controller of the Company, 200,000 stock options and an additional 200,000 will be granted on July 1,2024.

The initial 200,000 stock options are exercisable at $ 0.08 per share.

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