love-20221030

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number: 001-38555

THE LOVESAC COMPANY (Exact name of registrant as specified in its charter)


Delaware						32-0514958
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Two Landmark Square, Suite 300
Stamford, Connecticut						06901
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (888) 636-1223

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value per share

LOVE

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 1, 2022, there were 15,192,442 shares of common stock, $0.00001 par value per share, outstanding.

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THE LOVESAC COMPANY

FORM 10-Q

INDEX TO QUARTERLY REPORT ON FORM 10-Q

October 30, 2022


		Page
PART I. FINANCIAL INFORMATION		1

Item 1.	Unaudited Financial Statements	1

	Condensed Balance Sheets as of October 30, 2022 and January 30, 2022	1

	Condensed Statements of Operations for the thirteen and thirty-nine weeks ended October 30, 2022 and October 31, 2021	2

	Condensed Statements of Changes in Stockholders’ Equity for the thirteen a nd thirty-nine weeks ended October 30, 2022 and October 31, 2021	3

	Condensed Statements of Cash Flows for the thirteen and thirty-nine weeks ended October 30, 2022 and October 31, 2021	4

	Notes to Condensed Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	30

Part II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

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Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other legal authority, which statements may involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions.

You should not place undue reliance on forward looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur at all or on a specified timeframe. The cautionary statements set forth in this Quarterly Report on Form 10-Q, including in Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

•our ability to sustain recent growth rates;

•our ability to sustain the increase in our Internet sales;

•our ability to manage the growth of our operations over time;

•our ability to maintain, grow and enforce our brand and trademark rights;

•our ability to improve our products and develop new products;

•our ability to obtain, grow and enforce intellectual property related to our business and avoid infringement or other violation of the intellectual property rights of others;

•our ability to successfully open and operate new showrooms;

•the impact of any systems interruptions that impair customer access to our sites or other performance failures in our technology infrastructure;

•any decline in consumer spending including due to negative impact from economic conditions;

•our ability to compete and succeed in a highly competitive and evolving industry; and

•the effect and consequences of current economic conditions, including the impact of the novel coronavirus (“COVID-19”) public health crisis, the conflict between Russia and Ukraine, and inflation on our business operations and continuity.

We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the sections entitled “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur at all or on a specified timeline, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

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The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

iii

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE LOVESAC COMPANY

CONDENSED BALANCE SHEETS

(unaudited)


	October 30, 2022		January 30, 2022
(amounts in thousands, except share and per share amounts)
Assets
Current Assets
Cash and cash equivalents	$	3,832	$	92,392
Trade accounts receivable	15,357		8,547
Merchandise inventories	154,481		108,493
Prepaid expenses and other current assets	41,867		15,726
Total Current Assets	215,537		225,158
Property and equipment, net	47,477		34,137
Operating lease right-of-use assets	133,075		100,891
Other Assets
Goodwill	144		144
Intangible assets, net	1,395		1,413
Deferred financing costs, net	73		—
Deferred tax asset	9,695		9,836
Total Other Assets	11,307		11,393
Total Assets	$	407,396	$	371,579
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	47,267	$	33,247
Accrued expenses	33,126		40,497
Payroll payable	7,199		9,978
Customer deposits	5,861		13,316
Current operating lease liabilities	20,774		16,382
Sales taxes payable	4,770		5,359
Total Current Liabilities	118,997		118,779
Operating Lease Liabilities, long-term	130,229		96,574
Line of Credit	—		—
Total Liabilities	249,226		215,353
Commitments and Contingencies (see Note 6)
Stockholders’ Equity
Preferred Stock $0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of October 30, 2022 and January 30, 2022.	—		—
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,192,134 shares issued and outstanding as of October 30, 2022 and 15,123,338 shares issued and outstanding as of January 30, 2022.	—		—
Additional paid-in capital	175,108		173,762
Accumulated deficit	(16,938)		(17,536)
Stockholders’ Equity	158,170		156,226
Total Liabilities and Stockholders’ Equity	$	407,396	$	371,579

The accompanying notes are an integral part of these condensed financial statements.

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THE LOVESAC COMPANY

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)


	Thirteen weeks ended				Thirty-nine weeks ended
(amounts in thousands, except per share data and share amounts)	October 30, 2022		October 31, 2021		October 30, 2022		October 31, 2021
Net sales	$	134,784	$	116,678	$	412,698	$	302,041
Cost of merchandise sold	71,212		58,062		202,092		138,317
Gross profit	63,572		58,616		210,606		163,724
Operating expenses
Selling, general and administration expenses	53,658		38,087		147,425		104,191
Advertising and marketing	19,050		15,832		54,039		39,548
Depreciation and amortization	2,459		1,726		8,196		5,748
Total operating expenses	75,167		55,645		209,660		149,487

Operating (loss) income	(11,595)		2,971		946		14,237
Interest expense, net	(69)		(45)		(101)		(135)
Net (loss) income before taxes	(11,664)		2,926		845		14,102
Benefit from (Provision for) income taxes	3,245		(174)		(247)		(842)
Net (loss) income	$	(8,419)	$	2,752	$	598	$	13,260

Net (loss) income per common share:
Basic	$	(0.55)	$	0.18	$	0.04	$	0.88
Diluted	$	(0.55)	$	0.17	$	0.04	$	0.83

Weighted average number of common shares outstanding:
Basic	15,220,593		15,146,890		15,190,079		15,092,844
Diluted	15,220,593		16,069,729		16,067,066		16,015,683

The accompanying notes are an integral part of these condensed financial statements.

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THE LOVESAC COMPANY

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 30, 2022 AND OCTOBER 31, 2021

(unaudited)


	Common			Additional Paid-in Capital		Accumulated Deficit		Total
(amounts in thousands, except share amounts)	Shares	Amount
Balance - January 31, 2021	15,011,556	$	—	$	171,382	$	(63,436)	$	107,946
Net income	—	—		—		2,061		2,061
Equity based compensation	—	—		654		—		654
Issuance of common stock for restricted stock	4,868	—		—		—		—
Exercise of warrants	2,106	—		20		—		20
Balance - May 2, 2021	15,018,530	—		172,056		(61,375)		110,681

Net income	—	—		—		8,448		8,448
Equity based compensation	—	—		1,085		—		1,085
Issuance of common stock for restricted stock	78,446	—		—		—		—
Exercise of Warrants	8,850	—		84		—		84
Taxes paid for net share settlement of equity awards	—	—		(3,370)				(3,370)
Balance - August 1, 2021	15,105,826	—		169,855		(52,927)		116,928

Net income	—	—		—		2,752		2,752
Equity based compensation	—	—		1,110		—		1,110
Issuance of common stock for restricted stock	17,056	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(193)				(193)
Balance - October 31, 2021	15,122,882	—		170,772		(50,175)		120,597

Balance - January 30, 2022	15,123,338	—		173,762		(17,536)		156,226
Net income	—	—		—		1,895		1,895
Equity based compensation	—	—		1,163		—		1,163
Issuance of common stock for restricted stock	1,704	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(47)		—		(47)
Balance - May 1, 2022	15,125,042	$	—	$	174,878	$	(15,641)	$	159,237

Net income	—	—		—		7,122		7,122
Equity based compensation	—	—		1,034		—		1,034
Issuance of common stock for restricted stock	58,235	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(1,402)		—		(1,402)
Balance - July 31, 2022	15,183,277	—		174,510		(8,519)		165,991

Net loss	—	—		—		(8,419)		(8,419)
Equity based compensation	—	—		732		—		732
Issuance of common stock for restricted stock	8,857	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(134)		—		(134)
Balance - October 30, 2022	15,192,134	$	—	$	175,108	$	(16,938)	$

SEC Form 10-Q filed by The Lovesac Company