love-20211031

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 31, 2021

☐ 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 7, 2021, there were 15,123,084 shares of common stock, $0.00001 par value per share, outstanding.

Table of Contents

THE LOVESAC COMPANY

FORM 10-Q

INDEX TO QUARTERLY REPORT ON FORM 10-Q

October 31, 2021


		Page
PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of October 31, 2021 (unaudited) and January 31, 2021	1

	Condensed Consolidated Statements of Operations for the thirteen and thirty -nine weeks ended October 31, 2021 and November 1, 2020 (unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the thirteen and thirty-nine weeks ended October 31, 2021 and November 1, 2020 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended October 31, 2021 and November 1, 2020 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

Item 4.	Controls and Procedures	29

Part II. OTHER INFORMATION		30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

Table of Contents

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 recent 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 the novel coronavirus (“COVID-19”) public health crisis 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.

Table of Contents

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

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS


	October 31, 2021		January 31, 2021
(amounts in thousands, except share and per share amounts)	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	47,862	$	78,341
Trade accounts receivable	9,794		4,513
Merchandise inventories	94,544		50,417
Prepaid expenses and other current assets	11,421		10,128
Total Current Assets	163,621		143,399
Property and equipment, net	32,133		25,868
Operating lease right-of-use assets	95,567		—
Other Assets
Goodwill	144		144
Intangible assets, net	1,345		1,517
Deferred financing costs, net	23		91
Total Other Assets	1,512		1,752
Total Assets	$	292,833	$	171,019
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	25,430	$	24,311
Accrued expenses	23,427		17,187
Payroll payable	7,865		6,362
Customer deposits	6,704		5,993
Current operating lease liabilities	15,722		—
Sales taxes payable	2,430		2,471
Total Current Liabilities	81,578		56,324
Deferred Rent	—		6,749
Operating Lease Liabilities, long-term	90,658		—
Line of Credit	—		—
Total Liabilities	172,236		63,073
Stockholders’ Equity
Preferred Stock $0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of October 31, 2021 and January 31, 2021.	—		—
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,122,882 shares issued and outstanding as of October 31, 2021 and 15,011,556 shares issued and outstanding as of January 31, 2021.	—		—
Additional paid-in capital	170,773		171,382
Accumulated deficit	(50,176)		(63,436)
Stockholders’ Equity	120,597		107,946
Total Liabilities and Stockholders’ Equity	$	292,833	$	171,019

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

Table of Contents

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Thirteen weeks ended				Thirty-nine weeks ended
(amounts in thousands, except per share data and share amounts)	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Net sales	$	116,678	$	74,742	$	302,041	$	191,060
Cost of merchandise sold	58,062		33,434		138,317		91,413
Gross profit	58,616		41,308		163,724		99,647
Operating expenses
Selling, general and administration expenses	38,087		25,945		104,191		75,160
Advertising and marketing	15,832		10,975		39,548		26,337
Depreciation and amortization	1,726		1,854		5,748		5,034
Total operating expenses	55,645		38,774		149,487		106,531

Operating income (loss)	2,971		2,534		14,237		(6,884)
Interest expense, net	(45)		(44)		(135)		(22)
Net income (loss) before taxes	2,926		2,490		14,102		(6,906)
Provision for income taxes	(174)		(11)		(842)		(70)
Net income (loss)	$	2,752	$	2,479	$	13,260	$	(6,976)

Net income (loss) per common share:
Basic	$	0.18	$	0.17	$	0.88	$	(0.48)
Diluted	$	0.17	$	0.16	$	0.83	$	(0.48)

Weighted average number of common shares outstanding:
Basic	15,146,890		14,561,835		15,092,844		14,520,282
Diluted	16,069,729		15,581,487		16,015,683		14,520,282

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

Table of Contents

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED OCTOBER 31, 2021 AND NOVEMBER 1, 2020

(unaudited)


	Common			Additional Paid-in Capital		Accumulated Deficit		Total
(amounts in thousands, except share amounts)	Shares	Amount
Balance - February 2, 2020	14,472,611	$	—	$	168,318	$	(78,163)	$	90,155
Net loss	—	—		—		(8,348)		(8,348)
Equity based compensation	—	—		898		—		898
Issuance of common stock for restricted stock	35,776	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(150)		—		(150)
Balance - May 3, 2020	14,508,387	—		169,066		(86,511)		82,555

Net loss	—	—		—		(1,107)		(1,107)
Equity based compensation	—	—		677		—		677
Issuance of common stock for restricted stock	19,192	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(306)		—		(306)
Balance - August 2, 2020	14,527,579	$	—	$	169,437	$	(87,618)	$	81,819

Net income	—	—		—		2,479		2,479
Equity based compensation	—	—		1,063		—		1,063
Issuance of common stock for restricted stock	18,725	—		—		—		—
Exercise of Warrants	136,834	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(109)		—		(109)
Balance - November 1, 2020	14,683,138	$	—	$	170,391	$	(85,139)	$	85,252

Balance - January 31, 2021	15,011,556	$	—	$	171,382	$	(63,436)	$	107,946
Net income	—	—		—		2,061		2,061
Equity based compensation	—	—		655		—		655
Issuance of common stock for restricted stock	4,868	—		—		—		—
Exercise of Warrants	2,106	—		20		—		20
Balance - May 2, 2021	15,018,530	$	—	$	172,057	$	(61,375)	$	110,682

Net income	—	—		—		8,447		8,447
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	—		169,856		(52,928)		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	—		170,773		(50,176)		120,597

SEC Form 10-Q filed by The Lovesac Company