love-20220501

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 May 1, 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 May 31, 2022, there were 15,125,175 shares of common stock, $0.00001 par value per share, outstanding.


		Page
PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of May 1, 202 2 (unaudited) and January 3 0 , 20 2 2	1

	Condensed Consolidated Statements of Operations for the thirteen weeks ended May 1, 202 2 and May 2, 202 1 (unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the thirteen weeks ended May 1, 202 2 and May 2 , 202 1 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended May 1 , 202 2 and May 2 , 202 1 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements (unaudited)	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	25

Item 4.	Controls and Procedures	26

Part II. OTHER INFORMATION		28

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

Item 5.	Other Information	28

Item 6.	Exhibits	29


	May 1, 2022		January 30, 2022
(amounts in thousands, except share and per share amounts)	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	64,380	$	92,392
Trade accounts receivable	6,413		8,547
Merchandise inventories	123,008		108,493
Prepaid expenses and other current assets	16,384		15,726
Total Current Assets	210,185		225,158
Property and equipment, net	37,455		34,137
Operating lease right-of-use assets	107,930		100,891
Other Assets
Goodwill	144		144
Intangible assets, net	1,452		1,413
Deferred financing costs, net	97		—
Deferred tax asset	9,313		9,836
Total Other Assets	11,006		11,393
Total Assets	$	366,576	$	371,579
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	29,764	$	33,247
Accrued expenses	39,431		40,497
Payroll payable	5,188		9,978
Customer deposits	7,607		13,316
Current operating lease liabilities	17,530		16,382
Sales taxes payable	4,339		5,359
Total Current Liabilities	103,859		118,779
Operating Lease Liabilities, long-term	103,480		96,574
Line of Credit	—		—
Total Liabilities	207,339		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 May 1, 2022 and January 30, 2022.	—		—
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,125,042 shares issued and outstanding as of May 1, 2022 and 15,123,338 shares issued and outstanding as of January 30, 2022.	—		—
Additional paid-in capital	174,878		173,762
Accumulated deficit	(15,641)		(17,536)
Stockholders’ Equity	159,237		156,226
Total Liabilities and Stockholders’ Equity	$	366,576	$	371,579


	Thirteen weeks ended
(amounts in thousands, except per share data and share amounts)	May 1, 2022		May 2, 2021
Net sales	$	129,380	$	82,915
Cost of merchandise sold	63,272		36,839
Gross profit	66,108		46,076
Operating expenses
Selling, general and administration expenses	44,901		30,718
Advertising and marketing	15,901		10,680
Depreciation and amortization	2,661		2,420
Total operating expenses	63,463		43,818

Operating income	2,645		2,258
Interest expense, net	(35)		(44)
Net income before taxes	2,610		2,214
Provision for income taxes	(715)		(153)
Net income	$	1,895	$	2,061

Net income per common share:
Basic	$	0.13	$	0.14
Diluted	$	0.12	$	0.13

Weighted average number of common shares outstanding:
Basic	15,155,378		15,034,954
Diluted	16,173,339		16,073,021


	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
Vested restricted stock units	4,868	—		—		—		—
Exercise of warrants	2,106	—		20		—		20
Balance - May 2, 2021	15,018,530	—		172,056		(61,375)		110,681

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
Vested restricted stock units	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


	Thirteen weeks ended
(amounts in thousands)	May 1, 2022		May 2, 2021
Cash Flows from Operating Activities
Net income	$	1,895	$	2,061
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property and equipment	2,575		1,956
Amortization of other intangible assets	86		463
Amortization of deferred financing fees	29		23
Equity based compensation	1,163		654
Non-cash operating lease cost	4,184		3,546
Deferred income taxes	523		—
Changes in operating assets and liabilities:
Trade accounts receivable	2,134		(2,382)
Merchandise inventories	(14,515)		(5,539)
Prepaid expenses and other current assets	270		(547)
Accounts payable and accrued expenses	(10,359)		(8,290)
Operating lease liabilities	(4,062)		(3,400)
Customer deposits	(5,709)		1,851
Net Cash Used in Operating Activities	(21,786)		(9,604)
Cash Flows from Investing Activities
Purchase of property and equipment	(5,893)		(2,919)
Payments for patents and trademarks	(125)		(139)
Net Cash Used in Investing Activities	(6,018)		(3,058)
Cash Flows from Financing Activities
Payment of deferred financing costs	(161)		—
Taxes paid for net share settlement of equity awards	(47)		—
Proceeds from the line of credit	—		42
Proceeds from the exercise of warrants	—		20
Net Cash (Used in) Provided by Financing Activities	(208)		62
Net Change in Cash and Cash Equivalents	(28,012)		(12,600)
Cash and Cash Equivalents - Beginning	92,392		78,341
Cash and Cash Equivalents - Ending	$	64,380	$	65,741
Supplemental Cash Flow Disclosures
Cash paid for taxes	$	905	$	61
Cash paid for interest	$	33	$	8


		May 1, 2022
(amounts in thousands)	Estimated Life	Gross Carrying Amount		Accumulated Amortization		Net carrying amount
Patents	10 years	$	2,923	$	(1,682)	$	1,241
Trademarks	3 years	1,430		(1,219)		211
Other intangibles	5 years	840		(840)		—
Total		$	5,193	$	(3,741)	$	1,452


		January 30, 2022
(amounts in thousands)	Estimated Life	Gross Carrying Amount		Accumulated Amortization		Net carrying amount
Patents	10 years	$	2,838	$	(1,626)	$	1,212
Trademarks	3 years	1,390		(1,189)		201
Other intangibles	5 years	840		(840)		—
Total		$	5,068	$	(3,655)	$	1,413


(amounts in thousands)
Remainder of Fiscal 2023	$	182
2024	260
2025	199
2026	174
2027	161
2028	10
Thereafter	466
	$	1,452


	May 1, 2022
Weighted average remaining lease term (in years)
Operating Leases	7.2

Weighted average discount rate
Operating Leases	3.97	%


(amounts in thousands)	Balance sheet location	May 1, 2022
Assets
Operating leases	Operating lease right-of-use assets (non-current)	$	107,930

Liabilities
Current:
Operating leases	Current operating lease liabilities	$	17,530

Noncurrent:
Operating leases	Operating lease liability, long term	103,480

Total lease liabilities		$	121,010


	Average exercise price		Number of warrants	Weighted average remaining contractual life (in years)
Warrants Outstanding at January 31, 2021	$	19.07	293,973	2.57
Warrants issued	—		—	0
Expired and canceled	—		—	0
Exercised	16.00		(2,375)	0.16
Outstanding at May 2, 2021	$	19.11	291,598	2.09

Warrants Outstanding at January 30, 2022	$	19.20	281,750	1.41
Warrants issued	—		—	0
Expired and canceled	—		—	0
Exercised	—		—	0.00
Outstanding at May 1, 2022	$	19.20	281,750	1.16


	Number of shares	Weighted average grant date fair value
Unvested at January 31, 2021	655,558	$	18.86
Granted	6,000	53.82
Forfeited	(4,638)	16.64
Vested	(4,868)	8.86
Unvested at May 2, 2021	652,052	$	19.27


	Number of shares	Weighted average grant date fair value
Unvested at January 30, 2022	533,333	$	28.41
Granted	256,329	46.11
Forfeited	(20,159)	22.88
Vested	(2,480)	16.57
Unvested at May 1, 2022	767,023	$	34.31


(amounts in thousands)
Remainder 2023	$	16,571
2024	21,582
2025	20,310
2026	18,187
2027	15,739
Thereafter	48,498
Total undiscounted future minimum lease payments	140,887
Less: imputed interest	(19,877)
Total present value of lease obligations	121,010
Less: current operating lease liability	(17,530)
Operating lease liability- long term	$	103,480


(amounts in thousands)	For the thirteen weeks ended May 1, 2022		For the thirteen weeks ended May 2, 2021
Operating cash flow information:
Amounts paid on operating lease liabilities	$	4,062	$	3,400
Non-cash activities
Right-of-use assets obtained in exchange for lease obligations	$	12,513	$	94,275


	Number of options	Weighted average exercise price		Weighted average remaining contractual life (in years)	Average intrinsic value
Outstanding at January 31, 2021	495,366	$	38.10	3.35	—
Exercised	—	—
Expired and canceled	—	—
Outstanding at May 2, 2021	495,366	$	38.10	3.10	22.87
Exercisable at the end of the period	—	—		—	—

	Number of options	Weighted average exercise price		Weighted average remaining contractual life (in years)	Average intrinsic value
Outstanding at January 30, 2022	495,366	$	38.10	2.35	28.68
Granted	—	—
Canceled and forfeited	—	—
Outstanding at May 1, 2022	495,366	$	38.10	2.10	8.05
Exercisable at the end of the period	—	—		—	—

SEC Form 10-Q filed by The Lovesac Company