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Luvu Brands Announces Fiscal 2018 First Quarter Results

ATLANTA, GA -- (Marketwired) -- 11/14/17 -- Luvu Brands, Inc., (OTCQB: LUVU), a manufacturer and marketer of premium consumer brands in the categories of sexual wellness, comfort top-of-bed accessories and lifestyle fashion furniture, today reported financial results for the three months ended September 30, 2017.

Operating highlights for the quarter ended September 30, 2017:

  • Net sales decreased 12% to $3.6 million for the first quarter of fiscal 2018, as compared to $4.1 million for the comparable prior-year period. Excluding the $743,000 decrease in the sales of Tenga products, the net sales would have increased 8% year-over-year.

  • Total gross profit was unchanged at $1.0 million, as compared to $1.0 million for the comparable prior-year period.

  • Gross profit as a percentage of net sales increased to 27% from 24% in the prior year first quarter.

  • Operating expenses remained unchanged at $1 million during the three months ended September 30, 2017 as compared to the prior year first quarter.

  • The net loss increased slightly to $193,000 during the current year first quarter compared to a net loss of $177,000 in the prior year.

Louis Friedman, Chairman and Chief Executive Officer, commented, "During the first quarter, we were able to recover much of the discontinued Tenga revenue through higher sales of our own branded products at a higher gross profit margin. Despite the $482,000 net decline in sales revenue, our net gross profit was unchanged at $1 million and, as a percentage of revenue, increased by over 300 basis points. Mr. Friedman added, "During the first quarter, sales of our Jaxx products increased by 27% and sales of our Avana products increased by over 74%. We expect to see continued strong growth for both of these brands through the holiday season and during the remainder of fiscal 2018."

About Luvu Brands

Luvu Brands, Inc. is an Atlanta, Georgia based designer, manufacturer and brand based marketer of consumer products that offers a growing number of product categories including: Liberator® sexual positioning furniture, Avana™ top-of-bed comfort pillows and Jaxx® casual fashion furniture, child, teen and adult beanbags, outdoor loungers, loveseats and daybeds. These products are sold through the Company's websites, concept factory store, online mass merchants and retail stores worldwide. Many of our products are offered flat-packed and vacuum compressed to save on shipping and reduce our carbon footprint.

The Company is headquartered in a 140,000 square foot vertically-integrated manufacturing facility that employs over 160 people. Bringing sewn products manufacturing back to the USA and creating innovative vacuum-compressed consumer products are core to the Company's operating principles. As the majority of the Company's products are constructed of polyurethane foam, sustainable manufacturing practices are used including re-purposing of foam trim into beanbag fill to reduce our overall carbon footprint.

Luvu Brands promotes its products globally in a variety of distribution channels including mass market web retailers, catalogers and specialty retail stores. The Company's brand sites include: liberator.com, jaxxliving.com, avanacomfort.com plus other global e-commerce sites. For more information about Luvu Brands, please visit luvubrands.com.

                   Condensed Consolidated Balance Sheets

                                                     2017        June 30,
                                                  (unaudited)      2017
                                                 ------------  ------------
                                                    (in thousands, except
Assets:                                                  share data)
 Current assets:
  Cash and cash equivalents                      $        439  $        742
  Accounts receivable, net                                537           631
  Inventories, net                                      1,613         1,545
  Prepaid expenses                                         62            80
                                                  -----------   -----------
   Total current assets                                 2,651         2,998

 Equipment and leasehold improvements, net                875           869
 Other assets                                              10             9
                                                  -----------   -----------
Total assets                                     $      3,536  $      3,876
                                                  ===========   ===========

Liabilities and stockholders' deficit:
 Current liabilities:
  Accounts payable                               $      2,231  $      2,177
  Current debt                                          1,975         2,115
  Other accrued liabilities                               411           535
                                                  -----------   -----------
   Total current liabilities                            4,617         4,827

 Noncurrent liabilities:
  Long-term debt                                        1,161         1,094
  Deferred rent payable                                   137           147
                                                  -----------   -----------
   Total noncurrent liabilities                         1,298         1,241
                                                  -----------   -----------
Total liabilities                                       5,915         6,068

Commitments and contingencies (See Note 15)                --            --
 Stockholders' deficit:
  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, 2017 and June 30,
   2017                                                    --            --
  Common stock, $0.01 par value, 175,000,000
   shares authorized, 73,452,596 shares issued
   and outstanding at September 30, 2017 and
   June 30, 2017                                          735           735
 Additional paid-in capital                             6,085         6,079
 Accumulated deficit                                   (9,199)       (9,006)
                                                  -----------   -----------
Total stockholders' deficit                            (2,379)       (2,192)
                                                  -----------   -----------
Total liabilities and stockholders' deficit      $      3,536  $      3,876
                                                  ===========   ===========

              Condensed Consolidated Statements of Operations

                                                     Three Months Ended
                                                        September 30,
                                                     2017          2016
                                                 ------------  ------------
                                                    (in thousands, except
                                                         share data)

Net Sales                                        $      3,623  $      4,105
Cost of goods sold                                      2,644         3,128
                                                  -----------   -----------
 Gross profit                                             979           977
Operating expenses:
 Advertising and promotion                                 93            82
 Other selling and marketing                              285           285
 General and administrative                               609           584
 Depreciation and amortization                             52            51
                                                  -----------   -----------
  Total operating expenses                              1,039         1,002
                                                  -----------   -----------
   Operating loss                                         (60)          (25)

Other income (expense):
  Interest income                                          --            --
  Interest (expense) and financing costs                 (133)         (152)
                                                  -----------   -----------
 Total other income (expense)                            (133)         (152)
                                                  -----------   -----------
  Loss from operations before income taxes               (193)         (177)
 Provision for income taxes                                --            --
                                                  -----------   -----------
   Net loss                                      $       (193) $       (177)
                                                  -----------   -----------

Net loss per share:
  Basic and diluted loss per common shares       $      (0.00) $      (0.00)
                                                  -----------   -----------
Weighted-average common shares outstanding:
  Basic and diluted weighted average common and
   common equivalent shares outstanding            73,452,596    71,452,596
                                                  ===========   ===========

Use of Non-GAAP Measure -- *Adjusted EBITDA

Luvu Brands management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. While Adjusted EBITDA is not a measure of performance in accordance with GAAP, management believes that this non-GAAP measure provides useful information about the Company's operating results. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.

As used herein, Adjusted EBITDA income (loss) represents net loss before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense.

Reconciliation of net loss to Adjusted EBITDA income (loss) for the three months ended September 30, 2017 and 2016:

                                                     Three months ended
(Dollars in thousands)                                 September 30,
                                                     2017          2016
                                                ------------- -------------
Net loss                                        $        (193)$        (177)
  Less interest income
  Plus interest expense, net                              133           152
  Plus depreciation and amortization expense               52            51
  Plus stock-based compensation                             7             7
                                                 ------------  ------------
Adjusted EBITDA income (loss)                   $          (1)$          33
                                                 ------------  ------------

Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. Examples of forward-looking statements in this release include statements related to new products, anticipated revenue and profitability. The Company assumes no obligation to update the cautionary information in this release.

Company Contact:
Luvu Brands, Inc.
Ronald Scott
Chief Financial Officer

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