UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 18, 2018

 

 

 

THE LOVESAC COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-38555   32-0514958

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS 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: (207) 273-9733

 

Not Applicable

(Former name or former address, if changed since last report.)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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. ☐

 

 

 

 

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On December 18, 2018, The Lovesac Company, a Delaware corporation (the “Company”), issued a press release (the “Press Release”) announcing the Company’s financial results for the third quarter ended November 4, 2018. A copy of the Press Release is attached to this current report on Form 8-K as Exhibit 99.1.

 

The Company will host a conference call on December 18, 2018 at 8:30 a.m. Eastern Time in connection with the release of the Company’s financial results for the third quarter ended November 4, 2018. Investors and analysts interested in participating in the call are invited to dial 877-407-3982 (international callers please dial 201-493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.lovesac.com. A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed online at investor.lovesac.com for 90 days.

 

The information hereunder and Exhibit 99.1 hereto shall be deemed “furnished” and not “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit
Number

 

Description

99.1   Press release, dated December 18, 2018.

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  THE LOVESAC COMPANY
   
Date: December 18, 2018 By: /s/ Shawn Nelson
    Name: Shawn Nelson
    Title:   Chief Executive Officer

 

2

 

Exhibit 99.1

 

The Lovesac Company Announces Third Quarter Fiscal 2019 Financial Results

 

Third Quarter Net Sales Increased 70.9% to $41.7 million

Comparable Sales, Including Showroom and Internet Sales, Increased 51.0%

EBITDA of ($1.6) million vs. EBITDA of ($1.2) million in Prior Year Period

Adjusted EBITDA of ($0.4) million vs. ($0.8) million in Prior Year Period

 

STAMFORD, Conn., December 18, 2018 (GLOBE NEWSWIRE) -- The Lovesac Company (Nasdaq:LOVE) today announced its financial results for the third quarter of fiscal 2019, which ended on November 4, 2018.

 

Shawn Nelson, Chief Executive Officer, stated, “We had an exceptional third quarter and are very pleased with our financial results. We believe that our highly differentiated product and disruptive direct-to-consumer business model are resonating with both new and existing customers alike as we continue to lean into our marketing strategy. We made good progress on our strategic priorities in the third quarter including expanding marketing, investing in infrastructure and capabilities, increasing and improving showroom presence, extending brand reach with shop-in-shops and driving higher levels of social media engagement.”

 

Mr. Nelson continued, “We continue to see significant growth opportunity for our innovative brand given the $31 billion total addressable market. Looking ahead, we plan to continue to execute on our key strategic priorities including a strong focus on marketing and investing in infrastructure to grow brand awareness, gain meaningful market share and establish a solid foundation for long term growth.”

 

For the Thirteen Weeks Ended November 4, 2018

 

Net sales increased 70.9% to $41.7 million in the third quarter of fiscal 2019 from $24.4 million in the third quarter of fiscal 2018. The increase was driven by strong showroom, Internet and shop-in-shop performance as a result of an increase in new customers combined with an increase in the total number of units sold and continued accelerated investments in marketing to increase brand awareness. Comparable sales, which includes showroom and Internet sales, increased 51.0%. Comparable showroom sales increased 40.5% and Internet sales increased 93.9%.

 

The Company opened five new showrooms and remodeled one showroom in the third quarter of fiscal 2019 and ended the quarter with 77 showrooms in 30 states. This represents a unit increase of 20% over the same quarter in the prior year.

 

Gross profit dollars increased 67.5% to $22.9 million in the third quarter of fiscal 2019 from $13.7 million in the third quarter of fiscal 2018. Gross margin decreased by 110 basis points to 54.9% in the third quarter of fiscal 2019 from 56.0% in the third quarter of fiscal 2018 due primarily to a channel mix shift toward shop-in-shop locations and growth in Sactional products, both of which carry a lower margin.

 

Selling, general and administrative expenses increased $7.2 million, or 59.8%, to $19.3 million in the thirteen weeks ended November 4, 2018 compared to $12.1 million in the thirteen weeks ended October 29, 2017. The increase in selling, general and administrative expenses was primarily related to an increase in employment costs of $0.7 million, $1.1 million of increased rent associated with our net addition of 11 showrooms, $3.7 million of expenses related to the increase in sales such as credit card fees, utility and repairs expenses, web affiliate program and web platform hosting commissions and shop in shop sales agent fees, $0.7 million increase in overhead expense to support overhead initiatives and public company expenses, $0.5 million of stock based compensation and $0.2 million of expenses related to capital raises. As a percent to sales, total SG&A expense decreased by 320 basis points.

 

1

 

 

Marketing expense increased 84.6%, or $2.4 million, to $5.2 million in the third quarter of fiscal 2019 from $2.8 million in the third quarter of fiscal 2018. The increase in marketing costs relates to increased media, to include national media and direct to consumer programs which drive revenue beyond the period of the expense.

 

Operating loss was $2.7 million in the third quarter of fiscal 2019 compared to an operating loss of $2.1 million in the third quarter of fiscal 2018. Excluding non-recurring items of $0.4 million in the third quarter of fiscal 2019 and $0.2 million in the third quarter of fiscal 2018, operating loss was $2.3 million in the third quarter of fiscal 2019 and $1.9 million for the third quarter of fiscal 2018

 

Net loss and net loss attributable to common shares was $2.5 million and $2.9 million, respectively. There was approximately $400K of preferred dividends and deemed dividends in the third quarter of fiscal 2019. This is compared to a net loss of $2.2 million, or net loss attributable to common shares of $2.6 million including preferred dividends and deemed dividends in the third quarter in fiscal 2018. Adjusted net loss, which excludes the impact of non-recurring expenses, was ($2.0) million in both the third quarter of fiscal 2019 and the third quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”). Net loss per share, including preferred dividends and deemed dividends, was ($0.22) in the third quarter of fiscal 2019 compared to a loss of ($0.43) in the third quarter of fiscal 2018. Adjusted net loss per common share, which is calculated by dividing adjusted net loss by adjusted weighted average common shares outstanding, assuming the IPO related issuances occurred at the beginning of each period presented, was ($0.15) in both the third quarter of fiscal 2019 and the third quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).

 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was ($1.6) million in the third quarter of fiscal 2019 compared to ($1.2) million in the third quarter of fiscal 2018. Adjusted EBITDA was ($0.4) million compared to ($0.8) million in the third quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).

 

Please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for more information.

 

For the Thirty-Nine Weeks Ended November 4, 2018

 

Net sales increased 62.0% to $101.7 million in the fiscal 2019 year-to-date period from $62.8 million in the same period of fiscal 2018. This increase was driven by strong showroom, Internet and shop-in-shop performance as a result of an increase in new customers combined with an increase in the total number of units sold and continued accelerated investments in marketing to increase brand awareness. Comparable sales, which includes showroom and Internet sales, increased 40.9%. Comparable showroom sales increased 33.2% and Internet sales increased 73.6%.

 

The Company opened 13 new showrooms and closed two showrooms in the fiscal 2019 year-to-date period.

 

Gross profit dollars increased 61.5% to $55.4 million in the fiscal 2019 year-to-date period. Gross margin decreased by 20 basis points to 54.4% in the fiscal 2019 year-to-date period from 54.6% in the same period of fiscal 2018. The decrease in gross margin was primarily due to a channel mix shift toward shop-in-shop locations which carry a lower margin.

 

2

 

 

Selling, general and administrative expenses increased $20.4 million, or 59.0%, to $55.0 million in the thirty-nine weeks ended November 4, 2018 compared to $34.6 million in the thirty-nine weeks ended October 29, 2017. The increase in selling, general and administrative expenses was primarily related to an increase in employment costs of $2.7 million, $3.0 million of increased rent associated with our net addition of 11 showrooms, and $8.3 million of expenses related to the increase in sales such as credit card fees, web affiliate program and web hosting program commissions, shop in shop sales agent fees, and utility and repairs expense, $1.0 million increase in overhead expense to support overhead initiatives and public company expenses, stock based compensation of $2.3 million, sponsor fees of $1.3 million, and equity raise expense of $1.2 million. As a percent to sales, total SG&A expense decreased by 102 basis points.

 

Marketing expense increased by $7.4 million or 128% to $13.2 million in the fiscal 2019 year-to-date period from $5.8 million in the same period of fiscal 2018. The increase in marketing costs relates to increased media, to include national media and direct to consumer programs which drive revenue beyond the period of the expense.

 

Operating loss was $15.3 million in the fiscal 2019 year-to-date period compared to an operating loss of $7.6 million in the same period of fiscal 2018. Excluding non-recurring items of $4.0 million in fiscal year-to-date 2019 and $0.7 million in fiscal year-to-date 2018, operating loss was $11.3 million and $6.9 million in the respective periods.

 

Net loss was $15.1 million, and net loss attributable to common shares was $43.0 million, including preferred dividends and deemed dividends in the fiscal 2019 year-to-date period. This compares to a net loss of $7.9 million in the prior year period and a net loss attributable to common shares of $8.6 million including preferred dividends and deemed dividends in the prior year period. Adjusted net loss, which excludes IPO related sponsor fees and equity-based compensation and certain other non-recurring expenses, was ($11.1) million in the fiscal 2019 year-to-date period compared to ($7.2) million in the prior year period (see “GAAP and Non-GAAP Measures”). Net loss per share, including preferred dividends and deemed dividends, was ($4.51) in the fiscal 2019 year-to-date period compared to ($1.43) in the prior year period. Adjusted net loss per common share, which is calculated by dividing adjusted net loss by adjusted weighted average common shares outstanding assuming the IPO related issuances occurred at the beginning of each period presented, was ($0.83) in the fiscal 2019 year-to-date period compared to ($0.54) in the prior year period (see “GAAP and Non-GAAP Measures”).

 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), was ($12.5) million in the year-to-date period of fiscal 2019 compared to ($6.1) million in prior year period in fiscal 2018. Adjusted EBITDA was ($6.3) million compared to ($4.8) million in the prior year period (see “GAAP and Non-GAAP Measures”).

 

Please see Non-GAAP financial measures. Please see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for more information.

 

3

 

 

Conference Call Details

 

A conference call to discuss the third quarter fiscal 2019 financial results is scheduled for today, December 18, 2018, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-407-3982 (international callers please dial 201-493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.lovesac.com.

 

A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed online at investor.lovesac.com for 90 days.

 

About The Lovesac Company

 

Based in Stamford, Connecticut, The Lovesac Company is a direct-to-consumer specialty furniture brand with 77 retail showrooms supporting its ecommerce delivery model. Lovesac’s name comes from its original Durafoam filled beanbags called Sacs. The Company derives a majority of its current sales from its proprietary platform called Sactionals, a washable, changeable, reconfigurable, and FedEx-shippable solution for large upholstered seating. Founder and CEO, Shawn Nelson’s, “Designed for Life” philosophy emphasizes sustainable products that are built to last a lifetime and designed to evolve with the customer’s needs, providing long-term utility and ultimately reducing the amount of furniture discarded into landfills.

 

Non-GAAP Information

 

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the “SEC”): adjusted net loss, adjusted diluted loss per share and Adjusted EBITDA. Adjusted net loss excludes the effect of one-time costs related to the Company’s IPO in June 2018 and fees associated with fundraising and reorganizing activities. Adjusted diluted loss per share is defined as adjusted net loss divided by a pro forma share count which assumes the IPO took place before the relevant time period. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, sponsor fees, deferred rent, equity-based compensation, write-off of property and equipment, one-time IPO-related expenses, and fees associated with fundraising and reorganizing activities. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures” in this release. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the Company’s business and facilitate a more meaningful comparison of its diluted income per share and actual results on a period-over-period basis. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

 

4

 

 

Cautionary Statement Concerning Forward Looking Statements

 

Certain statements either contained in or incorporated by reference into this communication, other than purely historical information, including estimates, projections and statements relating to Lovesac’s business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in or incorporated by reference into this press release regarding strategy, future operations, future financial position, future revenue, projected expenses, prospects, plans and objectives of management are forward-looking statements. Lovesac may not actually achieve the plans, carry out the intentions or meet the expectations disclosed in the forward-looking statements and you should not place undue reliance on these forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Lovesac disclaims any intent or obligation to update these forward-looking statements to reflect events or circumstances that exist after the date on which they were made.

 

Investor Relations Contact:

Rachel Schacter, ICR

(203) 682-8200

InvestorRelations@lovesac.com

  

5

 

 

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   November 4, 2018   February 4, 2018 
   (unaudited)     
         
Assets        
         
Current Assets        
Cash and cash equivalents  $44,683,851   $9,175,951 
Trade accounts receivable   2,913,322    2,805,186 
Merchandise inventories   24,618,738    11,641,482 
Prepaid expenses and other current assets   6,253,866    6,062,946 
           
Total Current Assets   78,469,777    29,685,565 
           
Property and Equipment, Net   17,092,936    11,037,289 
           
Other Assets          
Goodwill   143,562    143,562 
Intangible assets, net   828,289    526,370 
Deferred financing costs, net   237,327    48,149 
           
Total Other Assets   1,209,178    718,081 
           
Total Assets  $96,771,891   $41,440,935 
           
Liabilities and Stockholders’ Equity          
           
Current Liabilities          
Accounts payable  $16,869,229   $12,695,954 
Accrued expenses   2,864,069    784,340 
Payroll payable   2,151,332    1,454,193 
Customer deposits   2,525,034    909,236 
Sales taxes payable   663,021    894,882 
Line of credit   -    405 
           
Total Current Liabilities   25,072,685    16,739,010 
           
Deferred Rent   1,445,825    1,063,472 
           
Total Liabilities   26,518,510    17,802,482 
           
Stockholders’ Equity          
           
Preferred Stock $.00001 par value, 10,000,000 shares authorized, no shares issued as of November 4, 2018 and 1,018,600 shares issued as of February 4, 2018.   -    26 
Common Stock $.00001 par value, 40,000,000 shares authorized and 13,535,268 shares issued as of November 4, 2018, and 6,064,500 shares issued as of February 4, 2018, respectively.   135    61 
           
Additional paid-in capital   141,650,165    79,891,819 
           
Accumulated deficit   (71,396,919)   (56,253,453)
           
Stockholders’ Equity   70,253,381    23,638,453 
           
Total Liabilities and Stockholders’ Equity  $96,771,891   $41,440,935 

 

6

 

 

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   Thirteen weeks ended   Thirty-nine weeks ended 
   November 4, 2018   October 29, 2017   November 4, 2018   October 29, 2017 
                 
Net sales  $41,685,929   $24,391,450   $101,703,739   $62,769,038 
                     
Cost of merchandise sold   18,799,108    10,724,293    46,331,175    28,481,985 
                     
Gross profit   22,886,821    13,667,157    55,372,564    34,287,053 
                     
Operating expenses                    
Selling, general and administrative expenses   19,329,422    12,095,035    54,978,109    34,574,771 
Marketing   5,164,699    2,798,467    13,167,354    5,775,512 
Depreciation and amortization   1,084,180    835,819    2,513,009    1,521,461 
                     
Total operating expenses   25,578,301    15,729,321    70,658,472    41,871,744 
                     
Operating loss   (2,691,480)   (2,062,164)   (15,285,908)   (7,584,691)
                     
Interest income (expense), net   200,862    (114,667)   142,442    (343,755)
                     
Net loss before taxes   (2,490,618)   (2,176,831)   (15,143,466)   (7,928,446)
                     
Provision for income taxes   -    -    -    - 
                     
Net loss  $(2,490,618)  $(2,176,831)  $(15,143,466)  $(7,928,446)
                     
Net loss per common share:                    
Basic and diluted  $(0.22)  $(0.43)  $(4.51)  $(1.43)
                     
Weighted average number of  common shares outstanding:                    
Basic and diluted   13,465,882    6,000,000    9,536,164    6,000,000 

 

7

 

 

   For the thirteen
weeks ended
 
   November 4, 2018   October 29,
2017
 
Numerator:        
Net loss - Basic and diluted  $(2,490,618)  $(2,176,831)
Preferred dividends and deemed dividends   (408,919)   (382,573)
Net loss attributable to common shares   (2,899,537)   (2,559,404)
Denominator:          
Weighted average number of common shares for basic and diluted net loss per share   13,465,882    6,000,000 
Basic and diluted net loss per share  $(0.22)  $(0.43)

 

   For the thirty-nine
weeks ended
   November 4, 2018   October 29,
2017
 
Numerator:        
Net loss - Basic and diluted  $(15,143,466)  $(7,928,446)
Preferred dividends and deemed dividends   (27,832,998)   (669,605)
Net loss attributable to common shares   (42,976,464)   (8,598,051)
Denominator:          
Weighted average number of common shares for basic and diluted net loss per share   9,536,164    6,000,000 
Basic and diluted net loss per share  $(4.51)  $(1.43)

8

 

 

THE LOVESAC COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

   Thirty-nine weeks ended 
   November 4, 2018   October 29, 2017 
         
Cash Flows from Operating Activities        
Net loss  $(15,143,466)  $(7,928,446)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization of property and equipment   2,374,743    1,343,519 
Amortization of other intangible assets   138,266    177,942 
Amortization of deferred financing fees   102,917    108,660 
Loss on disposal of property and equipment   6,139    -- 
Equity based compensation   2,849,842    15,209 
Deferred rent   382,353    241,928 
Changes in operating assets and liabilities:          
Accounts receivable   (108,136)   (1,048,799)
Merchandise inventories   (12,977,256)   (2,048,493)
Prepaid expenses and other current assets   (190,920)   (2,166,290)
Accounts payable and accrued expenses   6,726,184    1,463,510 
Customer deposits   1,615,798    343,253 
           
Net Cash Used in Operating Activities   (14,223,536)   (9,498,007)
           
Cash Flows from Investing Activities          
Purchase of property and equipment   (8,436,529)   (5,340,484)
Payments for patents and trademarks   (440,185)   (70,852)
           
Net Cash Used in Investing Activities   (8,876,714)   (5,411,336)
           
Cash Flows from Financing Activities          
Proceeds from initial public offering, net   59,168,596    - 
Payments of initial public offering issuance costs   (260,044)   - 
Taxes paid for net share settlement of equity awards   (7,902)   - 
Proceeds from sale of preferred stock and warrants, net of issuance costs   -    18,919,419 
Principal payments on note payable   -    (194,530)
Principal (paydowns of) proceeds from the line of credit, net   (405)   1,015,708 
Payments of deferred financing costs   (292,095)   (75,266)
Net Cash Provided by Financing Activities   58,608,150    19,665,331 
           
Net Change in Cash and Cash Equivalents   35,507,900    4,755,988 
           
Cash and Cash Equivalents - Beginning   9,175,951    878,696 
           
Cash and Cash Equivalents - End  $44,683,851   $5,634,684 
           
Supplemental Cash Flow Disclosures          
Cash paid for interest  $48,256   $254,593 

 

 

9

 

 

THE LOVESAC COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited)

 

   Thirteen
weeks ended
   Thirteen
weeks ended
   Thirty-nine
weeks ended
   Thirty-nine
weeks ended
 
(dollars in thousands)  November 4,
2018
   October 29,
2017
   November 4,
2018
   October 29,
2017
 
Net loss  $(2,490)  $(2,177)  $(15,143)  $(7,928)
Interest (income) expense   (201)   115    142    344 
Taxes   -    -    -    - 
Depreciation and amortization   1,084    836    2,513    1,521 
EBITDA   (1,607)   (1,226)   (12,488)   (6,063)
Sponsor fees (a)   125    125    992    359 
Deferred Rent (b)   131    103    383    242 
Equity-based compensation (c)   516    15    2,850    15 
Write-off of property and equipment (d)   -    -    6    - 
Other non-recurring expenses (e)(f)   444    205    1,982    693 
Adjusted EBITDA  $(392)  $(778)  $(6,275)  $(4,754)

 

(a) Represents management fees charged by our equity sponsors.

 

(b) Represents the difference between rent expense recorded and the amount paid by the Company. In accordance with GAAP, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease terms.
   

(c)

Represents expenses associated with stock options, restricted stock units granted to our management and equity sponsors.

 

(d) Represents the net loss on the disposal of fixed assets.

  

(e) Other expenses in the thirteen weeks ended November 4, 2018 are made up of:  (1) $110 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities;  (2) $29 in fees paid for investor relations and public relations relating to the IPO; (3) $44 in executive recruitment fees to build executive management team; and (4) $261 in secondary offering legal fees.   Other expenses in the thirteen weeks ended October 29, 2017 are made up of: (1) $163 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $42 in other professional fees.

 

(f) Other expenses in the thirty-nine weeks ended November 4, 2018 are made up of:  Other expenses in the thirty-nine weeks ended November 4, 2018 are made up of: (1) $341 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $508 in fees paid for investor relations and public relations relating to the IPO; (3) $140 in executive recruitment fees to build executive management team; (4) $261 in secondary offering legal fees; (5) $84 in travel and logistical costs associated with the offering; (6) $198 in accounting fees related to the offering; and (7) $450 in IPO bonuses paid to executives .   Other expenses in the thirty-nine weeks ended October 29, 2017 are made up of: (1) $567 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $25 in travel and logistical costs associated with the offering; and (3) $59 in accounting fees related to the offering; (4) $42 in other professional fees.

 

10

 

 

THE LOVESAC COMPANY

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited)

 

   Thirteen
weeks ended
   Thirteen
weeks ended
   Thirty-nine
weeks ended
   Thirty-nine
weeks ended
 
(dollars in thousands)  November 4,
2018
   October 29,
2017
   November 4,
2018
   October 29,
2017
 
Net loss as reported  $(2,490)  $(2,177)  $(15,143)  $(7,928)
Adjustments:                    
Adjustments to selling, general and administrative expense:                    
Sponsor fees relating to the IPO (a)   -    -    625    - 
Equity based compensation related to the IPO (b)   -    -    1,442    - 
Other non-recurring expenses (c)(d)   444    205    1,982    693 
Adjusted net loss  $(2,047)  $(1,972)  $(11,094)  $(7,235)
                     
Adjusted basic and diluted weighted average shares outstanding- adjusted for IPO related issuance (e)   13,445,147    13,359,671    13,445,147    13,359,671 
Adjusted net loss per common share  $(0.15)  $(0.15)  $(0.83)  $(0.54)

 

(a) $625 paid in sponsor monitoring fees paid as a result of the IPO.
   
(b) $700 in executive restricted stock awards vested as a result of the IPO and $742 IPO bonus payable to Satori in common stock.
   
(c) Other expenses in the thirteen weeks ended November 4, 2018 are made up of: (1) $110 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $261 in legal fees related to the secondary offering, (3) $29 in fees paid for investor relations and public relations relating to the IPO and (6) $44 in executive recruitment fees to build executive management team.  Other expenses in the thirteen weeks ended October 29, 2017 are made up of: (1) $163 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $42 in executive recruitement fees to build executive management team.
   
(d) Other expenses in the thirty-nine weeks ended November 4, 2018 are made up of: (1) $341 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $84 in travel and logistical costs associated with the offering; (3) $198 in accounting fees related to the offering, (4) $450 in IPO bonuses paid to executives, (5) $508 in fees paid for investor relations and public relations relating to the IPO and (6) $140 in executive recruitment fees to build executive management team, (7) $261 in legal fees relating to the secondary offering.  Other expenses in the thirteen weeks ended October 29, 2017 are made up of: (1) $567 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $59 in accounting fees related to the offering, (3) $25 in travel and logistical costs associated with the offering, (4) $42 in executive recruitement fees to build the executive management team. 

 

11