There is a ton of truth in the old adage: “Sex Sells!” How does $4,293,482 for the quarter ended December 31, 2011 sound with a bottom line profit that was $400K better than the same period the year before? How about the shares in the penny stock have gained 200% in the past three weeks? Sound Sexy? It does for shareholders of Liberator Inc.’s (OTC: LUVU) penny stock.
Shares of LUVU are currently up 11.69% so far in today’s trading session at 0.43 on volume of 366 thousand. Liberator Inc. is a a designer and manufacturer of various specialty furnishings for the sexual wellness market. How we missed this until now is unacceptable for our readers and subscribers but when LUVU reported their most recent 10-Q, it would have been one of the best read quarterly reports I’ve seen for any OTC stocks in months.
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LUVU Stock Chart:
Market Cap (intraday)5: 28.14M
Price/Sales (ttm): 1.41
(May 3, 2012): 0.39
(Sep 30, 2011): 0.08
Avg Vol (3 month)3: 15,882
Avg Vol (10 day)3: 55,625
Shares Outstanding: 67.00M
Full Time Employees: 119
Revenue (ttm): 18.25M
Revenue Per Share (ttm): 0.20
Qtrly Revenue Growth (yoy): 16.10%
Gross Profit (ttm): 5.71M
Accumulated deficit: ($7,139,605)
LUVU Most Recent Financial Highlights
Second Quarter of Fiscal 2012 Compared to Second Quarter of Fiscal 2011
Net sales: For the three months ended December 31, 2011 increased from the comparable prior year period by $595,851, 16%.
The increase in net sales was primarily due to higher sales through the Wholesale channel. As a result of LUVU‘s continued focus on their Wholesale business, sales to Wholesale customers during the second quarter increased approximately 24% from the prior year. The Wholesale category includes Liberator branded products sold to distributors and retailers, non-Liberator products sold to retailers, and private label items sold to other resellers.
The Wholesale category also includes contract manufacturing services, which consists of specialty items that are manufactured in small quantities for certain customers, and which, to date, has not been a material part of LUVU‘s business.
Combined sales of Tenga and Booty Parlor products during the second quarter of fiscal 2012, of which 97% were sold through the Wholesale channel, accounted for 19.7% of total net sales and 13.7% of the gross profit.
Gross margin: Derived from net sales less the cost of goods sold, includes the cost of materials, direct labor, manufacturing overhead, freight costs and depreciation, total gross profit for the three months ended December 31, 2011 increased to $1,254,916 from $935,304, 34%, in the comparable prior year period.
Gross profit as a percentage of sales increased to 29% for the three months ended December 31, 2011 from 25% in the comparable prior year period and primarily resulted from both an improvement in the Direct margin (which resulted from better production efficiencies) and an increase in Wholesale sales with the corresponding increase in Wholesale margin. Gross profit from the Other sales channel (which consists principally of shipping and handling fees derived from our Direct sales channel) improved from -30% to 17% of Other sales revenue.
Operating expenses: For the three months ended December 31, 2011 were 24% of net sales, or $1,021,204, compared to 30% of net sales, or $1,119,329, for the same period in the prior year. The decrease in operating expenses was primarily the result of lower legal expense ($75,781), lower rent expense as a result of the sub-lease agreement with WMI ($36,000) and lower personnel related costs in sales and marketing ($25,529.)
Advertising and promotion expense increased from $131,249 to $146,018, or 11%. Depreciation expense decreased from $53,579 to $41,030, as many assets with five-year lives became fully depreciated.
Other income (expense): Decreased from an expense of $177,464 in fiscal 2011 to an expense of $92,321 in fiscal 2012. Interest expense and financing costs in the current and prior year quarter included $12,257 from the amortization of the debt discount on the convertible notes. Interest expense decreased from $112,881 in the prior year second quarter to $80,261 in the current year quarter, as the prior year included $48,000 in interest expense related to the one-time finance charge on the credit card advance. Excluding the prior year one-time charge of $48,000, interest expense increased from $64,881 to $80,261 as a result of higher average debt balances.
Expenses related to merger in the prior year consists of the fair market value of the 350,000 shares LUVU issued to Belmont Partners, LLC in connection with a Settlement and General Release LUVU entered into on October 13, 2010.
To view the most recent 10-Q filed with the SEC for LUVU, click here.
Bottom Line: Sex Sells! Sex Sells! Sex Sells! Liberator Inc.’s penny stock, LUVU, is a must add to the list of penny stock to watch. LUVU has all the makings of a profiting, growing company with a market that caters to high-level disposable income consumers. LUVU is one of the penny stock picks that you look back at a year from now and tell your friends and family about.
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