Luvu Brands Inc

that will improve our productivity. And as Jordan has mentioned, we're constantly shopping for new sources of supply, surplus materials that we can pick up, and we design products that are efficient to ship. So we're aware of UPS constantly raising their rates, and so we kind of look at our products to see how they can be compressed and what boxes they fit in so that we can meet certain price points. and reduce our freight costs. As you know, as an e-tailer, we tend to pay a lot of freight. We have to keep our freight costs as low as possible.

Actually, that was something I forgot to mention, too, is that we did just reduce one of our box sizes in a pretty significant manner on one of our best-selling products. That's saving a lot on freight costs.

If I can weigh in, we do realize that deteriorating margins that is a challenge that pretty much every every company is facing right now. And we're constantly looking and analyzing where we can improve and where we can automate, where we can shop for less and things of that nature.

And the new relationship distribution relationship you mentioned with Orion. What are you hopeful that margins will be through that channel?

Well, we're hoping, as I mentioned earlier, we're hoping that Orion purchases from us at least a million dollars worth of product as they ramp up their marketing and promotion. And obviously that's going to contribute to our bottom line. And so we don't pay freight with Orion. So they buy goods FOB Atlanta and they buy 40 feet at a time. And so we're busy month after month producing products. you know, basically trailer loads of goods being shipped to Germany. And so, yes, so that would certainly add to our bottom line.

It should be in line with our percentage right now that, you know, it should be somewhere in the 25% to 30% range.

Okay, appreciate that. And then where are your open orders at at this timeframe?

Well, as a direct consumer marketer, ideally, we would have everything in stock and not have a lot of open orders. But we tend to keep about 800,000. They may be contract orders. They may be orders with rooms to go. Or we're presently filling, as Jordan mentioned, Sandals and Room and Board and Margaritaville. And so those are more contract orders. But for the most part, we ship from our stock. And so we have to provide fast shipping. to all of our websites, whether it's mass market or liberator. So we, we manufacture for stock and ship from stock and ideally keep our open orders low.

Okay. Appreciating that. I saw your inventory actually did rise a few hundred thousand at the end of the quarter. Was that a supply issues, timing issues, any comments in that on that?

Well, some of that might be accumulation for Orion, or it might be accumulation for contracts that we have. So it may not be our dot-com business. It could be other business that we're accumulating and getting ready to ship. But we try to carefully manage our raw materials, both foam and fabric and finished goods and materials. For instance, we have some large school orders that are going out, right?

Yeah, and we are trying to increase our position at Amazon's warehouses as well to kind of capitalize on their Amazon Prime program for their customers. So I think we are doing a pretty good job at increasing that inventory position in their warehouses.

Okay, great. And in your opening remarks, you spoke about Some of the opportunities that I'll say in the more mass markets like Target and Walmart, can you offer a little more color on what you're referring to there?

Sure. Going back quite a few years ago, a company by the name of drugstore.com doesn't exist anymore, but they came up with a concept that we can sell adult goods if we call it sexual wellness products. So they produced a category called sexual wellness, and they started to, matter of fact, we were the first product that was on drugstore.com. And over time, more and more e-tailers got comfortable under the moniker of sexual wellness or sexual well-being. And then, of course, Amazon came in and said, well, we can sell these goods under sexual wellness as well. Recently, toys, vibrators, and primarily pleasure objects have found their way into Walmart and Target and mass market. including Sephora selling toys as well. And so we're presenting concepts right now. It seems to be a hot category for mass market. And so we're presenting packaging that's different than our current packaging that would perhaps work in Walmart or Target. And it's a category that they're really interested in at present. And Liberator has no competition within that category. It seems like they've already exhausted toys recently. Keep in mind that toys have been selling in drugstores and mass market in Europe and Japan, I mean, for years. And so the U.S. is slow to catch up on that. But it's an emerging trend. They've experimented online, and we have sold. As a matter of fact, companies like Wayfair sell some Liberator products under another name. Brookstone sells some Liberator products. So they've been comfortable selling it online for years, and they're finally dipping their toe into putting these items in stores. So hopefully the new packaging that we present to mass market will result in some large orders. And so we'll see.

When should you have a feel for the response on that?

Well, I guess it's really up to them. Actually, we've submitted packaging to Vitamin Shop before and we're still waiting for response from them. I would say, you know, perhaps by the end of our fourth quarter we'll have an answer, but we don't know how quickly they're going to respond.

Okay. Very good. That's it. Thanks, guys. Good luck. Thank you for your questions. We appreciate it.

Thank you. That appears to be the last question we have with the phone lines. I'm now going to hand over to Alex, who's going to promote any of the web questions.

Yes, thank you, Jen. We have a few questions on the webcast and I am going to read it out loud and let the team answer it. So the first question comes from Mike Levine, private investor. In the 10Q, it was mentioned that business is seasonal and you experience higher sales in Q2 and Q3. How does that square with your stating that you have strong revenue growth in the present quarter? Can you break that seasonal revenue trend?

So I can touch on that a little bit. So one of the ways that we're breaking that trend is we are continuing to expand our JAX outdoor line. And JAX outdoor is very strong in the Q4 that we're in now, basically all the way from April up until through July. So by continuing to offer more outdoor summer-type items, we are kind of breaking that trend to make not just one kind of seasonal moment, but multiple seasons throughout the year of kind of, you know, one brand might be hot in one season and then other brands take over the rest of the year. I think that's about it. Do you have any other comments on that?

No, no.

All right, the next question from Mike Levine. Today's share price is at 15 cents, which in his own opinion, very undervalued. Is there an interest by other companies based upon the current valuation in a buyout or buy-in?

Yeah, from time to time we get calls, but right now we have no one in play right now. as an acquisition target, we'd be reluctant to sell at this valuation. And so we'll keep answering these type of calls as they come up, and we'll have to evaluate it. But right now, there's no one in play.

All right. The next question comes from Paul Bettino, another private investor. On an earnings call last year, he asked if you knew about OnlyPants as a possible sales channel for Liberator. You said you would look into it, and his question is if the company actually did into it, and is there any update with the finding?

Yes, well, we did look into it, and I believe that's one of the, and we appreciate the recommendation. We are advertising in a variety of places, including Swinger websites, I believe we have plans to advertise and promote to only fans, but right now we're doing some swinger sites, and we have ads and content there. We also are advertising in Reddit, which is actually doing quite well for us.

Another question from Paul Batino. What are the benefits of company keeping the Havana brand? Can you please share your thoughts? on concentrating exclusively on Liberator and Jax instead?

Yeah. So, I mean, one of the benefits that we may have touched on before is that we utilize all of our foam trim from any solid foam shapes, which helps increase our profitability on the Jax brand of any beanbag items in the Jax brand. So some of the extra waste that comes off of the Ivana brand helps fuel our Jax and other brands as well. But the Ivana brand does have some fairly similar shapes and similar type items to the other brands that we carry. So they're all within our core competency without really any additional difficulties of making the Ivana brand versus other products.

Yeah, actually some of our mass market customers will buy across the board. They'll buy Liberator, they'll buy Jaxx, they'll buy children's products, indoor, outdoor Ivana products. So it's the same, really the same sales cycle. And the products from a core competency standpoint, Avana is in sync with what we do here. So it's not any additional stress on the business to manufacture those products. And, yeah, they kind of go with our distribution across the board model through mass market. So we'll keep it. We'll see what the next leg of Avana will bring us as we introduce some new IP to that product line.

And the next question comes from private investor, Russell Valentine. Does the company have a physical room for expansion if sales continue to increase at a high rate?

So our building is 140,000 square feet and we deploy lean manufacturing and warehousing. And so we're utilizing every part of this building, despite the fact that we're increasing new automation and whatever. I think we can do 50 million in this building. And if we outgrow it, we'll move the shipping department out and run a truck back and forth. And so shipping occupies about 35,000 square feet. So I believe we have certainly expansion within this building should we need it of 35,000 square feet. And shipping could be in another 60,000 square feet up the block. So building size should not preclude our ability to expand.

Thank you. And it appears that there are no further questions. Lois, would you like to?

Sure. Well, thank you to everyone. We appreciate your time. And if you have any questions or want to discuss anything between now and the next quarter, we are always available to chat. And so we look forward to meeting with you again. And, you know, have a good day. We appreciate it. Thank you.

Jen, thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect your phone lines and disconnect from the webcast at this time. Thank you for your participation.

Thank you for your help.