LUVU Luvu Brands Inc (QB)

Liberator Announces Third Fiscal Quarter and Nine Month Results

Reports Sales of $3.9 Million for the Third Quarter and $11.5 Million for the Nine Months

ATLANTA, GA--(Marketwired - May 14, 2014) -  Liberator, Inc. (OTCQB: LUVU), the manufacturer of Liberator®, a leading brand in the emerging sexual wellness category, today reported financial and operating results for its third fiscal quarter and nine months of fiscal 2014 (year ending June 30, 2014.)

Third Quarter and Nine Month Highlights:

• Adjusted EBITDA* of $490,000 for the nine months of fiscal 2014, a 34% increase from the prior year.
• Record revenue for the nine months of $11.5 million, a 6% increase from the prior year.
• Revenue of $3.9 million for the third quarter, an 11% increase from the prior year.
• A net loss of $104,000 for the third quarter compared to a net loss of $179,000 in the prior year.

Louis S. Friedman, the Company's President and Chief Executive Officer said, "During our third fiscal quarter, Liberator continued to take market share in the sexual wellbeing space. For the nine months, we achieved record revenues; 6% over the prior year despite a tougher than anticipated holiday selling season and the impact of weather on our customers' businesses. Additionally, we increased adjusted EBITDA* 34% from the prior year". Mr. Friedman added, "In our international markets, we are building relationships with wholesalers and distributors and the order volume is accelerating nicely. Smaller sized vacuum compressed packages cut our international ocean freight cost by 50% and we're now better sized for retail shelves. As we enter our last fiscal quarter, we remain focused on our core value-driven strategies. We believe the key to unlocking the value of the Company is to transform our packaging and web presentation for mainstream stores and audiences. Liberator has tremendous intrinsic value; in the lifestyle adult market there are only a handful of brands and brand categories recognized by consumers and we believe Liberator is one of them."

Revenues

Revenue for the quarter ended March 31, 2014 total $3.9 million compared to $3.6 million in the same quarter last year. Revenues for the nine months ended March 31, 2014 were $11.5 million compared to $10.8 million last year. Increases were primarily due to higher sales through our direct-to-consumer channel.

Gross Margin

In the third quarter of fiscal 2014, gross profit was $946,000 (24% of sales), compared to $999,000 (28% of sales) in the prior year's quarter. For the first nine months of fiscal 2014, gross profit was $3.1 million (27% of sales) compared to $3.2 million (30% of sales) in last year's period. The gross margin decreases were primarily the result of higher labor and raw material costs.

Selling, General and Administrative

For the third quarter of fiscal 2014, SG&A expenses were $0.9 million, or 24% of sales, compared to $1 million, or 28% of sales, in the third quarter of last year. For the current nine-month period, SG&A expenses were $2.9 million (25% of sales), compared to $2.9 million (or 27% of sales) last year.

Net Loss

Net loss was $104,000 in the third quarter of fiscal 2014, a decrease from $179,000 in the prior year third quarter. For the nine months ended March 31, 2014, the net loss was $36,000, a decrease from $69,000 last year.

Use of Non-GAAP Measure - Adjusted EBITDA*

Liberator 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.

Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation expense and common stock issued for services.

Reconciliation of Adjusted EBITDA* to Net Income

Computation of Adjusted EBITDA* (unaudited)
		Three Months Ended March 31								Nine Months Ended March 31,
		2014				2013				2014				2013
Net loss		$	(104,261	)		$	(179,265	)		$	(36,091	)		$	(69,080	)
Interest (net)			104,123				102,737				303,216				271,756
Income taxes			--				--				--				--
Depreciation & amortization			59,792				44,561				174,762				133,524
Stock based compensation			12,039				9,610				47,752				29,219
Adjusted EBITDA		$	71,663			$	22,357			$	489,639			$	365,419

About Liberator, Inc.

Liberator, Inc. is a vertically integrated USA-based manufacturer, marketer and multi-channel lifestyle retailer of Liberator® branded products sold through retail stores, mass merchants, and internet retailers worldwide. Established with the conviction that sensual pleasure and fulfillment are essential to a well-lived life, Liberator Bedroom Adventure Gear® empowers exploration, fantasy and the communication of desire for persons of all shapes, sizes and abilities. Products include Liberator shapes, sex furniture, positioning systems, pleasure objects, and sensual / intimate accessories. As a by-product from the manufacturing of Liberator shapes, the Company produces Jaxx, a line of contemporary furniture, which it sells to many of the same mass-market wholesale customers that purchase Liberator Bedroom Adventure Gear. Liberator, Inc. and its operating company, OneUp Innovations, Inc., are headquartered in a 140,000 square foot facility in a suburb of Atlanta, Georgia and have over 120 employees.

Liberator operates www.liberator.com and other global ecommerce sites plus a retail concept store within its factory. Liberator can be followed on Twitter at www.twitter.com/Liberator.

For comprehensive investor relations material, including fact sheets, videos, and research reports on Liberator and emerging sexual wellbeing trends visit the Company's investor relations web site at www.invest-in-LUVU-Liberator.com.

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, 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: Liberator, Inc. Ronald Scott Chief Financial Officer 770-246-6426 ron.scott@Liberator.com