# EDGAR Filing Document

**Accession Number:** 0001374567
**File Stem:** 0001654954-25-013056
**Filing Date:** 2025-11
**Character Count:** 106339
**Document Hash:** 695dad49bfca71144fcfda0468f53605
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001654954-25-013056.hdr.sgml**: 20251114

**ACCESSION NUMBER**: 0001654954-25-013056

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 78

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251114

**DATE AS OF CHANGE**: 20251114

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Luvu Brands, Inc.
- **CENTRAL INDEX KEY:** 0001374567
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOUSEHOLD FURNITURE [2510]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 593581576
- **STATE OF INCORPORATION:** FL
- **FISCAL YEAR END:** 0630

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-53314
- **FILM NUMBER:** 251483229

**BUSINESS ADDRESS:**
- **STREET 1:** 2745 BANKERS INDUSTRIAL DRIVE
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30360
- **BUSINESS PHONE:** 770-246-6426

**MAIL ADDRESS:**
- **STREET 1:** 2745 BANKERS INDUSTRIAL DRIVE
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30360

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Liberator, Inc.
- **DATE OF NAME CHANGE:** 20110304

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** WES Consulting, Inc.
- **DATE OF NAME CHANGE:** 20060905

?xml version='1.0' encoding='ASCII'? luvu_10q.htm

 **UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

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| | |
|:---|:---|
| **(Mark One)** | **(Mark One)** |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

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**FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025**

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| | |
|:---|:---|
|  | <br>or |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  |

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For the transition period from _____ to _____

**Commission File Number 000-53314**

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| |
|:---|
| **Luvu Brands, Inc.** |
| (Exact name of registrant as specified in its charter) |

---

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| | |
|:---|:---|
| **Florida** | 59-3581576 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

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| | |
|:---|:---|
| **2745 Bankers Industrial Drive, Atlanta, GA** | **30360** |
| (Address of principal executive offices) | (Zip code) |

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**<u>(770) 246-6400</u>**

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one):

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| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
|  |  | 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐&nbsp;&nbsp;&nbsp;&nbsp; No ☒

As of November 14, 2025, there were 76,834,057 shares of common stock outstanding.

**LUVU BRANDS, INC.**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  | **[PART I – FINANCIAL INFORMATION](#P1)** | |
|  |  | <br>**Page Number** |
| [ITEM 1.](#I1) | [Financial Statements](#I1) | 4 |
|  | [Consolidated Balance Sheets – At September 30, 2025 (unaudited) and June 30, 2025](#BS) | 4 |
|  | [Consolidated Statements of Operations – For the Three Months Ended September 30, 2025(unaudited) and September 30, 2024(unaudited)](#OP) | 5 |
|  | [Consolidated Statements of Stockholders' Equity – For the Three Months Ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited)](#EQ) | 6 |
|  | [Consolidated Statements of Cash Flows – For the Three Months Ended September 30, 2025 (unaudited) and September 30, 2024 (unaudited)](#CF) | 7 |
|  | [Notes Consolidated Financial Statements (unaudited)](#NOTE) | 8 |
| [ITEM 2.](#I2) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#I2) | 25 |
| [ITEM 3.](#I3) | [Quantitative and Qualitative Disclosures about Market Risk](#I3) | 27 |
| [ITEM 4.](#I4) | [Controls and Procedures](#I4) | 27 |
|  | **[PART II – OTHER INFORMATION](#P2)** |  |
| [ITEM 1.](#IT1) | [Legal Proceedings](#IT1) | 28 |
| [ITEM 1A.](#IT1a) | [Risk Factors](#IT1a) | 28 |
| [ITEM 2.](#IT2) | [Unregistered Sales of Equity Securities and Use of Proceeds](#IT2) | 28 |
| [ITEM 3.](#IT3) | [Defaults Upon Senior Securities](#IT3) | 28 |
| [ITEM 4.](#IT4) | [Mine Safety Disclosures](#IT4) | 28 |
| [ITEM 5.](#IT5) | [Other Information](#IT5) | 28 |
| [ITEM 6.](#IT6) | [Exhibits](#IT6) | 29 |
| [SIGNATURES](#SIG) |  | 30 |

---

Unless the context otherwise indicates, when used in this report, the terms the "Company," "LUVU", "we," "us, "our" and similar terms refer to LUVU Brands, Inc. and the Company's wholly owned subsidiaries, OneUp Innovations, Inc. ("OneUp"), and Foam Labs, Inc. ("Foam Labs"). The Company's corporate website is *www.LuvuBrands.com*. Certain of the Company's documents, its news releases and the Company's filings with the U.S. Securities and Exchange Commission including financial statements are available on the Company's corporate website.

Unless specifically set forth to the contrary, the information that appears on the Company's websites or its various social media platforms is not part of this report.

---

| |
|:---|
| 2 |
| *[**Table of Contents**](#TOC)* |

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**CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION**

This report may contain forward-looking statements, which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "expects," "anticipates," "intends," "plan," "believes," "predicts", "estimates" or similar expressions. In addition, any statement concerning future financial performance, ongoing business strategies or prospects and possible future actions are also forward-looking statements. Forward-looking statements are based upon current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning the Company, the performance of the industry in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of this report. Except to the extent required by federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

---

| |
|:---|
| 3 |
| *[**Table of Contents**](#TOC)* |

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**PART I FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**LUVU BRANDS, INC. AND SUBSIDIARIES**

***Consolidated Balance Sheets***

---

| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2025**<br>**(unaudited)** | <br>**June 30,**<br>**2025** |
| **Assets:** | **(in thousands, except share data)** | **(in thousands, except share data)** |
| **Current assets:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Cash and cash equivalents** | $818 | $735 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $35 on September 30, 2025 and $35 on June 30, 2025** | 1552 | 1600 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Inventories, net of allowance for inventory reserve of $232 on September 30, 2025 and $232 on June 30, 2025** | 3805 | 3585 |
| **Other current assets** | 132 | 108 |
| **Total current assets** | 6307 | 6028 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Equipment, property and leasehold improvements, net** | 1388 | 1476 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Finance lease assets** | 104 | 104 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Operating lease assets** | 930 | 1057 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Other assets** | 89 | 96 |
| **Total assets** | $8819 | $8761 |
| **Liabilities and stockholders' equity:** |  |  |
| **Current liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Accounts payable** | $1991 | $1858 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Current debt** | 1936 | 1949 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Other accrued liabilities** | 733 | 553 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Operating lease liability** | 620 | 646 |
| **Total current liabilities** | 5280 | 5006 |
| **Noncurrent liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Deferred Tax Liability** | 119 | 119 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Long-term debt** | 722 | 704 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Long-term operating lease liability** | 401 | 513 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total noncurrent liabilities** | 1242 | 1336 |
| **Total liabilities** | 6522 | 6342 |
| &nbsp;&nbsp;&nbsp;&nbsp; **Commitments and contingencies (See Note 13)** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Stockholders' equity:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Preferred stock, 5,700,000 shares authorized, $0.0001 par value none issued and outstanding** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**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 as of September 30, 2025 and June 30, 2025** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Common stock, $0.01 par value, 175,000,000 shares authorized, 76,834,057 and 76,834,057 shares issued and outstanding as of September 30, 2025 and June 30, 2025, respectively** | 766 | 766 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Additional paid-in capital** | 6298 | 6289 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Accumulated deficit** | (4767) | (4636) |
| **Total stockholders' equity** | 2297 | 2419 |
| **Total liabilities and stockholders' equity** | $8819 | $8761 |

---

See accompanying notes to unaudited consolidated financial statements.

---

| |
|:---|
| 4 |
| *[**Table of Contents**](#TOC)* |

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**LUVU BRANDS, INC. AND SUBSIDIARIES**

***Consolidated Statements of Operations***

(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **September 30,** | **September 30,** |
|  | **2025** | **2024** |
|  | **(in thousands, except share data)** | **(in thousands, except share data)** |
| **Net Sales** | $5841 | $5756 |
| **Cost of goods sold (excluding depreciation expense presented below)** | 4185 | 4239 |
| **Gross profit** | 1656 | 1517 |
| **Operating expenses:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Advertising and promotion** | 249 | 231 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Other selling and marketing** | 422 | 414 |
| &nbsp;&nbsp;&nbsp;&nbsp;**General and administrative** | 913 | 885 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Depreciation** | 87 | 109 |
| **Total operating expenses** | 1671 | 1639 |
| **Operating loss** | (15) | (122) |
| **Other expense:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;**Interest expense and financing costs** | (116) | (88) |
| **Total other expense** | (116) | (88) |
| **Loss from operations before income taxes** | (131) | (210) |
| **Provision for income taxes** | 0 | 0 |
| **Net loss** | $(131) | $(210) |
| **Net loss per share:** |  |  |
| **Basic** | $(0) | $(0) |
| **Diluted** | $(0) | $(0) |
| **Shares used in calculation of net loss per share:** |  |  |
| **Basic** | 76834057 | 76834057 |
| **Diluted** | 76834057 | 76834057 |

---

See accompanying notes to unaudited consolidated financial statements.

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|:---|
| 5 |
| *[**Table of Contents**](#TOC)* |

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**Luvu Brands, Inc. and Subsidiaries**

***Consolidated Statements of Changes in Stockholders' Equity***

**<u>For the Three Months ended September 30, 2025 and September 30, 2024 (unaudited)</u>**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series A Preferred Stock** | **Series A Preferred Stock** | **Common Stock** | **Common Stock** | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional** <br>**Paid-in** <br>**Capital** | **Accumulated** <br>**Deficit** | **Total Stockholders'** <br>**Equity** |
|  | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** |
| **Ending balance, June 30, 2024** | **4300000** | $0 | 76547672 | $765 | $6253 | ($4188) | $2830 |
| Stock-based compensation expense |  |  |  |  | 9 |  | 9 |
| Stock option exercises |  |  | 286385 | 1 |  |  | 1 |
| Net loss | - | - | - | - | - | (210) | (210) |
| **Ending balance, September 30, 2024** | **4300000** | $**0** | **76834057** | $**766** | $**6262** | **($4398)** | $**2630** |
| **Ending balance, June 30, 2025** | **4300000** | $**0** | **76834057** | $**766** | $**6289** | **($4636)** | $**2419** |
| Stock-based compensation expense |  |  |  |  | 9 |  | 9 |
| Stock option exercises |  |  |  |  |  |  |  |
| Net loss | - | - | - | - | - | (131) | (131) |
| **Ending balance, September 30, 2025** | **4300000** | $**0** | **76834057** | $**766** | $**6298** | **($4767)** | $**2297** |

---

See accompanying notes to unaudited consolidated financial statements.

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| 6 |
| *[**Table of Contents**](#TOC)* |

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**LUVU BRANDS, INC. AND SUBSIDIARIES**

***Consolidated Statements of Cash Flows***

(unaudited)

---

| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **September 30,** | **September 30,** |
|  | **2025** | **2024** |
|  | **(in thousands)** | **(in thousands)** |
| **OPERATING ACTIVITIES:** |  |  |
| Net loss  | $(131) | $(210) |
| *Adjustments to reconcile net loss to net cash provided by operating activities:* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 88 | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 9 | 9 |
| *Change in operating assets and liabilities:* |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 48 | (137) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory | (219) | 283 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current assets | (24) | (31) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other Assets | 7 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 133 | (63) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses and interest | 180 | 178 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liability | (138) | (141) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating lease asset | 127 | 135 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | $80 | $132 |
| **INVESTING ACTIVITIES:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Investment in equipment, software and leasehold improvements | $- | $(1) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | $- | $(1) |
| **FINANCING ACTIVITIES:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(Repayment) borrowing under revolving line of credit | $(59) | $10 |
| &nbsp;&nbsp;&nbsp;&nbsp;Repayment of unsecured line of credit | (2) | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from secured notes payable | 250 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on equipment notes | (92) | (94) |
| &nbsp;&nbsp;&nbsp;&nbsp;Payments on secured notes payable | (87) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Principal payments on finance leases | (7) | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | $3 | $(91) |
| **Net increase in cash and cash equivalents** | 83 | 40 |
| **Cash and cash equivalents at beginning of period** | $735 | $1028 |
| **Cash and cash equivalents at end of period** | $818 | $1068 |
| Supplemental Disclosure of Cash Flow Information: |  |  |
| Cash paid during the year for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest | $67 | $86 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income taxes |  |  |

---

See accompanying notes to unaudited consolidated financial statements.

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| 7 |
| *[**Table of Contents**](#TOC)* |

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**NOTE 1. ORGANIZATION AND NATURE OF BUSINESS**

Luvu Brands, Inc. (the "Company" or "Luvu") was incorporated in the State of Florida on February 25, 1999. References to the Company in these notes include the Company and its wholly owned subsidiaries, OneUp Innovations, Inc. ("OneUp"), and Foam Labs, Inc. ("Foam Labs"). All operations of the Company are currently conducted by OneUp.

The Company is an Atlanta, Georgia based designer, manufacturer and marketer of a portfolio of consumer lifestyle brands including:

· JAXX-a diverse range of convertible daybeds, headboard panels, outdoor soft seating and bean bags made from repurposed polyurethane foam trim.

· AVANA-products for yoga exercise, sleep comfort and inclined bed therapy.

· LIBERATOR-transformable chaises and specially designed pillows and props for enhancing sexual performance.

· FOAMLABS-private label Jaxx products and contract manufacturing for hospitality, school, furniture mass market and beyond.

These products are sold through the Company's websites, online mass merchants and retail stores worldwide. Many of our products are offered flat-packed and either roll or vacuum compressed to save on shipping and reduce our carbon footprint.

Sales are generated through internet and print advertisements and social marketing. We have a diversified customer base with only one customer accounting for 35% or more of consolidated net sales in the current and prior fiscal year and no particular concentration of credit risk in one customer type.

The accompanying unaudited consolidated financial statements of the Company and all of its wholly-owned subsidiaries included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles of the United States of America ("GAAP") have been or omitted pursuant to applicable rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included. The year-end balance sheet data were derived from audited consolidated financial statements but do not include all disclosures required by GAAP. The results of operations for the three months ended September 30, 2025 are not necessarily indicative of the results to be expected for the entire fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025 as filed with the Securities and Exchange Commission (the "SEC") on October 14, 2025 (the "2025 10-K").

**NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Basis of Presentation***

These consolidated financial statements include the accounts and operations of the Company's wholly owned operating subsidiaries, OneUp and Foam Labs. Intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current year presentation.

The accompanying consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These consolidated financial statements and notes should be read in conjunction with the Company's consolidated financial statements contained in the Company's 2025 10-K.

***Use of Estimates***

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in determining the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates in these consolidated financial statements include estimates of: income taxes; tax valuation reserves; allowances for doubtful accounts; inventory valuation and reserves; share-based compensation; and useful lives for depreciation and amortization. Actual results could differ materially from these estimates

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***Revenue Recognition***

The Company records revenue based on the five-step model which includes: (1) identifying the contract with the customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations; and (5) recognizing revenue when the performance obligations are satisfied. Substantially all of the Company's revenue is generated by fulfilling orders for the purchase of manufactured products and product purchased for resale to retailers, wholesalers, or direct to consumers via online channels, with each order considered to be a distinct performance obligation. These orders may be formal purchase orders, verbal phone orders, e-mail orders or orders received online. Shipping and handling activities for which the Company is responsible under the terms and conditions of the order are not accounted for as performance obligations but as fulfillment costs. These activities are required to fulfill the Company's promise to transfer the goods and are expensed when revenue is recognized. The impact of this policy election is insignificant as it aligns with the Company's current practice.

Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling a performance obligation. The Company has elected to exclude sales, use and similar taxes from the measurement of the transaction price. The impact of this policy election is insignificant, as it aligns with the Company's current practice. The amount of consideration expected to be received and revenue recognized includes estimates of variable consideration, which includes costs for trade promotion programs, coupons, returns and early payment discounts. Such estimates are calculated using historical averages adjusted for any expected changes due to current business conditions and experience. The Company reviews and updates these estimates at the end of each reporting period and the impact of any adjustments are recognized in the period the adjustments are identified. In assessing whether collection of consideration from a customer is probable, the Company considers the customer's ability and intent to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, typically 30 days from the invoice date, which occurs on the date of transfer of control of the products to the customer. Revenue is recognized at the point in time that control of the ordered products is transferred to the customer. Generally, this occurs when the product is shipped from the distribution center, or in some cases, picked up from one of the Company's distribution centers by the customer.

***Deferred Revenues***

Deferred revenues are recorded when the Company has received consideration (i.e. advance payment) before satisfying its performance obligations. Deferred revenues primarily relate to gift cards purchased, but not used, prior to the end of the fiscal period.

The Company's total deferred revenue as of September 30, 2025 was $1,650 and was included in "Other accrued liabilities" on the Company's consolidated balance sheets. The deferred revenue balance as of June 30, 2025 was $1,700.

***Cost of Goods Sold***

Cost of goods sold includes raw materials, labor, manufacturing overhead, and royalty expense.

***Cash and Cash Equivalents***

For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

***Allowance for Doubtful Accounts***

The allowance for doubtful accounts reflects management's best estimate of probable credit losses inherent in the accounts receivable balance. The Company determines the allowance based on historical experience, specifically identified nonpaying accounts, and other currently available evidence. The Company reviews its allowance for doubtful accounts monthly, focusing on significant individual past due balances over 90 days. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

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The following is a summary of Accounts Receivable as of September 30, 2025 and June 30, 2025.

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** **2025** |
|  | *(unaudited)* |  |
|  | **(in thousands)** | **(in thousands)** |
| Accounts receivable | $1587 | $1635 |
| Allowance for doubtful accounts | (35) | 35) |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for discounts and returns | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total accounts receivable, net | $1552 | $1600 |

---

The Company estimates expected credit losses on trade receivables and contract assets in accordance with ASC 326, *Financial Instruments – Credit Losses*. Effective July 1, 2025, the Company adopted Accounting Standards Update (ASU) 2025-05, *Financial Instruments—Credit Losses (Topic 326): Practical Expedient and Accounting Policy Election for Estimating Expected Credit Losses*, and elected the practical expedient permitted therein.

Under this expedient, the Company assumes that current economic conditions as of the balance sheet date remain unchanged over the life of the financial assets. This approach simplifies the estimation of expected credit losses by removing the requirement to forecast future economic conditions for assets with contractual maturities of one year or less.

As of September 30, 2025, the Company's accounts receivables totaling $1.55 million. Based on historical loss experience and current conditions, the Company had an allowance for credit losses of $35,000. The Company believes this estimate reasonably reflects expected losses given the short-term nature of the asset and the stability of current economic conditions.

The Company will continue to monitor credit risk and adjust its allowance methodology as necessary. No significant changes to the allowance methodology were made during the quarter.

***Inventories and Inventory Reserves***

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Net realizable value is defined as sales price less cost to dispose and a normal profit margin. Inventory costs include materials, labor, depreciation and overhead. The Company establishes reserves for excess and obsolete inventory, based on prevailing circumstances and judgment for consideration of current events, such as economic conditions, that may affect inventory. The reserve required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions.

***Concentration of Credit Risk***

The Company maintains its cash accounts with banks located in Georgia. The Federal Deposit Insurance Corporation ("FDIC") insures the total cash balances up to $250,000 per bank. On September 30, 2025, the Company had bank balances on deposit that exceeded the balance insured by the FDIC by $568,053. Accounts receivable are typically unsecured and are derived from revenue earned from customers primarily located in North America and Europe.

During the three month period ended September 30, 2025, the Company purchased 23% of total inventory purchases from one vendor.

During the three month period ended September 30, 2024, the Company purchased 22% of total inventory purchases from one vendor.

As of September 30, 2025, three of the Company's customers represent 41%, 11% and 8% of the total accounts receivable. For the three months ended September 30, 2024, two customers represented 57% and 8% of the total accounts receivable. For the three months ended September 30, 2025 and September 30, 2024 sales to and through Amazon accounted for 34% and 38%, respectively, of the Company's net sales.

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***Fair Value of Financial Instruments***

At September 30, 2025 and June 30, 2025, the Company's financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.

The fair values of these financial instruments approximated their carrying values based on either their short maturity or current terms for similar instruments.

The Company measures the fair value of its assets and liabilities under the guidance of *Accounting Standards Codification ("ASC") 820, Fair Value Measurements* and *Disclosures*, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.

ASC 820 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. ASC 820 requires the Company to use valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized as follows:

*Level 1*: Observable inputs such as quoted prices for identical assets or liabilities in active markets;

*Level 2*: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly such as quoted prices for similar assets or liabilities or market-corroborated inputs; and

*Level 3*: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions about how market participants would price the assets or liabilities.

The valuation techniques that may be used to measure fair value are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. *Market approach*- Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. *Income approach*- Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models, and excess earnings method.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. *Cost approach*- Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

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***Advertising Costs***

Advertising costs are expensed in the period when the advertisements are first aired or distributed to the public. Prepaid advertising as of September 30, 2025 and June 30, 2025 was $0 and $0. Advertising expense for the three months ended September 30, 2025, and September 30, 2024, was $249,387 and $231,131, respectively.

***Research and Development***

Research and development expenses for new products are expensed as they are incurred. For the three months ended September 30, 2025 and 2024, expenses for new product development totaled $38,107 and $42,594, respectively. Research and development costs are included in general and administrative expenses.

***Property and Equipment***

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over estimated service lives of 2-10 years for financial reporting purposes.

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the respective accounts, and any gain or loss is recognized currently.

***Impairment or Disposal of Long Lived Assets***

Long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. They are tested for recoverability using undiscounted cash flows to determine whether or not impairment to such value has occurred as required by Financial Accounting Standards Board ("*FASB") ASC Topic No. 360, Property, Plant, and Equipment*. The Company has determined that there was no impairment at September 30, 2025 and June 30, 2025.

***Operating Leases***

On November 2, 2020, the Company entered into an agreement with its landlord on a lease for its then current facilities for six years and two months, beginning January 1, 2021. The lease included two months of rent abatement totaling $103,230. Under the lease, the monthly rent on the facility is $51,615 with annual escalations of 3% with the final two months of rent at $61,605. In addition, the Company will pay the landlord a 2% property management fee. The rent expense for the three months ended September 30, 2025 and 2024 was $163,188 and $163,188, respectively.

Under ASC 842 Leases, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company elected not to recognize leases with a term less than one year on its balance sheet. Operating lease right-of-use (ROU) assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.) Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, the Company elected the practical expedient to not separate lease and non-lease components. The lease component results in an operating right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense. See Note 12 for details.

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***Segment Information***

As of September 30, 2025, the Company was comprised of two reportable segments: Direct to Consumer and Wholesale. The Company takes into account whether two or more operating segments can be aggregated together as one reportable segment, as well as the type of discrete financial information that is available and regularly reviewed by its Chief Operating Decision Maker ("CODM"). The CODM is the Company's Chief Executive Officer.

The CODM evaluates segment performance and determines how to allocate resources based on the Company's key financial measure of adjusted operating income ("AOI"), a non-GAAP financial measure. The Company defines AOI as operating income excluding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) depreciation, amortization and impairments of property and equipment, goodwill and intangible assets,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) amortization for capitalized costs,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) share-based compensation expense, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) gains or losses on sales or dispositions of assets.

The CODM uses AOI for each segment predominantly throughout the annual budget and forecasting process. Additionally, the CODM considers year-over-year variances in AOI, at least quarterly, when making decisions about allocating operating and capital resources to each segment. Management believes AOI is an appropriate measure for evaluating the operating performance of its business segments and the Company on a consolidated basis. AOI and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company's performance. The Company uses revenues and AOI measures as the most important indicators of its business performance, and evaluates management's effectiveness with specific reference to these indicators.

AOI should be viewed as a supplement to and not a substitute for operating (loss) income, net loss, cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since AOI is not a measure of performance calculated in accordance with GAAP, this measure may not be comparable to similar measures with similar titles used by other companies. The Company has presented the components that reconcile operating (loss) income, the most directly comparable GAAP financial measure, to AOI.

Information as to the operations of the Company's reportable segments is set forth below.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
|  | **September 30, 2025** | **September 30, 2025** | **September 30, 2025** | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** |
| (in thousands) | **Direct to Consumer** | **Wholesale** | **Total** | **Direct to Consumer** | **Wholesale** | **Total** |
| &nbsp;&nbsp;&nbsp;&nbsp;Revenues | $1955 | $3886 | $5841 | $1769 | $3986 | $5756 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of Goods Sold | 1372 | 2813 | 4185 | 1384 | 2854 | 4238 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other direct operating expenses (a) | 260 | 331 | 591 | 285 | 287 | 572 |
| &nbsp;&nbsp;&nbsp;&nbsp;Overhead expenses(b) |  |  | 992 |  |  | 958 |
| Operating income (loss) | 324 | 742 | 73 | 101 | 845 | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income |  |  | (1) |  |  | (1) |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense |  |  | 117 |  |  | 89 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other expense, net |  |  | - |  |  | - |
| Loss from operations before income taxes | 324 | 742 | (43) | 101 | 845 | (100) |
| **Reconciliation of operating (loss) income to adjusted operating income:** |  |  |  |  |  |  |
| Operating income (loss) | 324 | 742 | 73 | 101 | 845 | (12) |
| Adjustments: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Share-based compensation expense |  |  | 9 |  |  | 9 |
| Adjusted operating income | $324 | $742 | $82 | $101 | $845 | $(3) |

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(a) Other direct operating expenses are directly attributable to the business segment, such as marketing, salaries, customer relationship expenses, and travel and entertainment expenses.

(b) Overhead expenses are all non-direct expenses related to the operation of the business segment. It includes G&A, unallocated marketing expenses, facilities, and product development.

***Recent accounting pronouncements***

From time to time, the Financial Accounting Standards Board ("FASB") or other standard-setting bodies issue new accounting pronouncements that are adopted by the Company as of the specified effective date. The Company has adopted ASU 2023-07 regarding business segmentation reporting and will be adopting ASU2023-09 and 2024-03 in future filings. The Company has adopted ASU 2025-05 regarding practical expedient for expected credit loss.

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**Net Income (Loss) Per Share**

In accordance with ASC 260, "Earnings Per Share", basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common and common equivalent shares outstanding during the period plus the effect of stock options using the treasury stock method. As of September 30, 2025 and 2024, the common stock equivalents did not have any effect on net income (loss) per share.

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| | | |
|:---|:---|:---|
|  | **September 30,** | **September 30,** |
|  | **2025** | **2024** |
| Common stock options – 2015 Plan | 1200000 | 1250000 |
| Convertible preferred stock | 4300000 | 4300000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 5500000 | 5550000 |

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***Income Taxes***

The Company utilizes the asset and liability method of accounting for income taxes. The Company recognizes deferred tax liabilities or assets for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. The Company regularly assesses the likelihood that its deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies in assessing the amount of the valuation allowance necessary to offset the Company's deferred tax assets that will not be recoverable. The Company has recorded and continues to carry a full valuation allowance against its gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period. If the Company determines in the future that it is more likely than not that it will realize all or a portion of its deferred tax assets, the Company will adjust its valuation allowance in the period it makes the determination. The Company expects to provide a full valuation allowance on its future tax benefits until it can sustain a level of profitability that demonstrates the Company's ability to realize these assets.

***Stock Based Compensation***

The Company accounts for stock-based compensation to employees in accordance with *FASB ASC 718, Compensation – Stock Compensation.* The Company measures the cost of each stock option and restricted stock award at its fair value on the grant date. Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as an expense in the financial statements over the respective vesting period.

**NOTE 3. IMPAIRMENT OF LONG-LIVED ASSETS** 

The Company follows *FASB ASC 360, Property, Plant, and Equipment*, regarding impairment of the Company's other long-lived assets (property, plant and equipment). The Company's policy is to assess the Company's long-lived assets for impairment annually in the fourth quarter of each year or more frequently if events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

An impairment loss is recognized only if the carrying value of a long-lived asset is not recoverable and is measured as the excess of its carrying value over its fair value. The carrying amount of a long-lived asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of a long-lived asset.

Assets to be disposed of and related liabilities would be separately presented in the consolidated balance sheet. Assets to be disposed of would be reported at the lower of the carrying value or fair value less costs to sell and would not be depreciated. There was no impairment as of September 30, 2025 or June 30, 2025.

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**NOTE 4. INVENTORIES, NET**

Inventories are stated at the lower of cost (which approximates first-in, first-out) or net realizable value. Net realizable value is defined as sales price less cost to dispose and a normal profit margin. Inventories consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** <br>**2025** |
|  | *(unaudited)* | *(unaudited)* |
|  | *(in thousands)* | *(in thousands)* |
| Raw materials | $1542 | $1407 |
| Work in process | 449 | 366 |
| Finished goods | 2046 | 2044 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total inventories | 4037 | 3817 |
| Allowance for inventory reserves | (232) | (232) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total inventories, net of allowance | $3805 | $3585 |

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**NOTE 5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS**

Equipment, property and leasehold improvements at September 30, 2025 and June 30, 2025 consisted of the following:

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| | | | |
|:---|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** <br>**2025** | **Estimated** <br>**Useful Life** |
|  | *(unaudited)* |  |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;*(in thousands)* | &nbsp;&nbsp;&nbsp;&nbsp;*(in thousands)* |  |
| Factory equipment | $4465 | $4465 | 2-10 years |
| Computer equipment and software | 764 | 764 | 5-7 years |
| Office equipment and furniture | 181 | 181 | 5-7 years |
| Leasehold improvements | 475 | 475 | 6 years |
| &nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 5885 | 5885 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated depreciation | (4393) | (4305) |  |
| Equipment and leasehold improvements, net | $1492 | $1580 |  |

---

Depreciation expense was $87,325 and $109,221, respectively, for the three months ended September 30, 2025 and 2024 respectively.

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amount to forecasted undiscounted future cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future cash flows, then an impairment charge is recognized to the extent that the carrying amount exceeds the asset's fair value. Management has determined no asset impairment occurred during the three months ended September 30, 2025 and 2024.

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**NOTE 6. OTHER ACCRUED LIABILITIES**

Other accrued liabilities at September 30, 2025 and June 30, 2025:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** <br>**2025** |
|  | *(unaudited)* |  |
|  | *(in thousands)* | *(in thousands)* |
| Accrued compensation | $569 | $383 |
| Accrued expenses and interest | 164 | 170 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other accrued liabilities | $733 | $553 |

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**NOTE 7. CURRENT AND LONG-TERM DEBT SUMMARY**

Current and long-term debt at September 30, 2025 and June 30, 2025 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** <br>**2025** |
|  | *(unaudited)* |  |
| Current debt: | *(in thousands)* | *(in thousands)* |
| &nbsp;&nbsp;&nbsp;&nbsp;Line of credit (Note 10) | 1038 | 1096 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unsecured notes payable (Note 8) | 100 | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;Secured notes payable (Note 8A) | 549 | 344 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion of equipment notes payable (Note 12) | 227 | 286 |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion of finance leases payable (Note 12) | 22 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current debt | 1936 | 1949 |
| Long-term debt: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Unsecured notes payable (Note 8) | 300 | 200 |
| &nbsp;&nbsp;&nbsp;&nbsp;Secured notes payable (Note 8A) | 67 | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;Finance leases payable (Note 12) | 60 | 66 |
| &nbsp;&nbsp;&nbsp;&nbsp;Equipment notes payable (Note 12) | 127 | 159 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unsecured lines of credit (Note 11) | 50 | 52 |
| &nbsp;&nbsp;&nbsp;&nbsp;Notes payable – related party (Note 9) | 116 | 116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total long-term debt | $720 | $702 |

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**NOTE 8. UNSECURED NOTES PAYABLE**

Unsecured notes payable at September 30, 2025 and June 30, 2025 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,**<br>***2025***<br>***(unaudited)*** |<br>**June 30,**<br>**2025** |
| Current debt: |  |  |
| 13.5% Unsecured note, interest only, due July 31, 2025(3) | $- | $100 |
| 13.5% Unsecured note, interest only, due October 31, 2025(1) | 100 | 100 |
| Total current debt | $100 | $200 |
| Long-term debt: |  |  |
| 13.5% Unsecured note, interest only, due July 31, 2027 (3) | $100 | $- |
| 13.5% Unsecured note, interest only, due April 30, 2027 (2) | 200 | 200 |
| Total long-term debt | $300 | $200 |
| Total unsecured notes payable | $400 | $400 |

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(1) Unsecured note payable for $100,000 to a third-party with interest payable monthly at 20%, principal originally due in full on October 31, 2014, extended to October 31, 2019, then extended to October 31, 2021. This note was repaid in full on October 1, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2024. This note was extended in full on October 31, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2025. On October 28, 2025, this note was extended in full with the same lender with interest payable monthly at 13.5%, principal is due in full on October 31, 2027. Personally guaranteed by Louis Friedman, the Company's CEO and principal shareholder.

(2) Unsecured note payable for $200,000 to a third-party with interest payable monthly at 20%, principal originally due in full on May 1, 2013, extended to May 1, 2019, then extended to May 1, 2021. This note was repaid in full on April 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2024. This note was extended in full on April 30, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2025. This note was again extended in full on May 1, 2025 with the same lender with interest payable monthly at 13.5%, principal due April 30, 2027. Personally guaranteed by Louis Friedman, the Company's CEO and principal shareholder.

(3) Unsecured note payable for $100,000 to an individual with interest payable monthly at 20%, principal originally due in full on July 31, 2013, extended to July 31, 2019, then extended to July 31, 2021. This note was repaid in full on July 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2024. This note was extended in full on July 30, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2025. On August 20, 2025, this note was extended with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2027. Personally guaranteed by the Company's CEO and principal shareholder.

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**NOTE 8A. SECURED NOTES PAYABLE**

Secured notes payable at September 30, 2025 and June 30, 2025 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,** <br>**2025** | **June 30,** <br>**2025** |
|  | *(unaudited)* |  |
|  | *(in thousands)* | *(in thousands)* |
| Secured notes payable to third party, with 18% interest, due February 1, 2027 (1) | 136 | 121 |
| Secured notes payable to third party, with 19.2% interest, due July 3, 2026 (2) | 188 | 223 |
| Secured notes payable to third party, with 19.2% interest, due October 23, 2026 (3) | 225 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current secured notes payable | $549 | $344 |
| Secured notes payable to third party, with 18% interest, due February 1, 2027 (1) | 50 | 93 |
| Secured notes payable to third party, with 19.2% interest, due July 3, 2026 (2) |  | 16 |
| Secured notes payable to third party, with 19.2% interest, due October 23, 2026 (3) | 17 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Total long-term secured notes payable | $67 | $109 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total secured notes payable | $616 | $453 |

---

(1) On March 25 2025, the Company entered into a secured note payable in the amount of $250,000 with a monthly payment of $12,485 with 24-months term at an imputed monthly interest rate of 1.5%.

(2) On June 4, 2025, the Company entered into a secured note payable in the amount of $250,000 with a lender. The note is paid back on a weekly basis in the amount of $5,366 for fifty six payments concluding on July 3, 2026. The note is personally guaranteed by the Company's CEO and principal shareholder.

(3) On September 26, 2025, the Company entered into a secured note payable in the amount of $250,000 with a lender. The note is paid back on a weekly basis in the amount of $5,366 for fifty six payments concluding on October 23, 2026. The note is personally guaranteed by the Company's CEO and principal shareholder.

**NOTE 9. NOTES PAYABLE - RELATED PARTY**

Related party notes payable at September 30, 2025 and June 30, 2025 consisted of the following:

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| | | |
|:---|:---|:---|
|  | **September 30,**<br>**2025** | **June 30,** <br>**2025** |
|  | *(unaudited)* |  |
|  | *(in thousands)* | *(in thousands)* |
| Unsecured note payable to an officer, with interest at 7.25%, due on July 1, 2027 | $40 | $40 |
| Unsecured note payable to an officer, with interest at 7.25%, due on July 1, 2027 | 76 | 76 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total unsecured notes payable | 116 | 116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: current portion | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;Long-term unsecured notes payable | $116 | $116 |

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**NOTE 10. LINE OF CREDIT** 

The Company's wholly owned subsidiary, OneUp and OneUp's wholly owned subsidiary, Foam Labs, has entered into a credit facility with a finance company, Advance Financial Corporation dated May 24, 2011, as amended, to provide it with an asset based line of credit of up to $1,200,000 against 85% of eligible accounts receivable (as defined in the agreement) for the purpose of improving working capital and includes an Inventory Advance (as defined in the agreement) of up to the lesser of $500,000 or 125% of the eligible accounts receivable loan. The term of the agreement was one year, renewable for additional one-year terms unless either party provides written notice of non-renewal at least 90 days prior to the end of the current financing period. The credit facility is secured by the Company's accounts receivable and other rights to payment, general intangibles, inventory and equipment, and are subject to eligibility requirements for current accounts receivable. Advances under the agreement are currently charged interest at a rate of prime rate plus 2% over the lenders Index Rate. In addition, there is a Monthly Service Fee (as defined in the agreement) of currently 0.05 % per month.

The Company's CEO and principal shareholder, Louis Friedman, has personally guaranteed the repayment of the facility. In addition, the Company has provided its corporate guarantee of the credit facility (see Note 13). On September 30, 2025 and June 30, 2025, the balance owed under this line of credit was $1,037,582 and $1,096,403. As of September 30, 2025, the Company was current and in compliance with all terms and conditions of this line of credit.

Management believes cash flows generated from operations, along with current cash and investments as well as borrowing capacity under the line of credit should be sufficient to finance capital requirements required by operations. If new business opportunities do arise, additional outside funding may be required.

**NOTE 11. UNSECURED LINE OF CREDIT**

The Company has drawn a cash advance on one unsecured line of credit that is in the name of the Company and Louis Friedman. The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 12% as of September 30, 2025 and was 13.2% as of June 30, 2025. The aggregate amount owed on the unsecured line of credit was $50,154 at September 30, 2025 and $52,144 at June 30, 2025.

**NOTE 12. COMMITMENTS AND CONTINGENCIES**

***Operating Leases***

The Company leases its facilities under a non-cancelable operating lease, which now expires February 28, 2027. Right-of-use assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and liabilities for the lease renewal were recognized at the inception date of November 2, 2020, based on the present value of lease payments over the lease term, using the Company's incremental borrowing rate based on the information available. At September 30, 2025, the weighted average remaining lease term for the lease renewal is 1.5 years, and the weighted average discount rate is 14.49%. In addition to the rent payment, the Company pays a proportionate share of operating costs, taxes, and insurance costs. The cost for these additional rent expenses for the three months ending September 30, 2025 and 2024 were $72,623 and $52,992, respectively. Supplemental balance sheet information related to leases as of September 30, 2025 is as follows:

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| | | |
|:---|:---|:---|
| **Operating leases** | **Balance Sheet Classification** | **(in thousands)** |
| Right-of-use assets | Operating lease right-of-use assets, net | $930 |
| Current lease liabilities | Operating lease liabilities | $620 |
| Non-current lease liabilities | Long-term operating lease liabilities | 401 |
| Total lease liabilities |  | $1021 |

---

Maturities of lease liabilities at September 30, 2025 are as follows:

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| | |
|:---|:---|
| **Payments** | **(in thousands)** |
| &nbsp;&nbsp;&nbsp;&nbsp;2026 | $773 |
| &nbsp;&nbsp;&nbsp;&nbsp;2027 | 333 |
| Total undiscounted lease payment | $1106 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Present value discount | (85) |
| Total lease liability balance | $1021 |

---

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***Equipment Notes Payable***

The Company has acquired equipment under the provisions of long-term equipment notes. For financial reporting purposes, minimum note payments relating to the equipment have been capitalized. The equipment acquired with these equipment notes have a total cost of $1,725,849. These assets are included in the fixed assets listed in Note 5 - *Equipment and Leasehold Improvements* and include production equipment. The equipment notes have stated or imputed interest rates ranging from 5.9% to 13.2%.

The following is an analysis of the minimum future equipment note payable payments subsequent to September 30, 2025:

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| | |
|:---|:---|
|  | ***(in thousands)*** |
| &nbsp;&nbsp;&nbsp;&nbsp;2026 | $227 |
| &nbsp;&nbsp;&nbsp;&nbsp;2027 | 102 |
| &nbsp;&nbsp;&nbsp;&nbsp;2028 | 25 |
| Future Minimum Note Payable Payments | 354 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less Current Portion | (227) |
| Long-Term Obligations under Equipment Notes Payable | $127 |

---

***Finance Leases Payable***

The Company has lease obligations for equipment under the provisions of long-term finance leases. For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized. The equipment acquired with these leases has a total cost of approximately $126,782 These assets are included in the finance lease and include production equipment.

On January 5, 2022, the Company entered into finance lease agreement in the amount of $22,862 with monthly payment of $514 with 48-month term at an imputed interest rate of 3.75%.

On March 15, 2024, the Company entered into a finance lease agreement in the amount of $63,948 with monthly payments of $1,325 with 60-month term at an imputed rate of 8.90%.

On June 3, 2024, the Company entered into a finance lease agreement in the amount of $39,972 with monthly payments of $807 with 60-month term at an imputed rate of 7.80%.

At September 30, 2025, the weighted average remaining lease term is 3.6 years, and the weighted average discount rate is 8.5%

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The following is an analysis of the minimum finance lease payable payments subsequent to September 30, 2025:

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| | |
|:---|:---|
| **Year ending September 2025** | **(in thousands)** |
| 2026 | $28 |
| 2027 | 26 |
| 2028 | 26 |
| 2029 | 14 |
| Future Minimum Finance Lease Payable Payments | $94 |
| Less Amount Representing Interest | (12) |
| Present Value of Minimum Finance Lease Payable Payments | 82 |
| Less Current Portion | (22) |
| Long-Term Obligations under Finance Lease Payable | $60 |

---

***Employment Agreements***

The Company has entered into an employment agreement with Louis Friedman, President and CEO of the Company. The agreement provides for an annual base salary of $160,000 and eligibility to receive a bonus. In certain termination situations, the Company is liable to pay severance compensation to Mr. Friedman for up to nine months at his current salary.

On January 15, 2024, the Company, through OneUp, engaged Christopher Knauf to serve as Chief Financial Officer and Controller of the Company. The Company shall pay Mr. Knauf an annual salary of $160,000 and Mr. Knauf received options to purchase 200,000 shares of the Company's common stock, exercisable at $0.08 per share on the date of the agreement and subsequently on July 1, 2024, an additional option to purchase an additional 200,000 shares of common stock exercisable at $0.08 per share.

***Legal Proceedings***

As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to the Company or properties to which the Company is a party, and to the Company's knowledge there are no material proceedings to which any of the Company's directors, executive officers or affiliates are a party adverse to the Company or which have a material interest adverse to the Company.

**NOTE 13. RELATED PARTY TRANSACTIONS**

The Company has a subordinated note payable to an officer of the Company who is also the wife of the Company's CEO and principal shareholder in the amount of $76,000 (see Note 9). Interest on the note during the three months ended September 30, 2025 was accrued by the Company at the prevailing prime rate (currently 7.25%) and totaled $1,421 and $1,628 for the three months ending September 30, 2024. The accrued interest on the note as of September 30, 2025 and June 30, 2025, was $48,436 and $47,015, respectively. This note is subordinate to all other credit facilities currently in place.

On October 30, 2010, the Company's CEO loaned the Company $40,000 (see Note 9). The Company accrued interest on the note during the three months ending September 30, 2025, at the prevailing prime rate (currently 7.25%) and totaled $747 and $857 for the three months ending September 30, 2024. The accrued interest on the note as of September 30, 2025, and June 30, 2025, was $11,382 and $10,634, respectively. This note is subordinate to all other credit facilities currently in place.

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The Company's CEO has personally guaranteed the repayment of the loan obligation to Advance Financial Corporation (see Note 10 – Line of Credit). In addition, Luvu Brands has provided its corporate guarantees of the credit facility. On September 30, 2025, the balance owed under this line of credit was $1,037,582.

On July 20, 2011, the Company issued an unsecured promissory note to an individual for $100,000. Terms of the promissory note call for monthly interest payments of $1,667 (equal to interest at 20% per annum), with the principal amount due in full on July 31, 2012; extended by the holder to July 31, 2021 under the same terms (see Note 8). This note was repaid in full on July 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2024. This note was extended on July 30, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2025. This note was extended in full on August 20, 2025 with the same lender with interest payable monthly at 13.5%, principal is due in full on July 31, 2027. Repayment of this promissory note is personally guaranteed by the Company's CEO.

On October 31, 2013, the Company issued an unsecured promissory note to an individual for $100,000. Terms of the promissory note call for monthly interest payments of $1,667 (equal to interest at 20% per annum) beginning on November 30, 2013, with the principal amount due in full on or before October 31, 2014 extended by the holder to October 31, 2021 (see Note 8). This note was repaid in full on October 31, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2024. On October 1, 2024, this note was extended through October 31, 2025 at the same interest rate of 13.5%. On October 28, 2025, this note was extended in full with the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2027. Repayment of the promissory note is personally guaranteed by the Company's CEO.

On May 1, 2012, an individual loaned the Company $200,000 with an interest rate of 20%. Interest on the loan is being paid monthly, with the principal due in full on May 1, 2013; then extended to May 1, 2021 (see Note 8). This note was repaid in full on April 30, 2021 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2024. This note was repaid in full on April 30, 2024 and replaced with a new note from an entity controlled by the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2025. This note was again extended in full on May 1, 2025 with the same lender with interest payable monthly at 13.5%, principal due April 30, 2027. Personally guaranteed by Louis Friedman, the Company's CEO and principal shareholder.

The Company has drawn a cash advance on one unsecured lines of credit that is in the name of the Company and Louis S. Friedman. The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 8%. The aggregate amount owed on the unsecured line of credit was $50,154 at September 30, 2025 and $52,144 at June 30, 2025 (see Note 11). The loan is personally guaranteed by the Company's CEO.

**NOTE 14. STOCKHOLDERS' EQUITY**

***Options***

At September 30, 2025, the Company's 2015 Stock Option Plan (the "2015 Plan"), which was shareholder-approved and under which 1,700,000 shares were reserved for issuance under the 2015 Plan terminated on August 31, 2025.

The shares issued under the 2015 Plan will either be shares of the Company's authorized but previously unissued common stock or shares reacquired by the Company, including shares purchased on the open market.

The following table summarizes the Company's stock option activities during the three months ended September 30, 2024 and 2025:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number of** <br>**shares of** <br>**underlying** <br>**outstanding** <br>**option** | **Weighted** <br>**Average** <br>**Remaining** <br>**Contract Life** | **Weighted** <br>**Average**<br>**Exercise Price** | **Intrinsic Value** |
| Option Outstanding as of June 30, 2024 | 1350000 | 3.0 | $0.12 | $21000 |
| Granted | 200000 |  | 0.08 |  |
| Exercised | (300000) |  | 0.03 | (15000) |
| Forfeited or expired | - | - | - | - |
| Options Outstanding as of September 30, 2024 | 1250000 | 1.5 | $0.13 | $5000 |
| Option Outstanding as of June 30, 2025 | 1200000 | 2.3 | $0.14 | $- |
| Granted |  |  |  |  |
| Exercised |  |  |  |  |
| Forfeited or expired | - | - | - | - |
| Options Outstanding as of September 30, 2025 | 1200000 | 2.3 | $0.14 | $- |
| Options Exercisable as of September 30, 2025 | 700000 | 1.6 | $0.16 | $- |

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The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price that optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company's closing stock price of $0.04 for such day.

There were no stock options exercised during the three months ended September 30, 2025 and 300,000 options exercised during the three months ended September 30, 2024. The 300,000 options exercised were a cashless exercise which resulted in a net exercise amount 286,385 stock options during the three months ended September 30, 2024.

During the three months ending September 30, 2025, no options expired. There were no options that expired during the three months ending September 30, 2024.

There were no stock options granted during the three months ended September 30, 2025. There were 200,000 stock options granted during the three months ended September 30, 2024.

The following table summarizes the weighted average characteristics of outstanding stock options as of September 30, 2025:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Outstanding Options** | **Outstanding Options** | **Outstanding Options** | **Exercisable** | **Exercisable** |
| <br>**Exercise Prices** | **Number of Shares** | **Remaining** <br>**Life** <br>**(Years)** | **Weighted** <br>**Average** <br>**Price** | **Options** <br>**Number of** <br>**Shares** | **Weighted** <br>**Average** <br>**Price** |
| $0.02 to $0.03 |  |  |  |  |  |
| $0.04 to $0.10 | 450000 | 4.0 | $0.08 | 100000 | $0.08 |
| $0.15 to $0.20 | 700000 | 1.3 | $0.16 | 550000 | $0.16 |
| $0.30 | 50000 | 0.9 | $0.30 | 50000 | $0.30 |
| Total.stock options | 1200000 | 2.3 | $0.14 | 700000 | $0.16 |

---

***Stock-based compensation***

The Company accounts for stock-based compensation to employees in accordance with *FASB ASC 718, Compensation – Stock Compensation*. The Company measures the cost of each stock option and at its fair value on the grant date. Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as an expense in the financial statements over the respective vesting period.

Stock option-based compensation expense recognized in the consolidated statements of operations for the three months ended September 30, 2025 and 2024 is based on awards ultimately expected to vest and is reduced for estimated forfeitures.

The following table summarizes stock option-based compensation expense by line item in the Consolidated Statements of Operations, all relating to the Plans:

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| | | |
|:---|:---|:---|
|  | **Three Months**<br>**Ending September 30,** | **Three Months**<br>**Ending September 30,** |
|  | **2025** | **2024** |
|  | *($ in thousands)* | *($ in thousands)* |
| Cost of Goods Sold | $1 | $1 |
| Other Selling and Marketing | 4 | 5 |
| General and Administrative | 4 | 3 |
| Total Stock-based Compensation Expense | $9 | $9 |

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As of September 30, 2025, the Company's total unrecognized compensation cost was $36,746 which will be recognized over the weighted average vesting period of approximately twenty-four months.

***Warrants***

As of September 30, 2025 and 2024, there were no warrants outstanding.

***Common Stock***

The Company's authorized common stock was 175,000,000 shares at September 30, 2025 and June 30, 2025. Common shareholders are entitled to dividends if and when declared by the Company's Board of Directors, subject to preferred shareholder dividend rights. At September 30, 2025, the Company had reserved the following shares of common stock for issuance:

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| | |
|:---|:---|
|  | **September 30,**<br>**2025** |
| Shares of common stock reserved for issuance under the 2015 Plan | 1200000 |
| Shares of common stock issuable upon conversion of the Preferred Stock | 4300000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total shares of common stock equivalents | 5500000 |

---

***Preferred Stock***

On February 18, 2011, the Company filed an amendment to its Articles of Incorporation, effective February 9, 2011, authorizing the issuance of preferred stock and the Company now has 10,000,000 authorized shares of preferred stock, par value $.0001 per share, of which 4,300,000 shares have been designated and issued as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into one share of common stock and has a liquidation preference of $.2325 ($1,000,000 in the aggregate). Liquidation payments to the preferred holders have priority and are made in preference to any payments to the holders of common stock. In addition, each share of Series A Convertible Preferred Stock is entitled to the number of votes equal to the result of: (i) the number of shares of common stock of the Company issued and outstanding at the time of such vote multiplied by 1.01; divided by (ii) the total number of Series A Convertible Preferred Shares issued and outstanding at the time of such vote. At each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors, holders of Series A Convertible Preferred Shares shall vote together with the holders of common shares as a single class.

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**ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**

**Results of Operations**

The following table sets forth, for the periods indicated, information derived from the Company's Interim Unaudited Consolidated Financial Statements, expressed as a percentage of net sales. The discussion that follows the table should be read in conjunction with the Company's Interim Unaudited Consolidated Financial Statements.

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| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **September 30,** | **September 30,** |
|  | **2025** | **2024** |
|  | **(unaudited)** | **(unaudited)** |
| Net sales | 100% | 100% |
| Cost of goods sold | 72% | 74% |
| &nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 28% | 26% |
| Operating Expenses | 29% | 28% |
| &nbsp;&nbsp;&nbsp;&nbsp;Income from operations | (1)% | (2)% |

---

**Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024**

***Net sales***. Sales for the three months ended September 30, 2025, were approximately $5,841,000, a 1.5% increase from the comparable prior year period. The major components of net sales by segment are as follows:

· *Direct sales –* Sales through our branded websites increased $186,000, or 11%, during the quarter from the comparable prior year period, due primarily to stronger sales through our Jaxx website capturing more of the outdoor product category. 

· *Wholesale sales*—Sales through our wholesale customers decreased 3% from the prior year's first quarter to $3,886,000. Increased competition from low-cost international manufacturers eroded our sales at several online retailers. We continue to add more distribution points both domestically and internationally. 

***Gross margin*.** Gross profit, derived from net sales less the cost of goods sold, includes the cost of materials, direct labor, manufacturing overhead, freight costs, and royalties. For the three months ended September 30, 2025 gross profit margin, as a percentage of sales, increased to 28% from 26% in the same period in the prior year. Gross profit increased to $1,656,000 from $1,517,000 for the previous year's first quarter due to lower costs for raw materials from international vendors.

***Operating expenses***. Total operating expenses for the three months ended September 30, 2025 were approximately 29% of net sales, or approximately $1,671,000, compared to 28% of net sales, or approximately $1,639,000, for the same period in the prior year.

***Other income (expense)****.* Interest expense during the first quarter decreased to approximately ($116,000) in the first quarter of fiscal 2026 from approximately ($88,000) in the first quarter of fiscal 2025. The increase was primarily due to the issuance of notes payable during the three months ended September 30, 2025 to fund working capital and inventory needs.

***Net Income.*** For the three months ended September 30, 2025, we had a net loss of ($131,000) as compared to a net loss of ($210,000) for the three months ended September 30, 2024. The reduction in net loss was due to the increased gross profit that offset the increase in operating and interest expense.

**Variability of Results**

The Company has experienced significant quarterly fluctuations in operating results and anticipate that these fluctuations may continue in future periods. Operating results have fluctuated as a result of changes in sales levels to consumers and wholesalers, competition, seasonality costs associated with new product introductions, and increases in raw material costs. In addition, future operating results may fluctuate as a result of factors beyond the Company's control such as foreign exchange fluctuation, changes in government regulations, and economic changes in the regions in which it operates and sells. A portion of the Company's operating expenses are relatively fixed and the timing of increases in expense levels is based in large part on forecasts of future sales. Therefore, if net sales are below expectations in any given period, the adverse impact on results of operations may be magnified by the Company's inability to meaningfully adjust spending in certain areas, or the inability to adjust spending quickly enough, as in personnel and administrative costs, to compensate for a sales shortfall. The Company may also choose to increase spending in response to market conditions, and these decisions may have a material adverse effect on financial condition and results of operations.

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**Liquidity and Capital Resources**

The following table summarizes the Company's cash flows:

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| | | |
|:---|:---|:---|
| | **Three months Ended** | **Three months Ended** |
| | **September 30,** | **September 30,** |
| <br>**Cash flow data:** | **2025** | **2024** |
|  | **(Unaudited)** | **(Unaudited)** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Cash provided by operating activities | $80 | $132 |
| Cash used in investing activities | $- | $(1) |
| Cash provided by (used in) financing activities | $3 | $(91) |

---

As of September 30, 2025, the Company's cash and cash equivalents totaled $818,053, compared to $734,910 in cash and cash equivalents as of June 30, 2025 The impact of increased tariffs for raw materials and finished goods may have an adverse effect on the future cash position of the Company. Our direct exposure to tariff fees is limited, and we are sourcing goods and materials from lower tariff countries. However, indirectly, the goods and materials we purchase domestically may increase prices to us as tariffs impact them. Therefore, we may need to raise prices and offset this increase in the future.

For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The Company's principal sources of liquidity are the Company's cash flow that the Company generates from its operations, availability of borrowings under its line of credit and cash raised through debt financings.

**Operating Activities**

Net cash provided by operating activities was $80,000 during the three months ended September 30, 2025 compared to $132,000 net cash provided by operating activities in the three months ended September 30, 2024. The primary components of the cash provided by operating activities in the current year are the increase in accounts payable of $131,988 and an increase in accrued payroll of $186,213. This was mostly offset by an increase in inventory of $218,562. Increases in accrued payroll was due to timing of the quarter. Increases in inventory is due to larger deposits made for raw materials purchased from overseas vendors compared to June 30, 2025.

**Investing Activities**

Cash used in investing activities in the three months ended September 30, 2025 was $0 compared to a use of $1,000 during the three months ended September 30, 2024.

**Financing Activities**

Cash provided by (used in) financing activities during the three months ended September 30, 2025 and September 30, 2024 of $3,000 and $(91,000) respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes offset by the addition of secured notes payable.

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**<u>Non-GAAP Financial Measures</u>**

Reconciliation of net income to Adjusted EBITDA for the three ended September 30, 2025 and 2024:

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| | | |
|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** |
|  | **September 30,** | **September 30,** |
|  | **2025** | **2024** |
|  | **(in thousands)** | **(in thousands)** |
| Net loss | $(131) | $(210) |
| &nbsp;&nbsp;&nbsp;&nbsp;Plus interest expense, financing costs and income tax | 116 | 88 |
| &nbsp;&nbsp;&nbsp;&nbsp;Plus depreciation and amortization expense | 88 | 109 |
| &nbsp;&nbsp;&nbsp;&nbsp;Plus stock-based compensation expense | 9 | 9 |
| Adjusted EBITDA  | $82 | $(4) |

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As used herein, Adjusted EBITDA represents net loss before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense. The Company has excluded the non-cash expenses and stock-based compensation, as they do not reflect the cash-based operations of the Company. Adjusted EBITDA is a non-GAAP financial measure which is not required by or defined under GAAP. The presentation of this financial measure is not intended to be considered in isolation or as a substitute for the financial measures prepared and presented in accordance with GAAP, including the net income of the Company or net cash provided by operating activities.

Management recognizes that non-GAAP financial measures have limitations in that they do not reflect all of the items associated with the Company's net income or net loss as determined in accordance with GAAP and are not a substitute for or a measure of the Company's profitability or net earnings. Adjusted EBITDA is presented because the Company believes it is useful to investors as a measure of comparative operating performance and liquidity, and because it is less susceptible to variances in actual performance resulting from depreciation and non-cash charges for stock-based compensation expense.

**Off-Balance Sheet Arrangements**

The Company does not use off-balance sheet arrangements with unconsolidated entities or related parties, nor does it use other forms of off-balance sheet arrangements. Accordingly, the Company's liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities. As of September 30, 2025, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

**Critical accounting policies**

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances and impairment of long-lived assets. The Company also has adopted other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding the Company's results, which are described in Note 2 to its unaudited consolidated financial statements appearing in this report.

**Recent accounting pronouncements**

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the unaudited consolidated accompanying financial statements.

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

The Company does not enter into any transactions using derivative financial instruments or derivative commodity instruments, and believes that the Company's exposure to market risk associated with other financial instruments is not material.

**ITEM 4. CONTROLS AND PROCEDURES**

**Evaluation of Disclosure Controls and Procedures**

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosures. As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of the Company's management, including its principal executive officer (Chief Executive Officer) and principal financial officer (Chief Financial Officer), of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Company's CEO and CFO concluded that its disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the management, including CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

**Changes in Internal Control Over Financial Reporting**

There were no changes in the Company's internal control over financial reporting during its most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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**PART II OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

The Company is not currently subject to any material legal proceedings, nor, to its knowledge, is there any legal proceeding threatened against us. However, from time to time, the Company may become a party to certain legal proceedings in the ordinary course of business.

**ITEM 1A. RISK FACTORS**

In addition to the disclosure below, we incorporate by reference the risk factors disclosed in our 2025 10-K. See also "Liquidity and Capital Resources" above.

**Rising threats of international tariffs may have an adverse impact on our business.**

We rely on suppliers for purchasing the raw materials used in the manufacture and production of our goods. In fiscal year 2025 and the three months ending September 30, 2025, approximately 20% and 16%, respectively, of our materials were sourced from foreign suppliers, including 13% and 10% in fiscal year 2025 and the three months ended September 30, 2025, respectively, from China. The Trump Administration has imposed steep tariffs on the import of goods from several countries from which we purchase raw materials and finished goods. This increase in tariffs could adversely affect our business and our results of operations. The imposition of additional tariffs fluctuates dramatically, creating uncertainty in global markets. These tariffs apply directly to a small portion of our materials. As a result, we may be forced to implement price increases to adjust to the higher costs of production and sale of our products in the future, which carries the risk of reduced demand for such products, thus lowering sales and resulting revenue. Additionally, future tariffs or any additional costs or restrictions imposed on imported materials that lead to an increase in our prices may result in a loss of customers and harm our business.

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

The Company had no unregistered sales of equity securities during the three months ended September 30, 2025.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4. MINE SAFETY DISCLOSURES**

Not applicable.

**ITEM 5. OTHER INFORMATION**

None.

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**ITEM 6. EXHIBITS**

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Incorporated by Reference** | **Incorporated by Reference** | **Incorporated by Reference** |
| <br>**No.** | <br>**Exhibit Description** | **Form** | **Date Filed** | **Number** |
| [2.1](http://www.sec.gov/Archives/edgar/data/1374567/000114420409054090/v163418_ex2-1.htm) | [Merger and Recapitalization Agreement between WES Consulting, Inc., the majority shareholder of WES Consulting, Inc., Luvu Brands, Inc., and the majority shareholder of Luvu Brands, Inc., dated as of October 19, 2009](http://www.sec.gov/Archives/edgar/data/1374567/000114420409054090/v163418_ex2-1.htm) | 8-K | 10/22/09 | 2.1 |
| [2.2](http://www.sec.gov/Archives/edgar/data/1374567/000114420410015381/v178277_ex2-2.htm) | [Stock Purchase and Recapitalization Agreement between OneUp Acquisition, Inc., Remark Enterprises, Inc., OneUp Innovations, Inc., and Louis S. Friedman, dated March 31, 2009 and fully executed on April 3, 2009](http://www.sec.gov/Archives/edgar/data/1374567/000114420410015381/v178277_ex2-2.htm) | 8-K/A | 3/24/10 | 2.2 |
| [2.3](http://www.sec.gov/Archives/edgar/data/1374567/000114420410015381/v178277_ex2-3.htm) | [Amendment No. 1 to Stock Purchase and Recapitalization Agreement, dated June 22, 2009](http://www.sec.gov/Archives/edgar/data/1374567/000114420410015381/v178277_ex2-3.htm) | 8-K/A | 3/24/10 | 2.3 |
| [3.1](http://www.sec.gov/Archives/edgar/data/1374567/000117337507000032/ex3iamendedrestated.htm) | [Amended and Restated Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1374567/000117337507000032/ex3iamendedrestated.htm) | SB-2 | 3/2/07 | 3i |
| [3.2](http://www.sec.gov/Archives/edgar/data/1374567/000117337507000032/ex3iibylaws.htm) | [Bylaws](http://www.sec.gov/Archives/edgar/data/1374567/000117337507000032/ex3iibylaws.htm) | SB-2 | 3/2/07 | 3ii |
| [3.3](http://www.sec.gov/Archives/edgar/data/1374567/000114420411010262/v212273_ex3-1.htm) | [Articles of Amendment to the Amended and Restated Articles of Incorporation](http://www.sec.gov/Archives/edgar/data/1374567/000114420411010262/v212273_ex3-1.htm) | 8-K | 2/23/11 | 3.1 |
| [3.4](http://www.sec.gov/Archives/edgar/data/1374567/000101738615000294/exhibit_3-5.htm) | [Articles of Amendment to the Amended and Restated Articles of Incorporation, effective February 28, 2011](http://www.sec.gov/Archives/edgar/data/1374567/000101738615000294/exhibit_3-5.htm) | 8-K | 3/3/11 | 3.1 |
| [3.5](http://www.sec.gov/Archives/edgar/data/1374567/000101738615000294/exhibit_3-5.htm) | [Articles of Amendment to the Amended and Restated Articles of Incorporation, effective November 5, 2015](http://www.sec.gov/Archives/edgar/data/1374567/000101738615000294/exhibit_3-5.htm) | 8-K | 11/5/15 | 3.5 |
| [4.1](http://www.sec.gov/Archives/edgar/data/1374567/000114420411010262/v212273_ex4-1.htm) | [Designation of Rights and Preferences of Series A Convertible Preferred Stock.](http://www.sec.gov/Archives/edgar/data/1374567/000114420411010262/v212273_ex4-1.htm) | 8-K | 2/23/11 | 4.1 |
| [31.1](luvu_ex311.htm) | [Section 302 Certificate of Chief Executive Officer](luvu_ex311.htm) |  |  | Filed |
| [31.2](luvu_ex312.htm) | [Section 302 Certificate of Chief Financial Officer](luvu_ex312.htm) |  |  | Filed |
| [32.1](luvu_ex321.htm) | [Section 906 Certificate of Chief Executive Officer](luvu_ex321.htm) |  |  | Filed |
| [32.2](luvu_ex322.htm) | [Section 906 Certificate of Chief Financial Officer](luvu_ex322.htm) |  |  | Filed |
| 101.INS | XBRL Instance Document |  |  | Filed |
| 101.SCH | XBRL Taxonomy Extension Schema Document |  |  | Filed |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |  |  | Filed |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |  |  | Filed |
| 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document |  |  | Filed |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |  |  | Filed |

---

\*Management contract or compensatory plan or arrangement

---

| |
|:---|
| 29 |
| *[**Table of Contents**](#TOC)* |

---

**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 thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | <br>**LUVU BRANDS, INC.** | <br>**LUVU BRANDS, INC.** |
|  | (Registrant) | (Registrant) |
| November 14, 2025 | By:  | /s/ Louis S. Friedman |
| (Date) |  | Louis S. Friedman |
|  |  | *President and Chief Executive Officer*<br>*(Principal Executive Officer)* |
| November 14, 2025 | By:  | /s/ Christopher Knauf |
| (Date) |  | Christopher Knauf |
|  |  | *Chief Financial Officer*<br>*(Principal Financial & Accounting Officer)* |

---

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATION**

I, Louis S. Friedman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Luvu Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: November 14, 2025 | /s/ Louis S. Friedman |
|  | Louis S. Friedman |
|  | Chief Executive Officer (Principal Executive<br> Officer) |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATION**

I, Christopher A Knauf, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Luvu Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | |
|:---|:---|
| Date: November 14, 2025 | /s/ Christopher A Knauf |
|  | Christopher A Knauf |
|  | Chief Financial Officer (Principal Financial and Accounting Officer) |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION**

In connection with the quarterly report of Luvu Brands, Inc. (the Company") on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission (the Report"), I, Louis S. Friedman, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

---

| | |
|:---|:---|
| Date: November 14, 2025 | /s/ Louis S. Friedman |
|  | Louis S. Friedman |
|  | Chief Executive Officer (Principal Executive Officer) |

---

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION**

In connection with the quarterly report of Luvu Brands, Inc. (the Company") on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission (the Report"), I, Christopher A Knauf, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

---

| | |
|:---|:---|
| Date: November 14, 2025 | /s/ Christopher A Knauf |
|  | Christopher A Knauf |
|  | Chief Financial Officer (Principal Financial and<br> Accounting Officer) |

---