Luvu Brands, Inc.

Luvu Brands, Inc. designs, manufactures and markets a portfolio of consumer lifestyle brands through its websites, online mass merchants, and specialty retail stores worldwide. The brands include Liberator, a category of iconic products for enhancing sensuality and intimacy; Jaxx, a diverse range of casual fashion daybeds, sofas and beanbags made from virgin and re-purposed polyurethane foam; and Avana, products for yoga exercises, sleep comfort, and inclined bed therapy. The Company is headquartered in Atlanta, Georgia and occupies a 140,000-square-foot vertically integrated manufacturing facility ¹. The industry is highly fragmented and competition comes from many types of e-tailers and retailers across diverse channels, with competition based on the ability to deliver the right product at the right time, product quality and safety, innovation, customer service and price.

The Company's primary competitive advantage for Liberator products is consumer recognition of its iconic brand, with many e-commerce websites referring to Liberator as a product category rather than a generic sex furniture listing. For Jaxx and Avana products, the primary competitive advantages are good designs, a wide range of designer colors and fabrics, good price to value, and positive consumer reviews. The Company competes with other marketers of sexual wellness, lifestyle and casual seating products both within and outside the U.S., including Amazon, mass market and specialty e-tailers, and sexual wellness retailers and adult-oriented websites. The Company believes it competes favorably due to its broad product offering, vertically integrated manufacturing operation, commitment to quality and safety, and commitment to minimizing environmental impact.

The Company generates revenue through two segments: Direct to Consumer, consisting of its Internet websites, and Wholesale, consisting of stocking resellers, drop-ship accounts, contract manufacturing, and distributor accounts. 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. The Company uses a vertically integrated business model with manufacturing, distribution, product development, advertising and marketing performed in-house, which allows it to create new products with reduced lead times at a lower cost and respond quickly to market and customer demands. Sales are generated through internet, print advertisements, and social marketing, and the Company has a diversified customer base with only one customer accounting for 36% in fiscal 2026 and 34% in fiscal 2025 of consolidated net sales ²³.

The Liberator product line includes patented 'Liberator Bedroom Adventure Gear' products designed to elevate, create motion, and create surfaces and textures that expand the sexual repertoire. Liberator Shapes are manufactured from structured polyurethane foam and cut at various angles, platforms, and profiles, encased in a tight, fluid-resistant polyester shell. The line also includes vacuum-compressed large profile designs marketed as the Esse Chaise, Equus Wave, and Prelude Bench, as well as larger designs based on shredded polyurethane foam trim sold under the Zeppelin product offering. The wholesale business for Liberator sexual wellness products is conducted through four primary channels: adult and female-friendly retailers and specialty boutiques, e-tailers, mail order catalogers, and wholesale distributors, with these wholesale accounts having approximately 1,000 retail locations and websites in the United States and Canada ⁴.

The Jaxx brand includes a line of contemporary casual indoor and outdoor seating, with bean bags made from repurposed polyurethane foam trim, solid foam indoor furniture collections, and outdoor furniture collections that use polystyrene bead filling. Jaxx products are sold through modern furniture e-tailers, mass marketers, specialty retailers, interior designers, schools and daycare centers, and retail furniture stores, with private label and custom designs offered through the Foamlabs brand. The Avana brand offers a collection of comfort products that aid in sleep, meditation, and relaxation, including top-of-bed support cushions and props, many of which are assistive in relieving medical conditions associated with acid reflux, surgery recovery, and chronic pain. Avana products are sold through e-merchants including Amazon.com and Walmart.com, medical product distributors, specialty e-tailers, mail order catalogers, and through the AvanaComfort.com website. The Company also imports high-quality pleasure objects from around the world for sale on its direct-to-consumer website Liberator.com.

During fiscal 2026, the Company entered into a lease agreement for its manufacturing facility for 56 months beginning November 7, 2025, with four months of rent abatement totaling $333,000 beginning March 1, 2027 ⁵. The Company also entered into a $250,000 secured note payable in September 2025 ⁶. The Company increased its inventory reserve by $68,598 to $300,877 ⁷⁸, and continued to implement cost reduction strategies such as sourcing more raw materials from China and India, reducing warehouse and production headcounts, and system improvements to better forecast inventory requirements. The Company repurposes over 4,000 pounds of polyurethane foam trim daily, primarily for Jaxx bean bags ⁹, and repurposes 98% of its foam trim to other products ¹⁰.

Net sales grew 5.8% in fiscal 2026 compared to fiscal 2025 ¹¹. Gross profit as a percentage of sales increased to 31.5% from 29.5% in the prior year ¹²¹³, and gross profit dollars increased to $8,613,562 from $7,633,516, representing a 12.8% increase ¹⁴¹⁵¹⁶. The Company reported a net loss from operations of ($245,718) or ($0.00) per diluted share for the year ended June 30, 2026, compared with a net loss from operations of ($448,659) or $0.00 per diluted share for the year ended June 30, 2025 ^17181920. Adjusted EBITDA was $1,256,000 for fiscal 2026 compared to $395,000 for fiscal 2025 ²¹²².

The Company expects total capital expenditures for fiscal 2027 to be less than $100,000, funded primarily by equipment loans and, to a lesser extent, anticipated operating cash flows and borrowings under the line of credit with Advance Financial Corporation ²³. The Company believes it has sufficient working capital to meet financial needs over the next twelve months.

A key growth vector is the expansion of the wholesale segment, which rose by $1.3 million or 8% in fiscal 2026, driven by the continued increase in the dropship network and higher demand from international and new customers ²⁴²⁵. The direct-to-consumer segment rose by $0.1 million, or 2%, driven by new marketing efforts from social media influencers and pay per click ²⁶²⁷. The Company plans to shift more production to low cost international manufacturers as demand for certain high-volume products increases, and to continue expanding distribution channels and customer base for Liberator, Jaxx, and Avana.

The Company's gross margin improved in fiscal 2026 to 31.5% from 29.5% in the prior year, despite higher fuel, freight and raw material costs arising from the armed conflict involving Iran ²⁸²⁹. The Company implemented cost reduction strategies including sourcing more raw materials from China and India, reducing warehouse and production headcounts, and system improvements to better forecast inventory requirements. However, the impact of import tariffs on raw materials may offset some of the savings from lower cost manufacturers and may impact gross margin in the future.

The Company's manufacturing facility is a 140,000-square-foot vertically integrated operation with two CAD controlled fabric cutters, one CAD controlled wood cutter, two CAD controlled foam contouring machines and two state-of-the-art conveyor unit production sewing systems. The Company outsources the sewing of certain high-volume products to a contract sewing facility in Mexico and sources raw materials from multiple domestic and foreign suppliers. As of June 30, 2026, the Company had 189 full time employees and 1 part time employee ³⁰.

The Company plans to make continued investments in advertising and marketing, and expects to incur capital expenditures of less than $100,000 for fiscal 2027 ³¹. The Company does not anticipate paying any cash dividends in the foreseeable future, and under the terms of its credit facility, it is precluded from paying a dividend.

The Company faces headwinds from increased raw material and shipping costs related to increases in fuel cost, including those associated with the war in Iran, which have raised transportation, logistics, and supplier costs across its supply chain. The Company was unable to fully absorb these higher costs and was forced to pass a portion of these increased costs on to customers through higher selling prices. A prolonged conflict, further disruption to Middle East shipping lanes, or a sustained increase in fuel prices could raise inbound freight and raw material costs faster than the Company is able to offset them and could adversely affect gross margin, operating results and liquidity in fiscal 2027.

The Company is dependent on its suppliers and does not have supply agreements with its manufacturers, and the loss of one or more significant customers could have a material adverse effect on its business. Sales to and through Amazon accounted for 36% of net sales during the year ended June 30, 2026 and 34% of net sales for the year ended June 30, 2025 ³²³³.

The Company is highly dependent on a single customer, with sales to and through Amazon accounting for 36% of net sales in fiscal 2026 and 34% in fiscal 2025 ³⁴³⁵. The loss of, or a significant adverse change in the relationship with, any of its largest customers could have a material adverse effect on the business. The Company has been adversely affected by increases in raw material and shipping costs related to higher fuel costs, including those associated with the war in Iran, and was forced to pass a portion of these increased costs on to customers through higher selling prices. The Company is dependent on its suppliers and does not have supply agreements with its manufacturers, and events adversely affecting its suppliers could adversely affect the Company. The Company's board currently consists of a single director, and it is substantially dependent upon its Chief Executive Officer and controlling shareholder, Louis Friedman, who owns the Series A convertible preferred shares, giving him the ability to determine the outcome of matters submitted to shareholders. The Company has a history of operating losses and faces the risk of incurring additional losses in the future.

Management's message emphasizes the Company's vertically integrated business model and its ability to create new products with reduced lead times at a lower cost while responding quickly to market and customer demands. The strategic priorities include expanding distribution channels and customer base for Liberator, Jaxx, and Avana, managing the impact of rising raw material and labor costs by improving manufacturing productivity and efficiency, and shifting more production to low cost international manufacturers as demand for high-volume products increases. Management also emphasizes sustainability, including repurposing 98% of foam trim to other products and maintaining vacuum-compressed packaging to reduce carbon footprint and outbound shipping costs ³⁶. The Company aims to achieve long-term growth and profitability by running its own websites and aligning with mass market and specialty retailers, leaving less room for importers and copy-cats to compete.