What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-05-15 · 222 added, 263 removed, 375 unchanged (56% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

September 30,

(in thousands, except share data)

1 unchanged sentence

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses

Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $ 10 on September 30, 2024 and $ 11 on June 30, 2024

Inventories, net of allowance for inventory reserve of $ 214 on September 30, 2024 and $ 214 on June 30, 2024

Other current assets

Total current assets

Equipment and leasehold improvements, net

Equipment, property and leasehold improvements, net

Finance lease assets

Operating lease assets

Deferred tax asset, net

Liabilities and stockholders’ equity:

5 unchanged sentences

Noncurrent liabilities:

Deferred Tax Liability

Long-term debt

3 unchanged sentences

Commitments and contingencies (See Note 12)

Stockholders’ equity:

Stockholders’ equity (deficit):

Preferred stock, 5,700,000 shares authorized, $ 0.0001 par value none issued and outstanding

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 at March 31, 2024 and June 30, 2023

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 76,547,672 and 76,547,672 shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively

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, 2024 and June 30, 2024

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 76,834,057 and 76,547,672 shares issued and outstanding as of September 30, 2024 and June 30, 2024, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except share data)

Cost of goods sold

Cost of goods sold (excluding depreciation expense presented below)

Operating expenses:

2 unchanged sentences

General and administrative

Depreciation and amortization

Total operating expenses

Income from operations

Operating loss

Other income (expense):

Interest expense and financing costs

Total Other Income (Expense)

Income before income taxes

Interest expense and financing costs, net

Loss from operations before income taxes

Provision for income taxes

Net income (loss)

Net income per share:

Shares used in computing net income per share:

Net loss per share:

Shares used in calculation of net loss per share:

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Nine Months ended March 31, 2024 and March 31, 2023 (unaudited)

Series A Preferred

For the Three Months ended September 30, 2024 and September 30, 2023 (unaudited)

Series A Preferred Stock

Stockholders'

(in thousands, except share data)

Balance, June 30, 2022

B alance, June 30, 2023

Stock-based compensation expense

Stock option exercises

Net income for the nine months ended March 31, 2023

Balance, March 31, 2023 (unaudited)

Balance, September 30, 2023

Balance, June 30, 2024

Stock-based compensation expense

Net loss for the nine months ended March 31, 2024

Balance, March 31, 2024 (unaudited)

For the Three Months ended March 31, 2024 and March 31, 2023 (unaudited)

Series A Preferred

Stockholders’

(in thousands, except share data)

Balance, December 31, 2022 (unaudited)

Stock-based compensation expense

Stock option exercises

Net income for the three months ended March 31, 2023

Balance, March 31, 2023 (unaudited)

Balance, December 31, 2023 (unaudited)

Stock-based compensation expense

Stock option exercises

Net loss for the three months ended March 31, 2024

Balance, March 31, 2024 (unaudited)

Balance, September 30, 2024

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

OPERATING ACTIVITIES:

Three Months Ended

September 30,

(in thousands)

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Provision for bad debt

Amortization of operating lease asset

Changes in operating assets and liabilities:

Change in operating assets and liabilities:

Accounts receivable

Inventories, net

Prepaid expenses and other assets

Prepaid expenses and other current assets

Accounts payable

Accrued compensation

Accrued expenses and interest

Operating lease liability

Operating lease asset

Net cash provided by operating activities

INVESTING ACTIVITIES:

Investment in purchase of equipment and leasehold improvements

Investment in equipment, software and leasehold improvements

Net cash used in investing activities

FINANCING ACTIVITIES:

Borrowing under revolving line of credit

Repayment of unsecured line of credit

Proceeds from unsecured notes payable

Repayment of unsecured notes payable

Net cash provided by (repaid to) line of credit

Repayment of unsecured line of credit

Proceeds from exercise of stock options

Payments on equipment notes

Principal payments on leases payable

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

CASH AND CASH EQUIVALENTS AT END OF PERIOD

Principal payments on capital leases

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental Disclosure of Cash Flow Information:

Non cash item:

Purchases of equipment with equipment notes

Cash paid during the period for:

Cash paid during the year for:

See accompanying notes to unaudited consolidated financial statements.

7 unchanged sentences

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 pillow and props for enhancing sexual performance.

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

Liberator ® , a brand category of iconic products for enhancing sexual performance;

Avana ® , Top-of-Bed Comfort products and inclined bed therapy products, assistive in relieving medical conditions associated with acid reflux, surgery recovery, and chronic pain;

and Jaxx ® , a diverse range of casual fashion daybeds, sofas and beanbags made from polyurethane foam and repurposed polyurethane foam trim.

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.

Many of the Company’s products are offered flat-packed and either roll or vacuum compressed to save on shipping and reduce the Company’s 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 30 % 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 Company has a diversified customer base with only one customer accounting for 10 % or more of consolidated net sales in the current and prior fiscal year and no particular concentration of credit risk in one economic sector.

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 omitted pursuant to applicable rules and regulations.

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 and nine months ended March 31, 2024 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, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on October 16, 2023 (the “2023 10-K”).

The results of operations for the three months ended September 30, 2024 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, 2024 as filed with the Securities and Exchange Commission (the “SEC”) on September 30, 2024 (the “2024 10-K”).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These consolidated financial statements include the accounts and operations of our wholly owned operating subsidiaries, OneUp and Foam Labs.

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.

9 unchanged sentences

allowances for doubtful accounts;

inventory valuation and allowances;

inventory valuation and reserves;

share-based compensation;

3 unchanged sentences

Revenue Recognition

We record revenue based on the five-step model which includes:

The Company records revenue based on the five-step model which includes:

(1) identifying the contract with the customer;

3 unchanged sentences

and (5) recognizing revenue when the performance obligations are satisfied.

Substantially all of our 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.

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 we are 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 our promise to transfer the goods and are expensed when revenue is recognized.

The impact of this policy election is insignificant as it aligns with our current practice.

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.

We have 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 our current practice.

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.

We review and update 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, we consider the customer's ability and intent to pay that amount of consideration when it is due.

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 delivered, or in some cases, picked up from one of our distribution centers by 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

2 unchanged sentences

Deferred revenues primarily relate to gift cards purchased, but not used, prior to the end of the fiscal period.

Our total deferred revenue as of March 31, 2024 was $ 19,254 and was included in “Other accrued liabilities” on our consolidated balance sheets.

The deferred revenue balance as of March 31, 2023 was $ 18,272 .

The Company’s total deferred revenue as of September 30, 2024 was $ 20,029 and was included in “Other accrued liabilities” on the Company’s consolidated balance sheets.

The deferred revenue balance as of June 30, 2024 was $ 19,454 .

Cost of Goods Sold

4 unchanged sentences

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts to reflect our estimate of current and past due receivable balances that may not be collected.

The allowance for doubtful accounts is based upon our assessment of the collectability of specific customer accounts, the aging of accounts receivable and our history of bad debts.

We believe that the allowance for doubtful accounts is adequate to cover anticipated losses in the receivable balance under current conditions.

However, significant deterioration in the financial condition of our customers, resulting in an impairment of their ability to make payments, could materially change these expectations and an additional allowance may be required.

The following is a summary of Accounts Receivable as of March 31, 2024 and June 30, 2023.

March 31, 2024

June 30, 2023

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.

The following is a summary of Accounts Receivable as of September 30, 2024 and June 30, 2024.

September 30,

(in thousands)

3 unchanged sentences

Total accounts receivable, net

Inventories and Inventory Allowances

Inventories and Inventory Reserves

Inventories are stated at the lower of cost or net realizable value.

2 unchanged sentences

Inventory costs include materials, labor, depreciation and overhead.

The Company establishes allowances 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 allowances required to record inventory at lower of cost or net realizable value may be adjusted in response to changing conditions.

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 total cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 per bank.

The Company had bank balances on deposit at March 31, 2024 that exceeded the balance insured by the FDIC by $ 822,772 .

Accounts receivable is typically unsecured and is derived from revenue earned from customers primarily located in North America and Europe.

During the three and nine months ended March, 31 2024, we purchased 24.6 % of total inventory purchases from one vendor.

During the fiscal year ended June 30, 2023, we purchased 35 % of total inventory purchases from one vendor.

As of March 31, 2024, one of the Company’s customers represent 44 % of the total accounts receivables.

As of June 30, 2023, two of the Company’s customers represent 35 % and 12 % of the total accounts receivables, respectively.

For the nine months ended March 31, 2024, sales to and through Amazon accounted for 39 % of our net sales.

The Federal Deposit Insurance Corporation (“FDIC”) insures the total cash balances up to $ 250,000 per bank.

On September 30, 2024, the Company had bank balances on deposit that exceeded the balance insured by the FDIC by $ 817,862 .

Accounts receivable are typically unsecured and are derived from revenue earned from customers primarily located in North America and Europe.

During the three months ended September 30, 2024, the Company purchased 16 % of total inventory purchases from one vendor.

During the three months ended September 30, 2023, the Company purchased 35 % of total inventory purchases from one vendor.

As of September 30, 2024, two of the Company’s customers represents 57 % and 8 % of the total accounts receivables, respectively.

As of June 30, 2024, two of the Company’s customers represents 43 % and 17 % of the total accounts receivables, respectively.

For the three months ended September 30, 2024 and September 30, 2023, sales to and through Amazon accounted for 38 % and 37 %, respectively, of the Company’s net sales.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

At March 31, 2024 and June 30, 2023, our financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term debt, and other long-term debt.

At September 30, 2024 and June 30, 2024, 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.

14 unchanged sentences

Advertising costs are expensed in the period when the advertisements are first aired or distributed to the public.

Prepaid Advertising (included in prepaid expenses) was $ 336 at March 31, 2024 and $ 525 at March 31, 2023.

Advertising expense for the nine months ended March 31, 2024 and 2023 was $ 785,081 and $ 557,114 , respectively.

There were $ 338 in Prepaid advertising at September 30, 2024 and $ 836 at June 30, 2024.

Advertising expense for the three months ended September 30, 2024 and 2023 was $ 231,131 and $ 268,544 , respectively.

Research and Development

Research and development expenses for new products are expensed as they are incurred.

Expenses for new product development totaled $ 115,467 and $ 100,326 for the nine months ended March 31, 2024 and 2023, respectively.

Research and development costs are included in general and administrative expense.

Expenses for new product development totaled $ 42,594 and $ 32,722 for the three months ended September 30, 2024 and 2023, respectively.

Research and development costs are included in general and administrative expenses.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

9 unchanged sentences

360, Property, Plant, and Equipment .

The Company has determined that there was no impairment at March 31, 2024.

The Company has determined that there was no impairment at September 30, 2024.

Operating Leases

3 unchanged sentences

In addition, the Company will pay the landlord a 2 % property management fee.

The rent expense for the nine months ended March 31, 2024 and 2023 was $ 497,502 and $ 483,183 , respectively.

Under ASC 842, which was adopted July 1, 2019, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

The rent expense for the three months ended September 30, 2024 and 2023 was $ 163,188 and $ 163,188 , respectively.

Under ASC 842, 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.

3 unchanged sentences

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 ASU 2016-02, components of a lease should be split into three categories:

In accordance with the guidance in ASC 842, components of a lease should be split into three categories:

lease components (e.g.

5 unchanged sentences

See Note 12 for details.

Under prior guidance ASC 840, rent expense and lease incentives from operating leases were recognized on a straight-line basis over the lease term.

The difference between rent expense recognized and rental payments was recorded as deferred rent in the accompanying consolidated balance sheets.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Segment Information

We have identified three reportable sales channels:

The Company have identified three reportable sales channels:

Direct, Wholesale and Other .

Direct includes product sales through our four e-commerce sites.

Direct includes product sales through the Company’s four e-commerce sites.

Wholesale includes Liberator, Jaxx, and Avana branded products sold to distributors and retailers, purchased products sold to retailers, and private label items sold to other resellers.

The Wholesale category also includes contract manufacturing services, which consists of specialty items that are manufactured in small quantities for certain customers, and which, to date, has not been a material part of our business.

Other consists principally of shipping and handling fees and costs derived from our Direct business.

Other consists principally of shipping and handling fees and costs derived from the Company’s Direct business.

The following is a summary of sales results for the Direct, Wholesale , and Other channels.

Three Months Ended

March 31, 2024

September 30, 2024

Three Months Ended

March 31, 2023

September 30, 2023

(in thousands)

3 unchanged sentences

Three Months Ended

March 31, 2024

March 31, 2023

(in thousands)

Gross Profit by Channel:

Total Gross Profit

Nine Months Ended

March 31, 2024

Nine Months Ended

March 31, 2023

(in thousands)

Net Sales by Channel:

Total Net Sales

Nine Months Ended

March 31, 2024

Nine Months Ended

Nine 31, 2023

September 30, 2024

September 30, 2023

(in thousands)

2 unchanged sentences

Total Gross Profit

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by FASB or other standard setting bodies that are adopted by the Company as of the specified effective date.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , which provides improvements to reportable segment disclosure requirements, primarily through enhanced disclosures around segment expenses.

ASU 2023-07 requires the Company to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

ASU 2023-07 also requires that the Company disclose an amount for other segment items by reportable segment, a description of their composition and provide all annual disclosures about a reportable segment’s profit or loss and assets pursuant to Topic 280 during interim periods.

The Company must also disclose the CODM’s title and position, as well as certain information around the measures used by the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources.

For public entities with a single reportable segment, the entity must provide all the disclosures required pursuant to ASU 2023-07 and all existing segment disclosures under Topic 280.

The amendments of ASU 2023-07 are effective for the Company for annual periods beginning July 1, 2024, and effective for interim periods beginning January 1, 2025.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company will evaluate the impact of ASU 2023-07 on its financial statements.

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Net Income Per Share

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Net Loss Per Share

In accordance with ASC 260, “Earnings Per Share”, basic net income per share is computed by dividing the net income available to common stockholders for the period by the weighted average number of common shares outstanding during the period.

Diluted net income 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 March 31, 2024 and 2023, the common stock equivalents did not have any effect on net income per share.

As of September 30, 2024 and 2023, the common stock equivalents did not have any effect on net loss per share.

September 30,

Common stock options – 2015 Plan

Convertible preferred stock

We utilize the asset and liability method of accounting for income taxes.

We recognize deferred tax liabilities or assets for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities.

We regularly assess the likelihood that our deferred tax assets will be recovered from future taxable income.

We consider projected future taxable income and ongoing tax planning strategies in assessing the amount of the valuation allowance necessary to offset our deferred tax assets that will not be recoverable.

We have recorded and continue to carry a full valuation allowance against our gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period.

If we determine in the future that it is more likely than not that we will realize all or a portion of our deferred tax assets, we will adjust our valuation allowance in the period we make the determination.

We expect to provide a full valuation allowance on our future tax benefits until we can sustain a level of profitability that demonstrates our ability to realize these assets.

On November 27, 2023 the Company received a notice from the Internal Revenue Service of Taxes and Penalties due of approximately $ 125,000 .

The Company believes once Net Operating Losses and tax credits are applied the penalties and interest will be reduced to approximately $ 38,000 therefore the Company has accrued $ 38,000 for estimated penalties and interest as of March 31, 2024.

On January 22, 2024, the Company received a notice from the Georgia Department of Revenue for Tax and Penalties due of approximately $ 104,000 .

The Company believes once Net Operating Losses and tax credit are applied the liability will be reduced to penalties and interest of approximately $ 6,000 .

Therefore, the Company has accrued $ 6,000 for estimated penalties and interest as of March 31, 2024.

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

We account for stock-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation.

We measure the cost of each stock option and restricted stock award at its fair value on the grant date.

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 expense in the financial statements over the respective vesting period.

The cost of each award is recognized as an expense in the financial statements over the respective vesting period.

IMPAIRMENT OF LONG-LIVED ASSETS

We follow FASB ASC 360, Property, Plant, and Equipment , regarding impairment of our other long-lived assets (property, plant and equipment).

Our policy is to assess our 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.

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.

2 unchanged sentences

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 March 31, 2024 or June 30, 2023.

There was no impairment as of September 30, 2024 or June 30, 2024.

INVENTORIES, NET

2 unchanged sentences

Inventories consisted of the following:

March 31, 2024

June 30, 2023

September 30,

(in thousands)

3 unchanged sentences

Total inventories

Allowance for excess and obsolete inventory

Allowance for inventory reserves

Total inventories, net of allowance

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are stated at cost.

Depreciation and amortization are provided using the straight-line method over the estimated useful lives for equipment and furniture and fixtures, or the shorter of the remaining lease term or estimated useful lives for leasehold improvements.

Equipment and leasehold improvements consisted of the following:

March 31, 2024

June 30, 2023

Equipment, property and leasehold improvements at September 30, 2024 and June 30, 2024 consisted of the following:

September 30,

Estimated Useful Life

4 unchanged sentences

Leasehold improvements

Project in process

Accumulated depreciation

Equipment and leasehold improvements, net

Depreciation expense was $ 103,874 and $ 88,902 for the three months ended March 31, 2024 and 2023, respectively.

For the nine months ended March 31, 2024 and 2023, depreciation and amortization expense was $ 306,840 and $ 263,755 , respectively.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS (continued)

Depreciation expense was $ 109,221 and $ 99,222 for the three months ended September 30, 2024 and 2023, 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.

1 unchanged sentence

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 nine months ended March 31, 2024.

Management has determined no asset impairment occurred during the three months ended September 30, 2024.

OTHER ACCRUED LIABILITIES

Other accrued liabilities at March 31, 2024 and June 30, 2023:

March 31, 2024

June 30, 2023

Other accrued liabilities at September 30, 2024 and June 30, 2024:

September 30,

(in thousands)

3 unchanged sentences

CURRENT AND LONG-TERM DEBT SUMMARY

Current and long-term debt at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

Current and long-term debt at September 30, 2024 and June 30, 2024 consisted of the following:

September 30, 2024

Current debt:

4 unchanged sentences

Current portion of equipment notes payable (Note 12)

Notes payable – related party

Current portion of finance leases payable (Note 12)

4 unchanged sentences

Equipment notes payable (Note 12)

Notes payable – related party (Note 9)

Notes payable – related party

Total long-term debt

UNSECURED NOTES PAYABLE

Unsecured notes payable at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

Current unsecured notes payable:

Unsecured notes payable at September 30, 2024 and June 30, 2024 consisted of the following:

September 30,

Current debt:

(in thousands)

13.5% Unsecured note, interest only, due July 31, 2023 (3)

13.5% Unsecured note, interest only, due October 31, 2023 (1)

Total current unsecured notes payable

Long-term unsecured notes payable:

13.5% Unsecured note, interest only, due May 1, 2025 (2)

13.5% Unsecured note, interest only, due July 31, 2025(3)

Total current debt

Long-term debt:

13.5% Unsecured note, interest only, due July 31, 2025(3)

13.5% Unsecured note, interest only, due October 31, 2025(1)

Total long-term unsecured notes payable

Total long-term debt

Total unsecured notes payable

(1) Unsecured note payable for $ 100,000 to an individual 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.

(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, 2023.

This note was extended in full on September 30, 2023 with the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2025.

Personally guaranteed by Louis Friedman, the Company’s SEC and principal stockholder.

(2) Unsecured note payable for $ 200,000 to an individual 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.

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, 2023.

This note was extended in full on April 30, 2023 with the same lender with interest payable monthly at 13.5%, principal due in full on May 1, 2025.

Personally guaranteed by the Company’s CEO and principal stockholder.

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 .

1 unchanged sentence

This note was extended in full on July 30, 2023 with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2025.

Personally guaranteed by the Company’s CEO and principal stockholder.

Personally guaranteed by the Company’s CEO and principal shareholder.

NOTES PAYABLE - RELATED PARTY

Related party notes payable at March 31, 2024 and June 30, 2023 consisted of the following:

March 31, 2024

June 30, 2023

Related party notes payable at September 30, 2024 and June 30, 2024 consisted of the following:

September 30,

(in thousands)

7 unchanged sentences

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 our accounts receivable and other rights to payment, general intangibles, inventory and equipment, and are subject to eligibility requirements for current accounts receivable.

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 President, Chief Executive Officer (CEO), and principal shareholder, Louis Friedman, has personally guaranteed the repayment of the facility.

The Company’s President, Chief Executive Officer (CEO), and majority 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 March 31, 2024, the balance owed under this line of credit was $ 1,103,049 .

As of March 31, 2024, we were current and in compliance with all terms and conditions of this line of credit.

On September 30, 2024, the balance owed under this line of credit was $ 1,053,908 .

As of September 30, 2024, 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.

3 unchanged sentences

The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 11 %.

The credit line is for $ 55,000 .

The aggregate amount owed on the unsecured line of credit was $ 3,097 at March 31, 2024 and $ 12,806 at June 30, 2023.

The aggregate amount owed on the unsecured line of credit was $ 0 at September 30, 2024 and $ 116 at June 30, 2024.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

Right-of-use assets and liabilities for the lease renewal were recognized at the inception date which is 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 March 31, 2024, the weighted average remaining lease term for the lease renewal is 4 years and the weighted average discount rate is 14.49 %.

Supplemental balance sheet information related to leases at March 31, 2024 is as follows:

At September 30, 2024, the weighted average remaining lease term for the lease renewal is 2.4 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 2024 and 2023 were $ 52,992 and $ 54,484 respectively.

Supplemental balance sheet information related to leases at September 30, 2024 is as follows:

Operating leases

8 unchanged sentences

Total lease liabilities

COMMITMENTS AND CONTINGENCIES (continued)

Maturities of lease liabilities at March 31, 2024 are as follows:

Maturities of lease liabilities at September 30, 2024 are as follows:

(in thousands)

Remainder of 2024

2027 and thereafter

Total undiscounted lease payments

Total undiscounted lease payment

Present value discount

Total lease liability balance

COMMITMENTS AND CONTINGENCIES (continued)

Equipment Notes Payable

4 unchanged sentences

The equipment notes have stated or imputed interest rates ranging from 7.1 % to 13.5 %.

The following is an analysis of the minimum future equipment note payable payments subsequent to March 31, 2024:

Years ending June 30,

The following is an analysis of the minimum future equipment note payable payments subsequent to September 30, 2024:

Years ending September 30,

(in thousands)

Remainder of 2024

Future Minimum Note Payable Payments

Less Amount Representing Interest

Present Value of Minimum Note Payable Payments

Less Current Portion

1 unchanged sentence

Finance Leases Payable

The Company has a lease obligations for equipment under the provisions of long-term finance leases.

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.

1 unchanged sentence

These assets are included in the finance lease and include production equipment.

On June 22, 2020 the Company entered into a finance lease agreement with Wells Fargo in the amount of $ 34,761 with monthly payment of $ 850 with 48 -month term at an imputed interest rate of 8.09 %.

On February 1, 2022 the Company entered into a finance lease agreement with Raymond in the amount of $ 22,862 with monthly payment of $ 514 with 48 -month term at an imputed interest rate of 3.75 %.

On July 1, 2020 the Company entered into finance lease agreement in the amount of $ 35,000 with monthly payment of $ 850 with 48 -month term at an imputed interest rate of 8.09 %.

On January 5, 2022 the Company entered into finance lease agreement in the amount of $ 23,000 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, 2024, the weighted average remaining lease term is 4.5 years, and the weighted average discount rate is 8.1 %

COMMITMENTS AND CONTINGENCIES (continued)

The following is an analysis of the minimum finance lease payable payments subsequent to March 31,2024:

Year ending June 30,

The following is an analysis of the minimum finance lease payable payments subsequent to September 30, 2024:

Year ending September 30,

(in thousands)

Remainder of 2024

2029 and thereafter

Future Minimum Finance Lease Payable Payments

4 unchanged sentences

Employment Agreements

The Company has entered into an employment agreement with Louis Friedman, President and CEO.

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 $ 155,000 and eligibility to receive a bonus.

1 unchanged sentence

Friedman for up to nine months at his current salary.

On January 15, 2024, the Company, through OneUp, engaged Chris 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 our Company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

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.

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 (Louis Friedman) and principal shareholder in the amount of $ 76,000 (see Note 9).

Interest on the note during the nine months ended March 31, 2024 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 4,406 .

The accrued interest on the note as of March 31, 2024 was $ 39,449 .

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, 2024 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 1,628 and $ 1,615 for the three ended September 30, 2023.

The accrued interest on the note as of September 30, 2024 and June 30, 2024 was $ 42,688 and $ 41,060 , respectively .

This note is subordinate to all other credit facilities currently in place.

On October 30, 2010, Mr.

Friedman, loaned the Company $ 40,000 (see Note 9).

Interest on the note during the nine months ended March 31, 2024 was accrued by the Company at the prevailing prime rate (which is currently 8.50 %) and totaled $ 2,319 .

The accrued interest on the note as of March 31, 2024 was $ 6,652 .

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 ended September 30, 2024 at the prevailing prime rate (which is currently 8.50 %) and totaled $ 856 and $ 850 for the three months ended September 30, 2023[RA1] .

The accrued interest on the note as of September 30, 2024 and June 30, 2024 was $ 8,357 and $ 7,500 respectively.

This note is subordinate to all other credit facilities currently in place.

The Company’s CEO, Louis Friedman, has personally guaranteed the repayment of the loan obligation to Advance Financial Corporation (see Note 10 – Line of Credit).

In addition, Luvu has provided its corporate guarantees of the credit facility.

On March 31, 2024, the balance owed under this line of credit was $ 1,103,049 .

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, 2024, the balance owed under this line of credit was $ 1,053,908 .

On July 20, 2011, the Company issued an unsecured promissory note to an individual for $ 100,000 .

3 unchanged sentences

This note was extended on July 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2025 .

Repayment of this promissory note is personally guaranteed by the Company’s CEO, Louis S.

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, 2023.

This note was extended in full on September 30, 2023 with the same lender with interest payable monthly at 13.5 %, principal due in full on October 31, 2025 .

Repayment of the promissory note is personally guaranteed by the Company’s CEO, Louis Friedman.

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, 2023.

On October 1, 2023, this note was extended through October 31, 2025 at the same interest rate of 13.5 %.

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 %.

1 unchanged sentence

then extended to May 1, 2021 (see Note 8).

This note was repaid in full on April 30, 2021 and extended with the same lender with interest payable monthly at 13.5 %, principal due in full on May 1, 2023.

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, 2023.

Friedman has personally guaranteed the repayment of the loan obligation.

This note was repaid in full on April 30, 2023 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 .

The Company’s CEO has personally guaranteed the repayment of the loan obligation.

The Company has drawn a cash advance on one unsecured lines of credit that is in the name of the Company and Louis S.

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 $ 3,097 at March 31, 2024 (see Note 11).

The loan is personally guaranteed by the Company’s CEO, Louis S.

The aggregate amount owed on the unsecured line of credit was $ 0 at September 30, 2024 and $ 116 at June 30, 2024 (see Note 11).

The loan is personally guaranteed by the Company’s CEO.

STOCKHOLDERS’ EQUITY

At March 31, 2024, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is shareholder-approved and under which 1,650,000 shares are reserved for issuance under the 2015 Plan until such Plan terminates on August 31, 2025.

At September 30, 2024, the Company had the 2015 Stock Option Plan (the “2015 Plan”), which is shareholder-approved and under which 1,700,000 shares are reserved for issuance under the 2015 Plan until such Plan terminates on August 31, 2025.

Under the 2015 Plan, eligible employees and certain independent consultants may be granted options to purchase shares of the Company’s common stock.

The shares issuable 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.

As of March 31, 2024, the number of shares available for issuance under the 2015 Plan was 450,000 .

The following table summarizes the Company’s stock option activities during the nine months ended March 31, 2024:

Number of Shares

Options outstanding as of June 30, 2023

As of September 30, 2024, the number of shares available for issuance under the 2015 Plan was 450,000 .

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

Number of shares of underlying outstanding option

Weighted Average Remaining Contract Life

Weighted Average Exercise Price

Aggregated Intrinsic Value

Option Outstanding as of June 30, 2024

Forfeited or expired

Options outstanding as of March 31, 2024

Options exercisable as of March 31, 2024

Options Outstanding as of September 30, 2024

Options Exercisable as of September 30, 2024

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price 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 $ 0.07 for such day.

There were no stock options exercised during the nine months ended March 31, 2024.

During the nine months ended March 31, 2023, 525,000 stock options were exercised.

There were 200,000 stock options granted during the nine months ended March 31, 2024.

There were no stock options granted during the nine months ended March 31, 2023.

The following table summarizes the weighted average characteristics of outstanding stock options as of March 31, 2024:

There were 300,000 stock options exercised during the three months ended September 30, 2024 and none exercised during the three months ended September 30, 2023.

The 300,000 options exercised were a cashless exercise which resulted in a net exercise amount of 286,385 stock option during the three months ended September 30, 2024 .

There were 200,000 stock options granted during the three months ended September 30, 2024.

There were 200,000 stock options granted during the three months ended September 30, 2023.

The following table summarizes the weighted average characteristics of outstanding stock options as of September 30, 2024:

Outstanding Options

Exercisable Options

Exercise Prices

Number of Shares

Remaining Life (Years)

Weighted Average Price

Options Number of Shares

Weighted Average Price

$0.02 to $0.03

3 unchanged sentences

Stock-based compensation

We account for stock-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation .

We measure the cost of each stock option and at its fair value on the grant date.

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 expense in the financial statements over the respective vesting period.

Stock option-based compensation expense recognized in the consolidated statements of operations for the nine months ended March 31, 2024 and 2023 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.

Stock option-based compensation expense recognized in the consolidated statements of operations for the three months ended September 30, 2024 and 2023 are 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:

Ended March 31,

Ended September 30,

($ in thousands)

3 unchanged sentences

Total Stock-based Compensation Expense

As of March 31, 2024, the Company’s total unrecognized compensation cost was $ 58,115 which will be recognized over the weighted average vesting period of approximately twenty-three months.

As of March 31, 2024 and 2023, there were no warrants outstanding.

The Company’s authorized common stock was 175,000,000 shares at March 31, 2024 and June 30, 2023.

Common shareholders are entitled to dividends if and when declared by the Company’s Board of Directors, subject to preferred stockholder dividend rights.

At March 31, 2024, the Company had reserved the following shares of common stock for issuance:

As of September 30, 2024, the Company’s total unrecognized compensation cost was $ 72,614 which will be recognized over the weighted average vesting period of approximately twenty-seven months.

As of September 30, 2024 and 2023, there were no warrants outstanding.

The Company’s authorized common stock was 175,000,000 shares at September 30, 2024 and June 30, 2024.

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, 2024, the Company had reserved the following shares of common stock for issuance:

September 30,

Shares of common stock reserved for issuance under the 2015 Plan

9 unchanged sentences

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.

SUBSEQUENT EVENTS

On April 1, 2024, the Company issued Christopher Knauf, the Chief Financial Officer and Controller of the Company, 200,000 stock options and an additional 200,000 will be granted on July 1,2024.

The initial 200,000 stock options are exercisable at $ 0.08 per share.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements