What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-02-10 compared with 2024-11-14 · 61 added, 31 removed, 62 unchanged (60% of the section changed)

4 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Cost of goods sold

4 unchanged sentences

(Dollars in thousands)

September 30, 2 024

September 30, 2023

December 31, 2024

December 31, 2023

Products purchased for resale

Total Net Sales

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Sales for the three months ended September 30, 2024, were approximately $5,756,000, a 6% decrease from the comparable prior year period.

Six Months Ended

(Dollars in thousands)

December 31, 2024

December 31, 2023

Products purchased for resale

Total Net Sales

Three Months Ended December 31, 2024 Compared to Three Months Ended December 31, 2023

Sales for the three months ended December 31, 2024, were approximately $7,186,000, a 6% increase from the comparable prior year period.

The major components of net sales, by product, are as follows:

Liberator sales - Sales of Liberator branded products decreased $214,000, or 6%, during the quarter from the comparable prior year period, due primarily to lower sales through our wholesale channels.

Weaker consumer sentiment continues to drag the sector.

Jaxx sales – Jaxx product sales increased 1% from the prior year first quarter to $1,820,000.

We continue to develop our marketing efforts into the special education market, which offsets the decline in the competitive online market place.

Avana sales – Net sales of Avana products decreased 9% during the quarter from the comparable prior year quarter to $485,000.

Sales of this product line have been impacted by lower-priced competitive products in the marketplace, production constraints which resulted in longer delivery lead times which resulted in lower sales through drop ship channels including Amazon, Overstock and Wayfair.

Products purchased for resale – This product category decreased by 16%, or $39,000, from the prior year first quarter due to lower sales of certain products through our e-commerce website, Liberator.com.

Liberator sales - Sales of Liberator branded products increased $345,000, or 9%, during the quarter from the comparable prior year period, due primarily to stronger sales through our liberator.com website.

Jaxx sales – Jaxx product sales increased 12% from the prior year second quarter to $2,023,000.

We continue to develop our marketing efforts into the special education market and expand our product assortment.

Avana sales – Net sales of Avana products decreased 20% during the quarter from the comparable prior year second quarter to $548,000.

Products purchased for resale – This product category decreased by 15%, or $44,000, from the prior year second quarter due to lower sales of certain products through our e-commerce website, Liberator.com.

We believe our focus on expanding our online third party drop ship business will return this channel to growth.

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, royalties and depreciation.

Gross profit margin, as a percentage of sales, increased to 26% from 26% in the prior year first quarter.

Gross profit decreased to $1,517,000 from $1,582,000 in the prior year first quarter.

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 ending December 31, 2024 gross profit margin, as a percentage of sales, increased to 28% from 27% in the same period in the prior year.

Gross profit increased to $1,982,000 from $1,818,000 in the prior year second quarter.

Operating expenses .

Total operating expenses for the three months ended September 30, 2024 were approximately 28% of net sales, or approximately $1,639,000, compared to 26% of net sales, or approximately $1,614,000, for the same period in the prior year.

Total operating expenses for the three months ended December 31, 2024 were approximately 24% of net sales, or approximately $1,691,000, compared to 25% of net sales, or approximately $1,664,000, for the same period in the prior year.

Other income (expense) .

Interest expense during the first quarter decreased from approximately ($96,000) in the first quarter of fiscal 2024 to approximately ($89,000) in the first quarter of fiscal 2025.

Interest expense during the second quarter decreased from approximately ($98,000) in the second quarter of fiscal 2024 to approximately ($94000) in the second quarter of fiscal 2025.

The decrease was primarily due to the reduction in notes payable.

For the three months ended September 30, 2024, we had a net loss of $210,000 as compared to a net loss of $126,000 for the three months ended September 30, 2023.

The increase in net loss was primarily due to the decrease in Liberator product sales.

For the three months ended December 31, 2024, we had a net profit of $193,000 as compared to a net profit of $29,000 for the three months ended December 31, 2023.

The increase in net income was due to the increase in sales and the reduction in production costs which provided an increase in the gross margin for the period.

Six Months Ended December 31, 2024 Compared to the Six Months Ended December 31, 2023

Sales for the six months ended December 31, 2024, were approximately $12,941,000, a 0.2% increase from the comparable prior year period.

The major components of net sales, by product, are as follows:

Liberator sales - Sales of Liberator branded products increased $131,000, or 2%, during the six month from the comparable prior year period, due primarily to stronger sales through our liberator.com website but were slightly offset by a decline in our wholesale accounts.

Jaxx sales – Jaxx product sales increased 6% from the prior year six month to $3,842,000.

We continue to develop our marketing efforts into the special education market and expand our product assortment.

Avana sales – Net sales of Avana products decreased 15% during the six months from the comparable prior year period to $1,032,000.

Products purchased for resale – This product category decreased by 15%, or $82,000, from the prior year six months due to lower sales of certain products through our e-commerce website, Liberator.com.

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 six months ending December 31, 2024 gross profit margin, as a percentage of sales, increased to 27% from 26% in the same period in the prior year.

Gross profit increased to $3,497,000 from $3,400,000 in the prior year comparable six month period.

Operating expenses .

Total operating expenses for the six months ended December 31, 2024 were approximately 26% of net sales, or approximately $3,329,000, compared to 25% of net sales, or approximately $3,278,000, for the same period in the prior year.

Reduction in advertising expense was offset by an increase in personnel related expenses.

Other income (expense) .

Interest expense during the six months ended December 31, 2024 decreased to approximately ($185000) from approximately ($188,000) in the same period from the prior year.

The decrease was primarily due to the reduction in notes payable.

For the six months ended December 31, 2024, we had a net loss of $17,000 as compared to a net loss of $97,000 for the six months ended December 31, 2023.

The reduction in net loss was due to the increase in sales and the reduction in production costs which provided an increase in the gross margin for the period.

Variability of Results

7 unchanged sentences

The following table summarizes the Company’s cash flows:

Three Months Ended

September 30 ,

Six Months Ended

December 31 ,

Cash flow data:

2 unchanged sentences

Cash used in investing activities

Cash provided by financing activities

As of September 30, 2024, the Company’s cash and cash equivalents totaled $1,067,862, compared to $1,132,317 in cash and cash equivalents as of September 30, 2023.

Cash used in financing activities

As of December 31, 2024, the Company’s cash and cash equivalents totaled $1,349,285, compared to $1,213,068 in cash and cash equivalents as of December 31, 2023.

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.

1 unchanged sentence

Operating Activities

Net cash provided by operating activities was $132,000 during the three months ended September 30, 2024 compared to $171,000 net cash provided by operating activities in the three months ended September 30, 2023.

The primary components of the cash provided by operating activities in the current year is the decrease in Inventory of $283,000 offset in part by an increase in accounts receivable of $137,000.

Net cash provided by operating activities was $363,000 during the six months ended December 31, 2024 compared to $370,000 net cash provided by operating activities in the three months ended December 31, 2023.

The primary components of the cash provided by operating activities in the current year is the increase in Accrued expenses and payroll of $107,000 and a reduction in operation lease costs of $151,000.

Inventory reserves were reduced by $49,000 for the period.

Investing Activities

Cash used in investing activities in the three months ended September 30, 2024 and September 30, 2023 was $1,000 and $32,000, respectively, related to the purchase of computer equipment and the installation of certain production equipment during the periods.

Cash used in investing activities in the six months ended December 31, 2024 was $3,000 compared to a use of $39,000 during the six months ended December 31, 2023.

This is due to the disposal of a forklift during the six months ended December 31, 2024.

No replacement forklift is needed at this time.

Financing Activities

Cash used by financing activities during the three months ended September 30, 2024 and September 30, 2023 of $91,000 and $43,000 respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes.

Cash used by financing activities during the three months ended December 31, 2024 and December 31, 2023 of $39,000 and $159,000 respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes.

Non-GAAP Financial Measures

Reconciliation of net income to Adjusted EBITDA for the three months ended September 30, 2024 and 2023:

Reconciliation of net income to Adjusted EBITDA for the three and six months ended December 31, 2024 and 2023:

Three Months Ended

September 30,

Six Months Ended

(in thousands)

Net income (loss)

Plus interest expense, financing costs and income tax

11 unchanged sentences

Accordingly, the Company’s liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities.

As of September 30, 2024, the Company did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

As of December 31, 2024, 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

8 unchanged sentences

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 2. Management’s Discussion and Analysis