What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2025-02-10 · 192 added, 150 removed, 479 unchanged (42% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $ 10 on December 31, 2024 and $ 11 on June 30, 2024

Inventories, net of allowance for inventory reserve of $ 165 on December 31, 2024 and $ 214 on June 30, 2024

Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $ 10 on March 31, 2025 and $ 11 on June 30, 2024

Inventories, net of allowance for inventory reserve of $ 165 on March 31, 2025 and $ 214 on June 30, 2024

Other current assets

10 unchanged sentences

Noncurrent liabilities:

Deferred Tax Liabilities

Deferred Tax Liability

Long-term debt

3 unchanged sentences

Commitments and contingencies (See Note 13)

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 as of December 31, 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 December 31, 2024 and June 30, 2024, 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 March 31, 2025 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 March 31, 2025 and June 30, 2024, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except share data)

6 unchanged sentences

Total operating expenses

Operating income

Operating income/(loss)

Other income (expense):

1 unchanged sentence

Total other income (expense)

Income (loss) from operations before income taxes

Loss from operations before income taxes

Provision for income taxes

Net income/(loss)

Net loss per share:

Shares used in calculation of net income (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 Six Months ended December 31, 2024 and December 31, 2023 (unaudited)

For the Nine Months ended March 31, 2025 and March 31, 2024 (unaudited)

Series A Preferred Stock

Total Stockholders'

Additional Paid-in

Total Stockholders' Equity

(in thousands, except share data)

2 unchanged sentences

Stock option exercises

Ending balance, December 31, 2023

Ending balance, March 31, 2024

Ending balance, June 30, 2024

1 unchanged sentence

Stock option exercises

Ending balance, December 31, 2024

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

Ending balance, March 31, 2025

For the Three Months ended March 31, 2025 and March 31, 2024 (unaudited)

Series A Preferred Stock

Total Stockholders'

Additional Paid-in

Total Stockholders' Equity

(in thousands, except share data)

Ending balance, September 30 ,2023

Ending balance, December 31, 2023

Stock-based compensation expense

Stock option exercises

Ending balance, March 31, 2024

Ending balance, December 31, 2024

Ending balance, September 30, 2024

Stock-based compensation expense

Stock option exercises

Ending balance, December 31, 2024

Ending balance, March 31, 2025

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

(in thousands)

3 unchanged sentences

Stock-based compensation expense

Provision for bad debt

Loss on sale of fixed asset

Inventory reserves

Change in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Prepaid expenses and other assets

Accounts payable

Other accrued liabilities

Accrued expenses and interest

Operating lease liability

5 unchanged sentences

FINANCING ACTIVITIES:

Borrowing under revolving line of credit

Repayment of unsecured line of credit

Borrowing (repayment) under revolving line of credit

Proceeds from unsecured line of credit

Proceeds from unsecured notes payable

1 unchanged sentence

Payments on equipment notes

Principal payments on capital leases

Principal payments on finance leases

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental Disclosure of Cash Flow Information:

9 unchanged sentences

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

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.

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 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.

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.

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.

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").

2 unchanged sentences

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 six months ended December 31, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year.

The results of operations for the nine months ended March 31, 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, 2024 as filed with the Securities and Exchange Commission (the “SEC”) on September 30, 2024 (the “2024 10-K”).

44 unchanged sentences

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 December 31, 2024 was $ 20,679 and was included in “Other accrued liabilities” on the Company’s consolidated balance sheets.

The Company’s total deferred revenue as of March 31, 2025 was $ 20,729 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 .

10 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

The following is a summary of Accounts Receivable as of March 31, 2025 and June 30, 2024.

June 30, 2024

(in thousands)

13 unchanged sentences

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

On December 31, 2024, the Company had bank balances on deposit that exceeded the balance insured by the FDIC by $ 1,054,533 .

On March 31, 2025, the Company had bank balances on deposit that exceeded the balance insured by the FDIC by $ 860,268 .

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

During the three and six month periods ended December 31, 2024, the Company purchased 25 % and 21 % , respectively, of total inventory purchases from one vendor.

During the three and six month periods ended December 31, 2023, the Company purchased 25 % and 24 %, respectively, of total inventory purchases from one vendor.

As of December 31, 2024, two of the Company’s customers represents 40 % and 12 % 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 six months ended December 31, 2024 and December 31, 2023, sales to and through Amazon accounted for 41 % and 42 %, respectively, of the Company’s net sales.

During the three and nine month periods ended March 31, 2025, the Company purchased 23 % and 27 %, respectively, of total inventory purchases from one vendor.

During the three and nine month periods ended March 31, 2024, the Company purchased 29 % and 30 %, respectively, of total inventory purchases from one vendor.

As of March 31, 2025, three of the Company’s customers represent 49 %, 10 % and 9 % of the total accounts receivables, respectively.

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

For the three months ended March 31, 2025 and March 31, 2024, sales to and through Amazon accounted for 35 % and 35 %, respectively, of the Company’s net sales For the nine months ended March 31, 2025 and March 31, 2024, sales to and through Amazon accounted for 35 % and 36 %, respectively, of the Company’s net sales.

Fair Value of Financial Instruments

At December 31, 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.

At March 31, 2025 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.

15 unchanged sentences

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

Prepaid advertising as of December 31, 2024 and June 30, 2024 was $ 0 and $ 836 .

Advertising expense for the three and six months ended December 31, 2024 was $ 247,057 and $ 478,189 , respectively.

Advertising expense for the three and six months ended December 31, 2023 were $ 272,751 and $ 541,295 , respectively.

Prepaid advertising as of March 31, 2025 and June 30, 2024 was $ 0 and $ 836 .

Advertising expense for the three and nine months ended March 31, 2025 was $ 240,145 and $ 718,334 , respectively.

Advertising expense for the three and nine months ended March 31, 2024 were $ 243,786 and $ 785,081 , respectively.

Research and Development

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

For the three months ended December 31, 2024 and 2023, expenses for new product development totaled $ 42,430 and $ 38,115 , respectively.

For the six months ended December 31, 2024 and 2023, expenses totaled $ 85,024 and $ 70,837 .

For the three months ended March 31, 2025 and 2024, expenses for new product development totaled $ 41,409 and $ 44,630 , respectively.

For the nine months ended March 31, 2025 and 2024, expenses totaled $ 126,433 and $ 115,467 .

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

10 unchanged sentences

360, Property, Plant, and Equipment .

The Company has determined that there was no impairment at December 31, 2024 and June 30, 2024.

The Company has determined that there was no impairment at March 31, 2025 and June 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 three months ended December 31, 2024 and 2023 was $ 163,188 and $ 163,188 , respectively.

The rent expense for the six months ended December 31, 2024 and 2023 was $ 326,376 and $ 326,376 , respectively.

The rent expense for the three months ended March 31, 2025 and 2024 was $ 163,188 and $ 163,188 , respectively.

The rent expense for the nine months ended March 31, 2025 and 2024 was $ 489,564 and $ 489,564 , respectively.

Under ASC 842 Leases, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.

13 unchanged sentences

Segment Information

The Company have identified three reportable sales channels:

Direct, Wholesale and Other .

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

As of March 31, 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:

depreciation, amortization and impairments of property and equipment, goodwill and intangible assets,

amortization for capitalized costs,

share-based compensation expense,

gains or losses on sales or dispositions of assets,

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

The Company has identified two reportable sales segmentations:

Direct to Consumer and Wholesale .

Direct to Consumer 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 the Company’s 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.

The Wholesale category also includes contract manufacturing services, which consist of specialty items that are manufactured in small quantities for certain customers, and which, to date, have not been a material part of the Company’s business.

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

Three Months Ended

December 31, 2024

Three Months Ended

December 31, 2023

March 31, 2025

March 31, 2024

(in thousands)

Net Sales by Channel:

Total Net Sales

Direct to Consumer

Cost of Goods Sold

Other direct operating expenses (a)

Overhead expenses(b)

Operating (loss) income

Interest income

Interest expense

Other expense, net

Loss from operations before income taxes

Reconciliation of operating loss to adjusted operating income:

Operating (loss) income

Share-based compensation expense

Depreciation and amortization

Adjusted operating income

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

Overhead expenses are all non-direct expenses related to the operation of the business segment.

It includes G&A, unallocated marketing expenses, facilities, product development, and depreciation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Three Months Ended

(in thousands)

Gross Profit by Channel:

Total Gross Profit

Six Months Ended

December 31, 2024

Six Months Ended

December 31, 2023

(in thousands)

Net Sales by Channel:

Total Net Sales

Six Months Ended

(in thousands)

Nine Months Ended

March 31, 2025

March 31, 2024

(in thousands)

Gross Profit by Channel:

Total Gross Profit

Direct to Consumer

Cost of Goods Sold

Other direct operating expenses (a)

Overhead expenses(b)

Operating (loss) income

Interest income

Interest expense

Other expense, net

Loss from operations before income taxes

Reconciliation of operating (loss) income to adjusted operating income:

Operating (loss) income

Share-based compensation expense

Depreciation and amortization

Adjusted operating income

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

Overhead expenses are all non-direct expenses related to the operation of the business segment.

It includes G&A, unallocated marketing expenses, facilities, product development, and depreciation.

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.

3 unchanged sentences

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 December 31, 2024 and 2023, the common stock equivalents did not have any effect on net income (loss) per share.

As of March 31, 2025 and 2024, the common stock equivalents did not have any effect on net income (loss) per share.

Common stock options – 2015 Plan

19 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 December 31, 2024 or June 30, 2024.

There was no impairment as of March 31, 2025 or June 30, 2024.

INVENTORIES, NET

10 unchanged sentences

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment, property and leasehold improvements at December 31, 2024 and June 30, 2024 consisted of the following:

Equipment, property and leasehold improvements at March 31, 2025 and June 30, 2024 consisted of the following:

Estimated Useful Life

(in thousands)

5 unchanged sentences

Equipment and leasehold improvements, net

For the three months ended December 31, 2024 and 2023, depreciation expense was $ 108,243 and $ 103,770 , respectively.

Depreciation expense was $ 217,464 and $ 202,992 for the six months ended December 31, 2024 and 2023, respectively.

Depreciation expense was $ 106,517 and $ 103,848 , respectively, for the three months ended March 31, 2025 and

For the nine months ended March 31, 2025 and 2024, it was $ 323,981 and $ 306,840 , 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 six months ended December 31, 2024 and 2023.

Management has determined no asset impairment occurred during the nine months ended March 31, 2025 and 2024.

OTHER ACCRUED LIABILITIES

Other accrued liabilities at December 31, 2024 and June 30, 2024:

Other accrued liabilities at March 31, 2025 and June 30, 2024:

March 31, 2025

June 30, 2024

(in thousands)

3 unchanged sentences

CURRENT AND LONG-TERM DEBT SUMMARY

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

Current and long-term debt at March 31, 2025 and June 30, 2024 consisted of the following:

March 31, 2025

June 30, 2024

Current debt:

(in thousands)

Unsecured lines of credit (Note 11)

Line of credit (Note 10)

Short-term unsecured notes payable (Note 8)

Unsecured notes payable (Note 8)

Current portion of equipment notes payable (Note 12)

Notes payable – related party

Notes payable – related party (Note 9)

Current portion of finance leases payable (Note 12)

4 unchanged sentences

Equipment notes payable (Note 12)

Notes payable – related party

Unsecured lines of credit (Note 11)

Notes payable – related party (Note 9)

Total long-term debt

UNSECURED NOTES PAYABLE

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

Unsecured notes payable at March 31, 2025 and June 30, 2024 consisted of the following:

2025(unaudited)

Current debt:

1 unchanged sentence

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

18.0% Unsecured note, due February 28, 2027 (4)

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

2 unchanged sentences

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

13.5% Unsecured note, interest only, due April 30, 2027 (2)

18.0% Unsecured note, due February 28, 2027 (4)

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

1 unchanged sentence

Total unsecured notes payable

UNSECURED NOTES PAYABLE (continued).

(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 December 31, 2023 with the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2025.

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 .

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

2 unchanged sentences

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 unchanged sentences

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

(4) On March 27, 2025, the Company entered into an unsecured 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 %.

NOTES PAYABLE - RELATED PARTY

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

Related party notes payable at March 31, 2025 and June 30, 2024 consisted of the following:

(in thousands)

10 unchanged sentences

In addition, there is a Monthly Service Fee (as defined in the agreement) of currently 0.05 % per month.

LINE OF CREDIT (continue)

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 December 31, 2024, the balance owed under this line of credit was $ 1,203,874 .

As of December 31, 2024, the Company was current and in compliance with all terms and conditions of this line of credit.

On March 31, 2025, the balance owed under this line of credit was $ 961,979 .

As of March 31, 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.

3 unchanged sentences

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

The aggregate amount owed on the unsecured line of credit was $ 0 at December 31, 2024 and $ 116 at June 30, 2024.

The aggregate amount owed on the unsecured line of credit was $ 54,078 at March 31, 2025 and $ 116 at June 30, 2024.

COMMITMENTS AND CONTINGENCIES

Operating Leases

Operating Lease

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 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 December 31, 2024, the weighted average remaining lease term for the lease renewal is 2.2 years and the weighted average discount rate is 14.49 %.

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 March 31, 2025, the weighted average remaining lease term for the lease renewal is 1.9 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 December 31, 2024 and 2023 were $ 52,992 and $ 54,484 respectively.

The cost for these additional rent expenses for the six months ending December 31, 2024 and 2023 were $ 105,983 and $ 108,968 respectively.

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

The cost for these additional rent expenses for the three months ending March 31, 2025, and 2024 were $ 77,551 and $ 56,828 , respectively.

The cost for these additional rent expenses for the nine months ending March 31, 2025, and 2024 was $ 183,554 and $ 165,796 , respectively.

Supplemental balance sheet information related to leases as of March 31, 2025 is as follows:

Operating leases

8 unchanged sentences

Total lease liabilities

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

Maturities of lease liabilities at March 31, 2025 are as follows:

(in thousands)

9 unchanged sentences

COMMITMENTS AND CONTINGENCIES (continued)

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

Years ending December 31, 2024

The following is an analysis of the minimum future equipment note payable payments subsequent to March 31, 2025:

(in thousands)

7 unchanged sentences

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

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 %.

1 unchanged sentence

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 December 31, 2024, the weighted average remaining lease term is 4.3 years, and the weighted average discount rate is 8.1 %

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

Year ending December 31, 2024

At March 31, 2025, the weighted average remaining lease term is 4.3 years, and the weighted average discount rate is 8.1 %

The following is an analysis of the minimum finance lease payable payments subsequent to March 31, 2025:

(in thousands)

2029 and thereafter

Future Minimum Finance Lease Payable Payments

17 unchanged sentences

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 December 31, 2024 was accrued by the Company at the prevailing prime rate (which is currently 7.50 %) and totaled $ 1,500 and $ 1,628 for the three months ended December 31, 2023.

The accrued interest on the note as of December 31, 2024 and June 30, 2024 was $ 44,188 and $ 41,060 , respectively .

Interest on the note during the three months ended March 31, 2025 was accrued by the Company at the prevailing prime rate (currently 7.50 %) and totaled $ 1,405 and $ 1,611 for the three months ending March 31, 2024.

The accrued interest on the note as of March 31, 2025, and June 30, 2024, was $ 45,594 and $ 41,060 , 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 ended December 31, 2024 at the prevailing prime rate (which is currently 7.50 %) and totaled $ 790 and $ 857 for the three months ended December 31, 2023.

The accrued interest on the note as of December 31, 2024 and June 30, 2024 was $ 9,147 and $ 7,500 respectively.

The Company accrued interest on the note during the three months ending March 31, 2025, at the prevailing prime rate (currently 7.50 %) and totaled $ 740 and $ 848 for the three months ending March 31, 2024.

The accrued interest on the note as of March 31, 2025, and June 30, 2024, was $ 9,886 and $ 7,500 , respectively.

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

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

On December 31, 2024, the balance owed under this line of credit was $ 1,203,874 .

On March 31, 2025, the balance owed under this line of credit was $ 961,979 .

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

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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.

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

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.

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 $ 0 at December 31, 2024 and $ 116 at June 30, 2024 (see Note 11).

The aggregate amount owed on the unsecured line of credit was $ 54,078 at March 31, 2025 and $ 0 at June 30, 2024 (see Note 11).

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

STOCKHOLDERS’ EQUITY

At December 31, 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.

At March 31, 2025, 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 December 31, 2024, the number of shares available for issuance under the 2015 Plan was 550,000 .

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

As of March 31, 2025, the number of shares available for issuance under the 2015 Plan was 550,000 .

The following table summarizes the Company’s stock option activities during the nine months ended March 31, 2025:

Number of shares of underlying outstanding option

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Forfeited or expired

Options Outstanding as of December 31, 2024

Options Exercisable as of December 31, 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 $ 0.05 for such day.

There were 300,000 stock options exercised during the six months ended December 31, 2024 and none exercised during the six months ended December 31, 2023.

The 300,000 options exercised were a cashless exercise which resulted in a net exercise amount of 286,385 stock option during the six months ended December 31, 2024 .

During the six months ending December 31, 2024, 100,000 options expired.

There were 250,000 options that expired during the six months ending December 31, 2023.

There were 200,000 stock options granted during the six months ended December 31, 2024.

There were 200,000 stock options granted during the six months ended December 31, 2023.

Options Outstanding as of March 31, 2025

Options Exercisable as of March 31, 2025

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 $ 0.05 for such day.

There were 300,000 stock options exercised during the nine months ended March 31, 2025 and none exercised during the nine months ended March 31, 2024.

The 300,000 options exercised were a cashless exercise, which resulted in a net exercise amount of 286,385 stock options during the nine months ended March 31, 2025 .

During the nine months ending March 31, 2025, 100,000 options expired.

There were 450,000 options that expired during the nine months ending March 31, 2024.

There were 200,000 stock options granted during the nine months ended March 31, 2025.

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

STOCKHOLDERS’ EQUITY (continued)

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

The following table summarizes the weighted average characteristics of outstanding stock options as of March 31, 2025:

Outstanding Options

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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 three and six months ended December 31, 2024 and 2023 are based on awards ultimately expected to vest, and is reduced for estimated forfeitures.

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 and nine months ended March 31, 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:

Ending December 31,

Three Months Ending March 31,

($ in thousands)

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Total Stock-based Compensation Expense

Ending December 31,

Nine Months Ending March 31,

($ in thousands)

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Total Stock-based Compensation Expense

As of December 31, 2024, the Company’s total unrecognized compensation cost was $ 62,851 which will be recognized over the weighted average vesting period of approximately twenty four months.

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

As of March 31, 2025, the Company’s total unrecognized compensation cost was $ 52,581 , which will be recognized over the weighted average vesting period of approximately twenty-four months.

As of March 31, 2025 and 2024, there were no warrants outstanding.

STOCKHOLDERS’ EQUITY (continued)

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

The Company’s authorized common stock was 175,000,000 shares at March 31, 2025 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 December 31, 2024, the Company had reserved the following shares of common stock for issuance:

At March 31, 2025, the Company had reserved the following shares of common stock for issuance:

Shares of common stock reserved for issuance under the 2015 Plan

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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