What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-05-15 · 155 added, 194 removed, 477 unchanged (42% 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 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

Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $ 35 on September 30, 2025 and $ 35 on June 30, 2025

Inventories, net of allowance for inventory reserve of $ 232 on September 30, 2025 and $ 232 on June 30, 2025

Other current assets

16 unchanged sentences

Commitments and contingencies (See Note 13)

Stockholders’ equity (deficit):

Stockholders’ equity:

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 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

Series A Convertible Preferred stock, 4,300,000 shares authorized $ 0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $ 1,000 as of September 30, 2025 and June 30, 2025

Common stock, $ 0.01 par value, 175,000,000 shares authorized, 76,834,057 and 76,834,057 shares issued and outstanding as of September 30, 2025 and June 30, 2025, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

(in thousands, except share data)

September 30,

(in thousands, except share data)

5 unchanged sentences

Total operating expenses

Operating income/(loss)

Other income (expense):

Operating loss

Other expense:

Interest expense and financing costs

Total other income (expense)

Total other expense

Loss from operations before income taxes

5 unchanged sentences

and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

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

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months ended September 30, 2025 and September 30, 2024 (unaudited)

Series A Preferred Stock

Additional Paid-in

Total Stockholders' Equity

Total Stockholders'

(in thousands, except share data)

2 unchanged sentences

Stock option exercises

Ending balance, March 31, 2024

Ending balance, September 30, 2024

Ending balance, June 30, 2025

1 unchanged sentence

Stock option exercises

Ending balance, March 31, 2025

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

Series A Preferred Stock

Additional Paid-in

Total Stockholders' Equity

(in thousands, except share data)

Ending balance, December 31, 2023

Stock-based compensation expense

Stock option exercises

Ending balance, March 31, 2024

Ending balance, December 31, 2024

Stock-based compensation expense

Stock option exercises

Ending balance, March 31, 2025

Ending balance, September 30, 2025

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

Three Months Ended

September 30,

(in thousands)

3 unchanged sentences

Stock-based compensation expense

Loss on sale of fixed asset

Change in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Other current assets

Accounts payable

7 unchanged sentences

FINANCING ACTIVITIES:

Borrowing (repayment) under revolving line of credit

Proceeds from unsecured line of credit

Proceeds from unsecured notes payable

Repayment of unsecured notes payable

(Repayment) borrowing under revolving line of credit

Repayment of unsecured line of credit

Proceeds from secured notes payable

Payments on equipment notes

Payments on secured notes payable

Principal payments on finance leases

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

23 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 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”).

The results of operations for the three months ended September 30, 2025 are not necessarily indicative of the results to be expected for the entire fiscal year.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2025 as filed with the Securities and Exchange Commission (the “SEC”) on October 14, 2025 (the “2025 10-K”).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

16 unchanged sentences

Actual results could differ materially from these estimates

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

24 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 March 31, 2025 was $ 20,729 and was included in “Other accrued liabilities” on the Company’s consolidated balance sheets.

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

The deferred revenue balance as of June 30, 2025 was $ 1,700 .

9 unchanged sentences

The Company does not have any off-balance sheet credit exposure related to its customers.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

September 30,

June 30, 2025

4 unchanged sentences

Total accounts receivable, net

The Company estimates expected credit losses on trade receivables and contract assets in accordance with ASC 326, Financial Instruments – Credit Losses .

Effective July 1, 2025, the Company adopted Accounting Standards Update (ASU) 2025-05, Financial Instruments—Credit Losses (Topic 326):

Practical Expedient and Accounting Policy Election for Estimating Expected Credit Losses , and elected the practical expedient permitted therein.

Under this expedient, the Company assumes that current economic conditions as of the balance sheet date remain unchanged over the life of the financial assets.

This approach simplifies the estimation of expected credit losses by removing the requirement to forecast future economic conditions for assets with contractual maturities of one year or less.

As of September 30, 2025, the Company’s accounts receivables totaling $ 1.55 million.

Based on historical loss experience and current conditions, the Company had an allowance for credit losses of $ 35,000 .

The Company believes this estimate reasonably reflects expected losses given the short-term nature of the asset and the stability of current economic conditions.

The Company will continue to monitor credit risk and adjust its allowance methodology as necessary.

No significant changes to the allowance methodology were made during the quarter.

Inventories and Inventory Reserves

8 unchanged sentences

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

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

On September 30, 2025, the Company had bank balances on deposit that exceeded the balance insured by the FDIC by $ 568,053 .

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

During the three 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.

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

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

As of September 30, 2025, three of the Company’s customers represent 41 %, 11 % and 8 % of the total accounts receivable.

For the three months ended September 30, 2024, two customers represented 57 % and 8 % of the total accounts receivable.

For the three months ended September 30, 2025 and September 30, 2024 sales to and through Amazon accounted for 34 % and 38 %, respectively, of the Company’s net sales.

Fair Value of Financial Instruments

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.

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

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

1 unchanged sentence

ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

ASC 820 clarifies that fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability.

11 unchanged sentences

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

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.

Prepaid advertising as of September 30, 2025 and June 30, 2025 was $ 0 and $ 0 .

Advertising expense for the three months ended September 30, 2025, and September 30, 2024, was $ 249,387 and $ 231,131 , respectively.

Research and Development

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

For the three months ended 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 .

For the three months ended September 30, 2025 and 2024, expenses for new product development totaled $ 38,107 and $ 42,594 , respectively.

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

1 unchanged sentence

Property and equipment are stated at cost.

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

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

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized.

1 unchanged sentence

When properties are disposed of, the related costs and accumulated depreciation are removed from the respective accounts, and any gain or loss is recognized currently.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Impairment or Disposal of Long Lived Assets

2 unchanged sentences

360, Property, Plant, and Equipment .

The Company has determined that there was no impairment at March 31, 2025 and June 30, 2024.

The Company has determined that there was no impairment at September 30, 2025 and June 30, 2025.

Operating Leases

On November 2, 2020, the Company entered into an agreement with its landlord on a new lease for the current facilities for six years and two months, beginning January 1, 2021.

The new lease includes two months of rent abatement totaling $ 103,230 .

On November 2, 2020, the Company entered into an agreement with its landlord on a lease for its then current facilities for six years and two months, beginning January 1, 2021.

The lease included two months of rent abatement totaling $ 103,230 .

Under the lease, the monthly rent on the facility is $ 51,615 with annual escalations of 3 % with the final two months of rent at $ 61,605 .

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

The rent expense for the three months ended 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.

The rent expense for the three months ended September 30, 2025 and 2024 was $ 163,188 and $ 163,188 , respectively.

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

13 unchanged sentences

Segment Information

As of March 31, 2025, the Company was comprised of two reportable segments:

As of September 30, 2025, the Company was comprised of two reportable segments:

Direct to Consumer and Wholesale.

3 unchanged sentences

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)

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

(ii) amortization for capitalized costs,

(iii) share-based compensation expense, and

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

The CODM uses AOI for each segment predominantly throughout the annual budget and forecasting process.

6 unchanged sentences

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 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.

1 unchanged sentence

Three Months Ended

March 31, 2025

March 31, 2024

(in thousands)

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)

Nine Months Ended

March 31, 2025

March 31, 2024

September 30, 2025

September 30, 2024

(in thousands)

4 unchanged sentences

Overhead expenses(b)

Operating (loss) income

Operating income (loss)

Interest income

3 unchanged sentences

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

Operating (loss) income

Operating income (loss)

Share-based compensation expense

Depreciation and amortization

Adjusted operating income

1 unchanged sentence

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)

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

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.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies issue new accounting pronouncements that are adopted by the Company as of the specified effective date.

The Company has adopted ASU 2023-07 regarding business segmentation reporting and will be adopting ASU2023-09 and 2024-03 in future filings.

The Company has adopted ASU 2025-05 regarding practical expedient for expected credit loss.

Net Income (Loss) Per Share

1 unchanged sentence

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

As of September 30, 2025 and 2024, the common stock equivalents did not have any effect on net income (loss) per share.

September 30,

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 March 31, 2025 or June 30, 2024.

There was no impairment as of September 30, 2025 or June 30, 2025.

INVENTORIES, NET

2 unchanged sentences

Inventories consisted of the following:

September 30,

(in thousands)

6 unchanged sentences

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

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

Estimated Useful Life

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

September 30,

(in thousands)

5 unchanged sentences

Equipment and leasehold improvements, net

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.

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

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.

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, 2025 and 2024.

Management has determined no asset impairment occurred during the three months ended September 30, 2025 and 2024.

OTHER ACCRUED LIABILITIES

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

March 31, 2025

June 30, 2024

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

September 30,

(in thousands)

3 unchanged sentences

CURRENT AND LONG-TERM DEBT SUMMARY

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

March 31, 2025

June 30, 2024

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

September 30,

Current debt:

2 unchanged sentences

Unsecured notes payable (Note 8)

Secured notes payable (Note 8A)

Current portion of equipment notes payable (Note 12)

Notes payable – related party (Note 9)

Current portion of finance leases payable (Note 12)

2 unchanged sentences

Unsecured notes payable (Note 8)

Secured notes payable (Note 8A)

Finance leases payable (Note 12)

4 unchanged sentences

UNSECURED NOTES PAYABLE

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

2025(unaudited)

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

September 30,

Current debt:

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

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)

3 unchanged sentences

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)

Total long-term debt

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 .

1 unchanged sentence

This note was extended in full on October 31, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on October 31, 2025.

On October 28, 2025, this note was extended in full with the same lender with interest payable monthly at 13.5%, principal is due in full on October 31, 2027 .

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

7 unchanged sentences

This note was extended in full on July 30, 2024 with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2025.

On August 20, 2025, this note was extended with the same lender with interest payable monthly at 13.5%, principal due in full on July 31, 2027 .

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

(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 %.

SECURED NOTES PAYABLE

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

September 30,

(in thousands)

Secured notes payable to third party, with 18% interest, due February 1, 2027 (1)

Secured notes payable to third party, with 19.2% interest, due July 3, 2026 (2)

Secured notes payable to third party, with 19.2% interest, due October 23, 2026 (3)

Total current secured notes payable

Secured notes payable to third party, with 18% interest, due February 1, 2027 (1)

Secured notes payable to third party, with 19.2% interest, due July 3, 2026 (2)

Secured notes payable to third party, with 19.2% interest, due October 23, 2026 (3)

Total long-term secured notes payable

Total secured notes payable

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

(2) On June 4, 2025, the Company entered into a secured note payable in the amount of $ 250,000 with a lender.

The note is paid back on a weekly basis in the amount of $ 5,366 for fifty six payments concluding on July 3, 2026 .

The note is personally guaranteed by the Company’s CEO and principal shareholder.

(3) On September 26, 2025, the Company entered into a secured note payable in the amount of $ 250,000 with a lender.

The note is paid back on a weekly basis in the amount of $ 5,366 for fifty six payments concluding on October 23, 2026 .

The note is personally guaranteed by the Company’s CEO and principal shareholder.

NOTES PAYABLE - RELATED PARTY

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

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

September 30,

(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.

The Company’s CEO and principal shareholder, Louis Friedman, has personally guaranteed the repayment of the facility.

In addition, the Company has provided its corporate guarantee of the credit facility (see Note 13).

On 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.

On September 30, 2025 and June 30, 2025, the balance owed under this line of credit was $ 1,037,582 and $ 1,096,403 .

As of September 30, 2025, the Company was current and in compliance with all terms and conditions of this line of credit.

Management believes cash flows generated from operations, along with current cash and investments as well as borrowing capacity under the line of credit should be sufficient to finance capital requirements required by operations.

2 unchanged sentences

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

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

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

The terms of this unsecured line of credit calls for monthly payments of principal and interest, with interest at 12 % as of September 30, 2025 and was 13.2 % as of June 30, 2025.

The aggregate amount owed on the unsecured line of credit was $ 50,154 at September 30, 2025 and $ 52,144 at June 30, 2025.

COMMITMENTS AND CONTINGENCIES

Operating Lease

Operating Leases

The Company leases its facilities under a non-cancelable operating lease, which now expires February 28, 2027.

1 unchanged sentence

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 %.

At September 30, 2025, the weighted average remaining lease term for the lease renewal is 1.5 years, and the weighted average discount rate is 14.49 %.

In addition to the rent payment, the Company pays a proportionate share of operating costs, taxes, and insurance costs.

The cost for these additional rent expenses for the three months ending 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:

The cost for these additional rent expenses for the three months ending September 30, 2025 and 2024 were $ 72,623 and $ 52,992 , respectively.

Supplemental balance sheet information related to leases as of September 30, 2025 is as follows:

Operating leases

8 unchanged sentences

Total lease liabilities

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

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

(in thousands)

5 unchanged sentences

For financial reporting purposes, minimum note payments relating to the equipment have been capitalized.

The equipment acquired with these equipment notes has a total cost of $ 2,451,838 .

The equipment acquired with these equipment notes have a total cost of $ 1,725,849 .

These assets are included in the fixed assets listed in Note 5 - Equipment and Leasehold Improvements and include production equipment.

The equipment notes have stated or imputed interest rates ranging from 5.9 % to 13.2 %.

COMMITMENTS AND CONTINGENCIES (continued)

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

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

(in thousands)

5 unchanged sentences

For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized.

The equipment acquired with these leases has a total cost of approximately $ 126 ,.

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

The equipment acquired with these leases has a total cost of approximately $ 126,782 These assets are included in the finance lease and include production equipment.

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

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 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:

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

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

Year ending September 2025

(in thousands)

4 unchanged sentences

Long-Term Obligations under Finance Lease Payable

COMMITMENTS AND CONTINGENCIES (continued)

Employment Agreements

11 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 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.

Interest on the note during the three months ended September 30, 2025 was accrued by the Company at the prevailing prime rate (currently 7.25 %) and totaled $ 1,421 and $ 1,628 for the three months ending September 30, 2024.

The accrued interest on the note as of September 30, 2025 and June 30, 2025, was $ 48,436 and $ 47,015 , respectively.

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

On October 30, 2010, the Company’s CEO loaned the Company $ 40,000 (see Note 9).

The Company accrued interest on the note during the three months ending 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.

The Company accrued interest on the note during the three months ending September 30, 2025, at the prevailing prime rate (currently 7.25 %) and totaled $ 747 and $ 857 for the three months ending September 30, 2024.

The accrued interest on the note as of September 30, 2025, and June 30, 2025, was $ 11,382 and $ 10,634 , respectively.

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

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

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

On September 30, 2025, the balance owed under this line of credit was $ 1,037,582 .

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

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This note was extended on July 30, 2024 with the same lender with interest payable monthly at 13.5 %, principal due in full on July 31, 2025 .

This note was extended in full on August 20, 2025 with the same lender with interest payable monthly at 13.5%, principal is due in full on July 31, 2027 .

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

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On October 1, 2024, this note was extended through October 31, 2025 at the same interest rate of 13.5 %.

On October 28, 2025, this note was extended in full with the same lender with interest payable monthly at 13.5 %, principal due in full on October 31, 2027.

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

RELATED PARTY TRANSACTIONS (continued)

On May 1, 2012, an individual loaned the Company $ 200,000 with an interest rate of 20 %.

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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 $ 54,078 at March 31, 2025 and $ 0 at June 30, 2024 (see Note 11).

The aggregate amount owed on the unsecured line of credit was $ 50,154 at September 30, 2025 and $ 52,144 at June 30, 2025 (see Note 11).

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

STOCKHOLDERS’ EQUITY

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 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

Weighted Average Remaining Contract Life

Weighted Average Exercise Price

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

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

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

Contract Life

Exercise Price

Intrinsic Value

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Forfeited or expired

Options Outstanding as of March 31, 2025

Options Exercisable as of March 31, 2025

Options Outstanding as of September 30, 2024

Option Outstanding as of June 30, 2025

Forfeited or expired

Options Outstanding as of September 30, 2025

Options Exercisable as of September 30,2025

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 $ 0.04 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 March 31, 2025:

There were no stock options exercised during the three months ended September 30, 2025 and 300,000 options exercised during the three months ended September 30, 2024.

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

During the three months ending September 30, 2025, no options expired.

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

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

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

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

Outstanding Options

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Number of Shares

Remaining Life (Years)

Weighted Average Price

Options Number of Shares

Weighted Average Price

$0.02 to $0.03

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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.

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

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

Three Months Ending March 31,

($ in thousands)

Cost of Goods Sold

Other Selling and Marketing

General and Administrative

Total Stock-based Compensation Expense

Nine Months Ending March 31,

Ending September 30,

($ in thousands)

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Total Stock-based Compensation Expense

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 March 31, 2025 and June 30, 2024.

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

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

The Company’s authorized common stock was 175,000,000 shares at September 30, 2025 and June 30, 2025.

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

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

At September 30, 2025, 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

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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