What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-14 compared with 2025-05-15 · 29 added, 66 removed, 58 unchanged (62% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of goods sold

1 unchanged sentence

Income from operations

The following table represents the net sales and percentage of net sales by product type:

Three Months Ended

(Dollars in thousands)

Products purchased for resale

1 Total Net Sales

Nine Months Ended

(Dollars in thousands)

Products purchased for resale

Total Net Sales

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Sales for the three months ended March 31, 2025, were approximately $5,846,000, a 1% decrease 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 $427,000, or 12%, during the quarter from the comparable prior year period, due primarily to stronger sales through our liberator.com website.

Jaxx sales —Jaxx product sales decreased 19% from the prior year's third quarter to $1,145,000.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Sales for the three months ended September 30, 2025, were approximately $5,841,000, a 1.5% increase from the comparable prior year period.

The major components of net sales by segment are as follows:

Direct sales – Sales through our branded websites increased $186,000, or 11%, during the quarter from the comparable prior year period, due primarily to stronger sales through our Jaxx website capturing more of the outdoor product category.

Wholesale sales —Sales through our wholesale customers decreased 3% from the prior year's first quarter to $3,886,000.

Increased competition from low-cost international manufacturers eroded our sales at several online retailers.

We are increasing our sourcing efforts to reduce our raw materials costs from new vendors.

Avana sales – Net sales of Avana products decreased 24% during the quarter from the comparable prior year third quarter to $518,000.

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.

We have reduced marketing spend on this brand as it was not profitable and reallocated those funds to support the Liberator and Jaxx brands.

Products purchased for resale – This product category decreased by 13%, to $225,000, from the prior year third 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, and royalties.

For the three months ending March 31, 2025 gross profit margin, as a percentage of sales, decreased to 27% from 28% in the same period in the prior year.

Gross profit decreased to $1,603,000 from $1,639,000 for the previous year's third quarter.

Operating expenses .

Total operating expenses for the three months ended March 31, 2025 were approximately 27% of net sales, or approximately $1,604,000, compared to 27% of net sales, or approximately $1,600,000, for the same period in the prior year.

Other income (expense) .

Interest expense during the third quarter decreased to approximately ($87,000) in the third quarter of fiscal 2025 from approximately ($133,000) in the third quarter of fiscal 2024.

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

For the three months ended March 31, 2025, we had a net loss of ($88,000) as compared to a net loss of ($94,000) for the three months ended March 31, 2024.

The reduction in net loss was due to the decrease in interest expense for the period.

Nine months Ended March 31, 2025 Compared to the Nine months Ended March 31, 2024

Sales for the nine months ended March 31, 2025, were approximately $18,787,000, a 0.3% decrease 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 $558,000, or 5%, during the nine months 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 decreased 1% from the prior year's nine period to $4,987,000.

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 18% during the nine months from the comparable prior year period to $1,551,000.

Products purchased for resale – This product category decreased by 15%, or $116,000, from the prior year nine months due to lower sales of certain products through our e-commerce website, Liberator.com.

We continue to add more distribution points both domestically and internationally.

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 nine months ending March 31, 2025 gross profit margin, as a percentage of sales, increased to 27% from 27% in the same period in the prior year.

Gross profit increased to $5,100,000 from $5,039,000 in the prior year comparable nine month period.

For the three months ended September 30, 2025 gross profit margin, as a percentage of sales, increased to 28% from 26% in the same period in the prior year.

Gross profit increased to $1,656,000 from $1,517,000 for the previous year's first quarter due to lower costs for raw materials from international vendors.

Operating expenses .

Total operating expenses for the nine months ended March 31, 2025 were approximately 26% of net sales, or approximately $4,933,000, compared to 26% of net sales, or approximately $4,878,000, for the same period in the prior year.

Increases in facilities expenses and equipment repairs accounted for the majority of the additional expenses.

Total operating expenses for the three months ended September 30, 2025 were approximately 29% of net sales, or approximately $1,671,000, compared to 28% of net sales, or approximately $1,639,000, for the same period in the prior year.

Other income (expense) .

Interest expense during the nine months ended March 31, 2025 decreased to approximately ($272,000) from approximately ($322,000) in the same period from the prior year.

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

For the nine months ended March 31, 2025, we had a net loss of $105,000 as compared to a net loss of $191,000 for the nine months ended March 31, 2024.

The reduction in net loss was due to the decrease in sales and an increase in equipment maintenance costs..

Interest expense during the first quarter decreased to approximately ($116,000) in the first quarter of fiscal 2026 from approximately ($88,000) in the first quarter of fiscal 2025.

The increase was primarily due to the issuance of notes payable during the three months ended September 30, 2025 to fund working capital and inventory needs.

For the three months ended September 30, 2025, we had a net loss of ($131,000) as compared to a net loss of ($210,000) for the three months ended September 30, 2024.

The reduction in net loss was due to the increased gross profit that offset the increase in operating and interest expense.

Variability of Results

7 unchanged sentences

The following table summarizes the Company’s cash flows:

Nine months Ended

Three months Ended

September 30 ,

Cash flow data:

2 unchanged sentences

Cash used in investing activities

Cash used in financing activities

As of March 31, 2025, the Company’s cash and cash equivalents totaled $1,110,268, compared to $1,072,772 in cash and cash equivalents as of March 31, 2024.

The impact of increased tariffs for raw materials and finished goods may have an adverse effect on the future cash position of the Company.

Cash provided by (used in) financing activities

As of September 30, 2025, the Company’s cash and cash equivalents totaled $818,053, compared to $734,910 in cash and cash equivalents as of June 30, 2025 The impact of increased tariffs for raw materials and finished goods may have an adverse effect on the future cash position of the Company.

Our direct exposure to tariff fees is limited, and we are sourcing goods and materials from lower tariff countries.

4 unchanged sentences

Operating Activities

Net cash provided by operating activities was $202,980 during the nine months ended March 31, 2025 compared to $333,193 net cash provided by operating activities in the nine months ended March 31, 2024.

The primary components of the cash provided by operating activities in the current year are the increase in accounts payable of $312,000 and a increase in accounts receivables of $359,000.

Accounts receivable increase was due to the merchant service provider establishing a $200,000 reserve on our credit card transactions.

Net cash provided by operating activities was $80,000 during the three months ended September 30, 2025 compared to $132,000 net cash provided by operating activities in the three months ended September 30, 2024.

The primary components of the cash provided by operating activities in the current year are the increase in accounts payable of $131,988 and an increase in accrued payroll of $186,213.

This was mostly offset by an increase in inventory of $218,562.

Increases in accrued payroll was due to timing of the quarter.

Increases in inventory is due to larger deposits made for raw materials purchased from overseas vendors compared to June 30, 2025.

Investing Activities

Cash used in investing activities in the nine months ended March 31, 2025 was $34,308 compared to a use of $52,212 during the nine months ended March 31, 2024.

This is due to the disposal of a forklift during the nine months ended March 31, 2025.

No replacement forklift is needed at this time.

A replacement database server was purchased in March 2025 for approximately $29,000.

Cash used in investing activities in the three months ended September 30, 2025 was $0 compared to a use of $1,000 during the three months ended September 30, 2024.

Financing Activities

Cash used by financing activities during the nine months ended March 31, 2025 and March 31, 2024 of $86,853 and $249,519 respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes.

Cash provided by (used in) financing activities during the three months ended September 30, 2025 and September 30, 2024 of $3,000 and $(91,000) respectively, primarily attributable to the repayment of the secured and unsecured notes payable and payments made on equipment notes offset by the addition of secured notes payable.

Non-GAAP Financial Measures

Reconciliation of net income to Adjusted EBITDA for the three and nine months ended March 31, 2025 and 2024:

Reconciliation of net income to Adjusted EBITDA for the three ended September 30, 2025 and 2024:

Three Months Ended

Nine Months Ended

(in thousands)

September 30,

(in thousands)

3 unchanged sentences

Adjusted EBITDA

As used herein, Adjusted EBITDA represents net income before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense.

As used herein, Adjusted EBITDA represents net loss before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense.

The Company has excluded the non-cash expenses and stock-based compensation, as they do not reflect the cash-based operations of the Company.

6 unchanged sentences

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

As of March 31, 2025, 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 September 30, 2025, 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