What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-02-17 compared with 2025-11-14 · 42 added, 25 removed, 62 unchanged (52% of the section changed)

4 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Cost of goods sold

1 unchanged sentence

Income from operations

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.

Three and Six Months Ended December 31, 2025 Compared to Three and Six Months Ended December 31, 2024

Sales for the three and six months ended December 31, 2025, were approximately $6,900,000 and $12,700,000, respectively.

For the three month period ended December 31, 2025, this was a 4.2% decline from the same period the prior year.

For the six month period ended December 31, 2025, this was a 1.7% decline 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.

Direct sales – Sales through our branded websites increased $21,000, or 1%, during the three month ended December 31, 2025, from the comparable prior year period, due primarily to stronger sales through our Liberator website.

For the six months ended December 31, 2025, our branded websites increased $210,000 or 5.1% compared to the same period the prior year.

This was the result of increased marketing focus on higher return channels.

Wholesale sales —For the three months ended December 31, 2025, sales to our wholesale customers were $4,404,000, down 7% from the same period in the prior year.

Our wholesale channels continue to experience significant competition from low-cost international manufacturers eroded our sales at several online retailers.

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

1 unchanged sentence

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 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.

For the three and six months ended December 31, 2025 gross profit margin, as a percentage of sales, was 26% and 26% respectively.

Compared to the same period in the prior year, this was a decline from 28% and 27%, respectively.

For the three months ended December 31, 2025, gross profit reduced to approximately $1,800,000 from $1,980,000 in the prior year.

For the six months ended December 31, 2025, gross profit decreased to approximately $,3454,000 from $3,97,000 Foin the prior year.

The decline was related to increased freight and tariff costs.

Operating 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.

Total operating expenses for the three months ended December 31, 2025 were approximately 25% of net sales, or approximately $1,705,271, compared to 24% of net sales, or approximately $1,691,142, for the same period in the prior year.

For the six months ended December 31, 2025, operating expenses were $3,377,000, which is an increase of 1.4% compared to the same period in the prior year.

This increase was mainly related to the change in rent expense related to the new operating lease.

Other income (expense) .

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.

Interest expense increased to approximately ($136,000) in the second quarter of fiscal 2026 from approximately ($97,000) in the second quarter of fiscal 2025.

The increase was primarily due to the issuance of notes payable during the three months ended December 31, 2025 to fund working capital and inventory needs.

For the three months ended December 31, 2025, we had a net loss of ($765,000) as compared to net income of $192,000 for the three months ended December 31, 2024.

The increase is the loss is a result of recognition of the Deferred Tax Liability relating to the new operating lease for the manufacturing facility totaling $813,000.

Variability of Results

7 unchanged sentences

The following table summarizes the Company’s cash flows:

Three months Ended

September 30 ,

Six months Ended

Cash flow data:

3 unchanged sentences

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.

As of December 31, 2025, the Company’s cash and cash equivalents totaled $1,085,613, 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 $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.

Net cash provided by operating activities was $365,000 during the six months ended December 31, 2025 compared to $363,000 net cash provided by operating activities in the six months ended December 31, 2024.

The primary components of the cash provided by operating activities in the current year are the decrease in accounts receivable of $116,964 and decrease in Inventory of $ 234,174.

This was mostly offset by decrease in accounts payable of $162,510 and an increase in accrued payroll of $62,393.

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

Cash used in investing activities in the six months ended December 31, 2025 was $49,270 compared to a use of ($4,000) during the six months ended December 31, 2024.

The company entered into a loan with Navitas for purchasing Factory equipment – Sander Forklift.

Financing Activities

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.

Cash provided by (used in) financing activities during the six months ended December 31, 2025 and December 31, 2024 of $35,000 and $(39,000) 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 ended September 30, 2025 and 2024:

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

Three Months Ended

September 30,

(in thousands)

Net income (loss)

Plus interest expense, financing costs and income tax

1 unchanged sentence

Plus stock-based compensation expense

Plus income tax provision

Adjusted EBITDA

Six Months Ended

(in thousands)

Net income (loss)

Plus interest expense, financing costs and income tax

Plus depreciation and amortization expense

Plus stock-based compensation expense

Plus income tax provision

Adjusted EBITDA

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

7 unchanged sentences

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

As of September 30, 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 December 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.

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