What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2026-02-17 · 36 added, 34 removed, 70 unchanged (50% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of goods sold

1 unchanged sentence

Income from operations

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.

Three and Nine Months Ended March 31, 2026 Compared to Three and Nine Months Ended March 31, 2025

Sales for the three and nine months ended March 31, 2026, were approximately $6,500,000 and $19,200,000, respectively.

For the three month period ended March 31, 2026, this was a 12% increase from the same period the prior year.

For the nine month period ended March 31, 2026, this was a 2.6% 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 $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.

Direct sales – Sales through our branded websites increased $367,000, or 19.5%, during the three month ended March 31, 2026, from the comparable prior year period, due primarily to stronger sales through our Liberator website.

For the nine months ended March 31, 2026, our branded websites increased $577,000 or 9.5% 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.

Wholesale sales – For the three months ended March 31, 2026, sales to our wholesale customers were $4,304,000, up 8.4% from the same period in the prior year.

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

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

This strategy has shown effective in addressing these adverse market conditions.

For the nine month period ending March 31, 2026, sales in this channel were down 1% to $12.6 million compared to the same period in the prior year.

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 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.

For the three and nine months ended March 31, 2026 gross profit margin, as a percentage of sales, was 28% and 27% respectively.

For the three and nine months ended March 31, 2025, gross margin was 27% and 27%, respectively.

We have been able to maintain Gross Margin, even though shipping costs and tariff costs have increased this fiscal year, due to the change in sale channel mix and improved raw material sourcing from international vendors.

Operating expenses .

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.

Total operating expenses for the three months ended March 31, 2026 were approximately 25% of net sales, or approximately $1,609,000 compared to 27% of net sales, or approximately $1,603,000 for the same period in the prior year.

For the nine months ended March 31, 2026, operating expenses were $4,895,000, which is a decrease of 0.8% compared to the same period in the prior year.

Reductions in headcount and other overhead expenses were somewhat offset by the increase in rent expense related to the new operating lease.

Other income (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.

Interest expense increased to approximately ($102,000) in the third quarter of fiscal 2026 from approximately ($87,500) in the third quarter of fiscal 2025.

The increase was primarily due to the issuance of short term notes payable during the nine months ended March 31, 2026 to fund working capital and inventory needs.

For the three months ended March 31, 2026, we had a net income of $174,000 as compared to net loss of ($86,650) for the three months ended March 31, 2025.

The increase in net income is a result of stronger sales, improved gross margin, and minimal increase in operating expenses.

For the nine months ended March 31, 2026, the company had a net loss of ($724,000) compared to a net loss of ($104,000) for the same period in the prior year.

The increase in net loss was due to the recognition of a deferred tax liability related to the new operating lease entered into in November 2025 for the manufacturing facility.

Variability of Results

7 unchanged sentences

The following table summarizes the Company’s cash flows:

Six months Ended

Nine months Ended

Cash flow data:

2 unchanged sentences

Cash used in investing activities

Cash provided by (used in) financing activities

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.

Cash used in financing activities

As of March 31, 2026, the Company’s cash and cash equivalents totaled $1,229,719, 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 $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.

During the nine months ended March 31, 2026, net cash provided by operating activities was $690,000 compared to the nine months ended March 31, 2025 in which net cash provided by operating activities was $203,000.

The primary components of the cash provided by operating activities in the current year are the decrease in Inventory of $ 246,119.

This was mostly offset by decrease in accounts payable of $122,583 and an increase in accrued payroll of $225,500.

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

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

Investing Activities

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.

Cash used in investing activities in the nine months ended March 31, 2026 was $109,000 compared to a use of $34,000 during the nine months ended March 31, 2025.

The company entered into a finance lease and an equipment loan for purchasing factory equipment, one for $29,350 and one for $21,812, respectively.

Financing Activities

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.

Cash provided by (used in) financing activities during the nine months ended March 31, 2026 and March 31, 2025 of $(86,000) and $(87,000) respectively is 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 six months ended December 31, 2025 and 2024:

Reconciliation of net income to Adjusted EBITDA for the three and nine months ended March 31, 2026 and 2025:

Three Months Ended

6 unchanged sentences

Adjusted EBITDA

Six Months Ended

Nine Months Ended

(in thousands)

Net income (loss)

Plus interest expense, financing costs and income tax

12 unchanged sentences

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

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.

As of March 31, 2026, 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