EMERSON RADIO CORP

NOTE1 — SIGNIFICANT ACCOUNTING POLICIES:

Description of the Business

The consolidated financial statements include the accounts of Emerson Radio Corp. (“Emerson”, consolidated — the “Company”), and its subsidiaries. The Company designs, sources, imports and markets a variety of houseware and consumer electronic products, and licenses the Emerson trademark for a variety of products domestically and internationally.

Basis of Presentation and Principals of Consolidation

It is the Company’s policy to prepare its consolidated financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Certain items in prior year financials* mayhave been reclassified to conform to current year presentation. In fiscal2023,* the Consolidated Statement of Operations presented licensing revenue as $1,102,000 which included royalty revenue of $730,000 and licensing revenue of approximately $372,000. In fiscal2023, the Consolidated Statement of Cash Flows presented long term lease liabilities as a usage of cash of approximately $141,000 and has been adjusted to a usage of cash of approximately $139,000. Also in fiscal2023, the Consolidated Statement of Cash Flows presented long term finance liability asnil and has been adjusted to a usage of cash of approximately $2,000.

Use of Estimates

The preparation of the Company's financial statements requires management to make estimates and judgements which affect the reported amounts of assets, liabilities, revenues and expenses. Management considers certain accounting policies related to inventory, trade accounts receivables, impairment of long-lived assets, valuation of deferred tax assets, sales return reserves and sales allowance accruals to be critical policies due to the estimation processes involved in each. Actual results could differ from those estimates.

Cash and Cash Equivalents

Highly liquid investments with original maturities ofthree months or less at the time of purchase are considered to be cash equivalents.

Fair Values of Financial Instruments

The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term maturity of these financial instruments.

Long-Lived Assets

The Company’s long-lived assets include property and equipment. At* March 31, 2024*, the Company had approximately $95,000 of propertyand equipment, net of accumulated depreciation. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable in accordance with ASC Topics350 “Intangibles” and360 “Property, Plant and Equipment”. The recoverability of assets held and used is measured by a comparison of the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Future events could cause the Company to conclude that impairment indicators exist and that long-lived assets* may*be impaired. If impairment is deemed to exist, the asset will be written down to fair value. Any such impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets being depreciated. The cost of maintenance and repairs is charged to expense as incurred. Significant renewals and betterments are capitalized and depreciated over the remaining estimated useful lives of the related assets. At time of disposal, the cost and related accumulated depreciation are removed from the Company’s records and the difference between net carrying value of the asset and the sale proceeds is recorded as a gain or loss.

34

Depreciation of property and equipment is provided by the straight-line method as follows:

Revenue Recognition

Distribution of products

Revenue recognition**:** Sales to customers and related cost of sales are primarily recognized at the point in time when control of goods transfers to the customer. The Company recognizes revenues at the time title passes to the customer as this is when the Company satisfies its performance obligation under the contracts with its customers. Under the Direct Import Program, title passes in the country of origin. Under the Domestic Program, title passes primarily at the time of shipment. Estimates for future expected returns are based upon historical return rates and netted against revenues.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue is recorded net of customer discounts, promotional allowances, volume rebates and similar charges. When the Company offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue.

Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves* may*be required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve.

The Company adopted ASC topic606. Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized. Prior to the adoption of ASC topic606, the Company followed the provisions of ASC topic605. The adoption of ASC topic606 didnot have a material impact on revenue recognition as compared to revenue recognition provided under ASC topic605.

If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves* may*be required and are accrued for when such support is offered.

The Company offers limited warranties for its consumer electronics, comparable to those offered to consumers by the Company’s competitors in the United States. Such warranties typically consist of aone year period for microwaves and a 90 day period for audio products, under which the Company pays for labor and parts, or offers a new or similar unit in exchange for a non-performing unit.

Licensing

The Company grants licenses for the right to access the Company’s intellectual property, specifically the Company’s trademarks, for a stated term for the manufacture and/or sale of consumer electronics and other products under agreements which require payment of either (i) a non-refundable minimum guaranteed royalty or, (ii) the greater of the actual royalties due (based on a contractual calculation, normally comprised of actual product sales by the licensee multiplied by a stated royalty rate, or “Sales Royalties”) or a minimum guaranteed royalty amount. In the case of (i), such amounts are recognized as revenue on a straight-line basis over the term of the license agreement. In the case of (ii), Sales Royalties in excess of guaranteed minimums are accounted for as variable fees and arenot recognized as revenue until the Company has ascertained that the licensee’s sales of products have exceeded the guaranteed minimum. In effect, the Company recognizes the greater of Sales Royalties earned to date or the over-time amount of minimum guaranteed royalties to date. In the case where a royalty is paid to the Company in advance, the royalty payment is initially recorded as deferred revenue on the consolidated balance sheets and recognized as revenue as the royalties are deemed to be earned according to the principles outlined above.

Disaggregation of Revenue

35

Inventory**

Inventory is valued at the lower of cost or net realizable value. Cost is determined using thefirst-in,first-out basis and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs.

Accounts Receivable, net

The Company extends credit based upon evaluations of a customer’s financial condition and provides for any anticipated credit losses in the Company’s financial statements based upon management’s estimates and ongoing reviews of recorded allowances. Credit is extended for periods between30 and90 days, on a net basis. If the financial condition of a customer deteriorates, resulting in an impairment of that customer’s ability to make payments, additional reserves* maybe required. Conversely, reserves are reduced to reflect credit and collection improvements. Receivables are written off once they are considered uncollectible. The allowance for doubtful accounts receivable increased approximately $800 for the year ended March 31, 2024* and increased by $20,800 for the year ended* March 31, 2023*. As of* March 31, 2024*, Walmart, Chedraui and Amazon accounted for 34%,30% and 25%, respectively, of the Company’s total trade accounts receivable, net ofspecific reserves. As of* March 31, 2023*, Amazon, Walmart and Fred Meyer accounted for 43%,35% and 11%, respectively, of the Company’s total trade accounts receivable, net of specific reserves.No other customer accounted for more than10% of the Company’s total trade accounts receivable, net of specific reserves, as of* March 31, 2024* or* March 31, 2023*.

Cost of Sales

Cost of sales includes actual product cost, quality control costs, duty, buying costs, the cost of transportation to the Company’sthird party logistics providers’ warehouse from its manufacturers and warehousing costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include all operating costs of the Company that arenot directly related to the cost of procuring product or costsnot included in other operating costs and expenses.

Sales Return Reserves

Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves* maybe required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve. At March 31, 2024the sales return reserve balance was approximately $67,000 as compared to approximately $83,000 as of March 31, 2023,a decrease of $16,000 during fiscal2024.* At* March 31, 2023,the sales return reserve balance was approximately $83,000 as compared to approximately $84,000 as of March 31, 2022,a decrease of $1,000 during fiscal2023.*

Foreign Currency

The assets and liabilities of foreign subsidiaries, whose functional currencies are other than the United States Dollar, have been translated at current exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the year. Related translation adjustments are reported as a separate component of shareholders’ equity. Losses and gains resulting from foreign currency transactions are included in the results of operations.

The Company generally doesnot enter into foreign currency exchange contracts to hedge its exposures related to foreign currency fluctuations and there wereno foreign exchange forward contracts held by the Company at* March 31, 2024* or* March 31, 2023*.

Advertising Expenses

Advertising expenses are charged against earnings as incurred and are included in selling, general and administrative expenses. The Company incurred approximately $122,000 of advertising expenses during fiscal2024 and approximately $39,000 during fiscal2023.

Sales Allowance and Marketing Support Expenses

Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic606, “Revenue from Contracts with Customers”.

36

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic606, “Revenue from Contracts with Customers.” (i) sales incentives offered to customers that meet the criteria for accrual and (ii) an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers which it doesnot expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items because that percentage of shipped revenue fails to meet the collectability criteria within ASC topic606.

If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves* may*be required and are accrued for when such support is offered.

The sales and marketing support accrual activity for fiscal2024 and fiscal2023 was as follows (in thousands):

Interest income, net

The Company records interest income as earned and interest expense as incurred. The net interest income for fiscal2024 and2023 consists of:

Income Taxes

Deferred income taxes are recorded to account for the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets have been recorded net of an appropriate valuation allowance, to the extent management believes it is more likely thannot that such assets will be realized. (See Note5 “Income Taxes.”) Any tax penalties are recorded as part of selling, general and administrative expenses and any interest to which the Company is subject, is recorded as a part of income tax expense. Penalties and interest incurred during fiscal2024 and fiscal2023 were bothnil.

Earnings Per Common Share

Earnings per common share are based upon the weighted average number of common and common equivalent shares outstanding. Outstanding stock options and warrants are treated as common stock equivalents when dilution results from their assumed exercise. As of* March 31, 2024and March 31, 2023,*the Company hadno outstanding options or warrants.

Accounting Pronouncements

The following ASU was issued by the FASB which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates.

Accounting Standards Update2016-13 “Financial Instruments– Credit Losses”** (Issued* June 2016)***

In* June 2016,the FASB issued ASU2016*-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU2016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU2016-13 is effective for fiscal years and interim periods beginning after* December 15, 2022.The adoption didnot* have a material impact on its financial statements.

NOTE2 — INVENTORIES:

Inventories are stated at the lower of cost or net realizable value. Cost is determined using thefirst-in,first-out method. As of* March 31, 2024* and* March 31, 2023*, inventories consisted exclusively of purchased finished goods. As of* March 31, 2024*, inventory was valued at approximately $6,953,000 which included a valuation reserve of approximately $316,000. As of* March 31, 2023*, inventory was valued at approximately $3,813,000 which included a valuation reserve of approximately $320,000.

NOTE3 — RELATED PARTY TRANSACTIONS:

From time to time, Emerson engages in business transactions with its controlling shareholder, Nimble, formerly known as The Grande Holdings Limited, andone or more of Nimble’s direct and indirect subsidiaries, or with entities related to the Company’s Chairman of the Board. Set forth below is a summary of such transactions.

Controlling Shareholder

S&T International Distribution Limited (“S&T”), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd., which is a wholly owned subsidiary of Nimble, collectively have, based on a Schedule13D/A filed with the SEC on* February 15, 2019,the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 72.4%, of the Company’s outstanding common stock as of March 31, 2024.Accordingly, the Company is a “controlled company” as defined in Section801*(a) of the Company Guide.

Related Party Transactions

Charges of rental and utility fees on office space in Hong Kong

During fiscal2024 and fiscal2023, the Company was billed approximately $158,000 and $158,000, resp ectively, for rental and utility fees from Vigers Appraisal and Consulting Ltd (“VACL”), which is a company related to the Company’s Chairman of the Board. The Company owed $827 to VACL related to rental charges as of* March 31, 2024* and $842 as of* March 31, 2023*.

During fiscal2024 and fiscal2023, the Company was billed approximatelynil and $1,600, respectively, for its share of installation charges related to an air conditioning system, and purchase of protective materials for coronavirus from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the Board. Vigers Strategic Services Ltd was formerly known as Lafe Strategic Services Ltd. The Company owednil to VSSL related to these charges as at* March 31, 2024* and* March 31, 2023*.

37

NOTE4 — PROPERTY AND EQUIPMENT:

As of* March 31, 2024and2023*, property and equipment is comprised of the following:

Depreciation of property and equipment amounted to approximately $26,000 and $800 for thetwelve months ended* March 31, 2024and2023*, respectively. During fiscal2024, the Company didnot dispose of any property and equipment. During fiscal2023, the Company disposed of fully depreciated property and equipment with a gross book value of approximately $211,000. The Company didnot recognize a gain or loss on these disposals.

NOTE5 — INCOME TAXES:

The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic740-Accounting for Income Taxes. When uncertain tax positions exist, the Company will recognize the tax benefit of tax positions to the extent that the benefit will more likely thannot be realized. The determination as to whether the tax benefit will more likely thannot be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of* March 31, 2024,the Company doesnot* believe it has any uncertain tax positions.

Income taxes are recorded in accordance with ASC740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely thannot some or all of the deferred tax assets willnot be realized.

As of* March 31, 2024,the Company had available net operating loss carryforwards to reduce federal and state income taxes of approximately $14.8 million and $14.9 million respectively. Ifnot* utilized, these carryforwards begin to expire in 2034. Of the federal net operating loss carryforwards at* March 31, 2024,*$14.8 million can be carried forward indefinitely.

Utilization of the net operating loss and tax credit carryforwards* maybe subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section382* of the Internal Revenue Code of1986, as amended, or the Code, or Section382, as well as similar state provisions and other provisions of the Code. Ownership changes* maylimit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section382,* occurs when there is greater than50% change in the ownership of stock among certain5% shareholders over athree-year period.

The Company’s provision for income tax expense for fiscal2024 and fiscal2023 was as follows:

The Company adopted ASU2019-12 (Topic740)Simplifying the Accounting for Income Taxesduring fiscal2023. In the table above, the income tax expense of $9,000 in fiscal2024 and $7,000 in fiscal2023, was removed as it represented non-income based taxes.

The Company files a consolidated federal return and certain state and local income tax returns.

38

The difference between the effective rate reflected in the provision for income taxes and the amounts determined by applying the statutory federal rate of 21% to earnings before income taxes for fiscal2024 and fiscal2023 is analyzed below:

39

As of* March 31, 2024* and* March 31, 2023*, the significant components of the Company’s deferred tax assets and liabilities which were classified as non-current, were as follows:

40

The Company has $14.8 million of U.S. federal net operating loss carry forwards (“NOLs”) and $14.9 million of state NOLs as of* March 31, 2024* as follows:

• March 31, 2024*

The tax benefits related to these state NOLs and future deductible temporary differences are recorded to the extent management believes it is more likely thannot that such benefits will be realized.

The income of foreign subsidiaries before taxes was $1,181,000 for the fiscal year ended* March 31, 2024* as compared to income before taxes of $772,000 for the fiscal year ended* March 31, 2023*, respectively.

The Company analyzed the future reasonability of recognizing its deferred tax assets at* March 31, 2024*. As a result, the Company concluded that a valuation allowance of approximately $4,510,000 would be recorded against the assets.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of* March 31, 2024*, the Company’s open tax years for examination for U.S. federal tax are tax years ending* March 31,2020 and forward. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns maybe different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may*be subject to additional tax expense.

As of* March 31, 2024* the Company is asserting under ASC740-30 that all of the unremitted earnings of its foreign subsidiaries are indefinitely invested. The Company evaluates this assertion each period based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S.

The Tax Cut and Job Act (“TCJA”) establishes new tax rules designed to tax U.S. companies on global intangible low-taxed income (GILTI) earned by foreign subsidiaries. The Company has evaluated this provision of the TCJA and the application of ASC740 and its impact is reflected in the financial statements as of* March 31, 2024*.

NOTE6 — COMMITMENTS AND CONTINGENCIES:

The Company’s ERP software provider is subscription based with annual commitments as follows (in thousands).

41

Rent expense resulting from leases with non-affiliated companies aggregated $49,000 and $86,000 for fiscal2024 and2023.

Letters of Credit:

The Company utilizes the services ofone of its banks to issue secured letters of credit on behalf of the Company, as needed, on a100% cash collateralized basis. At* March 31, 2024* and* March 31, 2023*, the Company hadno letters of credit outstanding.

Capital Expenditure:

As of* March 31, 2024* and* March 31, 2023*, there wereno capital expenditures or other commitments other than the normal purchase orders used to secure product.

Employee Benefit Plan:

The Company currently sponsors a defined contribution401(k) retirement plan which is subject to the provisions of the Employee Retirement Income Security Act. The Company matches a percentage of the participants’ contributions up to a specified amount. These contributions to the plan for fiscal2024 and2023 were approximately $19,000 for both periods and were charged against earnings for the periods presented.

NOTE7 — SHAREHOLDERS’** EQUITY:**

Common Shares:

Authorized common shares total 75,000,000 with a par value $0.01 per share, of which 21,042,652 were outstanding as of* March 31, 2024* and* March 31, 2023*. Shares held in treasury at* March 31, 2024* and* March 31, 2023* were 31,923,145.

Series A Preferred Stock:

The Company has issued and outstanding 3,677 shares of Series A Preferred Stock, $.01 par value (“Preferred Stock”), with a face value of $3,677,000, which hadno determinable market value as of* March 31, 2024*. The Preferred Stock is non-voting, hasno dividend preferences and hasnot been convertible since* March**31,* 2002; however, it retains a liquidation preference.

NOTE8 — SHORT TERM INVESTMENTS:

At both* March 31, 2024* and* March 31, 2023*, the Company held short-term investments in deposits totalingnil. The Company held $19.1 million in term deposits which were classified as cash equivalents as of* March 31, 2024* and $23.1 million in term deposits classified as cash equivalents as of* March 31, 2023*. As of* March 31, 2024and March 31, 2023,the Company's term deposits had maturity dates of90* days or less.

NOTE9 — NET INCOME (LOSS) PER SHARE:

The following table sets forth the computation of basic and diluted income (loss) per share for the years ended* March 31, 2024* and* March 31, 2023*:

For the years ended* March 31, 2024* and* March 31, 2023*, there wereno outstanding instruments which were potentially dilutive.

42

NOTE10 — LICENSE AGREEMENTS:

During fiscal2024 the Company was party tothree license agreements, one of which was terminated by the Company in* June 2023.The remaining agreements allow the licensee to access the Company’s trademarks for the manufacture and/or the sale of consumer electronics and other products. The license agreements (i) allow the licensee to use the Company’s trademarks for a specific product category, or for sales within specific geographic areas, or for sales to a specific customer base, or any combination of the above, or any other category that might be defined in the applicable license agreement and (ii) maybe subject to renewal at the initial expiration of the applicable license agreement and are governed by the laws of the United States. The Company recorded licensing revenues of approximately $218,000 in fiscal2024* and $372,000 in fiscal2023 under the license agreements.

The Company also recorded severalone-time settlement agreements with customers of Emerson Quiet Kool, which aggregated $175,000 in fiscal2024 and $730,000 in fiscal2023. The agreements allow Emerson Quiet Kool's customers to sell-off their on hand inventories over a limited period. These amounts are presented separately as Royalty Income in the Consolidated Statements of Operations.

NOTE11 — LEGAL PROCEEDINGS:

On* October 10, 2023,the US District Court for the District of Delaware granted final judgment in favor of the Company in its trademark infringement lawsuit against air conditioning and heating products provider Emerson Quiet Kool and wholesaler Home Easy (the “defendants”). Among other things, the court order issues an injunction and directs the US Patent and Trademark Office to cancel the d efendants’ existing and proposed " E merson Q uiet K ool " trademark s and prohibit s d efendants from register ing or applying to register, or using t he same mark or any other mark or name containing the word "Emerson" going forward . The total judgment awarded to the Company has increased from approximately $6.5 million to approximately $10.4 million, inclusive of disgorgement of wrongful profits, attorney's fees and enhanced damages. The aggregate award to the Company also includes the $4.1 million of advanced deposits previously paid to the Company. The$4.1* million of advanced deposits was reduced by approximately $1 million of incurred legal fees. The remaining balance of $3.1 million was released by the Company to other income during the quarter ended* September 30, 2023.Like any judgement, there isno* guarantee that the Company will be able to collect the entire judgement or if it is able to collect, how soon it will be able to do so. The defendants have filed separate bankruptcy petitions in the US Bankruptcy Court for the District of New Jersey, and there isno guarantee that those bankruptcy proceedings willnot have any effect on the ability of the Company to collect the judgement. The Company isnot currently a party to any other legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to its business. Management cannot estimate with certainty the Company’s ultimate legal and financial liability with respect to such pending litigation matters. However, management believes, based on its examination of such matters, that the Company’s ultimate liability willnot have a material adverse effect on the Company’s financial position, results of operations or cash flows.

NOTE12 — RISKS AND UNCERTAINTIES:

Customer Concentration

For fiscal2024, the Company’sthree largest customers accounted for approximately 83% of the Company’s net revenues, with Walmart accounting for 53%, Amazon accounting for 20% and Fred Meyer accounting for 10%. For fiscal2023, the Company’sthree largest customers accounted for approximately 77% of the Company’s net revenues with Walmart accounting for 42%, Amazon accounting for 23% and Fred Meyer accounting for 12%.

Product Concentration

For fiscal2024, the Company’s gross product sales included microwave ovens, which generated approximately 33%, and audio products, which generated 66% of the Company's gross product sales.

For fiscal2023, the Company’s gross product sales included microwave ovens, which generated approximately 27%, and audio products, which generated 73% of the Company's gross product sales.

As a result of this dependence, a significant decline in pricing of, or market acceptance of these product types and categories, either in general or specifically as marketed by the Company, would have a material adverse effect on the Company’s business, financial condition and results of operations. Because the market for these product types and categories is characterized by periodic new product introductions, the Company’s future financial performance will depend, in part, on the successful and timely development and customer acceptance of new and enhanced versions of these product types and other products distributed by the Company. There can beno assurance that the Company will continue to be successful in marketing these products types within these categories or any other new or enhanced products.

43

Concentrations of Credit Risk

As a percent of the Company’s total trade accounts receivable, net ofspecific reserves, Walmart, Chedraui and Amazon accounted for 34%,30% and 25%, respectively, as of* March 31, 2024*. As a percent of the Company’s total trade accounts receivable, net of specific reserves, Amazon, Walmart and Fred Meyer accounted for 43%,35% and 11%, respectively, as of* March 31, 2023*.No other customer accounted for more than10% of the Company’s total trade accounts receivable, net of specific reserves, as of* March 31, 2024* or* March 31, 2023*. The Company periodically performs credit evaluations of its customers but generally doesnot require collateral, and the Company provides for any anticipated credit losses in the financial statements based upon management’s estimates and ongoing reviews of recorded allowances. The accounts receivable allowance for doubtful accounts on the Company’s total trade accounts receivable balances was approximately $25,000 at* March 31, 2024* and at* March 31, 2023*. Due to the high concentration of the Company’s net trade accounts receivables among justthree customers, any significant failure byone of these customers to pay the Company their outstanding balances would result in a material adverse effect on the Company’s business, financial condition and results of operations.

The Company maintains its cash accounts with major U.S. and foreign financial institutions. The Company’s cash and restricted cash balances on deposit in the U.S. as of* March 31, 2024* and* March 31, 2023* were insured by the Federal Deposit Insurance Corporation (“FDIC”) up to*$250,000* per qualifying bank account in accordance with FDIC rules. The Company’s cash, cash equivalents and restricted cash balances in excess of these FDIC-insured limits were approximately $19.6 million and approximately $25.0 million at* March 31, 2024* and* March 31, 2023*, respectively.

Supplier Concentration

During fiscal2024, the Company reduced its reliance on its largest factory supplier, from approximately 75% to 38% of the Company's purchases of products for resale. During fiscal2023, the Company procured 95% of its products for resale from itstwo largest factory suppliers. Approximately 75% of these products were procured fromone of the suppliers and approximately 20% were procured from the other.

No assurance can be given that ample supply of product would be available at current prices and on current credit terms. This is if the Company were required to seek alternative sources of supply, without adequate notice by a supplier or a reasonable opportunity to seek alternate production facilities and component parts. Any resulting significant shortage of product supply would have a material adverse effect on the Company’s business, financial condition and results of operation.

Third Party Representatives

In fiscal2024, the Company utilized 6 sales representative organizations, includingone which represented approximately 30% of its net revenues. In fiscal2023, the Company utilized 2 sales representative organizations, includingone which represented 38% of it net revenues.No other sales representative organization accounted for more than10% of the Company's net revenues in fiscal2024 or fiscal2023. The loss or reduction of product sales made throughthird party representative organizations could have a material adverse effect on the Company's business and results of operations. Finding replacement organizations could be a time consuming process during which the Company's revenues could be negatively impacted.

NOTE13 — GEOGRAPHIC INFORMATION:

Net revenues and long-lived assets of the Company for the fiscal years ended* March 31, 2024* and* March 31, 2023* are summarized below by geographic area (in thousands). Net revenues are attributed to geographic area based on the location of the customer.

44

NOTE14 — LEASES

The Company leases office space in the U.S. and in Hong Kong as well as a copier in the U.S. These leases have remaining non-cancellable lease terms of three tofifty-seven months. The Company has electednot to separate lease and non-lease components for all leased assets. The Company didnot identify any events or conditions during fiscal2024 to indicate that a reassessment or re-measurement of the Company’s existing leases was required. There were alsono impairment indicators identified during fiscal2024 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC360-10, "Impairment and Disposal of Long-Lived Assets”.

As of* March 31, 2024*, the Company’s current operating and finance lease liabilities were approximately $93,000 and*$300,* respectively, and its non-current operating and finance lease liabilities were approximately $198,000 andnil, respectively. The Company’s operating and finance lease right-of-use asset balances are presented in non-current assets. The net balance of the Company’s operating and finance lease right-of-use assets as of* March 31, 2024* were approximately $282,000 and*$200,* respectively.

As disclosed in "Note3 - Related Party Transactions", the Company's Hong Kong office space is being leased from Vigers Appraisal and Consulting Ltd (“VACL”), which is a company related to the Company’s Chairman of the Board. As of* March 31, 2024*, the current operating liability of this lease is approximately $62,000 and its non-current liability isnil. Its right-of-use asset value is approximately $61,000, as of* March 31, 2024*.

In* January 2023,the Company relocated its corporate headquarters to a temporary office space, while its new landlord built out the agreed-upon space. The Company wasnot* obligated to pay rent while it resided in the temporary office space. The Company took possession of the completed space on* July**1,* 2023, which became the commencement date of a 66 month lease. The right-of-use asset value of this operating lease is approximately $248,000.

The components of lease costs, which were included in operating expenses in the Company’s condensed consolidated statements of operations, were as follows:

45

Information relating to the lease term and discount rate are as follows:

As of March 31, 2024 the maturities of lease liabilities were as follows:**

**NOTE15 **—****GOVERNMENTAL ASSISTANCE PROGRAM

During fiscal2024 and2023, the Company’s Hong Kong subsidiary recorded income ofnil and approximately $34,000, respectively, under a governmental program called the Employment Support Scheme (“ESS”). The proceeds were required to be used for payroll expenses and the Company was subject to government-appointed random reviews to verify the information submitted by the applicant.

The income realized from the amount granted under the ESS program is presented as Other Income under the description called “Income from governmental assistance program” in the Consolidated Statements of Operations.

NOTE16 —** **SUBSEQUENT EVENTS

As of the date of this filing, there wereno subsequent events to disclose.