EMERSON RADIO CORP
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
MSN$0.29-1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-20.
0001437749-24-004822
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial ConditionCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026775
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial ConditionThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 54 previous paragraphs and 41 current paragraphs.
14 unchanged; 22 reworded; 5 added; 17 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 26 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
ii)Audio products: Net sales of audio products were essentially flat at approximately $1.0 million for the three month period ended June 30, 2024 as compared to approximately $1.0 million for the three month period ended June 30, 2023.
Current report
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 defendants’ existing and proposed "Emerson Quiet Kool" trademarks and prohibits defendants from registering or applying to register, or using the 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 is no 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 is no guarantee that those bankruptcy proceedings will not have any effect on the ability of the Company to collect the judgement. The Company is not 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 will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Current report
Licensing revenue — Licensing revenue for the three month period ended June 30, 2024 was approximately $69,000 as compared to approximately $77,000 for the three month period ended June 30, 2023, a decrease of approximately $8,000, or 10.4%. The year-over-year decreasewas the result of lost revenue from a terminated licensee in June 2023 of approximately $54,000, partially offset by the increase in revenue from a new licensee of approximately $25,000 and from an existing licensee of approximately $21,000.
Current report
Recent Accounting Pronouncement
Current report
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): "Improvements to Reportable Segment Disclosures" ("ASU 2023-07") to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the condensed consolidated financial statements. We do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.
Removed paragraphs (17)
Previous report
Net product sales for the nine month period ended December 31, 2023 were $6.7 million as compared to $4.3 million for thenine month period ended December 31, 2022, an increase of $2.4 million, or 55.6%. The Company’s sales during thenine month periods ended December 31, 2023 and December 31, 2022 were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Fred Meyer – comprising in the aggregate approximately 91% of the Company’s total net product sales for both periods.
Previous report
ii) Audio products: Net sales increased $0.4 million, or 27.4%, to $2.0 million for the three month period ended December 31, 2023 as compared to $1.6 million for the three month period ended December 31, 2022, resulting from increased net sales of clock radios. Net sales increased $1.4 million, or 44.4%, to $4.7 million for the nine month period ended December 31, 2023 as compared to $3.3 million for the nine month period ended December 31, 2022, resulting from increased net sales of clock radios.
Previous report
Starting in the fourth quarter of fiscal 2020, the global COVID-19 pandemic has presented significant challenges and impacted the Company’s business and operating results, and the operations and production capabilities of the Company’s suppliers in China. The pandemic has directly and indirectly disrupted certain sales and supply chain activities. Global component shortages, in particular semiconductor chips, arising from changes in consumer demand and reduced manufacturing capacity related to the COVID-19 pandemic may cause price fluctuations and longer lead times in the supply of these components. Although the Company is seeking alternate suppliers for these components, developing alternate sources of supply will be time consuming, difficult and costly, and may require the re-tooling of products to accommodate components from different suppliers. In addition to increasing cost trends, the Company’s suppliers are not equipped to hold meaningful amounts of inventory and could pause manufacturing, which could ultimately impact the Company’s ability to fulfill customer orders on a timely basis. These impacts on the Company’s supply chain may continue to impact the Company’s ability to meet product demand, which could result in additional costs, customer dissatisfaction in the event of inventory shortages or may otherwise adversely impact the Company’s business and results of operations.
Previous report
Legal Proceedings*** ***— On April 19, 2022, the U.S. District Court for the District of Delaware (the "District Court") granted 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 District Court’s order included an injunction prohibiting Defendants’ distribution, manufacturing, and sales of EMERSON QUIET KOOL branded products or use of that trademark and directed the U.S. Patent and Trademark Office to cancel Defendants’ trademark registration for the EMERSON QUIET KOOL trademark and prohibited Defendants from attempting to register that mark or any other confusingly similar mark in the future. The judgment also awards $6.5 million to the Company. The Defendants, through a third party, made certain payments to the Company, including certain advances towards a portion of their liability. Those amounts were previously reflected as advanced deposits in the Consolidated Balance Sheets. The aggregate amount of the payments is $4.1 million, which has been reduced by approximately $784,000 for legal fees incurred in fiscal 2023 and approximately $216,000 for legal fees incurred in fiscal 2024, in pursuit of the advanced deposits. Separately, on July 11, 2023, the U.S. Court of Appeals for the Third Circuit affirmed the District Court's judgment against the Defendants. On September 29, 2023, the District court granted the Company’s request for final judgement including approximately $3.16 million in legal fees and $700,000 in enhanced damages, along with the prospect of additional damages due to Defendants’ alleged contempt of court. The Company is pursuing all available remedies against the Defendants and those acting in concert with them. There is no guarantee that the Company will be able to collect the entire judgment or that any negotiated resolution regarding these matters will ever be agreed among the parties or, if agreed, how soon the parties might be able to do so. Due to the legal judgement having been affirmed as stated above, the Company has released the balance of the advanced deposits of approximately $3,100,000, to other income during the quarter ended September 30, 2023.
Previous report
Licensing revenue — Licensing revenue for the three month period ended December 31, 2023 was $23,000 as compared to $123,000 for the three month period ended December 31, 2022, a decrease of $100,000, or 81.0%. Licensing revenue for the nine month period ended December 31, 2023 was $124,000 as compared to $271,000 for the nine month period ended December 31, 2022, a decrease of $147,000, or 54.2%. The decreases for the three and nine month periods ended December 31, 2023 were a result of an expiring license agreement on December 31, 2022.
Previous report
Royalty income — Royalty income for the three month periods ended December 31, 2023 and December 31, 2022 were nil and $105,000, respectively. Royalty income for the nine month periods ended December 31, 2023 and December 31, 2022 were nil and $700,000, respectively. The royalty income in the three and nine month periods ended December 31, 2022 was derived from sell-off agreements made with customers of Emerson Quiet Kool, which did not repeat during the three and nine month periods ended December 31, 2023.
Previous report
Cost of sales increased $2.1 million, or 59.3% to $5.7 million for thenine month period ended December 31, 2023 as compared to $3.6 million for thenine month period ended December 31, 2022. The increase in absolute terms for thenine month period ended December 31, 2023 as compared to thenine month period ended December 31, 2022 was primarily related to an increase in net product sales and by higher year-over-year gross cost of sales as a percentage of gross sales.
Previous report
S,G&A was $3.5 million for thenine month period ended December 31, 2023 as compared to $3.7 million for thenine month period ended December 31, 2022, a decrease of $0.2 million or 6.0%. S,G&A, as a percentage of net revenues, was 50.4% for thenine month period ended December 31, 2023 as compared to 69.5% for thenine month period ended December 31, 2022. The Company benefitted from a decrease in legal fees of $546,000, a decrease in insurance expense of $31,000 and a decrease in rent expense of $32,000 for the nine month period ended December 31, 2023 as compared to the nine month period ended December 31, 2022. These reductions were offset by an increase in compensation costs of $156,000, additional advertising costs of $50,000, travel and entertainment fees of $21,000, auditing fees of $28,000 and bad debt expense of $73,000 for thenine month period ended December 31, 2023. as compared to the nine month period ended December 31, 2022. Legal fees for thenine month period ended December 31, 2023 were $461,000 as compared to $1,007,000 for thenine month period ended December 31, 2022. Insurance expense for thenine month period ended December 31, 2023 was $357,000 as compared to $388,000 for thenine month period ended December 31, 2022. Rent expense for thenine month period ended December 31, 2023 was $142,000 as compared to $174,000 for thenine month period ended December 31, 2022. Compensation costs for thenine month period ended December 31, 2023 were$1,680,000 as compared to $1,524,000 for thenine month period ended December 31, 2022.
Previous report
Settlement of litigation — Based on a judgement affirmation by the U.S. Court of Appeals for the Third Circuit, the Company recorded income of $3.1 million, which was the remaining balance of the advanced deposits as of September 30, 2023. See "Note 11 - Legal Proceedings".
Previous report
Interest income, net, was $872,000 for thenine month period ended December 31, 2023 as compared to $424,000 for thenine month period ended December 31, 2022, an increase of $448,000. The increase was primarily due to higher average interest rates earned on the Company’s short term investments.
Previous report
Income from governmental assistance programs — For the three month periods ended December 31, 2023 and December 31, 2022, the Company recorded income of nil and approximately $4,000, respectively, under the ESS program. See “Note 10 – Governmental Assistance Programs”.
Previous report
For thenine month periods ended December 31, 2023 and December 31, 2022, the Company recorded income of nil and approximately $34,000, respectively, under the ESS program. See “Note 10 – Governmental Assistance Programs”.
Previous report
The Company realized net income of $1,649,000 for the nine month period ended December 31, 2023 as compared to a net loss of $1,471,000 for the nine month period ended December 31, 2022.
Previous report
Recently Issued Accounting Pronouncements
Previous report
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. This standard took effect in the first quarter (June 2021) of the Company’s fiscal year ending March 31, 2022. The adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures.
Previous report
Accounting Standards Update 2016-13“Financial Instruments–* Credit Losses**”** (Issued June 2016)***
Previous report
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 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, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2022. The adoption of ASU 2016-13 had no material impacts on the Company's financial statements.
Reworded paragraphs (22)
Previous wording
The following discussion of the Company’s operations and financial condition should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Current wording
The following discussion of the Company’s operations and financial condition should be read in conjunction with the interim condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.
Previous wording
The following table summarizes certain financial information for the three and nine month periods ended December 31, 2023 (fiscal 2024) and December 31, 2022 (fiscal 2023) (in thousands):
Current wording
The following table summarizes certain financial information for the three month period ended June 30, 2024 (fiscal 2024) and June 30, 2023 (fiscal 2023) (in thousands):
Previous wording
Net product sales — Net product sales for the three month period ended December 31, 2023 were $2.6 million as compared to $1.7 million for the three month period ended December 31, 2022, an increase of $0.9 million, or 52.5%. The Company’s sales during the three month periods ended December 31, 2023 and December 31, 2022 were highly concentrated among the Company’s two largest customers – Wal-Mart and Amazon – comprising in the aggregate approximately 85% and 95%, respectively, of the Company’s total net product sales for such periods.
Current wording
Net product sales — Net product sales for the three month period ended June 30, 2024 were approximately $2.1 million as compared to approximately $1.7 million for the three month period ended June 30, 2023, an increase of $0.4 million, or 22.9%. The Company’s sales during the three month period ended June 30, 2024 were highly concentrated among its three largest customers – Amazon, Walmart and Chedraui – comprising in the aggregate approximately 89% of the Company’s total net product sales. The Company’s sales during the three month period ended June 30, 2023, were highly concentrated among its three largest customers – Walmart, Amazon and Fred Meyer – comprising in the aggregate approximately 92% of the Company’s total net product sales.
Previous wording
Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period. In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approxim ately$3,000 and $10,000 forthe three month periods ended December 31, 2023 and December 31, 2022, respectively, and by approximately $9,000 and $15,000 for the nine month periods ended December 31, 2023 and December 31, 2022, respectively. The major elements which contributed to the overall increase in net product sales were as follows:
Current wording
Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period. In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approxim ately$10,000 and $3,000 forthe three month periods ended June 30, 2024 and June 30, 2023, respectively. The major elements which contributed to the overall increase in net product sales were as follows:
Previous wording
i)Houseware products: Net sales increased $0.4 million, or 313.4%, to $0.6 million for the three month period ended December 31, 2023 as compared to $0.2 million for the three month period ended December 31, 2022, driven by increased net sales of microwave ovens and refrigerators. Net sales increased $0.9 million, or 89.9%, to $2.0 million for the nine month period ended December 31, 2023 as compared to $1.1 million for the nine month period ended December 31, 2022, driven by increased net sales of microwave ovens and refrigerators.
Current wording
i)Houseware products: Net sales of houseware products increased approximately $0.4 million, or 62.3%, to approximately $1.1 million for the three month period ended June 30, 2024 as compared to approximately $0.6 million for the three month period ended June 30, 2023, driven by increased net sales of newly introduced microwave ovens and refrigerators to the market.
Previous wording
Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products on which the Company has historically focused. The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensing Services Pte Limited as an agent to assist in identifying and procuring potential licensees.
Current wording
Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S and Mexico. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products on which the Company has historically focused. The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensing Services Pte Limited as an agent to assist in identifying and procuring potential licensees.
Previous wording
In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures. However, the environment remains uncertain. Demand for the Company’s products remains competitive and retailers continue to carefully manage inventory. Accordingly, the current results and financial condition discussed herein may not be indicative of future operating results and trends.
Current wording
In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures. However, the environment remains uncertain. Demand for the Company’s products remains competitive and requires actions to continue carefully managing inventory. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and trends.
Previous wording
For more information on risks associated with the Company’s operations, including tariffs, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the year ended March 31, 2023.
Current wording
For more information on risks associated with the Company’s operations, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2024.
Previous wording
Net revenues — Net revenues were $2.6 million for the three month period ended December 31, 2023 as compared to $1.9 million for the three month period ended December 31, 2022, an increase of $0.7 million, or 35.7%. The increase in net revenues can be attributed to the introduction of new models to the marketplace as well as increased demand from the Company's key customers.
Current wording
Net revenues — Net revenues were approximately $2.2 million for the three month period ended June 30, 2024 as compared to approximately $1.8 million for the three month period ended June 30, 2023, an increase of approximately $0.4 million, or 21.5%. The increase in net revenues can be attributed primarily to the introduction of new models of the Company's houseware products to the marketplace as well as increased demand from the Company's key customers.
Previous wording
Cost of sales — Cost of sales increased $0.8 million, or 57.5% to $2.1 million for the three month period ended December 31, 2023 as compared to $1.3 million for the three month period ended December 31, 2022. The increase in absolute terms for the three month period ended December 31, 2023 as compared to the three month period ended December 31, 2022 was primarily related to an increase in net product sales and by higher year-over-year gross cost of sales as a percentage of gross sales.
Current wording
Cost of sales — Cost of sales increased approximately $0.5 million, or 36.3% to approximately $2.0 million for the three month period ended June 30, 2024 as compared to approximately $1.5 million for the three month period ended June 30, 2023. The increase in absolute terms for the three month period ended June 30, 2024 as compared to the three month period ended June 30, 2023 was primarily related to an increase in net product sales, increased carrying costs of inventory and the product mix of sales in the current quarter.
Previous wording
Selling, general and administrative expenses (“S,G&A”) — S,G&A was $1.2 million for the three month period ended December 31, 2023 as compared to $1.1 million for the three month period ended December 31, 2022, an increase of $0.1 million or 14.4%. S,G&A, as a percentage of net revenues, was 45.8% for the three month period ended December 31, 2023 as compared to 54.4% for the three month period ended December 31, 2022. Compensation costs increased by $69,000, legal fees increased by $68,000 and audit fees increased by $28,000 for the three month period ended December 31, 2023 as compared to the three month period ended December 31, 2022. Compensation costs for the three month period ended December 31, 2023 were $558,000 as compared to $489,000 for the three month period ended December 31, 2022. Legal fees for the three month period ended December 31, 2023 were $236,000 as compared to $168,000 for the three month period ended December 31, 2022. Audit fees for the three month period ended December 31, 2023 were $53,000 as compared to $25,000 for the three month period ended December 31, 2022.
Current wording
Selling, general and administrative expenses (“S,G&A”) — S,G&A was approximately $1.4 million for the three month period ended June 30, 2024 as compared to approximately $1.2 million for the three month period ended June 30, 2023, an increase of approximately $0.2 million or 18.2%. S,G&A, as a percentage of net revenues, was approximately 64.4% for the three month period ended June 30, 2024 as compared to approximately 66.2% for the three month period ended June 30, 2023. Compensation costs increased by approximately $136,000, legal fees increased by approximately $71,000 and audit fees increased by approximately $42,000 for the three month period ended June 30, 2024 as compared to the three month period ended June 30, 2023. Compensation costs for the three month period ended June 30, 2024 were approximately $695,000 as compared to approximately $559,000 for the three month period ended June 30, 2023. Legal fees for the three month period ended June 30, 2024 were approximately $184,000 as compared to approximately $113,000 for the three month period ended June 30, 2023. Audit fees for the three month period ended June 30, 2024 were approximately $66,000 as compared to approximately $24,000 for the three month period ended June 30, 2023.
Previous wording
Interest income, net — Interest income, net, was $289,000 for the three month period ended December 31, 2023 as compared to $235,000 for the three month period ended December 31, 2022, an increase of $54,000. The increase was primarily due to higher average interest rates earned on the Company’s short term investments.
Current wording
Interest income, net — Interest income, net, was approximately $263,000 for the three month period ended June 30, 2024 as compared to approximately $294,000 for the three month period ended June 30, 2023, a decrease of approximately $31,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments.
Previous wording
(Benefit) provision for income taxes — For the three and nine month periods ended December 31, 2023, the Company recorded an income benefit of $14,000 and income tax expense of $74,000, respectively. For the quarter ended September 30, 2023, the Company estimated its income tax expense to be approximately $88,000 based on the income generated during that period. That estimate has been reduced by $14,000 and is now estimated to be $74,000 for the nine months ended December 31, 2023. The Company under the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”incurred non-income based state taxes of nil for both of the three month periods ended December 31, 2023 and December 31, 2022.For the nine month periods ended December 31, 2023 and December 31, 2022, the Company incurrednon-income based state taxes of$8,650 and $10,950, respectively, which are now reported as S,G &A. See “Note 5 – Income Taxes”.
Current wording
Provision for income taxes — For the three month period ended June 30, 2024, the Company recorded income tax expense of approximately $3,000 as compared to nil for the three month period ended June 30, 2023. The Company under the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” incurred non-income based state taxes of approximately $9,000 for both of the three month periods ended June 30, 2024 and June 30, 2023, which are now reported as S,G &A. See “Note 5 – Income Taxes”.
Previous wording
Although the Company generated net income during the nine months ended December 31, 2023, it has yet to demonstrate the ability to generate net income on a sustained basis in order to realize its deferred tax assets. Therefore, the Company is obligated to record a 100% valuation allowance against the deferred tax assets.
Current wording
Although the Company generated net income during the three months ended June 30, 2024, it has yet to demonstrate the ability to generate net income on a sustained basis in order to realize its deferred tax assets. Therefore, the Company is obligated to record a 100% valuation allowance against the deferred tax assets.
Previous wording
***Net (loss) income ***— As a result of the foregoing factors, the Company realized a net loss of $421,000 for the three month period ended December 31, 2023 as compared to a net loss of $241,000 for the three month period ended December 31, 2022.
Current wording
***Net loss ***— As a result of the foregoing factors, the Company realized a net loss of approximately $962,000 for the three month period ended June 30, 2024 as compared to a net loss of approximately $565,000 for the three month period ended June 30, 2023.
Previous wording
As of December 31, 2023, the Company had cash and cash equivalents of approximately $3.6 million as compared to approximately $25.3 million at March 31, 2023. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of $2.7 million as of December 31, 2023 compared to $23.1 million of such deposits as of March 31, 2023. Working capital increased to $27.5 million at December 31, 2023 as compared to $26.4 million at March 31, 2023. The decrease in cash and cash equivalents of approximately $21.6 million was due to an increase in short term deposits of $18.5 million, a decrease in advanced deposits of $3.3 million, an increase in inventory of $1.9 million and a decrease in long-term federal taxes payable of $0.5 million partially offset by the net income generated during the period of $1.6 million, an increase in accounts payable and other current liabilities of $0.6 million, an increase in short-term federal income taxes payable of $0.2 million and an increase in long-term operating lease liabilities of $0.2 million.
Current wording
As of June 30, 2024, the Company had cash and cash equivalents of approximately $2.8 million as compared to approximately $19.9 million at March 31, 2024. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of approximately $2.2 million as of June 30, 2024 compared to approximately $19.1 million of such deposits as of March 31, 2024. Working capital decreased to approximately $25.5 million at June 30, 2024 as compared to approximately $26.6 million at March 31, 2024. The decrease in cash and cash equivalents of approximately $17.0 million was due to an increase in short term deposits of approximately $16.0 million, the net loss generated during the period of approximately $0.9 million, an increase in prepaid expenses and other current assets of approximately $0.4 million, an increase in accounts receivable of approximately $0.4 million, an increase in prepaid purchases of approximately $0.3 million and an increase in property and equipment of approximately $0.2 million, partially offset by a decrease in inventory of approximately $0.8 million and an increase in accounts payable and other current liabilities of approximately $0.4 million.
Previous wording
Net cash used by operating activities was approximately $3.0 million for thenine month period ended December 31, 2023, resulting from a decrease in advanced deposits of $3.3 million, an increase in inventory of $1.9 million and a decrease in federal taxes payable of $0.3 million partially offset bythe net income generated during the period of $1.6 million, an increase in accounts payable and other current liabilities of $0.6 million, an increase in long-term operating lease liabilities of $0.2 million and an increase in right-of-use assets of $0.1 million.
Current wording
Net cash used by operating activities was approximately $0.8 million for thethree month period ended June 30, 2024, resulting from the loss generated during the period of approximately $0.9 million, an increase in prepaid and other current assets of approximately $0.4 million, an increase in accounts receivable of approximately $0.4 million, and an increase in prepaid purchases of approximately $0.3 million, partially offset by a decrease in inventory of approximately $0.8 million and an increase in accounts payable and other current liabilities of approximately $0.4 million.
Previous wording
Net cash used by investing activities was $18.6 million for thenine month period ended December 31, 2023 due to purchases of short-term investments of $18.5 million and additions to property and equipment of $0.1 million.
Current wording
Net cash used by investing activities was approximately $16.2 million for thethree month period ended June 30, 2024 due to purchases of short-term investments of approximately $16.0 million and additions to property and equipment of approximately $0.2 million.
Previous wording
Net cash used by financing activities was nil for the nine month period ended December 31, 2023.
Current wording
Net cash provided by financing activities was approximately $7,000 for thethree month period ended June 30, 2024 due to a new copier lease.
Previous wording
The Company’s principal existing sources of cash are generated from operations and its existing short-term deposits. The Company believes that its existing cash balance and sources of cash will be sufficient to support existing operations over the next 12 months.
Current wording
The Company’s principal existing sources of cash are generated from operations and its existing short-term deposits and investments. The Company believes that its existing cash balance and sources of cash will be sufficient to support existing operations over the next 12 months.
Previous wording
The following ASUs were 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.
Current wording
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.
Previous wording
Accounting Standards Update 2019-12“Income Taxes (Topic 740)–* Simplifying the Accounting for Income Taxes**”** (Issued December 2019)***
Current wording
Accounting Standards Update 2023-07Segment Reporting (Topic 280): "Improvements to Reportable Segment Disclosures”** (Issued October 2023)******
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net revenues were $6.9 million for thenine month period ended December 31, 2023 as compared to $5.3 million for thenine month period ended December 31, 2022, an increase of $1.6 million, or 29.5%. The increase in net revenues can be attributed to the introduction of new models to the marketplace as well as increased demand from the Company's key customers.