EMERSON RADIO CORP

Previous 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):

Current wording

The following table summarizes certain financial information for the three and six month periods ended September 30, 2024 (fiscal 2025) and September 30, 2023 (fiscal 2024) (in thousands):

Previous 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.

Current wording

Net product sales — Net product sales for the three month period ended September 30, 2024 were approximately $2.7 million as compared to approximately $2.4 million for the three month period ended September 30, 2023, an increase of approximately $0.3 million, or 10.6%. The Company’s sales during the three month period ended September 30, 2024 were highly concentrated among its three largest customers –Walmart, Amazon, and Fred Meyer – comprising in the aggregate approximately 88% of the Company’s total net product sales. The Company’s sales during the three month period ended September 30, 2023, were highly concentrated among its three largest customers – Walmart, Amazon and Fred Meyer – comprising in the aggregate approximately 91% 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$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:

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$11,000 and $3,000 forthe three month periods ended September 30, 2024 and September 30, 2023, respectively, and by approximately $21,000 and $6,000 for the six month periods ended September 30, 2024 and September 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 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.

Current wording

i)Houseware products: Net sales of houseware products increased approximately $0.5 million, or 67.5%, to approximately $1.2 million for the three month period ended September 30, 2024 as compared to approximately $0.7 million for the three month period ended September 30, 2023, driven by increased net sales of newly introduced microwave ovens and refrigerators to the market. Net sales of houseware products increased approximately $0.9 million, or 65.0%, to approximately $2.3 million for thesix month period ended September 30, 2024 as compared to approximately $1.4 million for thesix month period ended September 30, 2023, driven by increased net sales of newly introduced microwave ovens and refrigerators to the market.

Previous wording

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 wording

Licensing revenue — Licensing revenue for the three month period ended September 30, 2024 was approximately $68,000 as compared to approximately $24,000 for the three month period ended September 30, 2023, an increase of approximately $44,000, or 183.3%. The increase for the three month period ended September 30, 2024, was the result of an annual escalation of guaranteed minimum royalties from an ongoing licensee and the revenue earned from a new licensee. Licensing revenue for thesix month period ended September 30, 2024 was approximately $137,000 as compared to approximately $101,000 for thesix month period ended September 30, 2023, an increase of approximately $36,000, or 35.6%. The year-over-year increase was the result of an annual escalation of guaranteed minimum royalties from an ongoing licensee and the revenue earned from a new licensee partially offset by lost revenue from a terminated licensee in June 2023.

Previous 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.

Current wording

Net revenues — Net revenues were approximately $2.7 million for the three month period ended September 30, 2024 as compared to approximately $2.4 million for the three month period ended September 30, 2023, an increase of approximately $0.3 million, or 12.3%. 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 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.

Current wording

Cost of sales — Cost of sales increased approximately $0.4 million, or 20.9% to approximately $2.5 million for the three month period ended September 30, 2024 as compared to approximately $2.1 million for the three month period ended September 30, 2023. The increase in absolute terms for the three month period ended September 30, 2024 as compared to the three month period ended September 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 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.

Current wording

Selling, general and administrative expenses (“S,G&A”) — S,G&A was approximately $1.4 million for the three month period ended September 30, 2024 as compared to approximately $1.1 million for the three month period ended September 30, 2023, an increase of approximately $0.3 million or 30.6%. S,G&A, as a percentage of net revenues, was approximately 50.7% for the three month period ended September 30, 2024 as compared to approximately 43.6% for the three month period ended September 30, 2023. The increase in S,G&A for the three month period ended September 30, 2024 as compared to the three month period ended September 30, 2023 was driven primarily by increased compensation costs of approximately $259,000, increased audit fees of approximately $29,000, and increased advertising expense of approximately $27,000, partially offset by a decrease in legal fees of approximately $57,000. Compensation costs for the three month period ended September 30, 2024 were approximately $822,000 as compared to approximately $563,000 for the three month period ended September 30, 2023. Audit fees for the three month period ended September 30, 2024 were approximately $54,000 as compared to approximately $25,000 for the three month period ended September 30, 2023. Advertising expense for the three month period ended September 30, 2024 were approximately $45,000 as compared to approximately $18,000 for the three month period ended September 30, 2023. Legal fees for the three month period ended September 30, 2024 were approximately $55,000 as compared to approximately $112,000 for the three month period ended September 30, 2023.

Previous 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.

Current wording

Interest income, net — Interest income, net, was approximately $236,000 for the three month period ended September 30, 2024 as compared to approximately $289,000 for the three month period ended September 30, 2023, a decrease of approximately $53,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments.

Previous 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”.

Current wording

Provision for income taxes — For the three month period ended September 30, 2024, the Company recorded income tax expense of nil as compared to approximately $88,000 for the three month period ended September 30, 2023. For the six month period ended September 30, 2024, the Company recorded income tax expense of approximately $3,000 as compared to $88,000 for the six month period ended September 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 six month periods ended September 30, 2024 and September 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 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.

Current wording

Although the Company generated a net loss during the three and six months ended September 30, 2024, it is unable to realize an income tax benefit until the Company can demonstrate the ability to generate net income on a sustained basis. Therefore, the Company is obligated to record a 100% valuation allowance against the deferred tax assets.

Previous 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.

Current wording

***Net loss (income) ***— As a result of the foregoing factors, the Company realized a net loss of approximately $881,000 for the three month period ended September 30, 2024 as compared to net income of approximately $2,365,000 for the three month period ended September 30, 2023.

Previous 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.

Current wording

As of September 30, 2024, the Company had cash and cash equivalents of approximately $0.5 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 nil as of September 30, 2024 compared to approximately $19.1 million of such deposits as of March 31, 2024. Working capital decreased to approximately $23.9 million at September 30, 2024 as compared to approximately $26.6 million at March 31, 2024. The decrease in cash and cash equivalents of approximately $19.4 million was due to an increase in short term deposits of approximately $16.3 million, the net loss generated during the period of approximately $1.8 million, an increase in accounts receivable of approximately $0.8 million, a decrease in long-term taxes payable of approximately $0.7 million, a decrease in accounts payable and other current liabilities of approximately $0.3 million, an increase in right of use assets of approximately $0.2 million, an increase in prepaid purchases of approximately $0.2 million and an increase in prepaid expenses and other current liabilities of approximately $0.1 million, partially offset by a decrease in inventory of approximately $0.8 million and an increase in long term operating lease liabilities of approximately $0.2 million.

Previous 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.

Current wording

Net cash used by operating activities was approximately $2.9 million for thesix month period ended September 30, 2024, resulting from the loss generated during the period of approximately $1.8 million, an increase in accounts receivable of approximately $0.8 million, a decrease in income taxes payable of approximately $0.5 million, a decrease in accounts payable and other current liabilities of $0.3 million, an increase in right of use assets of approximately $0.3 million and an increase in prepaid purchases of approximately $0.2 million, partially offset by a decrease in inventory of approximately $0.8 million and an increase in long term lease liabilities of approximately $0.2 million.

Previous 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.

Current wording

Net cash used by investing activities was approximately $16.5 million for thesix month period ended September 30, 2024 due to purchases of short-term investments of approximately $16.3 million and additions to property and equipment of approximately $0.2 million.

Previous 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.

Current wording

Net cash provided by financing activities was approximately $7,000 for thesix month period ended September 30, 2024 due to a new copier lease.

Previous wording

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.

Current wording

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. The adoption of this guidance did not have any impact on the Company's segment reporting.