EMERSON RADIO CORP

Previous 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.

Current wording

The following discussion of the Company’s operations and financial condition should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the "safe harbor" created by those sections.

Previous wording

All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Company’s use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “project,” “predict,” “could,” “intend,” “target,” “potential,” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

Current wording

All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Company’s use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “project,” “predict,” “could,” “intend,” “target,” “potential,” or the negative or plural of those terms and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

Previous wording

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The reader is cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. The Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, the Company cannot assure the reader that its expectations, beliefs or projections will result or be achieved or accomplished.

Current wording

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The reader is cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. Except as required by law, the Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, the Company cannot assure the reader that its expectations, beliefs or projections will result or be achieved or accomplished.

Previous wording

The following table summarizes certain financial information for the three and nine month periods ended December 31, 2024 (fiscal 2025) and December 31, 2023 (fiscal 2024) (in thousands):

Current wording

The following table summarizes certain financial information for the three month period ended June 30, 2025 (fiscal 2026) and June 30, 2024 (fiscal 2025) (in thousands):

Previous wording

Net product sales — Net product sales for the three month period ended December 31, 2024 were approximately $3.9 million as compared to approximately $2.6 million for the three month period ended December 31, 2023, an increase of approximately $1.3 million, or 49.8%. The Company’s sales during the three month period ended December 31, 2024 were highly concentrated among its three largest customers – Amazon, Walmart and Big Lots – comprising in the aggregate approximately 95% of the Company’s total net product sales during the period. The Company’s sales during the three month period ended December 31, 2023, were highly concentrated among its two largest customers – Walmart and Amazon – comprising in the aggregate approximately 85% of the Company’s total net product sales.

Current wording

Net product sales — Net product sales for the three month period ended June 30, 2025 were approximately $1.6 million as compared to approximately $2.1 million for the three month period ended June 30, 2024, a decrease of approximately $0.5 million, or 25.4%. The Company’s sales during the three month period ended June 30, 2025 were highly concentrated among its three largest customers – Variety, Fred Meyer and Amazon – comprising in the aggregate approximately 68% of the Company’s total net product sales during the period. 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.

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$11,000 and $3,000 forthe three month periods ended December 31, 2024 and December 31, 2023, respectively, and by approximately $32,000 and $9,000 for the nine month periods ended December 31, 2024 and December 31, 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 nil and approximately $10,000 forthe three month periods ended June 30, 2025 and June 30, 2024, 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 $1.5 million, or 239.8%, to approximately $2.1 million for the three month period ended December 31, 2024 as compared to approximately $0.6 million for the three month period ended December 31, 2023, driven by increased net sales of newly introduced microwave ovens to the market. Net sales of houseware products increased approximately $2.4 million, or 118.9%, to approximately $4.4 million for the nine month period ended December 31, 2024 as compared to approximately $2.0 million for the nine month period ended December 31, 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 $0.3 million, or 29.5%, to approximately $1.4 million for the three month period ended June 30, 2025 as compared to approximately $1.1 million for the three month period ended June 30, 2024, driven by increased net sales of newly introduced microwave ovens to the market.

Previous wording

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 wording

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. In addition, in connection with those bankruptcy proceedings, the Chapter 7 trustee of Home Easy has filed a complaint seeking the return of the $4.1 million of advanced deposits previously paid to the Company and the outcome of such litigation remains uncertain. 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.

Previous wording

Licensing revenue — Licensing revenue for the three month period ended December 31, 2024 was approximately $111,000 as compared to approximately $23,000 for the three month period ended December 31, 2023, an increase of approximately $88,000, or 382.6%. The increase for the three month period ended December 31, 2024, was the result of one of the Company's licensees exceeding their annual guaranteed minimum royalties and the revenue earned from a new licensee. Licensing revenue for the nine month period ended December 31, 2024 was approximately $248,000 as compared to approximately $124,000 for the nine month period ended December 31, 2023, an increase of approximately $124,000, or 100%. The year-over-year increase was the result of one of its licensees exceeding their annual guaranteed minimum royalties and the revenue earned from a new licensee, partially offset by lost revenue from a terminated licensee in June 2023.

Current wording

Licensing revenue — Licensing revenue for the three month period ended June 30, 2025 was approximately $86,000 as compared to approximately $69,000 for the three month period ended June 30, 2024, an increase of approximately $17,000, or 24.6%. The increase for the three month period ended June 30, 2025 was the result of increases of annual guaranteed minimum royalties of the Company's licensees.

Previous wording

Net revenues — Net revenues were approximately $4.0 million for the three month period ended December 31, 2024 as compared to approximately $2.6 million for the three month period ended December 31, 2023, an increase of approximately $1.4 million, or 52.7%. 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 $1.7 million for the three month period ended June 30, 2025 as compared to approximately $2.2 million for the three month period ended June 30, 2024, a decrease of approximately $0.5 million, or 23.8%. The decrease in net revenues can be attributed primarily to the discontinuation of a clock radio partially offset by the introduction of new models of the Company's houseware products to the marketplace.

Previous wording

Cost of sales — Cost of sales increased approximately $1.4 million, or 63.8% to approximately $3.5 million for the three month period ended December 31, 2024 as compared to approximately $2.1 million for the three month period ended December 31, 2023. The increase in absolute terms for the three month period ended December 31, 2024 as compared to the three month period ended December 31, 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 decreased approximately $0.3 million, or 17.0% to approximately $1.7 million for the three month period ended June 30, 2025 as compared to approximately $2.0 million for the three month period ended June 30, 2024. The decrease in absolute terms for the three month period ended June 30, 2025 as compared to the three month period ended June 30, 2024 was primarily related to a decrease in net product sales partially offset by 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 $1.2 million for both three month periods ended December 31, 2024 and December 31, 2023. S,G&A, as a percentage of net revenues, was approximately 30.6% for the three month period ended December 31, 2024 as compared to approximately 45.8% for the three month period ended December 31, 2023. The changes in S,G&A for the three month period ended December 31, 2024 as compared to the three month period ended December 31, 2023 was driven primarily by increased compensation costs of approximately $178,000, increased commission expense of approximately $49,000 and increases in trade expenses of approximately $35,000, partially offset by a decrease in legal fees of approximately $274,000. Compensation costs for the three month period ended December 31, 2024 were approximately $737,000 as compared to approximately $558,000 for the three month period ended December 31, 2023. Commission expense fees for the three month period ended December 31, 2024 were approximately $72,000 as compared to approximately $23,000 for the three month period ended December 31, 2023. Trade expenses for the three month period ended December 31, 2024 were approximately $73,000 as compared to approximately $38,000 for the three month period ended December 31, 2023. Legal fees for the three month period ended December 31, 2024 generated a benefit of approximately $37,000 as compared to expense of approximately $236,000 for the three month period ended December 31, 2023.

Current wording

Selling, general and administrative expenses (“S,G&A”) — S,G&A was approximately $1.3 million for the three month period ended June 30, 2025 as compared to $1.4 million for the three month period ended June 30, 2024, a decrease of approximately $0.1 million or 6.8%. S,G&A, as a percentage of net revenues, was approximately 78.8% for the three month period ended June 30, 2025 as compared to approximately 64.4% for the three month period ended June 30, 2024. The changes in S,G&A for the three month period ended June 30, 2025 as compared to the three month period ended June 30, 2024 was driven primarily by a decrease in legal fees of approximately $141,000 and a decrease in travel and entertainment costs of approximately $42,000 partially offset by an increase in compensation costs of approximately $75,000 and an increase in advertising costs of approximately $27,000.

Previous wording

Interest income, net — Interest income, net, was approximately $206,000 for the three month period ended December 31, 2024 as compared to approximately $289,000 for the three month period ended December 31, 2023, a decrease of approximately $83,000. 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 $169,000 for the three month period ended June 30, 2025 as compared to approximately $263,000 for the three month period ended June 30, 2024, a decrease of approximately $94,000. 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 month period ended December 31, 2024, the Company recorded income tax expense of nil as compared to an income tax benefit of approximately $14,000 for the three month period ended December 31, 2023. For the nine month period ended December 31, 2024, the Company recorded income tax expense of approximately $3,000 as compared to $74,000 for the nine month period 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 approximately $9,000 for both of the nine month periods ended December 31, 2024 and December 31, 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 June 30, 2025, the Company recorded income tax expense of nil as compared to $3,000 for the three month period ended June 30, 2024. 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 each of the three month periods ended June 30, 2025 and June 30, 2024, which are now reported as S,G&A. See “Note 5 – Income Taxes”.

Previous wording

Although the Company generated a net loss during the three and nine months ended December 31, 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.

Current wording

Although the Company generated a net loss during the three months ended June 30, 2025, 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 (income) ***— As a result of the foregoing factors, the Company realized a net loss of approximately $527,000 for the three month period ended December 31, 2024 as compared to a net loss of approximately $421,000 for the three month period ended December 31, 2023.

Current wording

***Net loss ***— As a result of the foregoing factors, the Company realized a net loss of approximately $1,140,000 for the three month period ended June 30, 2025 as compared to a net loss of approximately $962,000 for the three month period ended June 30, 2024.

Previous wording

As of December 31, 2024, the Company had cash and cash equivalents of approximately $0.7 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 $0.1 million as of December 31, 2024 compared to approximately $19.1 million of such deposits as of March 31, 2024. Working capital decreased to approximately $23.4 million at December 31, 2024 as compared to approximately $26.6 million at March 31, 2024. The decrease in cash and cash equivalents of approximately $19.2 million was due to an increase in short term deposits of approximately $15.7 million, the net loss generated during the period of approximately $2.4 million, an increase in accounts receivable of approximately $2.2 million, a decrease in long-term taxes payable of approximately $0.7 million, a decrease in right of use assets of approximately $0.2 million and an increase in property and equipment of approximately $0.1 million, partially offset by a decrease in inventory of approxima tely $1.8 million, an increase in long term operating lease liabilities of approximately $0.2 million and an increase in short-term taxes payable of approximately $0.1 million.

Current wording

As of June 30, 2025, the Company had cash and cash equivalents of approximately $1.7 million as compared to approximately $1.2 million at March 31, 2025. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of approximately $1.0 million as of June 30, 2025 compared to approximately $0.9 million of such deposits as of March 31, 2025. Working capital decreased to approximately $20.0 million at June 30, 2025 as compared to approximately $21.1 million at March 31, 2025. The increase in cash and cash equivalents of approximately $0.5 million was due to a decrease in short term deposits of approximately $1.0 million, an increase in accounts payable and current liabilities of approximately $0.9 million and a decrease in accounts receivable of approximately $0.2 million, partially offset by the net loss generated during the period of approximately $1.1 million, an increase in inventory of approximately $0.3 million, an increase in prepaid purchases of approximately $0.1 million and an increase in prepaid expenses and other current assets of approximately $0.1 million.

Previous wording

Net cash used by operating activities was approxim ately $3.3 million for the nine month period ended December 31, 2024, resulting from the loss generated during the period of approximately $2.4 million, an increase in accounts receivable of approximately $2.2 million, a decrease in income taxes payable of approximately $0.5 million and an increase in right of use assets of approximately $0.3 million, partially offset by a decrease in inventory of approximately $1.8 million, an increase in long term lease liabilities of approximately $0.2 million and an increase in accounts payable and other current liabilities of approximately $0.1 million.

Current wording

Net cash used by operating activities was approxim ately $0.5 million for the three month period ended June 30, 2025, resulting from the loss generated during the period of approximately $1.1 million, an increase in inventory of approximately $0.3 million, an increase in prepaid purchases of approximately $0.1 million and an increase in prepaid expenses and other current assets of approximately $0.1 million, partially offset by an increase in accounts payable and other current liabilities of approximately $0.9 million and a decrease in accounts receivable of approximately $0.2 million.

Previous wording

Net cash provided by financing activities was approximately $6,000 for thenine month period ended December 31, 2024 due to a new copier lease.

Current wording

Net cash provided by financing activities was nil for thethree month period ended June 30, 2025.

Previous wording

Accounting Standards Update 2023-07Segment Reporting (Topic 280): "Improvements to Reportable Segment Disclosures”** (Issued October 2023)******

Current wording

Accounting Standards Update 2023-09 Income Taxes (Topic 740): "Improvements to Income Tax Disclosures" Income Statement Expenses"(Issued December* 2023)*