EMERSON RADIO CORP

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Foreign regulations and changes in trade policies and the political, social and economic conditions in the United States and the foreign countries in which the Company operates its business could affect the Company’s revenues and earnings materially and adversely.

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The Company has operations in China and derives a significant portion of its revenue from sales of products manufactured by third parties located in China. In addition, third parties located in China and other countries located in the same region produce and supply many of the components and raw materials used in the Company’s products. Additionally, a significant portion of the shipping of the Company’s finished goods to the United States occurs through Hong Kong. Conducting an international business inherently involves a number of difficulties and risks that could materially and adversely affect the Company’s ability to generate revenues and could subject the Company to increased costs. The diplomatic tensions between the United States and China, including over China’s enactment of the Hong Kong national security law, create uncertainties for doing business in China, and the risk of additional protectionist trade policies and tariffs or other escalating retaliatory policies, such as the passage of the Hong Kong Autonomy Act in July 2020 and the concurrent U.S. executive order that ended the special economic status afforded to Hong Kong under the United States-Hong Kong Policy Act of 1992, could increase the Company’s cost of doing business and adversely affect the Company’s business, financial condition and results of operations. Furthermore, although there is currently significant uncertainty with respect to future United States trade regulations on a short-term or long-term basis, the current U.S. administration has publicly supported potential trade proposals, including import tariffs and other trade sanctions, including the U.S. administration's recent introduction of additional tariffs on China and proposed tariffs on Canada and Mexico, as well as modifications to international trade policy and other changes that may affect U.S. trade relations with other countries. It is possible that additional tariffs or other trade restrictions may be imposed on the categories of products the Company imports to the United States, or that the Company's business will be affected by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing the Company to raise prices or make changes to its operations, any of which could adversely affect demand for the Company's products or increase its costs.

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Among the other factors that may adversely affect the Company's revenues and increase its costs are:

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• currency fluctuations which could cause an increase in the price of the components and raw materials used in the Company’s products and a decrease in its profits;

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• Chinese labor laws;

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• labor shortages affecting the Company's facilities and it suppliers' manufacturing facilities located in China;

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• the elimination or reduction of value-added tax refunds to Chinese factories that manufacture products for export;

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• the rise of inflation and substantial economic growth in China;

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• more stringent export restrictions in the countries in which the Company operates which could adversely affect its ability to deliver its products to its customers;

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• tariffs and other trade barriers, such as import and export duties and quotas, which could make it more expensive for the Company to obtain and deliver its products to its customers;

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• increases in shipping costs for the Company’s products or other service issues with the Company’s third-party shippers, such as global availability of shipping containers and fuel costs;

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• political instability and economic downturns globally and in the countries in which the Company operates could adversely affect the Company’s ability to obtain its products from its manufacturers or deliver its products to its customers in a timely fashion;

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• outbreaks of public health threats affecting the production capabilities of the Company’s suppliers, including as a result of quarantines or closures;

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• new restrictions on the sale of electronic products containing certain hazardous substances; and

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• the laws of China are likely to govern many of the Company’s supplier agreements.

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Any of the factors described above may materially and adversely affect the Company's revenues and/or increase its operating expenses.

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Tariffs or other restrictions placed on the Company’s products imported into the United States from China, or any related countermeasures taken by China, could have a material adverse effect on the Company’s business, profitability and results of operations.

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The Company has operations in China and all of the Company’s products are currently manufactured by suppliers in China. Any tariffs or other trade restrictions affecting the import of these products to the United States from China or any retaliatory trade measures taken by China in response to existing or future tariffs could have a material adverse effect on the Company’s results of operations going forward. The Company's dependency on its overseas suppliers could exacerbate these and other risks. Previously imposed tariffs on the categories of products the Company imports to the United States negatively affected the demand for such products and increased the cost of components. Additional tariffs could further affect the demand for such products, increase the cost of components, result in delays in production or affect the Company's ability to compete against competitors who do not manufacture in China or otherwise are not subject to such tariffs.

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Effective in September 2018, the United States imposed tariffs of 10% on approximately $200 billion worth of goods imported from China, including categories of products the Company imports from China. These tariffs were increased to 25% effective in May 2019. Effective in September 2019, the United States imposed additional tariffs on essentially all remaining Chinese-origin imports, including approximately $300 billion worth of goods imported from China (“List 4 products”). Tariffs of 15% were imposed on certain List 4 products effective in September 2019 (“List 4A products”), and the remainder were scheduled to be subject to these tariffs effective in December 2019 (“List 4B products”). In January 2020, the United States and China signed a Phase One Economic and Trade Agreement, pursuant to which the tariff increases on the List 4B products remained suspended and the rate of additional tariffs on the List 4A products was reduced to 7.5%, while all other tariffs remained in place. In February 2025, the United States announced a 10% additional tariff on imports from China. The previous tariffs negatively affected the demand for the Company's products and increased the cost of components. The effects on the Company of the newly announced tariffs are uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products and potential retaliatory action from China. However, if the currently imposed and proposed tariffs covering the categories of products that the Company imports continue or are increased, and the Company is unable to obtain an exception, it could have a material adverse effect on the Company's business.

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Although the Company is monitoring the trade environment and working to mitigate the effects of tariffs through pricing and sourcing strategies, including through ongoing inventory management, the Company cannot be certain how its customers and competitors will react to the actions taken. If the Company determines to pass some or all of these new tariff burdens on to its customers as product price increases in the future, the result may be a degradation of the Company’s competitive position and a loss of customers that would adversely affect the Company’s operating performance. Additional tariffs imposed by the United States, and any related countermeasures by China, including as a result of the heightened tensions between the United States and China over Hong Kong, could further increase the Company’s cost of goods and reduce its gross margins. We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impacts upon our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has in the past has adversely impacted and has the potential to further adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could further adversely impact our business, financial condition and results of operations.