CRWS 10-K & 10-Q changes, risk factors and insider trading

Sales of licensed products represented 50%52% of the Company’s gross sales in fiscal year 2025,2026, which included 21%23% of gross sales associated with the Company’s license agreements with Disney. The Company could experience a material loss of revenues if it is unable to renew its major license agreements or obtain new licenses. The volume of sales of licensed products is inherently tied to the success of the characters, films and other licensed programs of the Company’s licensors. A decline in the popularity of these licensed programs or the inability of the licensors to develop new properties for licensing could also result in a material loss of revenues to the Company. Additionally, the Company’s license agreements with Disney and others require a material amount of minimum guaranteed royalty payments. The failure by the Company to achieve the sales envisioned by the license agreements could result in the payment by the Company of shortfalls in the minimum guaranteed royalty payments, which would adversely impact the Company’s operating results.

TheGlobal trade policy and the imposition of tariffs on imports from China have adversely affected the cost and sourcing of the Company’s products, among other things.

The Company sources its products primarily from foreign contract manufacturers, with the largest concentration being in China. TheDuring current2025, the U.S. administration has issued executive orders directing the United States to impose new tariffs on imports from several nations, including China. The newadditional tariffs have increased the cost of the products the Company sources from China and arefor affectinga futuretime affected shipments from the Company’s Chinese-based suppliers. The Company maywas not be able to pass along to its customers all increases in tariffs and freight charges to its customers,charges, and any alterations the Company may makemade to its business strategy orand operations to adapt to the foregoing, including sourcing products from suppliers in other countries, will bewere time consuming and expensive. TheAny fullunforeseen impactfuture of the new tariffs is uncertain because it is subject to a number of factors, including the duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that China may take and any mitigating actions that may become available. The full impact of the newadditional tariffs may have a material adverse effect on the Company’s business, cash flow, results of operations and financial condition.

MountingWe terroristare activity,currently experiencing significant geopolitical instability and armed conflicts in multiple regions of the world, including the ongoing warsconflict involving Russia and violenceUkraine, armed conflict and tensions involving Iran in the Middle EastEast, increasing military and Ukraine,political tensions involving China and Taiwan, and increasingly unpredictable and provocative actions by North Korea. These events, including disruptions affecting the potentialStrait of Hormuz, a critical transit route for thea escalationsignificant portion of China’sthe aggressionworld’s towardscrude Taiwanoil supply, together with elevated global oil prices and the increasingly erratic behavior of North Korea have resultedvolatility in growing geopolitical tensions. Nearly all nations have felt the effects of global economic uncertainty, including higher energy and foodfinancial prices. These uncertaintiesmarkets, could result in a slowdown to the global economy that may affect the Company’s business by reducing the prices that the Company’s customers may be willing or able to pay for its products or by reducing the demand for the Company’s products, which could negatively impact the Company’s revenues and result in a material adverse effect on the Company’s business, cash flow, results of operations and financial condition.

Sales are driven by consumer demand for the Company’s products. There can be no assurance that the demand for the Company’s products will not decline or that the Company will be able to anticipate and respond to changes in demand related to consumers’ tastes and preferences. The infant and toddler consumer products industry is characterized by the continual development of cutting-edge new products to meet the high standards of parents. Also, the development of social media has resultedcaused, inand awill continue to cause, monumental shiftshifts in the modern shopping experience. The Company’s failure to adapt to these changes, develop new products or reach consumers where they are could lead to lower sales and excess inventory, which could have a material adverse effect on the Company’s financial condition and operatingresults results.of operations.

The Company’s foreign operations are subject to laws prohibiting improper payments and bribery, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in foreign jurisdictions, which apply to the Company’s directors, officers, employees and agents acting on behalf of the Company. Failure to comply with these laws could result in damage to the Company’s reputation, a diversion of management’s attention from its business, increased legal and investigative costs, and civil and criminal penalties, any or all of which could adversely affect the Company’s operatingresults results.of operations.

The Company’s growth is largely influencedimpacted by the birthrate, and in particular, the rate of first births. Geopolitical risks and economic conditions, including the real and perceived threat of wars, terrorism, inflation, interest rates, tension among nations, rising prices or unemployment, could lead individuals to decide to forgo or delay having children. Even under optimal conditions, shifts in demographic trends and preferences could have the consequence of individuals starting to have children later in life and/or having fewer children.

In recent years, the birthrate in the United States has steadily declined. TheseThis in connection with other economic conditions could result in reduced demand for some of the Company’s products, increased order cancellations and returns, an increased risk of excess and obsolete inventories and increased pressure on the prices of the Company’s products. Also, although the Company’s use of a commercial factor significantly reduces the risk associated with collecting accounts receivable, such factor may at any time terminate or limit its approval of shipments to a particular customer. The bankruptcy of a customer, the perceived pending threat of a bankruptcy of a customer, or an adverse change in overall economic conditions are among the events that would increase the likelihood that the factor would terminate or limit its approval of shipments to customers. Such an action by the factor could result in the loss of future sales to such affected customers.

Economic conditions could result in an increase in the amountscosts paid forof the Company’s products.

Significant increases in freight costscosts, tariffs, and the price of raw materials that are components of the Company’s products, including cotton, oil and labor, could adversely affect the amounts that the Company must pay its suppliers for its finished goods. Additionally, U.S. government imposed tariffs on certain countries, including China, from which we source products. The actual impact of the new tariffs is uncertain because it is subject to a number of factors, including the duration of such tariffs, changes in the amount, scope and nature of the tariffs in future, any countermeasures that China may take and any mitigating actions that may become available. If the Company is unable to pass these cost increases along to its customers, its profitability could be adversely affected.

The infant and toddler consumer products industry is highly competitive. The Company competes with a variety of distributors and manufacturers, both branded and private label. The Company’s ability to compete successfully depends principally on styling, price, service to the retailer and continued high regard for the Company’s products and trade names. Several of these competitors are larger than the Company and have greater financial resources than the Company, and some have experienced financial challenges from time to time, including servicing significant levels of debt. Those facing financial pressures could choose to make particularly aggressive pricing decisions in an attempt to increase revenue. Competitors based in China have begun to sell and ship directly to customers without having to rely on distributors in the destination country, making their products more affordable. The effects of increased competition could result in a material decrease in the Company’s revenues.

The Company sources its products primarily from foreign contract manufacturers, with the largest concentration being in China. Difficulties encountered by these suppliers, such as fires, accidents, natural disasters and the instability inherent in operating within an authoritarian political structure, could halt or disrupt production and shipment of the Company’s products. The Chinese government could make allegations against the Company of corruption or antitrust violations, or could adopt regulations related to the manufacture of products within China, including quotas, duties, taxes and other charges or restrictions on the exportation of goods produced in China. The Company could also be affected by the United States imposition or increase of import duties, tariffs and other import regulations and deteriorating diplomatic relations with China, which could have a material adverse effect on the Company’s business, cash flow, results of operations and financial condition. See “Risk Factors – The imposition of tariffs on imports from China couldhave adversely affectaffected the cost and sourcing of the Company’s products, among other things.”

The Company’s products are primarily shipped by merchant vessels across the world’s oceans. The intrinsic nature of such shipping includes the risk of intentional or unintentional impediments at the world’s global marine chokepoints, including various straits and the Panama and Suez canals. The recent firingIran onconflict merchantimpacting vesselsshipping through the Strait of Hormuz has resulted in an increase in oil prices which may affect the Company’s shipping costs. Risk also remains in the Red Sea as firing on merchant vessels by militants of Yemen’s Houthi movement has resultedresults in the shipment of the Company’s products from China to Europeshipments to be routed around Africa, just as the Company has been benefitting from increased sales in Europe.Africa. These and any other events causing a disruption of the flow of the Company’s products, whether within the Chinese interior, at the port of embarkation, on global waters, or at the destination port, could result in delays in shipping.

The Company’s operations are highly dependent upon computer hardware and software systems, including customized information technology systems and cloud-based applications. The Company also employs third-party systems and software that are integral to its operations. These systems are vulnerable to cybersecurity incidents, including disruptions and security breaches, which can result from unintentional events or deliberate attacks by insiders or third parties, such as cybercriminals, competitors, nation-states, computer hackers and other cyber terrorists. The Company faces an evolving landscape of cybersecurity threats in which evildoers use a complex array of means to perpetrate attacks, including the use of stolen access credentials, malware, ransomware, phishing, structured query language injection attacks and distributed denial-of-service attacks. The use of AI technologies are in the early stages of wide spreadwidespread adoption and continue to evolve rapidly. The risks to AI include operational risks and the rapidly evolving and uncertain legal and regulatory environment relating to AI.

A stockholder could lose all or a portion of his or hertheir investment in the Company.

The following discussion and analysis is intended to provide material information relevant to an assessment of the Company’s financial condition and results of operations, as well as an evaluation of the amounts and certainty of cash flows from operations and from outside sources. This discussion and analysis is further intended to provide details concerning material events and uncertainties known to management that are reasonably likely to cause reported financial information to not be necessarily indicative of future operating results or future financial condition. This data includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that management has assessed to be reasonably likely to have a material impact on future operations. Management expectsintends that this discussion and analysis will enhance a reader’s understanding of the Company’s financial condition, results of operations, cash flows, liquidity and capital resources. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report.

Sales decreased to $87.3$82.3 million for the fiscal year ended March 30,29, 2025,2026, compared with $87.6$87.3 million in the fiscal year ended March 31,30, 2024,2025, a decrease of $382,000,$5.0 million, or 0.4%.5.7%. Sales of bedding and diaper bags increaseddecreased by $9.0$6.1 million, and sales of bibs, toys and disposable products decreasedincreased by $9.4$1.1 million. The increasedecrease in sales of bedding and diaper bags is due to the decrease in the number of items included in programs at a major retailer, which was partially offset by an increase in the sales of bibs, toys and disposables. Sales were also negatively affected by inventory shortages resulting from the Company’s strategy to minimize the impact of increased tariffs in effect primarily during the Acquisition,first whichquarter added $11.9 million net sales forof the fiscal year ended March 30,29, 2025, and sales of bibs, toys and disposable products decreased primarily due to a major retailer reducing inventory levels and the loss of a program at another major retailer.2026.

Gross profit decreased by $1.7$1.2 million and decreased from 26.2% of net sales for the fiscalprior year endedreflecting Marcha 31,margin 2024 toof 24.4% of net sales for the fiscal yearyears ended March 30, 2026 and March 29, 2025. ThisThe primary cause of this decrease in the gross profit amount for the current year was duerelates to an increase in royalty expense primarily resulting from the Baby Boom Acquisition, a $600,000 increase in rent at our Compton facility, and increased tariffstariff of $324,000costs associated with products imported from China.

Marketing and administrative expenses increased by $2.6$289 millionthousand and increased from 18.4% of net sales for fiscal year 2024 to 21.4% of net sales for fiscal year 2025.2025 Theto current23.1% of net sales for fiscal year period includes $244,000 associated with the closure of the Company’s subsidiary in the United Kingdom and $1.2 million in costs associated with the Acquisition.2026. Advertising costs increased $342,000$467,000 from the prior year.

During the fiscal year 2025,year, consumers responded to macroeconomic conditions by trading down to lower priced items, buying fewer items, or foregoing some items altogether due to inflationary concerns. The Company monitors the impact of inflation on its operations on an ongoing basis and may need to adjust its prices to mitigate the impact of changes to the rate of inflation in future periods. Future volatility of prices could affect consumer purchases of ourthe Company’s products. Additionally, the impact of inflation on input and other operational costs could adversely affect the Company's financial results.

The U.S. government has implemented tariffs on imports from certain countries, including China. The Company primarily sources products from foreign contract manufacturers, with the largest concentration being in China. The newU.S. government has tariffs haveon imports from certain countries, including China. During 2025, the U.S. government increased tariffs which increased the cost of the products the Company sources from China and are affecting futureaffected shipments from the Company’s Chinese-based suppliers. The Company maywas not be able to timely pass along to its customers all increases in tariffs and freight charges to its customers,charges, and any further alterations the Company may make to its business strategy or operations to adapt to the foregoing, including sourcing products from suppliers in other countries,foregoing will be time-consuming and expensive. The full impact of the new tariffs may have a material adverse effect on the Company’s business, cash flow, results of operations and financial condition. Some of these tariffs, the IEEPA tariffs, were recently deemed illegal by the U.S. Supreme Court ruling issued on February 20, 2026. In April 2026, the U.S. Customs and Border Protection launched CAPE, a platform for importers of record to submit IEEPA tariff refund requests. The Company has evaluated its eligibility, is complying with all applicable refund procedures and has submitted its eligible entries. The ultimate availability, timing and amount of any potential refunds of such tariffs are highly uncertain and are subject to further legal, regulatory and administrative developments. The Company continues to evaluate the impact of the tariffs, and their potential refund, on imports from China to the Company’s business and financial condition.

Net cash provided by operating activities increaseddecreased from $7.1 million for the fiscal year ended March 31, 2024 to $9.8 million for the fiscal year ended March 30, 2025.2025 to $8.3 million for the fiscal year ended March 29, 2026. The Companydecrease in the current year experiencedwas athe decreaseresult of an increase in itsinventories accountsin receivablethe balancescurrent year that was $1.2$4.5 million highergreater than the decrease in the prior year, and a decrease of $3.4 million in accrued liabilities from the Companyprior year to the current year. The decrease in the current year experiencedwas anpartially increaseoffset by a decrease in its accounts payablereceivable balances that was $3.3$4.0 million highergreater than the decrease in the prior year. The Company in the current year experienced an increase in its accrued liabilities balances that was $2.5 million higher than the decrease in the prior year.

Net cash used in investing activities was $864 thousand in the fiscal year ended March 29, 2026 compared with $17.2 million in the fiscal year ended March 30, 2025 compared with $193,000 in the fiscal year ended March 31, 2024.2025. The increasedecrease in the current year was primarily due to the $16.3 million payment that was made in the currentprior year to completefor the Acquisition.

Net cash usedprovided inby financing activities was $7.8$7.1 million in the fiscal year ended March 31,30, 20242025 compared with $7.1$7.7 million in cash providedused byin financing activities in the fiscal year ended March 30,29, 2025.2026. The Companydecrease incurredwas netdue borrowingsto underthe its revolving lineissuance of creditindebtedness ofpursuant $3.8to an $8.0 million and a term loan ofunder $8.0a millionfinancing thatagreement didwith notThe occurCIT Group/Commercial Services, Inc. (“CIT”) in a prior year as well as the Company repaying debt in the priorcurrent year, such borrowings primarily being required to fund the Acquisition.year.

To reduce its exposure to credit losses, the Company assigns substantiallythe allmajority of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.

To reduce the Company’s exposure to expected credit losses, and to enhance the predictability of its cash flows, the Company assigns substantiallythe allmajority of its receivables under factoring agreements with CIT. In the event that a factored receivable becomes uncollectible due to creditworthiness, CIT bears the risk of loss. With respect to the receivables that are not assigned under factoring agreements with CIT, the Company addresses this credit risk by establishing an allowance that is intended to represent the Company’s best estimate of the expected credit losses for such receivables. In the development of this estimate, the Company makes a number of judgements utilizing the Current Expected Credit Losses methodology, which requires the Company to estimate lifetime expected credit losses by specifically analyzing the receivables. This analysis incorporates an aging of the receivables, relevant payment history and historical loss experience, as well as the consideration of customer concentrations, customer creditworthiness, negotiated changes to the payment terms of customers, recent economic trends, and expectations regarding economic conditions over a reasonable and supportable future period. The allowance for expected credit losses is included in marketing and administrative expenses in the accompanying consolidated statements of operations.

Inventory Valuation: On a periodic basis, management reviews its inventory quantities on hand for obsolescence, physical deterioration, changes in price levels and the existence of quantities on hand which may not reasonably be expected to be sold within the Company’s normal operating cycle. To the extent that any of these conditions is believed to exist or the market value of the inventory expected to be realized in the ordinary course of business is otherwise no longer as great as its carrying value, an allowance against the inventory value is established. To the extent that this allowance is established or increased during an accounting period, an expense is recorded in cost of products sold in the Company's consolidated statements of operations. Only when inventory for which an allowance has been established is later sold or is otherwise disposed is the allowance reduced accordingly. Significant management judgment is required in determining the amount and adequacy of this allowance. In the event that actual results differ from management's estimates or these estimates and judgments are revised in future periods, the Company may not fully realize the carrying value of its inventory or may need to establish additional allowances, either of which could materially impact the Company's financial position and results of operations.

Certain of the statements made in this Quarterly Report on Form 10-Q (this “Quarterly Report”) within this Item 2. and elsewhere, including information incorporated herein by reference to other documents, are “forward-looking statements” within the meaning of, and subject to the protections 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”), and the Private Securities Litigation Reform Act of 1995. Such statements are based upon management’s current expectations, projections, estimates and assumptions. Words such as “expects,” “believes,” “anticipates,” “estimates,” “predicts,” “forecasts,” “plans,” “projects,” “targets,” “should,” “potential,” “continue,” “aims,” “intends,” “may,” “will,” “could,” “would” and variations of such words and similar expressions may identify such forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements. These risks include, among others, general economic conditions, including the impact of increased U.S. tariffs and any retaliatory measures by impacted exporting countries, the Company’s ability to mitigate the impact of such tariffs, changes in interest rates, changes in the overall level of consumer spending and in the price of oil, cotton and other raw materials used in the Company’s products, changing competition, changes in the retail environment, the Company’s ability to successfully integrate newly acquired businesses, the level and pricing of future orders from the Company’s customers, the Company’s dependence upon third-party suppliers, including some located in foreign countries with unstable political situations, the Company’s ability to successfully implement new information technologies, customer acceptance of both new designs and newly-introduced product lines, actions of competitors that may impact the Company’s business, disruptions to transportation systems or shipping lanes used by the Company or its suppliers, and the Company’s dependence upon licenses from third parties. Reference is also made to the Company’s periodic filings with the SEC for additional factors that may impact the Company’s results of operations and financial condition. The Company does not undertake to update the forward-looking statements contained herein to conform to actual results or changes in the Company’s expectations, whether as a result of new information, future events or otherwise.

The Company was originally formed as a Georgia corporation in 1957 and was reincorporated as a Delaware corporation in 2003. The Company primarily operates indirectly through its wholly-owned subsidiaries, NoJo Baby & Kids, Inc. and Sassy Baby, Inc. in the infant, toddler and juvenile products segment within the consumer products industry. The infant, toddler and juvenile products segment consists of infant and toddler bedding, bibs, toys, bibs,plush, dolls, diaper bags, disposables and feeding products.

The Company’s products are marketed under a variety of Company-owned trademarks, under trademarks licensed from others and as private label goods. The Company-owned trademarks include Sassy®, NoJo®, Manhattan Toy®, Baby Boom® and Neat Solutions®. Sales of the Company’s products are made directly to retailers, such as mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, wholesale clubs,clubs and internet-based retailers and direct-to-consumers through the Company’s websites.

Foreign and domestic contract manufacturers produce most of the Company’s products, with the largest concentration being in China. The Company makes sourcing decisions basedon onthe basis of quality, timeliness of delivery and price, including the impact of ocean freight and duties. Although the Company maintains relationships with a limited number of suppliers, the Company believes that its products may be readily manufactured by several alternative sources in quantities sufficient to meet the Company'sCompany’s requirements. The Company’s management and quality assurance personnel visit the third-party facilities regularly to monitor and audit product quality and to ensure compliance with labor requirements and social and environmental standards. In addition, the Company closely monitors the currency exchange rate. The impact of future fluctuations in the exchange rate or changes in safeguards cannot be predicted with certainty.

The Company’s products are warehoused and distributed domestically from leased facilities located in Compton, California and Eden Valley, Minnesota and internationally from third-party logistics warehouses in BelgiumBelgium, Shanghai and England.the United Kingdom.

The following table contains the results of operations for the three- and nine-monththree-month periods ended DecemberJune 28, 20252026 and DecemberJune 29, 20242025 and the dollar and percentage changes for those periods (in thousands, except percentages):

Gross Profit: Gross profit decreasedincreased by $1.2$4.5 million from the prior year reflecting a margin of 23.5%47.9% for the three-month period ended DecemberJune 28, 20252026 compared to 26.1%22.7% of net sales for the three-month period ended DecemberJune 29, 2024. Gross profit decreased by $2.1 million from the prior year reflecting a margin of 25.0% for the nine-month period ended December 28, 2025 compared to 26.6% of net sales for the nine-month period ended December 29, 2024.2025. The primarysignificant cause of this decreasefluctuation in gross profit relatesand gross margin is driven by the tariff refund recorded to increasedcost of products sold of $3.7 million. Gross margin without the tariff costsrefund associatedwould withhave productsbeen imported25.6%, an increase from China.the three-month period a year ago.

Marketing and Administrative Expenses: Marketing and administrative expenses increased by $0.6$515 millionthousand and changed to 24.0%31.2% of net sales for the three-month period ended DecemberJune 28, 20252026 from 18.8%30.5% of net sales for the three-month period ended DecemberJune 29, 2024.2025. TheThis increase was due to severance expenses incurred in connection with operational consolidation efforts. Marketing and administrative expenses increased by $0.3 million and changed to 24.0% of net sales for the nine-month period ended December 28, 2025 from 22.0% of net sales for the nine-month period ended December 29, 2024. The increase in the current year period is due to an increase in advertisingaccrued costsincentive andcompensation, severanceincluding expense$529 whichthousand wereassociated partiallywith offsettariff byrefunds, acquisitioncompared costs into the prior period.year.

Income Tax Expense (Benefit): Income tax expense increased $0.2$993 millionthousand from an income tax benefit for the three-month period ended DecemberJune 29, 20242025 to the three-month period ended DecemberJune 28, 2025, and increased $0.2 million from the nine-month period ended December 29, 2024 to the nine-month period ended December 29, 2025.2026. The Company’s estimated annual ETR was 24.7%24.1% and 22.3% for the three-month periods ended DecemberJune 28, 20252026 and DecemberJune 29, 2024, respectively, and was 24.7% and 22.4% for the nine-month periods ended December 28, 2025 and December 29, 2024,2025, respectively.

Net cash provided by operating activities increased from $7.0$5.2 million for the nine-monththree-month period ended DecemberJune 29, 20242025 to $7.1$5.5 million for the nine-monththree-month period ended DecemberJune 28, 2025.2026. The increase in the current year was partially the result of a decrease of $6.6$1.6 million in accounts receivableinventories that was $6.0$5.3 million lower than the increase in the prior year and an increase of $625 thousand in accrued liabilities that was $1.6 million higher than the decrease in the prior year. TheThese increaseincreases in the current year waswere partially offset by ana increasedecrease of $5.2 million in inventoriesaccounts in the current yearreceivable that was $2.7$2.2 million higherlower than the increase in the prior year, aan decreaseincrease of $2.9$4.5 million in accruedother liabilitiescurrent fromassets the prior year toin the current year that was $4.5 million lower in the prior year, and ana increasedecrease of $237 thousand in accounts payable in the current year that was $1.6$2.9 million lower than the increase in the prior year.

Net cash used in investing activities decreasedincreased from $17.0$86 millionthousand in the prior year to $616$156 thousand in the current year which were primarily associated with capital expenditures for property, plant and equipment. Prior year capital expenditures included $16.4 million for the Acquisition.

Net cash used in financing activities, which were primarily associated with net repayments under the revolving line of credit and payments of the term loan, was $4.6$5.4 million compared to net$5.5 cash provided by financing activitiesmillion in the prior yearyear, a decrease of $10.2$96 million. This decrease was due to the issuance of an $8.0 million term loan in the prior year as well as the Company paying down debt in the current year.thousand.

As of DecemberJune 28, 2025,2026, the balance on the revolving line of credit with CIT was $11.3$5.4 million, there was no letter of credit outstanding and $10.6$11.9 million was available under the revolving line of credit with CIT based on the Company’s eligible accounts receivable and inventory balances.

To reduce its exposure to credit losses and to enhance the predictability of its cash flow,losses, the Company assigns the majority of its trade accounts receivable to CIT underpursuant to factoring agreements.agreements, which have expiration dates that are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT. As such, the Company does not take advances on the factoring agreements.

CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income,operations, amounted to $74$77 thousand and $115$70 thousand for the three-month periods ended DecemberJune 28, 2025,2026, and DecemberJune 29, 2024, respectively, and amounted to $254 thousand and $283 thousand for the nine-month periods ended December 28, 2025 and December 29, 2024, respectively.2025.

On June 23, 2025, the Company and CIT further amended the Company’s financing agreement with CIT to: (i) provide that, until the Company’s term loan is paid in full, the Company shall maintain at all times Excess Availability (as defined in the financing agreement) equal to or the greater of (a) the sum of the balance outstanding under the Company’s term loan plus $1.0 million or (b) $4.0 million (the “Availability Covenant”); and (ii) reinstate the fixed charge coverage ratio; provided however, that the fixed charge coverage ratio shall not be tested at any fiscal quarter end in which, during the immediately preceding fiscal quarter, the Company at all times has been in compliance with the Availability Covenant. As of DecemberJune 28, 2025,2026, the Company has complied with the Excess Availability requirements.