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

CertainA small number of key customers have historically made up a significant percentage of the Company’s product sales and net revenues. For fiscal 2026, Amazon and Fred Meyer accounted for approximately 42% and 13%, respectively, of the Company’s net revenues. For fiscal 2025, Amazon and Walmart accounted for approximately 39% and 31%, respectively, of the Company’s net revenues. For fiscal 2024, Walmart, Amazon and Fred Meyer accounted for approximately 53%, 20% and 10%, respectively, of the Company’s net revenues. No other customer accounted for more than 10% of the Company’s net revenues during theseeither periods.period. AllAlthough the Company has long-standing relationships with its major customers, all customer purchases are made through individual purchase orders and the Company does not have any long-term supply contracts with its customers. Accordingly, sales from customers that have accounted for a significant portion of the Company’s net product sales and net revenues in past periods, individually or as a group, may not continue in future periods, or if continued, may not reach or exceed historical levels in any period, which has happened in the past and could happen in the future. Some of the Company’s key customers may also experience economic difficulties or otherwise default on their obligations to the Company. The complete loss of, or significant reduction in business from, or a material adverse change in the financial condition of, any of the Company’s key customers would cause a material and adverse change in the Company’s revenues and operating results.

The Company derives a substantial portion of its product revenues from a limited number of products, and the Company expects these products to continue to account for a large percentage of its product revenues in the near term. For the twelve months ended March 31, 2025,2026, the Company’s gross product sales were comprised principally of two product types within two categories — housewares products and audio products. Microwave ovens, which product type is within the housewares category, generated approximately 51% of the Company’s gross product sales. Audio products generated approximately 47%69% of the Company’s gross product sales during fiscal 2025.2026. Audio products generated approximately 25% of the Company’s gross product sales during fiscal 2026. For the twelve months ended March 31, 2024,2025, the Company’s gross product sales were comprised principally of the same two product types within the same two categories — housewares products and audio products. During fiscal 2024,2025, microwave ovens generated approximately 32%51% of the Company’s gross product sales and audio products generated approximately 66%47% of the Company’s gross product sales. Because the market for these product types and categories is characterized by periodic new product introductions, the Company’s future financial performance will depend, in part, on the successful and timely development and customer acceptance of new and enhanced versions of these product types and other products distributed by the Company. There can be no assurance that the Company will continue to be successful in marketing these product types within these categories or any other new or enhanced products. For example, certain of the Company’s key customers perform periodic line reviews to assess their product offerings, which have in the past and may in the future lead to loss of business and pricing pressures. As a result of this dependence, a significant decline in pricing of, or market acceptance of these product types and categories, either in general or specifically as marketed by the Company, would have a material adverse effect on the Company’s business, financial condition and results of operation.

A significant portion of the Company’s product sales are made through third party sales representative organizations, whose members are not employees of the Company. The Company’s level of sales depends on the effectiveness of these organizations, as well as the effectiveness of its own employees. Some of these third party representatives sell, with the Company’s permission, competitive products of third parties as well as the Company’s products. During fiscal 20252026 and fiscal 2024,2025, these third party representative organizations were responsible for approximately 52%82% and 40%,52%, respectively, of the Company’s net revenues. In addition, in fiscal 2026 one of these third party sales representative organizations was responsible for approximately 43% and another was responsible for approximately 25% of the Company’s net revenues. In fiscal 2025 one of these third party sales representative organizations was responsible for approximately 38% and another was responsible for approximately 10% of the Company’s net revenues. In fiscal 2024 one of these representative organizations was responsible for approximately 30% of the Company’s net revenues. No other representative was responsible for greater than 10% of the Company's net revenues in either fiscal 20252026 or fiscal 2024.2025. If any of the Company’s third party sales representative organizations engaged by the Company, especially the Company’s largest, fails to adequately promote, market and sell its products, the Company’s revenues could be significantly decreased until a replacement organization or distributor could be retained by the Company, which has happened in the past and could happen in the future. The loss or reduction of product sales made through third party sales representative organizations could have a material adverse effect on the Company’s business and results of operations. Finding replacement organizations and distributors could be a time consuming process during which the Company’s revenues could be negatively impacted.

With the concentration of the Company’s product sales among a limited number of retailers, the Company is dependent upon a small number of customers whose bargaining strength is substantial and growing. Brick-and-mortar retailers generally purchase a limited selection of houseware and consumer electronics products. As a result, there is significant competition for retail shelf space. In addition, the Company’s largest customers, including WalmartAmazon, Fred Meyer and Amazon,Walmart, use their own private label brands that compete directly with some of the Company’s products. As the retailers in the houseware and consumer electronics industry become more concentrated, competition for sales to these retailers may increase, which could materially reduce the Company's revenues and profitability. Additionally, as large traditional retail and online customers grow even larger and become more sophisticated, they may continue to demand lower pricing, special packaging, shorter lead times for the delivery of products, smaller more frequent shipments, or impose other requirements on product suppliers. These business demands may relate to inventory practices, logistics or other aspects of the customer-supplier relationship. If we do not effectively respond to these demands, these customers could decrease their purchases from us. A reduction in the demand for our products by these customers and the costs of complying with their business demands could have a material adverse effect on our business, operating results and financial condition.

The Company does not have any long-term or exclusive purchase commitments with any of its suppliers. In fiscal 20252026 and 2024,2025, the Company relied on its 4four largest suppliers to supply approximately 95%96% and 95%, respectively, of its purchases of products. The Company’s failure to maintain existing relationships with its suppliers or to establish new relationships on similar pricing and credit terms in the future could negatively affect the Company’s ability to obtain products in a timely manner. If the Company is unable to obtain an ample supply of product from its existing suppliers or secure alternative sources of supply, it may be unable to satisfy its customers’ orders, which could materially and adversely affect the Company’s revenues and relationships with its customers. Finding replacement suppliers could be a time consuming process during which the Company’s revenues and liquidity could be negatively impacted.

The Company has also experiencedcontinues to experience increased transportation costs in the past due to global supply chain challenges, including the cost of ocean freight from China,China. Shipping rates and surcharges are volatile and subject to market fluctuations, and the Company could be subject to future increases in transportation costs.costs Inwhich addition,would reduce the Company’sCompany's abilitymargins toand meetadversely customers’ demands depends, in part, onaffect its ability to obtain the timely and adequate shipment of its products.profitability. Given that the Company’s suppliers are based primarily in China, finding suppliers outside of China could result in additional risks, including additional compliance requirements with foreign laws and taxes, obtaining distribution and administrative support and training new personnel. Any disruption to the Company's supply chain, even for a relatively short period of time, could cause a loss of revenue, which could adversely affect the Company's operating results.

The Company’s ability to providemeet highcustomers' quality customer service,demands, process and fulfill orders, and manage inventory depends on the efficient and uninterrupted operation and timely and uninterrupted performance of its suppliers.suppliers and shipment of its products. The Company can provide no assurances that it will not experience operational difficulties with its suppliers, including reductions in the availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines, increases in manufacturing costs, increased lead times or production shutdowns or production slowdowns due to health pandemics or otherwise, which have in the past and could in the future result in increased costs and decreased efficiency. With the Company's manufacturers and suppliers located in China, its production lead times are relatively long. Therefore the Company must commit to production in advance of customers' orders. If the Company is unable to forecast customer or consumer demand accurately, the Company may encounter difficulties in filling customer orders on a timely basis or in liquidating excess inventories. If the Company is unable to obtain products from these factories in the required quantities and quality and in a timely fashion, the Company could experience delays or reductions in product shipments to its customers, which could negatively affect the Company’s ability to meet the requirements of its customers, as well as its relationships with its customers, which in turn could materially and adversely affect the Company’s revenues and operating results. In addition, shipping rates and surcharges are volatile and subject to market fluctuations, and any increases in shipping costs may reduce the Company’s margins and adversely affect its profitability.

The Company’s net revenue and operating results may vary significantly from year-to-year and quarter-to-quarter as well as in comparison to the corresponding quarter of the preceding year. Factors that may cause these variationsvariations, all of which are beyond our control, include:

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

Effective in SeptemberSince 2018, the United States imposed tariffsa series of 10%tariffs on certain goods imported from China, including categories of products the Company imports from China. TheseIn turn, China has responded to U.S. tariffs werewith increasedits toown 25%tariffs, effectiveexport in May 2019. Effective in September 2019 (and as amended by the certain Phase One Economiccontrols and Trademarket Agreement entered into between the United States and China in January 2020), the United States imposed additional tariffs of approximately 7.5% on essentially all remaining goods imported from China. The new United States presidential administration has promoted and implemented plans to further raise tariffs and pursue other trade policies intended to restrict imports from nearly all of the United States' current trading partners and, in particular, China.restrictions. In May and October 2025, following a series of tariffs imposed by the United States on imports from China and reciprocal tariffs from China on imports from the United States,States that dramatically escalated the countriestariff rate between the two countries, the United States and China agreed on cumulative, bilateral reciprocal tariffs of 10% to take effect on August 12, 2025,10%, pending the outcome of ongoing discussions between the countries. It has been reported that these negotiations will result in an additional 20% tariff on imports from China, representing an aggregate tariff rate of 55%. The ultimate scope of the effects on the Company of these imposed and proposed tariffs is uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. In addition, recent legal and policy developments have also increased uncertainty regarding the enforceability, duration, and potential re‑imposition of certain tariffs. For example, on February 20, 2026, the U.S. Supreme Court struck down certain tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"). Following that decision, the U.S. administration announced a new 10% global tariff under Section 122 of the Trade Act of 1974, subject to certain exceptions; however, on May 7, 2026, the U.S. Court of International Trade ruled that the Section 122 tariffs were not authorized by law, a decision the administration has appealed. These and similar developments have created significant uncertainty regarding the status of existing and newly announced tariffs; the future rate, scope, and enforceability of tariffs; the potential adoption of alternative legislative or executive actions; and the continued effectiveness of trade arrangements or mitigation actions adopted in response to prior tariffs. 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.

The products that we sell are subject to various mandatory and voluntary standards. As a marketer and distributor of consumer products, we are subject to the Consumer Product Safety Act ("CPSC") and the Federal Hazardous Substances Act, which empower the CPSC to seek to exclude from the market those products that are found to be unsafe or hazardous. In addition, the U.S. FDA and other governmental authorities regulate the development, manufacture, sale and distribution of certain of our products. Under certain circumstances, the CPSC, the FDA or other government agencies could require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so. Any repurchases or recalls of our products could be costly to us and could damage our reputation or the value of our brands. If we are required to remove, or we voluntarily remove our products from the market, our reputation or brands could be tarnished, and we might have large quantities of finished products that could not be sold. Furthermore, failure to timely notify the CPSC, the FDA or other applicable government agencies of a potential safety hazard can result in fines being assessed against us. Additionally, laws regulating certain of our products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future. Our results of operations are also susceptible to adverse publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a particular product.

Electrical appliances are subject to various mandatory and voluntary standards. Some jurisdictions require that products be listed by Underwriters’ Laboratories, Inc. (UL),Inc., a not-for-profit organization that sets safety standards for products, or other similar recognized laboratories. We endeavor to design our products to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold. Failure to comply with such certification requirements could result in additional re-design expenses, fines, or product liability claims.

The Company is subject to income taxes in various federal, state, local and certain foreign jurisdictions. The Company records tax expense based on its estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets, including net operating loss carryforwards. In addition, tax laws in certain jurisdictions may limit the ability to use net operating loss carryforwards upon a change in control. At any one time, many tax years may be subject to audit by the various taxing jurisdictions.jurisdictions Thein resultswhich we conduct business. Unfavorable resolutions to any of these audits and negotiations with taxing authorities maycould affectincrease the ultimateCompany's settlementeffective oftax theserate, issues.which could have an adverse effect on the Company's operating results and cash flow. In addition, the Company’s effective tax rate in a given financial statement period may be materially affected by a variety of factors including but not limited to changes in the mix and level of revenues, varying tax rates in the different jurisdictions in which the Company operates, fluctuations in the valuation allowance, timing of the utilization of net operating loss carryforwards, or by changes to existing accounting rules or regulations. Further, tax legislation or changes in tax rules and regulations or the interpretations thereof may be enacted in the future which could negatively affect the Company’s current or future tax structure and effective tax rates. For example, the OrganizationOrganisation for Economic Co-operation and Development has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as “Pillar Two.” Certain countries in which we operate have enacted legislation to adopt Pillar Two and other countries are considering changes to their tax laws to implement this framework. The EU agreed to implement Pillar Two starting in 2024. Whether, and to what extent, Pillar Two is adopted or enacted by the other jurisdictions in which we operate is uncertain and could increase the cost and complexity on compliance and may adversely affect our global effective tax rate, financial condition and results of operations.

The Company’s common stock, which trades on the NYSE American, has experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of the Company’s common stock. ForAny example,such theincreases Companyor believes that recent volatilitydecreases in the market price of the Company’sCompany's common stock reflects market and trading dynamics unrelated to the Company’s underlying business or macro or industry fundamentals. These fluctuations have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums. The Company may continue to incur rapid and substantial increases or decreases in its stock price that may not coincide in timing with the disclosure of news or developments by or affecting the Company. Accordingly, the market price of the Company’s common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in the Company’s business. The market price of the Company’s common stock may also fluctuate significantly in response to various factors and events, including:

Pursuant to the Company’s corporate bylaws, as amended (the “bylaws”), unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the Company or any stockholder to the Company or the Company’s stockholders; (iii) any action or proceeding asserting a claim against the Company or any current or former director, officer or other employee of the Company or any stockholder arising pursuant to any provision of the General Corporation Law of Delaware or the Company’s certificate of incorporation or bylaws (as each may be amended from time to time); (iv) any action or proceeding to interpret, apply, enforce or determine the validity of the Company’s certificate of incorporation or bylaws (including any right, obligation or remedy thereunder); (v) any action or proceeding as to which the General Corporation Law of Delaware confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against the Company or any director, officer or other employee of the Company or any stockholder, governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This forum selection clause in the Company’s bylaws does not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts of the United States of America have exclusive jurisdiction. The bylaws further provide, that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.Act. In addition, the bylaws provide that any person or entity holding, owning or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and to have consented to these provisions. The forum selection clause in the Company’s bylaws may limit stockholders’ ability to have certain claims heard in any court other than in the Court of Chancery or the federal district courts in Delaware.

Net product sales — Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. Net product sales for fiscal 20252026 were $10.4$5.9 million as compared to $8.7$10.4 million for fiscal 2024,2025, ana increasedecrease of $1.7$4.5 million, or 20.4%.43.3%. In fiscal 2026, the Company’s sales were highly concentrated among three customers - Amazon, Fred Meyer and Walmart - representing in the aggregate approximately 67% of the Company’s total gross product sales. In fiscal 2025, the Company’s sales were highly concentrated among three customers - Amazon, Walmart and Big Lots - representing in the aggregate approximately 81.2% of the Company’s total gross product sales. In fiscal 2024, the Company’s sales were highly concentrated among three customers - Walmart, Amazon and Fred Meyer - representing in the aggregate approximately 85.8%81% of the Company’s total gross product sales. The increasedecrease in net product sales during fiscal 20252026 compared to fiscal 20242025 was primarily driven by increaseda salesdiscontinued ofclock microwaveradio ovens.at Walmart. 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 approximately $38,000nil and $20,000$38,000 for fiscal 20252026 and fiscal 2024,2025, respectively. The major elements which contributed to the overall increase in net product sales were as follows:

Licensing revenue — Licensing revenue in fiscal 20252026 was approximately $336,000$386,000 as compared to approximately $218,000$336,000 in fiscal 2024,2025, an increase of $118,000,$50,000, or 54.1%.14.9%. The increase was primarily due to onethe ofincrease in guaranteed minimum royalties from the Company's licensees exceeding their guaranteed minimum royalties. Also contributing was the license revenue generated from a license agreement signed in fiscal 2024.licensees.

Net revenues —The Company’s net revenues were approximately $6.3 million for fiscal 2026 as compared to $10.8 million for fiscal 20252025, asa compared to $9.1 million for fiscal 2024, an increasedecrease of $1.7$4.5 million, or 18.9%,41.5%, which was driven primarily by ana increasedecrease in audio and houseware product sales and an increase in licensing revenue partially offset by decreases in audio product sales and royalty income.sales.

Cost of sales — Cost of sales includes the components described in Note "1 - "Significant Accounting Policies-“CostPolicies-Cost of Sales” in the Notes to the Consolidated Financial Statements. In absolute terms, cost of sales increaseddecreased approximately $2.4$3.7 million, or 31.7%,37.1%, to $6.2 million in fiscal 2026 as compared to $9.9 million in fiscal 2025 as compared to $7.5 million in fiscal 2024.2025. The increasedecrease in absolute terms for fiscal 20252026 as compared to fiscal 20242025 was primarily related to the increasedecrease in net product sales partially offsetand by lower year-over-year gross cost of sales as a percentage of gross sales. The increasedecrease in gross cost of sales as a percentage of gross sales for fiscal 20252026 as compared to fiscal 20242025 was primarily related to the change in the product mix of audio products compared to houseware products.

Provision for income tax expense — The Company recorded approximately $3,000 ofno income tax expense during fiscal 20252026 and recorded its non-income based state taxes of approximately $8,000$11,000 to S,GSG&A according to Accounting Standards Update ("ASU") 2019-12. In fiscal 2024,2025, the Company recorded $90,000approximately $3,000 of income tax expense and recorded its non-income based state taxes of approximately $9,000$8,000 to S,GSG&A according to ASU 2019-12. See Note 5 “Income Taxes” in the Notes to the Consolidated Financial Statements.

Net income (loss) — As a result of the foregoing factors, the Company recorded a net loss of approximately $4,731,000$4,300,000 for fiscal 20252026 as compared to a net incomeloss of approximately $766,000$4,731,000 for fiscal 2024.2025.

As of March 31, 2025,2026, the Company had cash and cash equivalents of approximately $1.2$9.2 million as compared to approximately $19.9$1.2 million at March 31, 2024.2025. Working capital decreased to $16.8 million at March 31, 2026 as compared to $21.1 million at March 31, 2025 as compared to $26.6 million at March 31, 2024.2025. The decreaseincrease in cash and cash equivalents of approximately $18.7$8.0 million is detailed further in “Cash Flows” below.

Net cash used by operating activities was approximately $3.7 million for fiscal 2026, compared to approximately $3.6 million for fiscal 2025, compared to approximately $5.3 million for fiscal 2024, resulting from the $4.7$4.3 million loss generated during the period, ana increasedecrease of $1.2approximately $1.1 million in non-cash reserve charges and a decrease of approximately $0.7 million in income taxes payable, partially offset by a decrease of approximately $1.3 million in gross accounts receivable, a decrease of $0.5approximately $0.8 million in incomeinventory taxesand payable,an a decreaseincrease of approximately $0.3 million in accounts payable and other current liabilities and a decrease of $0.3 million in right-of-use assets, partially offset by a decrease of $2.1 million in inventory, an increase of $1.1 million in asset valuation allowances and a decrease of $0.1 million in long term operating lease liabilities.

Net cash usedprovided by financinginvesting activities was approximately $6,000$11.7 million for fiscal 20252026, as compared to net cash providedused in investing activities of approximately $1,000$15.1 million for fiscal 20242025, due to additionsproceeds tofrom theinvestments Company'sof financeapproximately lease$20.8 liabilities.million, partially offset from purchases of investments of approximately $9.1 million.

The Company is subject to various legal proceedings, the outcomes of which are inherently uncertain. The Company records any potential gains related to legal proceedings only after cash is collected. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results. See "Note 11 - "Legal Proceedings" in the Notes to the Consolidated Financial Statements.

The Company adopted ASC topic 606, "Revenue from Contracts with Customers" ("ASC 606") effective April 1, 2018. Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized.

Sales Allowance and Marketing Support Accruals. Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic 606, “Revenue from Contracts with Customers”.606.

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 606, “Revenue from Contracts with Customers,” (i) sales incentives offered to customers that meet the criteria for accrual and (ii) an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers, which it does not expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items, because that percentage of shipped revenue fails to meet the collectability criteria within ASC topic 606.

Fair Value Measurements. The Company reports financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis in accordance with ASC Topic 820820, "Fair Value Measurement" (“ASC 820”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The U.S. GAAP established a hierarchy framework to classify the fair value based on the observability of significant inputs to the measurement.

The following table summarizes certain financial information for the three and nine month periodsperiod ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 20242025 (in thousands):

Net product sales — Net product sales for the three month period ended DecemberJune 31,30, 20252026 were approximately $1.8$0.9 million as compared to approximately $3.9$1.6 million for the three month period ended DecemberJune 31,30, 2024,2025, a decrease of approximately $2.1$0.7 million, or 53.6%.41.5%. The Company’s net product sales during the three month period ended DecemberJune 31,30, 20252026 were highly concentrated among its threetwo largest customers – Amazon, Bi-MartAmazon and Walmart – comprising in the aggregate approximately 82%65% of the Company’s total net product sales during the period. The Company’s net product sales during the three month period ended DecemberJune 31,30, 2024,2025, were highly concentrated among its three largest customers – Amazon,Variety, WalmartFred Meyer and Big LotsAmazon – comprising in the aggregate approximately 95%68% of the Company’s total net product sales during the period.

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 approximately $1,000 and approximately $11,000nil for each of the three month periods ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 2024, respectively, and by nil and approximately $32,000 for the nine month periods ended December 31, 2025 and December 31, 2024, respectively.2025. The major elements which contributed to the overall decrease in net product sales were as follows:

i) Houseware products: Net sales of houseware products decreased approximately $1.0$0.8 million, or 46.9%,54.6%, to approximately $1.1$0.6 million for the three month period ended DecemberJune 31,30, 20252026 as compared to approximately $2.1$1.4 million for the three month period ended DecemberJune 31,30, 2024,2025, driven by decreased net sales of microwave ovens. Certain of the Company's key customers refuse to accept price increases from recently imposed tariffs, which negatively impacted net sales during the quarter ended DecemberJune 31,30, 2025. Net sales of houseware products decreased $ 1.1 million, or 24.3%, to approximately $3.3 million for the nine month period ended December 31, 2025 as compared to approximately $4.4 million for the nine month period ended December 31, 2024, driven by decreased net sales of microwave ovens and compact refrigerators.2026.

ii) Audio products: Net sales of audio products decreasedincreased approximately $1.1$0.1 million, or 61.7%,85.9%, to approximately $0.7$0.2 million for the three month period ended DecemberJune 31,30, 20252026 as compared to approximately $1.8$0.1 million for the three month period ended DecemberJune 31,30, 2024, primarily due to a discontinued clock radio at Walmart. Net sales of audio products decreased approximately $3.1 million, or 72.6%, to approximately $1.1 million for the nine month period ended December 31, 2025 as compared to approximately $4.2 million for the nine month period ended December 31, 2024, primarily due to a discontinued clock radio at Walmart.2025.

Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.SU.S, Canada and Mexico. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products on which the Company has historically focused. The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensing Services Pte Limited as an agent to assist in identifying and procuring potential licensees.

Emerson’s success is dependent on its ability to anticipate and respond to changing consumer demands and trends in a timely manner, as well as expanding into new markets and sourcing new products that are profitable to the Company. Geo-political factors may also affect the Company’s operations and demand for the Company’s products, which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions. The Company expects that U.S. tariffs on categories of products that the Company imports from China, and China’s retaliatory tariffs on certain goods imported from the United States, as well as modifications to international trade policy, will continue to affect its product costs going forward. If the Company's mitigation efforts are unsuccessful, the combination of tariffs will result in significantly increased annualized costs to the Company as all of the Company's products are currently manufactured by suppliers in China. Although the Company is monitoring the trade and political environment and working to mitigate the possible effects of tariffs with its suppliers as well as its customers through pricing and sourcing strategies, certain of the Company's key customers have refused to accept price increases from imposed tariffs and the Company cannot be certain how itsother customers and competitors will react to theany future actions that may be taken. If the Company's mitigation efforts are unsuccessful, the impact of tariffs will result in significantly increased annualized costs to the Company as all of the Company’s products are currently manufactured by suppliers in China. In addition, heightened tensions between the United States and China over Hong Kong and any resulting retaliatory policies may affect our operations in Hong Kong. At this time the Company is unable to quantify possible effects on its costs arising from the existing or potential new tariffs, which are expected to increase the Company’s inventory costs and associated costs of sales as tariffs are incurred,incurred. andAlthough some costs may be passed through to the Company’s customers as product price increases in the future. However,future, if the Company is unable to successfully pass through the additional costs or otherwise mitigate the effects of these tariffs, or if the higher prices reduce demand for the Company’s products, it will have a negative effect on the Company’s product sales and gross margins.

In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures. However, the economic environment remains uncertain.uncertain Demandand demand for the Company’s products remains competitive and requires the Companyactions to continue carefully managing inventory. Accordingly, our current results and financial condition discussed herein may not be indicative of our future operating results and trends.

Licensing revenue — Licensing revenue for the ninethree month period ended DecemberJune 31,30, 20252026 was approximately $261,000$125,000 as compared to approximately $248,000$86,000 for the ninethree month period ended DecemberJune 31,30, 2024,2025, an increase of approximately $13,000,$39,000, or 5.2%.45.4%. The increase forwas primarily due to the nineescalation month period ended December 31, 2025 was the result of increases ofin annual guaranteed minimum royalties of one of the Company's licensees.

Net revenues — Net revenues were approximately $1.9$1.1 million for the three month period ended DecemberJune 31,30, 20252026 as compared to approximately $4.0$1.7 million for the three month period ended DecemberJune 31,30, 2024,2025, a decrease of approximately $2.1$0.6 million, or 53.6%.37.1%. The decrease in net revenues can be attributed primarily to the discontinuationrefusal by certain of athe clockCompany's radiokey atcustomers Walmart.to accept price increases from imposed tariffs.

Cost of sales — Cost of sales decreased approximately $3.4$1.2 million, or 42.8%,67.9%, to approximately $4.6$0.5 million for the ninethree month period ended DecemberJune 31,30, 20252026 as compared to approximately $8.0$1.7 million for the ninethree month period ended DecemberJune 31,30, 2024.2025. The decrease in absolute terms for the ninethree month period ended DecemberJune 31,30, 20252026 as compared to the ninethree month period ended DecemberJune 31,30, 20242025 was primarily related to the discontinuationreduction in net sales of aapproximately clock radio at Walmart$660,000 and thea negativeone-time impacttariff refund of tariffsapproximately on the Company's microwave product line.$548,000.

Selling, general and administrative expenses (“S,G&A”) — S,G&A was approximately $1.0 million for the three month period ended December 31, 2025 as compared to $1.2 million for the three month period ended DecemberJune 31,30, 2024,2026 as compared to $1.3 million for the three month period ended June 30, 2025, a decrease of approximately $0.2$0.1 million or 15.7%.8.6%. S,G&A, as a percentage of net revenues, was approximately 54.6%114.4% for the three month period ended DecemberJune 31,30, 20252026 as compared to approximately 30.6%78.8% for the three month period ended DecemberJune 31,30, 2024.2025. The decrease in S,G&A for the three month period ended DecemberJune 31,30, 20252026 as compared to the three month period ended DecemberJune 31,30, 20242025 was primarily driven by a decrease in compensation costs of approximately $168,000$138,000 and ana increasedecrease in bad debt recoveriesexpense of approximately $164,000,$23,000, partially offset by an increase in legal fees of approximately $160,000.$55,000. Compensation costs for the three month period ended DecemberJune 31,30, 20252026 were approximately $568,000$632,000 as compared to approximately $736,000$770,000 for the three month period ended DecemberJune 31,30, 2024.2025. Bad debt recoveries for the three month period ended DecemberJune 31,30, 20252026 were approximately $164,000$16,000 as compared to nilbad debt expense of approximately $7,000 for the three month period ended DecemberJune 31,30, 2024.2025. Legal fees for the three month period ended DecemberJune 31,30, 20252026 were approximately $123,000$98,000 as compared to approximately $37,000$43,000 of legal fee recoveriesfees for the three month period ended DecemberJune 31,30, 2024.2025.

Interest income, net — For the three month period ended June 30, 2026, interest income, net, was approximately $454,000$120,000, forwhich included approximately $20,000 of interest from the nineIEEPA monthtariff period ended December 31, 2025recovery, as compared to approximately $705,000$169,000 for the ninethree month period ended DecemberJune 31,30, 2024,2025, a decrease of approximately $251,000.$49,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments.

Provision for income taxes — For both three month periods ended December 31, 2025 and December 31, 2024, the Company recorded income tax expense of nil. For the nine month period ended December 31, 2025, theThe Company recorded income tax expense of nil asfor comparedeach to approximately $3,000 forof the ninethree month periodperiods ended DecemberJune 31,30, 2024.2026 and June 30, 2025. 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 ninethree month periods ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 2024,2025, which are now reported as S,G&A. See “Note 5 – Income Taxes”.

Although the Company generated a net loss during the three and nine months ended DecemberJune 31,30, 20252026, 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.

Net loss — As a result of the foregoing factors, the Company realized a net loss of approximately $694,000$566,000 for the three month period ended DecemberJune 31,30, 20252026 as compared to a net loss of approximately $527,000$1,140,000 for the three month period ended DecemberJune 31,30, 2024.2025.

As of DecemberJune 31,30, 2025,2026, the Company had cash and cash equivalents of approximately $4.2$5.3 million as compared to approximately $1.2$9.2 million at March 31, 2025.2026. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of approximately $3.8$4.5 million as of DecemberJune 31,30, 20252026 compared to approximately $0.9$9.1 million of such deposits as of March 31, 2025.2026. Working capital decreased to approximately $18.3$16.3 million at DecemberJune 31,30, 20252026 as compared to approximately $21.1$16.8 million at March 31, 2025.2026. The increasedecrease in cash and cash equivalents of approximately $3.0$3.9 million was due to the decreaseincrease in short term investments of approximately $5.8$3.0 million, the decreaseincrease in inventory of approximately $0.5$0.8 million and the net loss generated during the period of approximately $0.6 million, partially offset by the decrease in accounts receivable of approximately $0.4 million and an increase in accounts payable and other current liabilities of approximately $0.3 million, partially offset by the net loss generated during the period of approximately $2.9 million and the decrease in income tax payable of approximately $0.7$0.1 million.

Net cash used by operating activities was approximately $2.8$0.9 million for the ninethree month period ended DecemberJune 31,30, 2025,2026, resulting from an increase in inventory of approximately $0.8 million, the loss generated during the period of approximately $2.9$0.6 million and aan decreaseincrease in incomeprepaid taxexpenses payableand other current assets of approximately $0.7$0.1 million, partially offset by a decrease in inventoryaccounts receivable of approximately $0.5 million and an increase in accounts payable and other current liabilities of approximately $0.3$0.1 million.

Net cash providedused by investing activities was approximately $5.8$3.0 million for the ninethree month period ended DecemberJune 31,30, 20252026 due to purchases of short-term investments of approximately $4.0 million, partially offset by redemptions of short-term investments.investments of approximately $1.0 million.

Net cash used by financing activities was approximately $1,000 for the ninethree month period ended DecemberJune 31,30, 2025.2026.

As of DecemberJune 31,30, 2025,2026, the Company did not have any off-balance sheet arrangements as defined under the rules of the SEC.