What changed in this filing

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Item 1. Financial Statements

2025-08-13 compared with 2025-02-12 · 234 added, 187 removed, 228 unchanged (65% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 29, 2024 (UNAUDITED) AND MARCH 31, 2024

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 29, 2025 AND MARCH 30, 2025

(amounts in thousands, except share and per share amounts)

December 29, 2024

June 29, 2025

March 30, 2025

1 unchanged sentence

Cash and cash equivalents

$ 1,053 $ 829

Accounts receivable (net of allowances of $ 1,266 at December 29, 2024 and $ 1,486 at March 31, 2024):

Accounts receivable (net of allowances of $ 1,988 at June 29, 2025 and $ 1,723 at March 30, 2025):

Due from factor

37 unchanged sentences

Long-term debt

11,890 16,512

Operating lease liabilities, noncurrent

4 unchanged sentences

Common stock - $ 0.01 par value per share;

Authorized 40,000,000 shares at December 29, 2024 and March 31, 2024;

Issued 13,299,402 shares at December 29, 2024 and 13,208,226 shares at March 31, 2024

Authorized 40,000,000 shares at June 29, 2025 and March 30, 2025;

Issued 13,493,402 shares at June 29, 2025 and 13,478,402 shares at March 30, 2025

Additional paid-in capital

58,837 58,637

Treasury stock - at cost - 2,905,661 shares at December 29, 2024 and 2,897,507 at March 31, 2024

Treasury stock - at cost - 2,910,859 shares at June 29, 2025 and March 30, 2025

( 15,880 ) ( 15,880 )

Retained Earnings

Retained Earnings (accumulated deficit)

( 5,223 ) ( 3,273 )

Total shareholders' equity

2 unchanged sentences

$ 76,023 $ 81,154

See notes to unaudited condensed consolidated financial statements.

See notes to consolidated financial statements.

CROWN CRAFTS, INC.

AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2024 AND DECEMBER 31, 2023

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE-MONTH PERIODS ENDED JUNE 29, 2025 AND JUNE 30, 2024

(amounts in thousands, except per share amounts)

Three-Month Periods Ended

Nine-Month Periods Ended

December 29, 2024

December 31, 2023

December 29, 2024

December 31, 2023

$ 23,351 $ 23,801 $ 64,023 $ 65,053

June 29, 2025

June 30, 2024

Cost of products sold

17,253 17,367 47,002 47,281

6,098 6,434 17,021 17,772

Marketing and administrative expenses

4,397 4,107 14,108 12,189

Income from operations

1,701 2,327 2,913 5,583

Loss from operations

Other (expense) income:

Interest expense - net of interest income

( 391 ) ( 208 ) ( 840 ) ( 560 )

Gain (loss) on sale or disposition of property, plant and equipment

( 2 ) 58 ( 2 ) 58

( 33 ) 17 ( 55 ) ( 9 )

Income before income tax expense

1,275 2,194 2,016 5,072

Income tax expense

382 492 585 1,182

$ 893 $ 1,702 $ 1,431 $ 3,890

Other income - net

Loss before income tax benefit

Income tax benefit

Weighted average shares outstanding:

10,394 10,241 10,353 10,198

Effect of dilutive securities

10,394 10,241 10,354 10,200

Earnings per share - basic and diluted

$ 0.09 $ 0.17 $ 0.14 $ 0.38

See notes to unaudited condensed consolidated financial statements.

Basic loss per share

Diluted loss per share

See notes to consolidated financial statements.

CROWN CRAFTS, INC.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2024 AND DECEMBER 31, 2023

THREE-MONTH PERIODS ENDED JUNE 29, 2025 AND JUNE 30, 2024

Common Shares

2 unchanged sentences

(Dollar amounts in thousands)

Three-Month Periods

Balances - October 1, 2023

13,138,226 $ 131 ( 2,897,507 ) $ ( 15,821 ) $ 57,509 $ 8,334 $ 50,153

Issuance of shares

- - - - - - -

Stock-based compensation

- - - - 190 - 190

Acquisition of treasury stock

- - - - - - -

- - - - - 1,702 1,702

Dividend declared on common stock - $ 0.08 per share

- - - - - ( 820 ) ( 820 )

Balances - December 31, 2023

13,138,226 $ 131 ( 2,897,507 ) $ ( 15,821 ) $ 57,699 $ 9,216 $ 51,225

Balances - September 29, 2024

13,299,402 $ 132 ( 2,905,661 ) $ ( 15,860 ) $ 58,279 $ 8,284 $ 50,835

Issuance of shares

- - - - - - -

Stock-based compensation

- - - - 180 - 180

Acquisition of treasury stock

- - - - - - -

- - - - - 893 893

Dividend declared on common stock - $ 0.08 per share

- - - - - ( 832 ) ( 832 )

Balances - December 29, 2024

13,299,402 $ 132 ( 2,905,661 ) $ ( 15,860 ) $ 58,459 $ 8,345 $ 51,076

Nine-Month Periods

Balances - April 2, 2023

13,051,814 $ 131 ( 2,897,507 ) $ ( 15,821 ) $ 57,126 $ 7,778 $ 49,214

Issuance of shares

Balances - March 31, 2024

13,208,226 $ 132 ( 2,897,507 ) $ ( 15,821 ) $ 57,888 $ 9,402 $ 51,601

1 unchanged sentence

- - - - 202 - 202

Acquisition of treasury stock

- - - - - ( 322 ) ( 322 )

- - - - - 3,890 3,890

Dividend declared on common stock - $ 0.08 per share

- - - - - ( 825 ) ( 825 )

Balances - December 31, 2023

Balances - June 30, 2024

13,208,226 $ 132 ( 2,897,507 ) $ ( 15,821 ) $ 58,090 $ 8,255 $ 50,656

2 unchanged sentences

Issuance of shares

Stock-based compensation

15,000 - - - - - -

Acquisition of treasury stock

Stock-based compensation

- - - - 200 - 200

2 unchanged sentences

- - - - - ( 846 ) ( 846 )

Balances - December 29, 2024

Balances - June 29, 2025

13,493,402 $ 135 ( 2,910,859 ) $ ( 15,880 ) $ 58,837 $ ( 5,223 ) $ 37,869

See notes to unaudited condensed consolidated financial statements.

See notes to consolidated financial statements.

CROWN CRAFTS, INC.

1 unchanged sentence

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE-MONTH PERIODS ENDED DECEMBER 29, 2024 AND DECEMBER 31, 2023

THREE-MONTH PERIODS ENDED JUNE 29, 2025 AND JUNE 30, 2024

(amounts in thousands)

Nine-Month Periods Ended

December 29, 2024

December 31, 2023

Three-Month Periods Ended

June 29, 2025

June 30, 2024

Operating activities:

$ 1,431 $ 3,890

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation of property, plant and equipment

Amortization of intangibles

Amortization of debt issuance costs

Reduction in the carrying amount of right of use assets

Deferred income taxes

( 485 ) ( 1,106 )

(Gain) loss on sale or disposition of property, plant and equipment

Reserve for unrecognized tax liabilities

2 unchanged sentences

Accounts receivable

( 678 ) ( 1,112 )

Prepaid expenses

( 671 ) ( 1,130 )

( 52 ) ( 14 )

Lease liabilities

( 3,330 ) ( 2,497 )

Accounts payable

3,528 ( 113 )

Accrued liabilities

2 unchanged sentences

Capital expenditures for property, plant and equipment

( 659 ) ( 662 )

Proceeds from sale of property, plant and equipment

Payment to acquire Baby Boom

Aggregate adjustment from the Manhattan and MTE acquisition

Net cash used in investing activities

( 17,014 ) ( 69 )

Financing activities:

Repayments under revolving line of credit

( 59,774 ) ( 55,099 )

Borrowings under revolving line of credit

65,387 52,440

Payments on term loan

Proceeds from term loan, net of issuance cost

Shares withheld to pay taxes on stock compensation

Dividends paid

( 2,461 ) ( 2,433 )

Net cash provided by (used in) financing activities

10,244 ( 5,092 )

Net increase (decrease) in cash and cash equivalents

224 ( 1,059 )

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$ 1,053 $ 683

Supplemental cash flow information:

Income taxes paid

$ 629 $ 1,628

Interest paid

2 unchanged sentences

Dividends declared but unpaid

( 869 ) ( 833 )

See notes to unaudited condensed consolidated financial statements.

See notes to consolidated financial statements.

CROWN CRAFTS, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2024 AND DECEMBER 31, 2023

FOR THE THREE-MONTH PERIODS ENDED JUNE 29, 2025 AND JUNE 30, 2024

Note 1 – Interim Financial Statements

1 unchanged sentence

The accompanying unaudited condensed consolidated financial statements include the accounts of Crown Crafts, Inc.

(the “Company”) and its subsidiaries and have been prepared pursuant to accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information as promulgated by the Financial Accounting Standards Board (“FASB”).

and its subsidiaries (the “Company”) and have been prepared pursuant to accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information as promulgated by the Financial Accounting Standards Board (“FASB”).

Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements.

References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which the FASB periodically revises through the issuance of an Accounting Standards Update (“ASU”) and which has been established by the FASB as the authoritative source for GAAP recognized by the FASB to be applied by nongovernmental entities.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of December 29, 2024 and the results of its operations and cash flows for the periods presented.

In the opinion of the Company’s management, the unaudited condensed consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of June 29, 2025 and the results of its operations and cash flows for the periods presented.

Such adjustments include normal, recurring accruals, as well as the elimination of all significant intercompany balances and transactions.

Operating results for the three - and nine -month periods ended December 29, 2024 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 30, 2025.

Operating results for the three -month period ended June 29, 2025 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 29, 2026.

For further information, refer to the Company’s consolidated financial statements and notes thereto for the fiscal year ended March 30, 2025, included in the Company’s Annual Report on Form 10 -K filed with the United States Securities and Exchange Commission (the “SEC”).

2 unchanged sentences

Recently-Issued Accounting Standards:

In November 2023, the FASB issued ASU No.

2023 - 07, Segment Reporting (Topic 280 ) – Improvements to Reportable Segment Disclosures , the objective of which is to improve the disclosures about a public entity’s reportable segments by providing more detailed information about a reportable segment’s expenses.

For disclosures associated with annual and interim periods, the amendments in ASU No.

2023 - 07 are required to be adopted for fiscal years beginning after December 15, 2023 and December 15, 2024, respectively, and early adoption is permitted.

Upon adoption, a public entity must apply the amendments in ASU No.

2023 - 07 retrospectively to disclosures of all prior periods presented.

The Company is evaluating the guidance of ASU No.

2023 - 07 against its existing disclosures related to segment reporting.

In December 2023, the FASB issued ASU No.

10 unchanged sentences

2024 - 03 against its existing disclosures related to income statement expenses.

The Company has determined that all other ASUs issued which had become effective as of December 29, 2024, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

The Company has determined that all other ASUs issued which had become effective as of June 29, 2025, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

Loss Per Share:

Due to the net loss incurred by the Company in the three -month periods ended June 29, 2025 and June 30, 2024, diluted shares used in the calculation of the diluted loss per share represented basic shares because the inclusion of the potentially dilutive effect of the exercisable stock options would have resulted in anti-dilution.

Note 2 – Advertising Costs

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $ 151,000 and $ 267,000 for the three months ended December 29, 2024 and December 31, 2023, respectively, and amounted to $ 411,000 and $ 631,000 for the nine months ended December 29, 2024 and December 31, 2023, respectively.

Note 3 – Segment and Related Information

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and amounted to $ 396,000 and $ 127,000 for the three months ended June 29, 2025 and June 30, 2024, respectively.

Note 3 – Segment Reporting

The Company’s operations are managed and reported to its Chief Executive Officer, the Company’s chief operating decision maker (“CODM”), on a consolidated basis.

The Company operates primarily in one principal segment, infant, toddler and juvenile products.

These products consist of infant and toddler bedding, diaper bags, bibs, toys and disposable products.

Net sales of bedding and diaper bags and net sales of bibs, toys and disposable products for the three - and nine - month periods ended December 29, 2024 and December 31, 2023 are as follows (in thousands):

The CODM assesses performance and allocates resources based on the Company’s consolidated statements of operations, which requires the CODM to manage and evaluate the results of the Company in a consolidated manner to drive efficiencies and develop uniform strategies.

Segment asset information is not used by the CODM to allocate resources.

As a single reportable segment entity, the Company’s segment performance measure is net income (loss).

The following table presents information about the Company’s reportable segment (in thousands):

Three-Month Periods Ended

Nine-Month Periods Ended

December 29, 2024

December 31, 2023

December 29, 2024

December 31, 2023

Bedding and diaper bags

June 29, 2025

June 30, 2024

$ 15,478 $ 16,212

Bibs, toys and disposable products

Cost of products sold

11,960 12,246

Total net sales

Marketing and administrative expenses

Interest expense, net and other

Income tax benefit

( 279 ) ( 64 )

Segment net loss

$ ( 1,104 ) $ ( 322 )

Included in the profit or loss measure above are the following:

Depreciation expense and amortization expense were $ 198,000 and $ 214,000 , respectively, for the three months ended June 29, 2025 while for the three months ended June 30, 2024, depreciation and amortization expenses were $ 184,000 and $ 148,000 , respectively.

Note 4 – Licensing Agreements

The Company has entered into licensing agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts.

These royalty amounts are accrued based upon historical sales rates adjusted for current sales trends by customers.

Royalty expense is included in cost of products sold in the accompanying unaudited condensed consolidated statements of income and amounted to $ 1.7 million and $ 1.3 million for the three months ended December 29, 2024 and December 31, 2023, respectively, and amounted to $ 4.5 and $ 3.8 million for the nine months ended December 29, 2024 and December 31, 2023, respectively.

These royalty amounts are accrued based upon historical sales rates adjusted for current sales.

Royalty expense is included in cost of products sold in the accompanying unaudited condensed consolidated statements of operations and amounted to $ 1.0 million and $ 1.1 million for the three months ended June 29, 2025 and June 30, 2024, respectively.

Note 5 – Income Taxes

The Company files income tax returns in the many jurisdictions in which it operates, including the U.S., several U.S.

The Company files income tax returns in many jurisdictions in which it operates, including the U.S., several U.S.

states and the People’s Republic of China.

The statute of limitations varies by jurisdiction;

tax years open to examination or other adjustment as of December 29, 2024 were the fiscal years ended March 31, 2024, April 2, 2023, April 3, 2022, March 28, 2021, and March 29, 2020.

tax years open to examination or other adjustment as of June 29, 2025 were the fiscal years ended March 30, 2025 , March 31, 2024, April 2, 2023, April 3, 2022, March 28, 2021, and March 29, 2020.

Although management believes that the calculations and positions taken on its filed income tax returns are reasonable and justifiable, the outcome of an examination could result in an adjustment to the position that the Company took on such income tax returns.

3 unchanged sentences

Note 6 – Inventories

As of December 29, 2024 and March 31, 2024, the Company’s balances of inventory were $ 32.4 million and $ 29.7 million, respectively, nearly all of which were finished goods.

As of June 29, 2025 and March 30, 2025, the Company’s balances of inventory were $ 31.6 million and $ 27.8 million, respectively, nearly all of which were finished goods.

Note 7 – Acquisition

On July 19, 2024 ( the “Closing Date”), NoJo Baby & Kids, Inc.

(“NoJo”), a wholly-owned subsidiary of the Company acquired substantially all of the assets, and assumed certain specified liabilities, of Baby Boom Consumer Products, Inc.

(“Baby Boom”) (the "Acquisition”), for a purchase price of $ 18.0 million in cash, subject to a dollar-for-dollar adjustment to the extent that the working capital at closing was greater or less than the target working capital of approximately $ 6.5 million.

On July 19, 2024 ( the “Closing Date”), NoJo Baby & Kids, Inc., a wholly-owned subsidiary of the Company acquired substantially all of the assets, and assumed certain specified liabilities, of Baby Boom Consumer Products, Inc.

(“Baby Boom”) (the “Acquisition”), for a purchase price of $ 18.0 million in cash, subject to a working capital adjustment.

The Acquisition was funded by the Company using the proceeds of an $ 8.0 million term loan from The CIT Group/Commercial Services, Inc.

1 unchanged sentence

The Acquisition has been accounted for in accordance with FASB ASC Topic 805, Business Combinations .

The Company is currently determining the allocation of the acquisition cost with the assistance of an independent third party.

The identifiable assets acquired were recorded at their estimated fair value, which has been preliminarily determined based on available information and the use of multiple valuation approaches.

The estimated useful lives of the identifiable intangible assets acquired were determined based upon the remaining time that these assets are expected to directly or indirectly contribute to the future cash flow of the Company.

Certain data necessary to complete the acquisition cost allocation is not yet available, including the final appraisals and valuations of the assets acquired and liabilities assumed.

The acquisition cost paid on the Closing Date amounted to $ 16.4 million, which included an estimate for the net working capital adjustment.

The following table represents the Company’s preliminary allocation of the acquisition cost (in thousands) to the identifiable assets acquired and the liabilities assumed based on their respective estimated fair values as of the Closing Date.

The Company considers the measurement period to have ended as of June 25, 2025 and further considers all measurement period adjustments to be final.

The acquisition cost paid on the Closing Date amounted to $ 16.3 million, which included net working capital adjustment.

The following table represents the Company’s allocation of the acquisition cost (in thousands) to the identifiable assets acquired and the liabilities assumed based on their respective estimated fair values as of the Closing Date.

The excess of the acquisition cost over the estimated fair value of the identifiable net assets acquired is reflected as goodwill.

11 unchanged sentences

Net acquisition cost

The Company expects to complete the acquisition cost allocation during the 12 -month period following the Closing Date, during which time the values of the assets acquired and liabilities assumed, including the goodwill, may need to be revised as appropriate.

Based upon the preliminary allocation of the acquisition cost, the Company recognized $ 5.3 million of goodwill as of the Closing Date, the entirety of which was assigned to the reporting unit of the Company that produces and markets infant and toddler bedding and diaper bags, and the entirety of which is expected to be deductible for income tax purposes.

Based upon the initial allocation of the acquisition cost, the Company recognized $ 5.3 million of goodwill as of the Closing Date, the entirety of which was assigned to the reporting unit of the Company that produces and markets infant and toddler bedding and diaper bags, and the entirety of which is expected to be deductible for income tax purposes.

The goodwill recognized primarily consists of synergies expected from combining operations of Baby Boom and the Company and intangible assets acquired that do not qualify for separate recognition.

During the three -month period ended December 29, 2024, the Company increased the amount of goodwill recognized by $ 10,000 for the resolution of pre-acquisition accounts payable.

The assets acquired in the Acquisition generated net sales of $ 3.8 million of bedding and diaper bag products for the three -month period ended December 29, 2024, and net sales of $ 7.2 million of bedding and diaper bag products for the period from the Closing Date to December 29, 2024.

Amortization expense associated with the acquired amortizable intangible assets was $ 99,000 and $ 164,000 during the three and nine months ended December 29, 2024, respectively, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income.

Amortization is computed using the straight-line method over the estimated useful lives of the assets, which are 15 years for the tradename, 14 years for the customer and licensing relationships and 14 years on a weighted-average basis for the grouping taken together.

The Company has determined, on a pro forma basis, that the combined net sales and the combined net income of the Company and Baby Boom, giving effect to the Acquisition as if it had been completed on April 3, 2023, would have been $ 69.1 million and $ 2.0 million, respectively, for the nine -month period ended December 29, 2024.

The combined net sales and the combined net income would have been $ 29.3 million and $ 1.7 million, respectively, for the three -month period ended December 31, 2023, and would have been $ 81.7 million and $ 3.9 million, respectively, for the nine -month period ended December 31, 2023.

The combined net income includes adjustments related to the amortization of the amortizable intangible assets acquired and estimates of the interest expense and income tax expense or benefit that would have been incurred, but otherwise do not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any revenue, tax or other synergies that may result from the Acquisition.

The following table represents adjustments made to the amount of goodwill during the fiscal year ended March 30, 2025 ( in thousands):

Amount of goodwill recognized based upon the preliminary allocation of the acquisition cost

Adjustments made during the fiscal year ended March 30, 2025:

Increase to pre-acquisition accounts payable

Decrease to tradename as of the Closing Date

Decrease to licensing relationships as of the Closing Date

Settlement of working capital adjustment

Net adjustments made during the fiscal year ended March 30, 2025

Amount of goodwill recognized as of March 30, 2025

The assets acquired in the Acquisition generated net sales of $ 2.1 million of bedding and diaper bag products for the three -month period ended June 29, 2025.

Amortization expense associated with the acquired amortizable intangible assets was $ 88,000 for the three months ended June 29, 2025, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

Amortization is calculated using the straight-line method over the estimated useful lives of the assets, which are 15 years for the tradename, 14 years for the customer and licensing relationships and 14 years on a weighted-average basis for the grouping taken together.

Note 8 – Financing Arrangements

6 unchanged sentences

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, amounted to $ 115,000 and $ 106,000 for the three -month periods ended December 29, 2024 and December 31, 2023, respectively, and amounted to $ 283,000 and $ 265,000 for the nine -month periods ended December 29, 2024 and December 31, 2023, respectively.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of operations, amounted to $ 70,000 and $ 74,000 for the three -month periods ended June 29, 2025 and June 30, 2024, respectively.

Credit Facility:

1 unchanged sentence

The Company may borrow up to $ 40 million under the revolving line of credit, which includes a $ 1.5 million sub-limit for letters of credit, bearing interest at prime minus 0.5 % or the Secured Overnight Financing Rate (“SOFR”) plus 1.6 %, and is secured by a first lien on all assets of the Company.

At December 29, 2024, the Company had elected to pay interest on balances owed under the revolving line of credit under the SOFR option, which was 6.1 %.

The financing agreement for the revolving line of credit matures on July 19, 2029.

On June 29, 2025, the Company elected to pay interest on balances owed under the revolving line of credit under the SOFR option, which was 5.9 %.

The financing agreement also provides for the payment by CIT to the Company of interest at prime as of the beginning of the calendar month minus 2.0 % on daily negative balances, if any, held at CIT.

At December 29, 2024 and March 31, 2024, the balances on the revolving line of credit were $ 13.7 million and $ 8.1 million, respectively, there was no letter of credit outstanding and $ 15.3 million and $ 19.2 million, respectively, was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

At June 29, 2025 and March 30, 2025, the balances on the revolving line of credit were $ 7.7 million and $ 11.9 million, respectively, there was no letter of credit outstanding and $ 12.2 million and $ 13.8 million, respectively, was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

The financing agreement contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates, and changes in or amendments to the organizational documents for the Company and its subsidiaries.

The Company’s credit facility as of December 29, 2024 includes an $ 8.0 million term loan, issued July 19, 2024, which is payable by the Company in 48 equal monthly installments and bears interest at SOFR plus 2.25 % ( 6.7 % at December 29, 2024).

The balances on the term loan as of December 29, 2024 was $ 7.2 million, including $ 2.0 million classified as current.

On January 2, 2025, the Company and its subsidiaries entered into a letter agreement with CIT with respect to the financing agreement, pursuant to which CIT waived the Company's non-compliance with the fixed charge coverage ratio required under the financing agreement with respect to the Company's fiscal quarters ended September 29, 2024 and December 29, 2024.

In addition, the letter agreement modified the financing agreement by changing the Excess Availability (as defined in the Financing Agreement) required to be maintained by the Company with respect to its revolving credit line under the financing agreement to $ 7,000,000 (from 50% of the outstanding balance of the Company's term loan under the financing agreement).

Upon notice to the Company, CIT may reverse such modification.

The Company’s credit facility as of June 29, 2025 includes an $ 8.0 million term loan, issued July 19, 2024, which is payable by the Company in 48 equal monthly installments and bears interest at SOFR plus 2.25 % ( 6.6 % at June 29, 2025).

The balance on the term loan as of June 29, 2025 was $ 6.2 million, including $ 2.0 million classified as current.

On June 23, 2025, the Company and CIT 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 $ 1,000,000 or (b) $ 4,000,000 (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 June 29, 2025, the Company was in compliance with the Excess Availability requirements.

Credit Concentration:

The Company’s accounts receivable at December 29, 2024 amounted to $ 25.5 million, net of allowances of $ 1.3 million.

The Company’s accounts receivable at June 29, 2025 amounted to $ 17.2 million, net of allowances of $ 2.0 million.

Of this amount, $ 14.4 million was due from CIT under the factoring agreements, which represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements.

1 unchanged sentence

Of this amount, $ 21.9 million was due from CIT under the factoring agreements, which represented the maximum loss that the Company could have incurred if CIT had failed completely to perform its obligations under the factoring agreements.

The Company evaluates the fair value of its debt using the three level fair value heirarchy.

Fair value should be based on the assumptions market participants would use when pricing the liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value.

The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs in the fair value hierarchy are as follows:

Level 1 – Includes the most reliable sources, and includes quoted prices in active markets for identical assets or liabilities.

Level 2 – Includes observable inputs.

Observable inputs include inputs other than quoted prices that are observable for the liability, interest rates and forward rate curves, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the liabilities.

Level 3 – Includes unobservable inputs and should be used only when observable inputs are unavailable.

The following table presents fair value of debt as of June 29, 2025:

Fair Value Measurement Using

Quoted Prices in Active

Markets for Identical

Significant Other

Observable Inputs

Significant Unobservable

$ 6,147 $ - $ 6,147 $ -

Revolving line of credit

7,564 - 7,564 -

$ 13,711 $ - $ 13,711 $ -

The Company uses a valuation model to determine the fair value of its revolving line of credit and the term loan with CIT.

The Company uses a discounted cash flow model to project the future principal and interest payments over the remaining life of the loans.

The significant inputs used in the model are observable market data including SOFR Forward Curves.

Net debt issuance costs are presented as a direct reduction of the Company’s long-term debt in the consolidated balance sheets and amounted to $ 27,000 and $ 30,000 as of June 29, 2025 and March 30, 2025, respectively.

The amortization of the debt issuance costs was charged to interest expense.

The amount of debt issuance costs included in interest expense were $ 3,000 and $ 0 for the three months ended June 29, 2025 and June 30, 2024, respectively.

The aggregate maturities of long-term debt for each of the five years subsequent to June 29, 2025 are:

$ 1.5 million in 2026, $ 2.0 million in 2027, $ 2.2 million in 2028, $ 500,000 in 2029 and $ 7.7 million in 2030.

Note 9 – Goodwill

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in business combinations.

For the purpose of presenting and measuring for the impairment of goodwill, the Company has two reporting units:

one that produces and markets infant and toddler bedding and diaper bags and another that produces and markets infant and toddler bibs, toys and disposable products.

The Company measures for impairment the goodwill within its reporting units annually as of the first day of the Company’s fiscal year.

An additional interim measurement for impairment is performed during the year whenever an event or change in circumstances occurs that suggests that the fair value of either of the reporting units of the Company has more likely than not (defined as having a likelihood of greater than 50% ) fallen below its carrying value.

The annual or interim measurement for impairment is performed by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If such qualitative factors so indicate, then the measurement for impairment is continued by calculating an estimate of the fair value of each reporting unit and comparing the estimated fair value to the carrying value of the reporting unit.

If the carrying value exceeds the estimated fair value of the reporting unit, then an impairment charge is calculated as the difference between the carrying value of the reporting unit and its estimated fair value, not to exceed the goodwill of the reporting unit.

On April 1, 2024, the Company performed a qualitative assessment to determine if it is more likely than not that the fair values of the Company’s reporting units are less than their carrying values by evaluating relevant events and circumstances, including financial performance, market conditions and share price.

Based on this assessment, the Company concluded that the goodwill for each of the Company’s reporting units was not considered at risk of impairment.

For the purpose of presenting and measuring for impairment of goodwill, the Company has two reporting units:

one that produces and markets bedding and diaper bags and another that produces and markets bibs, toys and disposable products.

The Company measures for impairment of the goodwill within its reporting units annually as of the first day of the Company’s fiscal year.

The Company reported goodwill net of impairment charges of $ 7.9 million at June 30, 2024.

For the fiscal year ended March 30, 2025, the Company determined that a triggering event occurred in relation to the depressed market price of the Company’s common stock and corresponding significant decline in the Company’s market capitalization.

As a result, the Company performed a quantitative goodwill impairment test.

Based on the goodwill impairment analysis performed, the Company determined that the estimated fair values of its reporting units were lower than the carrying value, indicating the goodwill within these reporting units had been impaired.

Consequently, the Company recorded a non-cash goodwill impairment charge of $ 13.8 million during the three -month period ended March 30, 2025.

The Company reported no goodwill at June 29, 2025.

Note 10 – Concentrations

6 unchanged sentences

The impact of future fluctuations in the exchange rate or changes in safeguards cannot be predicted with certainty.

government has tariffs on imports from certain countries, including China.

During 2025, the U.S.

government introduced increased tariffs which have increased the cost of the products the Company sources from China and affected shipments from the Company’s Chinese-based suppliers.

The Company is evaluating the potential impact of the imposition of new tariffs on imports from China to the Company’s business and financial condition.

The impact of the increased 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 mitigation actions that may become available.

The Company maintains foreign representative offices located in Shanghai and Shenzhen, China, which are responsible for the coordination of production, purchases and shipments, seeking out new vendors and overseeing inspections for social compliance and quality.

6 unchanged sentences

License Agreement

Infant Bedding

March 31, 2025

Infant and Toddler Bedding and Diaper Bags (US and Canada)

December 31, 2027

Infant Feeding and Bath

December 31, 2025

Toddler Bedding

March 31, 2025

STAR WARS Toddler Bedding

March 31, 2025

STAR WARS - Lego Plush

December 31, 2025

The Company is currently negotiating with Disney with respect to the licenses set to terminate on March 31, 2025, and anticipates that they will be extended.

The Company expects to renew the licenses upon their expiration.

The Company’s customers consist principally of mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, internet accounts and wholesale clubs.

The Company does not enter into long-term or other purchase agreements with its customers.

The table below sets forth those customers that represented at least 10% of the Company’s gross sales for the nine months ended December 29, 2024.

The table below sets forth those customers that represented at least 10% of the Company’s gross sales:

Three-Month Periods Ended

June 29, 2025

June 30, 2024

Amazon.com, Inc.

Note 11 – Subsequent Events

On February 10, 2025, the Company and CIT amended the Company's financing agreement with CIT to:

(i) waive, with respect to the fiscal year ending March 30, 2025, and through the fiscal year ending March 29, 2026, the Company's obligation to comply with the fixed charge coverage ratio;

and (ii) increase the Excess Availability (as defined in the financing agreement) required to be maintained by the Company with respect to its revolving line of credit under the financing agreement from $ 7,000,000 to $ 7,500,000 , until further notice to the Company by CIT.

After such notice, the Excess Availability shall be 50% of the outstanding balance of the Company's term loan under the financing agreement.

The Company has evaluated all other events which have occurred between December 29, 2024, and the date that the accompanying unaudited condensed consolidated financial statements were issued, and has determined that there are no other material subsequent events that require disclosure.

Target Corporation

* Amount represented less than 10% of the Company's gross sales for the period.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

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 changes in interest rates, 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.

DESCRIPTION OF BUSINESS

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, diaper bags, bibs, disposables, toys and feeding products.

The Company’s products are marketed under Company-owned trademarks, under trademarks licensed from others and as private label goods.

The Company-owned trademarks include Sassy®, Manhattan Toy®, NoJo®, Baby Boom® and Neat Solutions®.

Sales of the Company’s products are made directly to retailers, such as mass merchants, large chain stores, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, wholesale clubs, internet-based retailers and direct-to-consumers through the Company’s websites.

The infant, toddler and juvenile consumer products industry is highly competitive.

The Company competes with a variety of distributors and manufacturers (both branded and private label), including large infant, toddler and juvenile product companies and specialty infant, toddler and juvenile product manufacturers, on the basis of quality, design, price, brand name recognition, service and packaging.

The Company’s ability to compete depends principally on styling, price, service to the retailer and continued high regard for the Company’s products and trade names.

Foreign and domestic contract manufacturers produce most of the Company’s products, with the largest concentration being in China.

The Company makes sourcing decisions based on 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's requirements.

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 Belgium and England.

A summary of certain factors that management considers important in reviewing the Company’s results of operations, financial position, liquidity and capital resources is set forth below, which should be read in conjunction with the accompanying condensed consolidated financial statements and related notes included in the preceding sections of this Quarterly Report.

KNOWN TRENDS AND UNCERTAINTIES

government has tariffs on imports from certain countries, including China.

During 2025, the U.S.

government introduced increased tariffs which have increased the cost of the products the Company sources from China and affected shipments from the Company’s Chinese-based suppliers.

The Company is evaluating the potential impact of the imposition of new tariffs on imports from China to the Company’s business and financial condition.

For additional discussion of trends, uncertainties and other factors that could impact the Company’s operating results, refer to the risk factors disclosed in Item 1A.

of Part 1 of the Company’s Annual Report on Form 10-K for the year ended March 30, 2025.

RESULTS OF OPERATIONS

The following table contains the results of operations for the three-month periods ended June 29, 2025 and June 30, 2024 and the dollar and percentage changes for those periods (in thousands, except percentages):

Three-Month Periods Ended

June 29, 2025

June 30, 2024

Net sales by category:

Bedding and diaper bags

Bibs, toys and disposable products

Total net sales

Cost of products sold

% of net sales

Marketing and administrative expenses

% of net sales

Interest expense - net

Other income - net

Income tax benefit

% of net sales

Sales decreased to $15.5 million for the three months ended June 29, 2025, compared with $16.2 million for the three months ended June 30, 2024, a decrease of $734,000, or 4.5%.

Sales of bedding and diaper bags increased by $540,000, and sales of bibs, toys and disposable products decreased by $1.3 million.

The Acquisition added $2.1 million in net sales during the three months ended June 29, 2025;

however, sales across all categories were negatively affected by inventory shortages resulting from the Company’s strategy to minimize the impact of the extremely high tariffs in effect during the first half of the quarter.

Gross Profit:

Gross profit decreased by $448,000 from the prior year resulting in a decrease from 24.5% of net sales for the three-month period ended June 30, 2024 to 22.7% of net sales for the three-month period ended June 29, 2025.

This decrease in gross profit is primarily a result of increased tariff costs associated with products imported from China.

Marketing and Administrative Expenses:

Marketing and administrative expenses increased by $454,000 and increased from 26.3% of net sales for the three-month period ended June 30, 2024 to 30.5% of net sales for the three-month period ended June 29, 2025.

The increase in the current year period includes increased advertising costs of $268,000 as well as increased marketing and administrative costs associated with the Acquisition.

Income Tax Benefit:

The Company’s provision for income taxes is based upon an estimated annual effective tax rate (“ETR”) of 22.3% for the three-month period ended June 29, 2025, as compared with an estimated annual ETR of 21.8% for the three-month period ended June 30, 2024.

The Company recorded discrete income tax charges of $30,000 and $20,000 during the three-month periods ended June 29, 2025 and June 30, 2024, respectively, to reflect the effects of the tax shortfalls and excess tax benefits arising from the forfeiture and expiration of stock options and the vesting of non-vested stock.

The ETR and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 20.2% and 16.6% for the three-month periods ended June 29, 2025 and June 30, 2024, respectively.

Although the Company does not anticipate a material change to the ETR for the remainder of fiscal year 2026, several factors could impact the ETR, including variations from the Company’s estimates of the amount and source of its pre-tax income, and the actual ETR for the year could differ materially from the Company’s estimates.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities decreased from $8.0 million for the three-month period ended June 30, 2024 to $5.2 million for the three-month period ended June 29, 2025.

The decrease in the current year was partially the result of an increase in inventories in the current year that was $2.9 million higher than the increase in the prior year and a decrease of $780,000 in net loss from the prior year to the current year.

This decrease was partially offset by an increase in accounts payable in the current year that was $950,000 higher than the increase in the prior year.

Net cash used in investing activities, which were primarily associated with capital expenditures for property, plant and equipment, decreased from $284,000 in the prior year to $86,000 in the current year.

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, decreased by $2.0 million from the prior to the current year.

As of June 29, 2025, the balance on the revolving line of credit with CIT was $7.7 million, there was no letter of credit outstanding and $12.2 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, the Company assigns the majority of its trade accounts receivable to CIT under factoring agreements.

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.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of operations, amounted to $70,000 and $74,000 for the three-month periods ended June 29, 2025, and June 30, 2024, respectively.

On June 23, 2025, the Company and CIT 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 $1,000,000 or (b) $4,000,000 (the “Availability Covenant”);

and (ii) reinstate the fixed charge coverage ratio;

As of June 29, 2025, the Company has complied with the Excess Availability requirements.

The Company’s future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors beyond its control.

Based upon the current level of operations, the Company believes that its cash flow from operations and funds available under the revolving line of credit will be adequate to meet its liquidity needs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements