EMERSON RADIO CORP 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page No. Report of Independent Registered Public Accounting Firm (Grassi & Co., CPAs, P.C., NY PCAOB firm ID 606) 28 Report of Independent Registered Public Accounting Firm (Moore Stephens, CPAs, P.C., NY PCAOB firm ID 717) 29 Consolidated Statements of Operations for the years ended March 31, 2024 and 2023 30 Consolidated Balance Sheets as of March 31, 2024 and 2023 31 Consolidated Statements of Changes in Shareholders’ Equity for the years ended March 31, 2024 and 2023 32 Consolidated Statements of Cash Flows for the years ended March 31, 2024 and 2023 33 Notes to Consolidated Financial Statements 34 27 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: the Board of Directors and Stockholders of Emerson Radio Corp. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Emerson Radio Corp. and Subsidiaries (the “Company”) as of March 31, 2024, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for the one year in the period ended March 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024, and the results of their operations and its cash flows for the year ended March 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matters communicated are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved are especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements. We determined that there are no critical audit matters. /s/ GRASSI & CO., CPAs, P.C. We have served as the Company’s auditor since 2024. Jericho, New York June 27, 2024 28 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: the Board of Directors and Stockholders of Emerson Radio Corp. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Emerson Radio Corp. and Subsidiaries (the “Company”) as of March 31, 2023, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for the one year in the period ended March 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023, and the results of their operations and their cash flows for the one year in the period ended March 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below arise from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relates. Inventories As described in Note 1 of the consolidated financial statements, the Company values inventory at the lower of cost or net realizable value (determined on a first-in, first-out basis) and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs. We identified valuation adjustments for slow-moving and obsolete inventories as a critical audit matter because of the significant judgment required by management in developing its assumptions about forecasted consumption and sales, and in determining the estimated net realizable value adjustments applied to individual inventory items. Testing management’s assumptions and estimates used in calculating the valuation adjustments required a high degree of auditor judgment. The primary procedures we performed to address this critical audit matter included: • We tested the reliability of system-generated reports used by management on a sample basis by agreeing the selected items to the underlying records. • We observed the physical condition of inventories during physical inventory counts. • We tested the accuracy of the valuation adjustments by selecting a sample of inventory items and recalculating the estimated net realizable value based upon subsequent period transactions. • We tested the reasonableness of management’s assumptions about forecasted sales by: • Performing a retrospective review to assess management’s estimated percentages by comparing the prior year inventory to current year consumption and sales. • Corroborating the assumptions related to slow-moving products and forecasted sales with management. /s/ MSPC Certified Public Accountants and Advisors, A Professional Corporation We have served as the Company’s auditor from 2005 through September 30, 2023. New York, New York June 27, 2024 29 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For The Years Ended March 31, 2024 and 2023 (In thousands, except per share data) 2024 2023 Net revenues: Net product sales $ 8,677 $ 6,075 Licensing revenue 218 372 Royalty income 175 730 Net revenues 9,070 7,177 Costs and expenses: Cost of sales 7,506 5,076 Selling, general and administrative expenses 4,963 4,197 Total cost of sales and SG&A 12,469 9,273 Operating loss ( 3,399 ) ( 2,096 ) Other income: Settlement of litigation 3,100 — Interest income, net 1,155 702 Income from governmental assistance program — 34 Income (loss) before income taxes 856 ( 1,360 ) Provision for income tax expense 90 — Net income (loss) 766 ( 1,360 ) Basic income (loss) per share $ 0.04 $ ( 0.06 ) Diluted income (loss) per share $ 0.04 $ ( 0.06 ) Weighted average shares outstanding Basic 21,042,652 21,042,652 Diluted 21,042,652 21,042,652 The accompanying notes are an integral part of the consolidated financial statements. 30 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of March 31, 2024 and 2023 (In thousands) March 31, 2024 March 31, 2023 ASSETS Current Assets: Cash and cash equivalents $ 19,890 $ 25,268 Accounts receivable, net 1,343 1,165 Licensing receivable 37 245 Inventory 6,953 3,813 Prepaid purchases 107 247 Prepaid expenses and other current assets 274 357 Total Current Assets 28,604 31,095 Non-Current Assets: Property and equipment, net 95 1 Right-of-use asset-operating leases 282 200 Right-of-use asset-finance leases — 1 Other assets 84 74 Total Non-Current Assets 461 276 Total Assets $ 29,065 $ 31,371 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable and other current liabilities 1,158 641 Due to affiliate 1 1 Short-term operating lease liability 93 139 Short-term finance lease liability — 1 Income tax payable, current portion 531 401 Advanced deposits — 3,316 Deferred revenue 191 149 Total Current Liabilities 1,974 4,648 Non-Current Liabilities: Long-term operating lease liability 198 62 Income tax payable 668 1,202 Total Non-Current Liabilities 866 1,264 Total Liabilities $ 2,840 $ 5,912 Shareholders’ Equity: Series A Preferred shares — 10,000,000 shares authorized; 3,677 shares issued and outstanding; liquidation preference of $ 3,677,000 3,310 3,310 Common shares — $ 0.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at March 31, 2024 and 2023, respectively; 21,042,652 shares outstanding at March 31, 2024 and 2023, respectively 529 529 Additional paid-in capital 79,792 79,792 Accumulated deficit ( 24,205 ) ( 24,971 ) Treasury stock, at cost ( 31,923,145 shares at March 31, 2024 and 2023, respectively) ( 33,201 ) ( 33,201 ) Total Shareholders’ Equity 26,225 25,459 Total Liabilities and Shareholders’ Equity $ 29,065 $ 31,371 The accompanying notes are an integral part of the consolidated financial statements. 31 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY For The Years Ended March 31, 2024 and 2023 (In thousands) Preferred Stock Common Stock Additional Total Number Preferred Number Par Paid-In Accumulated Treasury Shareholders’ of Shares Value of Shares Value Capital Deficit Stock Equity Balance — March 31, 2022 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 23,611 ) $ ( 33,201 ) $ 26,819 Net loss — — — — — ( 1,360 ) — ( 1,360 ) Balance — March 31, 2023 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 24,971 ) $ ( 33,201 ) $ 25,459 Net loss — — — — — 766 — 766 Balance — March 31, 2024 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 24,205 ) $ ( 33,201 ) $ 26,225 The accompanying notes are an integral part of the consolidated financial statements 32 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For The Years Ended March 31, 2024 and 2023 2024 2023 (In thousands) Cash Flows from Operating Activities: Net income (loss) $ 766 $ ( 1,360 ) Adjustments to reconcile net loss to net cash (used) by operating activities: Non-cash lease expense 167 204 Depreciation and amortization 25 1 Changes in assets and liabilities: Accounts receivable ( 178 ) 129 Licensing receivable 208 ( 245 ) Inventory ( 3,140 ) ( 1,701 ) Prepaid purchases 140 ( 106 ) Prepaid expenses and other current assets 83 33 Other assets ( 10 ) 16 Accounts payable and other current liabilities 517 ( 117 ) Right of use assets-operating ( 248 ) — Short term lease liabilities ( 46 ) ( 72 ) Long term lease liabilities 136 ( 139 ) Due to affiliate — 1 Income taxes payable ( 404 ) ( 205 ) Advanced deposits ( 3,316 ) 3,316 Deferred revenue 42 ( 61 ) Net cash (used) by operating activities ( 5,258 ) ( 306 ) Cash Flows From Investing Activities: Proceeds from sale of short-term investments 18,505 — Purchases of short-term investments ( 18,505 ) — Additions to property and equipment ( 119 ) — Net cash (used) by investing activities ( 119 ) — Cash Flows from Financing Activities: Short term finance liability ( 1 ) — Long term finance liability — ( 2 ) Net cash (used) by financing activities ( 1 ) ( 2 ) Net (decrease) in cash and cash equivalents ( 5,378 ) ( 308 ) Cash and cash equivalents at beginning of the year 25,268 25,576 Cash and cash equivalents at end of the year $ 19,890 $ 25,268 Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for new operating lease liabilities $ 248 $ — Supplemental disclosures: Cash paid for: Interest $ 5 $ 10 Income taxes $ 478 $ 205 The accompanying notes are an integral part of the consolidated financial statements 33 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES: Description of the Business The consolidated financial statements include the accounts of Emerson Radio Corp. (“Emerson”, consolidated — the “Company”), and its subsidiaries. The Company designs, sources, imports and markets a variety of houseware and consumer electronic products, and licenses the Emerson trademark for a variety of products domestically and internationally. Basis of Presentation and Principals of Consolidation It is the Company’s policy to prepare its consolidated financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation. Certain items in prior year financials may have been reclassified to conform to current year presentation. In fiscal 2023, the Consolidated Statement of Operations presented licensing revenue as $ 1,102,000 which included royalty revenue of $ 730,000 and licensing revenue of approximately $ 372,000 . In fiscal 2023, the Consolidated Statement of Cash Flows presented long term lease liabilities as a usage of cash of approximately $ 141,000 and has been adjusted to a usage of cash of approximately $ 139,000 . Also in fiscal 2023, the Consolidated Statement of Cash Flows presented long term finance liability as nil and has been adjusted to a usage of cash of approximately $ 2,000 . Use of Estimates The preparation of the Company's financial statements requires management to make estimates and judgements which affect the reported amounts of assets, liabilities, revenues and expenses. Management considers certain accounting policies related to inventory, trade accounts receivables, impairment of long-lived assets, valuation of deferred tax assets, sales return reserves and sales allowance accruals to be critical policies due to the estimation processes involved in each. Actual results could differ from those estimates. Cash and Cash Equivalents Highly liquid investments with original maturities of three months or less at the time of purchase are considered to be cash equivalents. Fair Values of Financial Instruments The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term maturity of these financial instruments. Long-Lived Assets The Company’s long-lived assets include property and equipment. At March 31, 2024 , the Company had ap proximately $ 95,000 of property and equipment, net of accumulated depreciation. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC Topics 350 “Intangibles” and 360 “Property, Plant and Equipment”. The recoverability of assets held and used is measured by a comparison of the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Future events could cause the Company to conclude that impairment indicators exist and that long-lived assets may be impaired. If impairment is deemed to exist, the asset will be written down to fair value. Any such impairment loss could have a material adverse impact on the Company’s financial condition and results of operations. Property and Equipment Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets being depreciated. The cost of maintenance and repairs is charged to expense as incurred. Significant renewals and betterments are capitalized and depreciated over the remaining estimated useful lives of the related assets. At time of disposal, the cost and related accumulated depreciation are removed from the Company’s records and the difference between net carrying value of the asset and the sale proceeds is recorded as a gain or loss. 34 Table of Contents Depreciation of property and equipment is provided by the straight-line method as follows: • Computer, Equipment and Software Three years to seven years • Furniture and Fixtures Seven years • Molds Three years Revenue Recognition Distribution of products Revenue recognition : Sales to customers and related cost of sales are primarily recognized at the point in time when control of goods transfers to the customer. The Company recognizes revenues at the time title passes to the customer as this is when the Company satisfies its performance obligation under the contracts with its customers. Under the Direct Import Program, title passes in the country of origin. Under the Domestic Program, title passes primarily at the time of shipment. Estimates for future expected returns are based upon historical return rates and netted against revenues. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue is recorded net of customer discounts, promotional allowances, volume rebates and similar charges. When the Company offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves may be required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve. The Company adopted ASC topic 606. 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. Prior to the adoption of ASC topic 606, the Company followed the provisions of ASC topic 605. The adoption of ASC topic 606 did not have a material impact on revenue recognition as compared to revenue recognition provided under ASC topic 605. If additiona l marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves may be required and are accrued for when such support is offered. The Company offers limited warranties for its consumer electronics, comparable to those offered to consumers by the Company’s competitors in the United States. Such warranties typically consist of a one year period for microwaves and a 90 day period for audio products, under which the Company pays for labor and parts, or offers a new or similar unit in exchange for a non-performing unit. Licensing The Company grants licenses for the right to access the Company’s intellectual property, specifically the Company’s trademarks, for a stated term for the manufacture and/or sale of consumer electronics and other products under agreements which require payment of either (i) a non-refundable minimum guaranteed royalty or, (ii) the greater of the actual royalties due (based on a contractual calculation, normally comprised of actual product sales by the licensee multiplied by a stated royalty rate, or “Sales Royalties”) or a minimum guaranteed royalty amount. In the case of (i), such amounts are recognized as revenue on a straight-line basis over the term of the license agreement. In the case of (ii), Sales Royalties in excess of guaranteed minimums are accounted for as variable fees and are not recognized as revenue until the Company has ascertained that the licensee’s sales of products have exceeded the guaranteed minimum. In effect, the Company recognizes the greater of Sales Royalties earned to date or the over-time amount of minimum guaranteed royalties to date. In the case where a royalty is paid to the Company in advance, the royalty payment is initially recorded as deferred revenue on the consolidated balance sheets and recognized as revenue as the royalties are deemed to be earned according to the principles outlined above. Disaggregation of Revenue Disaggregation of revenue (in 000's) 2024 2023 Net revenues by type: Net product sales $ 8,677 $ 6,075 Licensing revenue 218 372 Royalty income 175 730 Net revenues 9,070 7,177 Net revenues by customers: (over 10%) Walmart $ 4,769 $ 3,042 Amazon.com 1,815 1,644 Fred Meyer 889 833 7,473 5,519 35 Table of Contents Inventory Inventory is valued at the lower of cost or net realizable value. Cost is determined using the first -in, first -out basis and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs. Accounts Receivable, net The Company extends credit based upon evaluations of a customer’s financial condition and provides for any anticipated credit losses in the Company’s financial statements based upon management’s estimates and ongoing reviews of recorded allowances. Credit is extended for periods between 30 and 90 days, on a net basis. If the financial condition of a customer deteriorates, resulting in an impairment of that customer’s ability to make payments, additional reserves may be required. Conversely, reserves are reduced to reflect credit and collection improvements. Receivables are written off once they are considered uncollectible. The allowance for doubtful accounts receivable increased approximately $ 800 for the year ended March 31, 2024 and increased by $ 20,800 for the year ended March 31, 2023 . As of March 31, 2024 , Walmart, Chedraui and Amazon accounted for 34 %, 30 % and 25 %, respectively, of the Company’s total trade accounts receivable, net of specific reserves. As of March 31, 2023 , Amazon, Walmart and Fred Meyer accounted for 43 %, 35 % and 11 %, respectively, of the Company’s total trade accounts receivable, net of specific reserves. No other customer accounted for more than 10% of the Company’s total trade accounts receivable, net of specific reserves, as of March 31, 2024 or March 31, 2023 . Cost of Sales Cost of sales includes actual product cost, quality control costs, duty, buying costs, the cost of transportation to the Company’s third party logistics providers’ warehouse from its manufacturers and warehousing costs. Selling, General and Administrative Expenses Selling, general and administrative expenses include all operating costs of the Company that are not directly related to the cost of procuring product or costs not included in other operating costs and expenses. Sales Return Reserves Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves may be required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve. At March 31, 2024 the sales return reserve balance was approximately $ 67,000 as compared to approximately $ 83,000 as of March 31, 2023, a decrease of $ 16,000 during fiscal 2024. At March 31, 2023, the sales return reserve balance was approximately $ 83,000 as compared to approximately $ 84,000 as of March 31, 2022, a decrease of $ 1,000 during fiscal 2023. Foreign Currency The assets and liabilities of foreign subsidiaries, whose functional currencies are other than the United States Dollar, have been translated at current exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the year. Related translation adjustments are reported as a separate component of shareholders’ equity. Losses and gains resulting from foreign currency transactions are included in the results of operations. The Company generally does not enter into foreign currency exchange contracts to hedge its exposures related to foreign currency fluctuations and there were no foreign exchange forward contracts held by the Company at March 31, 2024 or March 31, 2023 . Advertising Expenses Advertising expenses are charged against earnings as incurred and are included in selling, general and administrative expenses. The Company incurred approximately $ 122,000 of advertising expenses during fiscal 2024 and approximately $ 39,000 during fiscal 2023 . Sales Allowance and Marketing Support Expenses 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”. 36 Table of Contents 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. If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves may be required and are accrued for when such support is offered. The sales and marketing support accrual activity for fiscal 2024 and fiscal 2023 was as follows (in thousands): Balance at March 31, 2022 $ 76 additions 319 usages ( 248 ) adjustments ( 45 ) Balance at March 31, 2023 $ 102 additions 435 usages ( 364 ) adjustments ( 20 ) Balance at March 31, 2024 $ 153 Interest income, net The Company records interest income as earned and interest expense as incurred. The net interest income for fiscal 2024 and 2023 consists of: 2024 2023 (In thousands) Interest expense $ ( 5 ) $ ( 10 ) Interest income 1,160 712 Interest income, net $ 1,155 $ 702 Income Taxes Deferred income taxes are recorded to account for the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets have been recorded net of an appropriate valuation allowance, to the extent management believes it is more likely than not that such assets will be realized. (See Note 5 “Income Taxes.”) Any tax penalties are recorded as part of selling, general and administrative expenses and any interest to which the Company is subject, is recorded as a part of income tax expense. Penalties and interest incurred during fiscal 2024 and fiscal 2023 were both nil . Earnings Per Common Share Earnings per common share are based upon the weighted average number of common and common equivalent shares outstanding. Outstanding stock options and warrants are treated as common stock equivalents when dilution results from their assumed exercise. As of March 31, 2024 and March 31, 2023, the Company had no outstanding options or warrants. Table of Contents Accounting Pronouncements The following ASU was issued by the FASB which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates. Accounting Standards Update 2016 - 13 “ Financial Instruments – Credit Losses ” (Issued June 2016) In June 2016, the FASB issued ASU 2016 - 13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016 - 13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016 - 13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016 - 13 is effective for fiscal years and interim periods beginning after December 15, 2022. The adoption did not have a material impact on its financial statements. NOTE 2 — INVENTORIES: Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first -in, first -out method. As of March 31, 2024 and March 31, 2023 , inventories consisted exclusively of purchased finished goods. As of March 31, 2024 , inventory was valued at approximately $ 6,953,000 which included a valuation reserve of approximately $ 316,000 . As of March 31, 2023 , inventory was valued at approximately $ 3,813,000 which included a valuation reserve of approximately $ 320,000 . NOTE 3 — RELATED PARTY TRANSACTIONS: From time to time, Emerson engages in business transactions with its controlling shareholder, Nimble, formerly known as The Grande Holdings Limited, and one or more of Nimble’s direct and indirect subsidiaries, or with entities related to the Company’s Chairman of the Board. Set forth below is a summary of such transactions. Controlling Shareholder S&T International Distribution Limited (“S&T”), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd., which is a wholly owned subsidiary of Nimble, collectively have, based on a Schedule 13D/A filed with the SEC on February 15, 2019, the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 72.4 %, of the Company’s outstanding common stock as of March 31, 2024. Accordingly, the Company is a “controlled company” as defined in Section 801 (a) of the Company Guide. Related Party Transactions Charges of rental and utility fees on office space in Hong Kong During fiscal 2024 and fiscal 2023 , the Company was billed approximately $ 158,000 and $ 158,000 , resp ectively, for rental and utility fees from Vigers Appraisal and Consulting Ltd (“VACL”), which is a company related to the Company’s Chairman of the Board. The Company owed $ 827 to VACL related to rental charges as of March 31, 2024 and $ 842 as of March 31, 2023 . During fiscal 2024 and fiscal 2023 , the Company was billed approximately nil and $ 1,600 , respectively, for its share of installation charges related to an air conditioning system, and purchase of protective materials for coronavirus from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the Board. Vigers Strategic Services Ltd was formerly known as Lafe Strategic Services Ltd. The Company owed nil to VSSL related to these charges as at March 31, 2024 and March 31, 2023 . 37 Table of Contents NOTE 4 — PROPERTY AND EQUIPMENT: As of March 31, 2024 and 2023 , property and equipment is comprised of the following: 2024 2023 (In thousands) Computer equipment and software $ 176 $ 169 Furniture and fixtures 10 10 Molds 112 — 298 179 Less accumulated depreciation and amortization ( 203 ) ( 178 ) Total property and equipment $ 95 $ 1 Depreciation of property and equipment amounted to approximately $ 26,000 and $ 800 for the twelve months ended March 31, 2024 and 2023 , respectively. During fiscal 2024 , the Company did not dispose of any property and equipment. During fiscal 2023 , the Company disposed of fully depreciated property and equipment with a gross book value of approximately $ 211,000 . The Company did not recognize a gain or loss on these disposals. NOTE 5 — INCOME TAXES: The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740 -Accounting for Income Taxes. When uncertain tax positions exist, the Company will recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of March 31, 2024, the Company does not believe it has any uncertain tax positions. Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not some or all of the deferred tax assets will not be realized. As of March 31, 2024, the Company had available net operating loss carryforwards to reduce federal and state income taxes of approximately $ 14.8 million and $ 14.9 million respectively. If not utilized, these carryforwards begin to expire in 2034 . Of the federal net operating loss carryforwards at March 31, 2024, $ 14.8 million can be carried forward indefinitely. Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, or Section 382, as well as similar state provisions and other provisions of the Code. Ownership changes may limit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, occurs when there is greater than 50% change in the ownership of stock among certain 5% shareholders over a three -year period. The Company’s provision for income tax expense for fiscal 2024 and fiscal 2023 was as follows: 2024 2023 (In thousands) Current: Federal $ 78 $ — Foreign, state and other 12 — Deferred: Federal — — Foreign, state and other — — Provision for income tax expense $ 90 $ — The Company adopted ASU 2019 - 12 (Topic 740 ) Simplifying the Accounting for Income Taxes during fiscal 2023 . In the table above, the income tax expense of $ 9,000 in fiscal 2024 and $ 7,000 in fiscal 2023 , was removed as it represented non-income based taxes. The Company files a consolidated federal return and certain state and local income tax returns. 38 Table of Contents The difference between the effective rate reflected in the provision for income taxes and the amounts determined by applying the statutory federal rate of 21 % to earnings before income taxes for fiscal 2024 and fiscal 2023 is analyzed below: 2024 2023 (In thousands) Statutory provision $ 180 $ ( 286 ) Foreign subsidiary ( 248 ) ( 162 ) State taxes 55 ( 86 ) Permanent differences 261 148 Adjustment to prior year taxes 86 ( 8 ) Valuation allowance ( 244 ) 394 Provision for income tax expense $ 90 $ — 39 As of March 31, 2024 and March 31, 2023 , the significant components of the Company’s deferred tax assets and liabilities which were classified as non-current, were as follows: 2024 2023 (In thousands) Deferred tax assets: Accounts receivable reserves $ 71 $ 34 Inventory 190 260 Accruals 116 9 Property and equipment and intangible assets — 14 Net operating loss and credit carry forwards 4,152 4,437 Total deferred tax assets: 4,529 4,754 Valuation allowance ( 4,510 ) ( 4,754 ) Net deferred tax assets: 19 — Deferred tax liabilities: Property and equipment ( 19 ) — Total deferred tax liabilities: $ ( 19 ) $ — 40 Table of Contents The Company has $ 14.8 million of U.S. federal net operating loss carry forwards (“NOLs”) and $ 14.9 million of state NOLs as of March 31, 2024 as follows: March 31, 2024 Federal NOL's State NOL's Loss Year (Fiscal) Included in DTA (in millions) Included in DTA (in millions) Expiration Year (Fiscal) 2014 $ — $ 0.2 2034 2016 $ — $ 1.5 2036 2017 $ — $ 0.8 2037 2018 $ — $ 2.7 2038 2019 $ 3.3 $ 2.8 2039 2020 $ 3.6 $ 3.1 2040 2021 $ 4.0 $ 1.9 2041 2022 $ 3.4 $ 1.9 2042 2023 $ ( 1.4 ) $ ( 1.6 ) 2043 2024 $ 1.9 $ 1.6 2044 Total $ 14.8 $ 14.9 The tax benefits related to these state NOLs and future deductible temporary differences are recorded to the extent management believes it is more likely than not that such benefits will be realized. The income of foreign subsidiaries before taxes was $ 1,181,000 for the fiscal year ended March 31, 2024 as compared to income before taxes of $ 772,000 for the fiscal year ended March 31, 2023 , respectively. The Company analyzed the future reasonability of recognizing its deferred tax assets at March 31, 2024 . As a result, the Company concluded that a valuation allowance of approximately $ 4,510,000 would be recorded against the assets. The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of March 31, 2024 , the Company’s open tax years for examination for U.S. federal tax are tax years ending March 31, 2020 and forward. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense. As of March 31, 2024 the Company is asserting under ASC 740 - 30 that all of the unremitted earnings of its foreign subsidiaries are indefinitely invested. The Company evaluates this assertion each period based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S. The Tax Cut and Job Act (“TCJA”) establishes new tax rules designed to tax U.S. companies on global intangible low-taxed income (GILTI) earned by foreign subsidiaries. The Company has evaluated this provision of the TCJA and the application of ASC 740 and its impact is reflected in the financial statements as of March 31, 2024 . NOTE 6 — COMMITMENTS AND CONTINGENCIES: The Company’s ERP software provider is subscription based with annual commitments as follows (in thousands). Fiscal Years Amount 2025 $ 29 Total $ 29 41 Table of Contents Rent expense resulting from leases with non-affiliated companies aggregated $ 49,000 and $ 86,000 f or fiscal 2024 and 2023 . Letters of Credit: The Company utilizes the services of one of its banks to issue secured letters of credit on behalf of the Company, as needed, on a 100% cash collateralized basis. At March 31, 2024 and March 31, 2023 , the Company had no letters of credit outstanding. Capital Expenditure: As of March 31, 2024 and March 31, 2023 , there were no capital expenditures or other commitments other than the normal purchase orders used to secure product. Employee Benefit Plan: The Company currently sponsors a defined contribution 401 (k) retirement plan which is subject to the provisions of the Employee Retirement Income Security Act. The Company matches a percentage of the participants’ contributions up to a specified amount. These contributions to the plan for fiscal 2024 and 2023 were approximately $ 19,000 for both periods and were charged against earnings for the periods presented. NOTE 7 — SHAREHOLDERS ’ EQUITY: Common Shares: Authorized common shares total 75,000,000 with a par value $ 0.01 per share, of which 21,042,652 were outstanding as of March 31, 2024 and March 31, 2023 . Shares held in treasury at March 31, 2024 and March 31, 2023 were 31,923,145 . Series A Preferred Stock: The Company has issued and outstanding 3,677 shares of Series A Preferred Stock, $. 01 par value (“Preferred Stock”), with a face value of $ 3,677,000 , which had no determinable market value as of March 31, 2024 . The Preferred Stock is non-voting, has no dividend preferences and has not been convertible since March 31, 2002; however, it retains a liquidation preference. NOTE 8 — SHORT TERM INVESTMENTS: At both March 31, 2024 and March 31, 2023 , the Company held short-term investments in deposits totaling nil . The Company held $ 19.1 million in term deposits which were classified as cash equivalents as of March 31, 2024 and $ 23.1 million in term deposits classified as cash equivalents as of March 31, 2023 . As of March 31, 2024 and March 31, 2023, the Company's term deposits had maturity dates of 90 days or less. NOTE 9 — NET INCOME (LOSS) PER SHARE: The following table sets forth the computation of basic and diluted income (loss) per share for the years ended March 31, 2024 and March 31, 2023 : Twelve Months Ended March 31, 2024 2023 Numerator: Net income (loss) $ 766 $ ( 1,360 ) Denominator: Denominator for basic and diluted income (loss) per share — weighted average shares 21,042,652 21,042,652 Net income (loss) per share: Basic and diluted income (loss) per share $ 0.04 $ ( 0.06 ) For the years ended March 31, 2024 and March 31, 2023 , there were no outstanding instruments which were potentially dilutive. 42 Table of Contents NOTE 10 — LICENSE AGREEMENTS: During fiscal 2024 the Company was party to three license agreements, one of which was terminated by the Company in June 2023. The remaining agreements allow the licensee to access the Company’s trademarks for the manufacture and/or the sale of consumer electronics and other products. The license agreements (i) allow the licensee to use the Company’s trademarks for a specific product category, or for sales within specific geographic areas, or for sales to a specific customer base, or any combination of the above, or any other category that might be defined in the applicable license agreement and (ii) may be subject to renewal at the initial expiration of the applicable license agreement and are governed by the laws of the United States. The Company recorded licensing revenues of approximately $ 218,000 in fiscal 2024 and $ 372,000 in fiscal 2023 under the license agreements. The Company also recorded several one -time settlement agreements with customers of Emerson Quiet Kool, which aggregated $ 175,000 in fiscal 2024 and $ 730,000 in fiscal 2023. The agreements allow Emerson Quiet Kool's customers to sell-off their on hand inventories over a limited period. These amounts are presented separately as Royalty Income in the Consolidated Statements of Operations. NOTE 11 — LEGAL PROCEEDINGS: On October 10, 2023, the US District Court for the District of Delaware granted final judgment in favor of the Company in its trademark infringement lawsuit against air conditioning and heating products provider Emerson Quiet Kool and wholesaler Home Easy (the “defendants”). Among other things, the court order issues an injunction and directs the US Patent and Tr ademark Office to cancel the d efendants’ existing and proposed " E merson Q uiet K ool " trademark s and prohibit s d efendants from register ing or applying to register, or using t he same mark or any other mark or name containing the word "Emerson" going forward . The total j udgment awarded to the Company has increased from approximately $ 6.5 million to approximately $ 10.4 million, inclusive of disgorgement of wrongful profits, attorney's fees and enhanced damages. The aggregate award to the Company also includes the $ 4.1 million of advanced deposits previously paid to the Company. The $4.1 million of advanced deposits was reduced by approximately $ 1 million of incurred legal fees. The remaining balance of $ 3.1 million was released by the Company to other income during the quarter ended September 30, 2023. Like any judgement, there is no guarantee that the Company will be able to collect the entire judgement or if it is able to collect, how soon it will be able to do so. The defendants have filed separate bankruptcy petitions in the US Bankruptcy Court for the District of New Jersey, and there is no guarantee that those bankruptcy proceedings will not have any effect on the ability of the Company to collect the judgement. The Company is not currently a party to any other legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to its business. Management cannot estimate with certainty the Company’s ultimate legal and financial liability with respect to such pending litigation matters. However, management believes, based on its examination of such matters, that the Company’s ultimate liability will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. NOTE 12 — RISKS AND UNCERTAINTIES: Customer Concentration For fiscal 2024 , the Company’s three largest customers accounted for approximately 83 % of the Company’s net revenues, with Walmart accounting for 53 %, Amazon accounting for 20 % and Fred Meyer accounting for 10 %. For fiscal 2023 , the Company’s three largest customers accounted for approximately 77 % of the Company’s net revenues with Walmart accounting for 42 %, Amazon accounting for 23 % and Fred Meyer accounting for 12 %. Product Concentration For fiscal 2024 , the Company’s gross product sales included microwave ovens, which generated approximately 33 %, and audio products, which generated 66 % of the Company's gross product sales. For fiscal 2023 , the Company’s gross product sales included microwave ovens, which generated approximately 27 %, and audio products, which generated 73 % of the Company's gross product sales. 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 operations. 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 products types within these categories or any other new or enhanced products. 43 Table of Contents Concentrations of Credit Risk As a percent of the Company’s total trade accounts receivable, net of specific reserves, Walmart, Chedraui and Amazon accounted for 34 %, 30 % and 25 %, respectively, as of March 31, 2024 . As a percent of the Company’s total trade accounts receivable, net of specific reserves, Amazon, Walmart and Fred Meyer accounted for 43 %, 35 % and 11 %, respectively, as of March 31, 2023 . No other customer accounted for more than 10% of the Company’s total trade accounts receivable, net of specific reserves, as of March 31, 2024 or March 31, 2023 . The Company periodically performs credit evaluations of its customers but generally does not require collateral, and the Company provides for any anticipated credit losses in the financial statements based upon management’s estimates and ongoing reviews of recorded allowances. The accounts receivable allowance for doubtful accounts on the Company’s total trade accounts receivable balances was approximately $ 25,000 at March 31, 2024 and at March 31, 2023 . Due to the high concentration of the Com pany’s net trade accounts receivables among just three customers, any significant failure by one of these customers to pay the Company their outstanding balances would result in a material adverse effect on the Company’s business, financial condition and results of operations. The Company maintains its cash accounts with major U.S. and foreign financial institutions. The Company’s cash and restricted cash balances on deposit in the U.S. as of March 31, 2024 and March 31, 2023 were insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per qualifying bank account in accordance with FDIC rules. The Company’s cash, cash equivalents and restricted cash balances in excess of these FDIC-insured limits were approximately $ 19.6 million and approximately $ 25.0 million at March 31, 2024 and March 31, 2023 , respectively. Supplier Concentration During fiscal 2024 , the Company reduced its reliance on its largest factory supplier, from approximately 75 % to 38 % of the Company's purchases of products for resale. During fiscal 2023 , the Company procured 95 % of its products for resale from its two largest factory suppliers. Approximately 75 % of these products were procured from one of the suppliers and approximately 20 % were procured from the other. No assurance can be given that ample supply of product would be available at current prices and on current credit terms. This is if the Company were required to seek alternative sources of supply, without adequate notice by a supplier or a reasonable opportunity to seek alternate production facilities and component parts. Any resulting significant shortage of product supply would have a material adverse effect on the Company’s business, financial condition and results of operation. Third Party Representatives In fiscal 2024 , the Company utilized 6 sales representative organizations, including one which represented approximately 30 % of its net revenues. In fiscal 2023 , the Company utilized 2 sales representative organizations, including one which represented 38 % of it net revenues. No other sales representative organization accounted for more than 10% of the Company's net revenues in fiscal 2024 or fiscal 2023 . The loss or reduction of product sales made through third party representative organizations could have a material adverse effect on the Company's business and results of operations. Finding replacement organizations could be a time consuming process during which the Company's revenues could be negatively impacted.  NOTE 13 — GEOGRAPHIC INFORMATION: Net revenues and long-lived assets of the Company for the fiscal years ended March 31, 2024 and March 31, 2023 are summarized below by geographic area (in thousands). Net revenues are attributed to geographic area based on the location of the customer. Year Ended March 31, 2024 U.S. Foreign Consolidated Net revenues $ 8,425 $ 645 $ 9,070 Long-lived assets $ 331 $ 130 $ 461 Year Ended March 31, 2023 U.S. Foreign Consolidated Net revenues $ 7,177 $ — $ 7,177 Long-lived assets $ 7 $ 269 $ 276 44 Table of Contents NOTE 14 — LEASES The Company leases office space in the U.S. and in Hong Kong as well as a copier in the U.S. These leases have remaining non-cancellable lease terms of thr ee to fifty-seven months. Th e Company has elected not to separate lease and non-lease components for all leased assets. The Company did not identify any events or conditions during fiscal 2024 to indicate that a reassessment or re-measurement of the Company’s existing leases was required. There were also no impairment indicators identified during fiscal 2024 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC 360 - 10, "Impairment and Disposal of Long-Lived Assets”. As of March 31, 2024 , the Company’s current operating and finance lease liabilities were approximately $ 93,000 and $ 300 , respectively, and its non-current operating and finance lease liabilities were approximately $ 198,000 and nil , respectively. The Company’s operating and finance lease right-of-use asset balances are presented in non-current assets. The net balance of the Company’s operating and finance lease right-of-use assets as of March 31, 2024 were approximately $ 282,000 and $ 200 , respectively. As disclosed in "Note 3 - Related Party Transactions", the Company's Hong Kong office space is being leased from Vigers Appraisal and Consulting Ltd (“VACL”), which is a company related to the Company’s Chairman of the Board. As of March 31, 2024 , the current operating liability of this lease is approximately $ 62,000 and its non-current liability is nil. Its right-of-use asset value is approximately $ 61,000 , as of March 31, 2024 . In January 2023, the Company relocated its corporate headquarters to a temporary office space, while its new landlord built out the agreed-upon space. The Company was not obligated to pay rent while it resided in the temporary office space. The Company took possession of the completed space on July 1, 2023, which became the commencement date of a 66 month lease. The right-of-use asset value of this operating lease is approximately $ 248,000 . The components of lease costs, which were included in operating expenses in the Company’s condensed consolidated statements of operations, were as follows: Twelve Months Ended March 31, 2024 2023 (in thousands) Lease cost Operating lease cost $ 196 $ 229 The supplemental cash flow information related to leases are as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases 167 232 Right-of-use assets obtained in exchange for lease obligations: Operating leases 248 — Finance leases — — 45 Table of Contents Information relating to the lease term and discount rate are as follows: Weighted average remaining lease term (in months) As of March 31, 2024 As of March 31, 2023 Operating leases 45.8 16.5 Finance leases 2.2 14.2 Weighted average discount rate Operating leases 9.76 % 7.50 % Finance leases 7.50 % 7.50 % As of March 31, 2024 the maturities of lease liabilities were as follows: (in thousands) Operating Leases Finance Leases 2025 $ 116 $ - 2026 54 — 2027 66 — 2028 67 — 2029 52 — Total lease payments $ 355 $ - Less: Imputed interest ( 64 ) — Total $ 291 $ - NOTE 15 — GOVERNMENTAL ASSISTANCE PROGRAM During fiscal 2024 and 2023, the Company’s Hong Kong subsidiary recorded income of nil and approximately $ 34,000 , respectively, under a governmental program called the Employment Support Scheme (“ESS”). The proceeds were required to be used for payroll expenses and the Company was subject to government-appointed random reviews to verify the information submitted by the applicant. The income realized from the amount granted under the ESS program is presented as Other Income under the description called “Income from governmental assistance program” in the Consolidated Statements of Operations. NOTE 16 — SUBSEQUENT EVENTS As of the date of this filing, there were no subsequent events to disclose. 46 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.