What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-06-27 compared with 2024-06-27 · 65 added, 42 removed, 135 unchanged (44% of the section changed)

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Interest income, net

Income from governmental assistance program

Income (loss) before income taxes

(Loss) income before income taxes

Provision for income taxes

Net income (loss)

Net (loss) income

Results of Operations — Fiscal 2025 compared with Fiscal 2024

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Net product sales for fiscal 2025 were $10.4 million as compared to $8.7 million for fiscal 2024, an increase of $1.7 million, or 20.4%.

The Company’s sales were highly concentrated among three customers - Walmart, Amazon and Fred Meyer - representing in the aggregate approximately 85.8% and 90.2% of the Company’s total gross product sales in fiscal 2024 and fiscal 2023, respectively.

The increase in net product sales during fiscal 2024 compared to fiscal 2023 was primarily driven by increased consumer demand for all of the Company’s products.

In fiscal 2025, the Company’s sales were highly concentrated among three customers - Amazon, Walmart and Big Lots - representing in the aggregate approximately 81.2% of the Company’s total gross product sales.

In fiscal 2024, the Company’s sales were highly concentrated among three customers - Walmart, Amazon and Fred Meyer - representing in the aggregate approximately 85.8% of the Company’s total gross product sales.

The increase in net product sales during fiscal 2025 compared to fiscal 2024 was primarily driven by increased sales of microwave ovens.

Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period.

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Houseware product net sales were $5.6 million in fiscal 2025 compared to $2.9 million in fiscal 2024, an increase of $2.7 million, or 90.5%, principally driven by increased sales of microwave ovens and the re-introduction of refrigerators.

Audio product net sales were $5.7 million in fiscal 2024 compared to $4.4 million in fiscal 2023, an increase of $1.3 million, or 30.2%, resulting from new clock radios introduced to the market.

Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S and Mexico.

Audio product net sales were $4.9 million in fiscal 2025 compared to $5.8 million in fiscal 2024, a decrease of $0.9 million, or 15.3%, primarily resulting from decreased demand for clock radios.

Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S, Canada and Mexico.

The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels.

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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.

Among other things, the court order issues an injunction and directs the US Patent and Trademark Office to cancel the defendants’ existing and proposed "Emerson Quiet Kool" trademarks and prohibits defendants from registering or applying to register, or using the same mark or any other mark or name containing the word "Emerson" going forward.

The total judgment 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.

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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.

In addition, in connection with those bankruptcy proceedings, the Chapter 7 trustee of Home Easy has filed a complaint seeking the return of the $4.1 million of advanced deposits previously paid to the Company and the outcome of such litigation remains uncertain.

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.

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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.

Licensing revenue — Licensing revenue in fiscal 2024 was approximately $218,000 as compared to approximately $372,000 for fiscal 2023, a decrease of $154,000, or 41.5%.

The decrease was primarily due to the expiration of a license agreement on December 31, 2022.

This was partially offset by the license revenue generated from a new license agreement signed in fiscal 2024.

Royalty income —The Company recorded royalty income in fiscal 2024 of $175,000 as compared to $730,000 in fiscal 2023.

The royalty income was derived from inventory sell-off agreements made with customers of Emerson Quiet Kool.

Net revenues —The Company’s net revenues were approximately $9.1 million for fiscal 2024 as compared to $7.2 million for fiscal 2023, an increase of $1.9 million, or 26.4%, which was driven primarily by the increase in audio and houseware product net sales, offset by the decreases in royalty income and licensing revenue.

Licensing revenue — Licensing revenue in fiscal 2025 was approximately $336,000 as compared to approximately $218,000 in fiscal 2024, an increase of $118,000, or 54.1%.

The increase was primarily due to one of the Company's licensees exceeding their guaranteed minimum royalties.

Also contributing was the license revenue generated from a license agreement signed in fiscal 2024.

Royalty income —The Company recorded royalty income in fiscal 2025 of nil as compared to $175,000 in fiscal 2024.

The Company's royalty income in fiscal 2024 was derived from inventory sell-off agreements made with customers of Emerson Quiet Kool.

Net revenues —The Company’s net revenues were approximately $10.8 million for fiscal 2025 as compared to $9.1 million for fiscal 2024, an increase of $1.7 million, or 18.9%, which was driven primarily by an increase in houseware product sales and an increase in licensing revenue partially offset by decreases in audio product sales and royalty income.

Cost of sales — Cost of sales includes the components described in Note "1 - Significant Accounting Policies-“ Cost of Sales ” in the Notes to the Consolidated Financial Statements.

In absolute terms, cost of sales increased approximately $2.4 million, or 31.7%, to $9.9 million in fiscal 2025 as compared to $7.5 million in fiscal 2024.

The increase in absolute terms for fiscal 2024 as compared to fiscal 2023 was primarily related to the increase in net product sales and by higher year-over-year gross cost of sales as a percentage of gross sales.

The increase in absolute terms for fiscal 2025 as compared to fiscal 2024 was primarily related to the increase in net product sales partially offset by lower year-over-year gross cost of sales as a percentage of gross sales.

The increase in gross cost of sales as a percentage of gross sales for fiscal 2025 as compared to fiscal 2024 was primarily related to the change in the product mix of audio products compared to houseware products.

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In fiscal 2025 SG&A, in absolute terms, was approximately $6.5 million and in fiscal 2024 SG&A, in absolute terms, was approximately $5.0 million, an increase of $1.5 million, or 31.3%.

In fiscal 2024 and fiscal 2023, the Company identified approximately $216,000 and $784,000, respectively, in legal fees incurred in the pursuit of $4.1 million in advanced deposits from Emerson Quiet Kool.

In fiscal 2025 and fiscal 2024, the Company identified approximately nil and $216,000, respectively, in legal fees incurred in the pursuit of $4.1 million in advanced deposits from Emerson Quiet Kool.

The Company applied those legal fees against the advanced deposit of $4.1 million which was reduced to $3.1 million.

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Legal fees during fiscal 2025 were approximately $312,000 as compared to approximately $729,000 during fiscal 2024.

The Company incurred an increase in compensation costs of approximately $254,000, an increase in auditing fees of approximately $92,000, an increase in advertising expense of approximately $84,000, an increase in bad debt expense of approximately $60,000 and an increase in sales commissions of approximately $40,000.

The Company incurred an increase in bad debt expense of approximately $1,033,000, an increase in compensation costs of approximately $683,000, an increase of commission expense of approximately $79,000, an increase in advertising costs of approximately $43,000, an increase in auditing fees of approximately $39,000 and an increase in travel and entertainment expense of approximately $39,000.

Settlement of litigation — Based on a judgement affirmation by the U.S.

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See "Note 11 - Legal Proceedings" in the Notes to the Consolidated Financial Statements.

Interest income, net — Interest income, net, was approximately $1,155,000 in fiscal 2024 as compared to approximately $702,000 in fiscal 2023, resulting from an increase in interest rates earned on the Company’s term deposits during fiscal 2024.

Income from governmental assistance program — During fiscal 2024, the Company recorded income of nil related to a governmental assistance program.

During fiscal 2023, the Company recorded income of approximately $34,000 received from the Hong Kong government under a program called the Employment Support Scheme ("ESS").

See “Note 15 - Governmental Assistance Program” in the Notes to the Consolidated Financial Statements.

Interest income, net — Interest income, net, was approximately $887,000 in fiscal 2025 as compared to approximately $1,155,000 in fiscal 2024, resulting from reduced amounts deposited and a decrease in interest rates earned on the Company’s term deposits during fiscal 2025.

Provision for income tax expense — The Company recorded approximately $3,000 of income tax expense during fiscal 2025 and recorded its non-income based state taxes of approximately $8,000 to S,G&A according to ASU 2019-12.

In fiscal 2023, the Company recorded no income tax expense and recorded its non-income based state taxes of approximately $7,000 to S,G&A according to ASU 2019-12.

In fiscal 2024, the Company recorded $90,000 income tax expense and recorded its non-income based state taxes of approximately $9,000 to S,G&A according to ASU 2019-12.

See Note 5 “Income Taxes” in the Notes to the Consolidated Financial Statements.

Net income (loss) — As a result of the foregoing factors, the Company recorded net income of approximately $766,000 for fiscal 2024 as compared to a net loss of $1.36 million for fiscal 2023.

Net income (loss) — As a result of the foregoing factors, the Company recorded a net loss of approximately $4,731,000 for fiscal 2025 as compared to net income of approximately $766,000 for fiscal 2024.

Liquidity and Capital Resources

As of March 31, 2025, the Company had cash and cash equivalents of approximately $1.2 million as compared to approximately $19.9 million at March 31, 2024.

Working capital increased to $26.6 million at March 31, 2024 as compared to $26.4 million at March 31, 2023.

The decrease in cash and cash equivalents of approximately $5.3 million is set out in “Cash Flows” below.

Net cash used by operating activ ities was approximately $5.3 million for fiscal 2024, compared to approximately $0.3 million for fiscal 2023, resulting from a $3.3 million decrease in advanced deposits, a $3.1 million increase in inventory and a $0.4 million decrease in income taxes payable partially offset by $0.8 million of income generated during the period, a $0.5 million increase in accounts payable and other current liabilities and a $0.2 million decrease in licensing receivable.

Net cash used by investing activities was approximately $119,000 for fiscal 2024 , compared to nil for fiscal 2023 , primarily due to additions to property and equipment.

Net cash used by financing activities was approximately $1,000 for fiscal 2024 and approximately $2,000 for fiscal 2023 due to reductions in the Company's finance lease liabilities.

Working capital decreased to $21.1 million at March 31, 2025 as compared to $26.6 million at March 31, 2024.

The decrease in cash and cash equivalents of approximately $18.7 million is detailed further in “Cash Flows” below.

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

Net cash used by investing activities was approximately $15.1 million for fiscal 2025, compared to $119,000 for fiscal 2024, due to purchases of investments of $16.3 million and additions to property and equipment of $195,000, partially offset from proceeds of investments of $1.4 million.

Net cash used by financing activities was approximately $6,000 for fiscal 2025 compared to net cash provided of approximately $1,000 for fiscal 2024 due to additions to the Company's finance lease liabilities.

Credit Arrangements

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.

Letters of Credit — The Company may occasionally utilize 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, 2025 and March 31, 2024, the Company had no letters of credit outstanding.

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The Company believes that its cash on hand and existing sources of cash will be sufficient to support its existing operations over the next 12 months.

Historically, a si gnificant percentage of the Company’s product sales were made under the Direct Import Program.

Historically, a significant percentage of the Company’s product sales were made under the Direct Import Program.

The direct importation of product by the Company to its customers can significantly benefit the Company’s liquidity because this inventory does not need to be financed by the Company.

In fiscal 2024 , approximate ly 12% of the Company’s product sales were imported directly to the Company’s customers.

In fiscal 2023, approximately 16% of the Com pany’s product sales were imported directly to the Company’s customers.

In fiscal 2025, approximately 11% of the Company’s product sales were imported directly to the Company’s customers.

In fiscal 2024, approximately 12% of the Company’s product sales were imported directly to the Company’s customers.

As of March 31, 2025, there were no capital expenditure or other commitments other than the normal purchase orders used to secure product.

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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.

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.

Fair Value Measurements .

The Company reports financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis in accordance with ASC Topic 820 Fair Value Measurement (“ASC 820”).

ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

ASC 820 also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels.

GAAP established a hierarchy framework to classify the fair value based on the observability of significant inputs to the measurement.

The levels of the fair value hierarchy are as follows:

Quoted price in an active market for identical assets or liabilities.

Quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The carrying amounts of the Company’s financial instruments, such as cash, short term investments accounts receivable and accounts payable approximate fair values due to the short-term nature of these instruments.

Recent Accounting Pronouncements

The following ASUs were 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 2023-07 Segment Reporting (Topic 280):

"Improvements to Reportable Segment Disclosures " (Issued October 2023)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

"Improvements to Reportable Segment Disclosures" ("ASU 2023-07") to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The adoption of this guidance did not have any impact on the Company's segment reporting.

Accounting Standards Update 2024-03 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

"Disaggregation of Income Statement Expenses " (Issued November 2024)

In November 2024, the FASB issued ASU No.

2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories.

The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027.

Entities are permitted to apply either the prospective or retrospective transition methods.

The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

Accounting Standards Update 2023-09 Income Taxes (Topic 740) :

"Improvements to Income Tax Disclosures" Income Statement Expenses " (Issued December 2023)

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-K

Item 5. Market for Registrant’s Common Equity