EMERSON RADIO CORP 10-Q

Item 1. Financial Statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Net revenues: Net product sales $ 1,127 $ 2,670 $ 2,716 $ 4,799 Licensing revenue 88 68 174 137 Net revenues 1,215 2,738 2,890 4,936 Costs and expenses: Cost of sales 1,216 2,466 2,880 4,470 Selling, general and administrative expenses 1,195 1,389 2,515 2,805 Total cost of sales and SG&A 2,411 3,855 5,395 7,275 Operating loss ( 1,196 ) ( 1,117 ) ( 2,505 ) ( 2,339 ) Other income: Interest income, net 153 236 322 499 (Loss) before income taxes ( 1,043 ) ( 881 ) ( 2,183 ) ( 1,840 ) Provision for income tax expense — — — 3 Net (loss) $ ( 1,043 ) $ ( 881 ) $ ( 2,183 ) $ ( 1,843 ) Basic (loss) per share $ ( 0.05 ) $ ( 0.04 ) $ ( 0.10 ) $ ( 0.09 ) Diluted (loss) per share $ ( 0.05 ) $ ( 0.04 ) $ ( 0.10 ) $ ( 0.09 ) Weighted average shares outstanding Basic 21,042,652 21,042,652 21,042,652 21,042,652 Diluted 21,042,652 21,042,652 21,042,652 21,042,652 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except share data) September 30, 2025 March 31, 2025 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 956 $ 1,186 Short term investments 12,545 14,868 Accounts receivable, net 1,203 1,499 Licensing receivable 42 42 Inventory 4,982 4,909 Prepaid purchases 8 43 Prepaid expenses and other current assets 362 247 Total Current Assets 20,098 22,794 Non-Current Assets: Property and equipment, net 170 211 Right-of-use asset-operating leases 374 443 Right-of-use asset-finance leases 5 6 Other assets 76 76 Total Non-Current Assets 625 736 Total Assets $ 20,723 $ 23,530 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable and other current liabilities 978 808 Due to affiliate 1 1 Short-term operating lease liability 153 136 Short-term finance lease liability 1 1 Income tax payable, current portion — 668 Deferred revenue 32 96 Total Current Liabilities 1,165 1,710 Non-Current Liabilities: Long-term operating lease liability 243 321 Long-term finance lease liability 4 5 Total Non-Current Liabilities 247 326 Total Liabilities $ 1,412 $ 2,036 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 September 30, 2025 and March 31, 2025, respectively; 21,042,652 shares outstanding at September 30, 2025 and March 31, 2025, respectively 529 529 Additional paid-in capital 79,792 79,792 Accumulated deficit ( 31,119 ) ( 28,936 ) Treasury stock, at cost ( 31,923,145 shares at September 30, 2025 and March 31, 2025, respectively) ( 33,201 ) ( 33,201 ) Total Shareholders’ Equity 19,311 21,494 Total Liabilities and Shareholders’ Equity $ 20,723 $ 23,530 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended September 30, 2025 2024 (In thousands) Cash Flows from Operating Activities: Net (loss) $ ( 2,183 ) $ ( 1,843 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Non-cash lease expense 70 86 Depreciation and amortization 41 37 Changes in assets and liabilities: Accounts receivable 296 ( 769 ) Inventory ( 73 ) 825 Prepaid purchases 35 ( 191 ) Prepaid expenses and other current assets ( 115 ) ( 136 ) Accounts payable and other current liabilities 170 ( 320 ) Right of use assets-operating — ( 313 ) Short term lease liabilities 17 35 Long term lease liabilities ( 78 ) 199 Income taxes payable ( 668 ) ( 531 ) Deferred revenue ( 64 ) ( 42 ) Net cash (used in) operating activities ( 2,552 ) ( 2,963 ) Cash Flows From Investing Activities: Proceeds from sale of short-term investments 2,323 — Purchases of short-term investments — ( 16,277 ) Additions to property and equipment — ( 187 ) Net cash provided by (used in) investing activities 2,323 ( 16,464 ) Cash Flows from Financing Activities: Short term finance liability — 1 Long term finance liability ( 1 ) — Net cash (used in) provided by financing activities ( 1 ) 1 Net (decrease) in cash and cash equivalents ( 230 ) ( 19,426 ) Cash and cash equivalents at beginning of the period 1,186 19,890 Cash and cash equivalents at end of the period $ 956 $ 464 Supplemental disclosure of non-cash investing and financing activities: Right-of-use assets obtained in exchange for new operating lease liabilities $ — $ 313 Right-of-use assets obtained in exchange for new finance lease liabilities $ — $ 6 Supplemental disclosures: Cash paid for: Interest $ 7 $ 3 Income taxes $ 676 $ 535 The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY (Unaudited) (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, 2025 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 28,936 ) $ ( 33,201 ) $ 21,494 Net loss — — — — — ( 1,140 ) — ( 1,140 ) Balance — June 30, 2025 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 30,076 ) $ ( 33,201 ) $ 20,354 Net loss — — — — — ( 1,043 ) — ( 1,043 ) Balance — September 30, 2025 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 31,119 ) $ ( 33,201 ) $ 19,311 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, 2024 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 24,205 ) $ ( 33,201 ) $ 26,225 Net loss — — — — — ( 962 ) — ( 962 ) Balance — June 30, 2024 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 25,167 ) $ ( 33,201 ) $ 25,263 Net loss — — — — — ( 881 ) — ( 881 ) Balance — September 30, 2024 3,677 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 26,048 ) $ ( 33,201 ) $ 24,382 The accompanying notes are an integral part of the condensed consolidated financial statements. 6 Table of Contents EMERSON RADIO CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 — BACKGROUND AND BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include the accounts of Emerson Radio Corp. and its subsidiaries (“Emerson” or the “Company”). The Company designs, sources, imports and markets certain houseware and consumer electronic products, and licenses the Company’s trademarks for a variety of products. The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s condensed consolidated financial position as of September 30, 2025 and the results of operations for the three and six month periods ended September 30, 2025 and September 30, 2024 . In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the unaudited condensed consolidated financial statements not misleading have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes; actual results could materially differ from those estimates. The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and accordingly do not include all of the disclosures normally made in the Company’s annual condensed consolidated financial statements. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto for the fiscal year ended March 31, 2025 (“fiscal 2025 ”), included in the Company’s Annual Report on Form 10 -K for fiscal 2025 . The results of operations for the three and six month periods ended September 30, 2025 are not necessarily indicative of the results of operations that may be expected for any other condensed interim period or for the full year ending March 31, 2026 (“fiscal 2026 ”). Recent Accounting Pronouncements The following Accounting Standards Updates (“ASUs”) were issued by the Financial Accounting Standards Board (“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 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.” ASU 2023 - 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. Segment Reporting The Company operates as one reportable segment under Accounting Standards Codification ("ASC") 280, Segment Reporting . The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in determining how to allocate resources and in assessing performance. 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 revenue at the time title passes to the customer as this is when the Company satisfies its performance obligation under the contracts with its customers. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good. Under the Direct Import Program, title passes in the country of origin when the goods are passed over the rail of the customer’s vessel. 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. R evenue 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. 7 Table of Contents 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” (“ASC 606” ). At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC 606, (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 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 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 refrigerators 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. The Company estimates its warranty reserve based on sales and its historical warranty claim rates. Licensing : In addition to the distribution of products, 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 (a) 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 (b) a minimum guaranteed royalty amount. In the case of the foregoing clause (i), such amounts are recognized as revenue on a straight-line basis over the term of the license agreement. In the case of the foregoing clause (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 straight-line 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 a liability and recognized as revenue as the royalties are deemed to be earned according to the principles outlined above. As of September 30, 2025 , the Company recorded deferred revenue of approximately $ 32,000 as compared to approximately $ 96,000 as of March 31, 2025 on its condensed consolidated balance sheets. As of September 30, 2024 , the Company recorded deferred revenue of $ 149,000 as compared to approximately $ 191,000 as of March 31, 2024 on its condensed consolidated balance sheets. All of the deferred revenue for the periods presented are related to licensing revenue. Disaggregation of Revenue Three Months Ended September 30, Six Months Ended September 30, Disaggregation of revenue (in 000's) 2025 2024 2025 2024 Net revenues by type: Net product sales $ 1,127 $ 2,670 $ 2,716 $ 4,799 Licensing revenue 88 68 174 137 Total: 1,215 2,738 2,890 4,936 Net revenues by customers: (over 10%) Amazon.com $ 680 $ 999 $ 880 $ 1,984 Costco 137 — 246 — Walmart 115 1,190 168 2,038 Variety Wholesalers — — 459 — Fred Meyer — 379 439 544 Total: $ 932 $ 2,568 $ 2,192 $ 4,566 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. The disclosure of the credit loss calculated is based on reasonable and supportable forecasts including historical, current and forecasted information. Credit is extended for periods between 30 and 150 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 accounts receivable balance on a net basis was approximately $ 1,203,000 as of September 30, 2025 as compared to approximately $ 1,499,000 as of March 31, 2025 and approximately $ 1,343,000 as of March 31, 2024 . As of September 30, 2025 , Amazon.com ("Amazon") accounted for approximately 59 % and Fred Meyer Inc. ("Fred Meyer") accounted for approximately 15 % of the Company’s total trade accounts receivable, net of specific reserves. As of March 31, 2025 , Amazon accounted for approximately 59 % and Variety Wholesalers Inc. ("Variety") accounted for approximately 19 % 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 September 30, 2025 or March 31, 2025 . Accounts receivable roll-forward: As of September 30, As of March 31, As of March 31, 2025 2025 2024 Trade receivables $ 2,316 $ 2,606 $ 1,368 Allowance for credit losses ( 1,113 ) ( 1,107 ) ( 25 ) Accounts receivable, net $ 1,203 $ 1,499 $ 1,343 8 Table of Contents Accounts receivables deemed uncollectible are charged against the allowance for credit losses when identified: As of September 30, 2025 2024 Opening balance $ ( 1,107 ) $ ( 29 ) Reserve adjustment ( 6 ) ( 8 ) Allowance for credit losses $ ( 1,113 ) $ ( 37 ) NOTE 2 — EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts). Weighted average shares includes the impact of shares held in treasury. Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Numerator: Net (loss) $ ( 1,043 ) $ ( 881 ) $ ( 2,183 ) $ ( 1,843 ) Denominator: Denominator for basic and diluted loss per share — weighted average shares 21,042,652 21,042,652 21,042,652 21,042,652 Net (loss) per share: Basic and diluted (loss) per share $ ( 0.05 ) $ ( 0.04 ) $ ( 0.10 ) $ ( 0.09 ) NOTE 3 — SHAREHOLDERS ’ EQUITY Outstanding capital stock at September 30, 2025 consisted of common stock and Series A preferred stock. The Series A preferred stock is non-voting, has no dividend preferences and has not been convertible since March 31, 2002; however, it retains a liquidation preference. At September 30, 2025 , the Company had no options, warrants or other potentially dilutive securities outstanding. NOTE 4 — INVENTORY Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value. Cost is determined using the first -in, first -out method. As of September 30, 2025 and March 31, 2025 , inventories consisted of the following (in thousands): September 30, 2025 March 31, 2025 Finished goods $ 4,982 $ 4,909 9 Table of Contents NOTE 5 — INCOME TAXES As of September 30, 2025 , the Com pany had approximately $ 21.4 million of U.S. federal net operating loss (“NOL”) carry forwards. These losses do not expire but are limited to utilization of 80 % of taxable income in any one year. At September 30, 2025 , the Company had approximately $ 23.2 million of U.S. state NOL carry forwards. The tax benefits related to these state NOL carry forwards 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 Company analyzed the future reasonability of recognizing its deferred tax assets at September 30, 2025 . As a result, the Company concluded that a 100% valuation allowance of approximately $ 6,739,000 w o uld be recorded against the assets. The income of foreign subsidiaries before taxes was approximately $ 165,000 for the three month period ended September 30, 2025 as compared to income of foreign subsidiaries before taxes of approximately $ 249,000 for the three month period ended September 30, 2024 . The income of foreign subsidiaries before taxes was approximately $ 344,000 for the six month period ended September 30, 2025 as compared to income of foreign subsidiaries before taxes of approximately $ 520,000 for the six month period ended September 30, 2024 . Although the Company generated a net operating loss, it recorded income tax expense of approximately $ 9,000 during the three and six month periods ended September 30, 2025 , primarily resulting from state income taxes. During the three and six month periods ended September 30, 2024 , the Company generated a net operating loss and recorded income tax expense of nil and approximately $ 3,000 , respectively, primarily resulting from state income taxes. After the adoption of ASU 2019 - 12 “Income Taxes (Topic 740 ) – Simplifying the Accounting for Income Taxes” during fiscal 2022, these non-income based state taxes are now reported within selling, general and administrative expenses. The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of September 30, 2025 , the Company’s open tax years for examination for U.S. federal tax are 2018 - 2025, and for U.S. states’ tax are 2016 - 2025. 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 September 30, 2025 , 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. As of September 30, 2025 and March 31, 2025 , the Company had a federal tax liability of nil and approximately $ 668,000 , respectively, related to the repatriation of the Company’s undistributed earnings of its foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017. As of September 30, 2025 and March 31, 2025 , the Company’s short term portion was nil and approximately $ 668,000 , respectively. As of each of September 30, 2025 and March 31, 2025 , the Company's long term portion was nil. The liability was payable over 8 years. The first five installments were each e qual to 8 %, the sixth was equal to 15 %, the seventh was equal to 20 % and the final installment was equal to 25 % of the liability. T he Company paid its eighth and final installment in July 2025. NOTE 6 — RELATED PARTY TRANSACTIONS From time to time, Emerson engages in business transactions with its controlling shareholder, Nimble Holdings Company Limited (“Nimble”), formerly known as The Grande Holdings Limited (“Grande”), and one or more of Nimble’s direct and indirect subsidiaries, or with entities related to the Company’s Chief Executive Officer. 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 September 30, 2025 . Accordingly, the Company is a “controlled company” as defined in Section 801 (a) of the NYSE American Company Guide. 10 Table of Contents Related Party Transactions Charges of rental and utility fees on office space in Hong Kong During the three and six month periods ended September 30, 2025 , the Company was billed approximately $ 33,000 and $ 65,000 , respectively, 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 of Directors ("Chairman"). As of September 30, 2025 the Company owed approximately $ 1,000 to VACL related to these charges. During the three and six month periods ended September 30, 2024 , the Company was billed approximately $ 36,000 and $ 76,000 , respectively, for rental and utility fees from VACL, which is a company related to the Company's Chairman. As of September 30, 2024 the Company owed approximately $ 1,000 to VACL related to these charges. Charges for promotional items During each of the three and six month periods ended September 30, 2025 , the Company purchased nil of promotional items from The Whisky Capital Pte Ltd ("TWCPL"), which is a company related to the Company's Chairman. During the three and six month periods ended September 30, 2024 , the Company purchased nil and approximately $ 30,000 , respectively, of promotional items from TWCPL. As of September 30, 2024 , the Company owed nil to TWCPL. NOTE 7 — SHORT TERM DEPOSITS AND INVESTMENTS As of September 30, 2025 and March 31, 2025 , the Company held approximately $ 0.7 million and approximately $ 0.9 million, respectively, in short term deposits. These short term deposits had maturity dates of 90 days or less and are classified as cash equivalents. As of September 30, 2025 and March 31, 2025 , the Company also held approximately $ 12.5 million and $ 14.9 million, respecti vely, in short term investments which had maturity dates greater than 90 days and are classified as short term investments. Under ASC Topic 820 Fair Value Measurement, the carrying amounts of the Company’s financial instruments, such as cash, short term deposits and short term investments approximate fair values due to the short-term nature of these instruments and are classified under the fair value hierarchy of Level 1. NOTE 8 — CONCENTRATION RISK Customer Concentration For the three month period ended September 30, 2025 , the Company’s three largest customers accounted for approximately 77 % of the Company’s net revenues, of which Amazon accounted for approximately 56 %, Costco accounted for approximately 11 % and Variety accounted for approximately 10 %. No other customer accounted for greater than 10% of the Company's net revenues during the period. For the six months ended September 30, 2025 , the Company’s three largest customers accounted for approximately 62 % of the Company’s net revenues, of which Amazon accounted for approximately 31 %, Variety accounted for approximately 16 % and Fred Meyer accounted for approximately 15 %. No other customer accounted for greater than 10% of the Company's net revenues during the period. For the three month period ended September 30, 2024 , the Company’s three largest customers accounted for approximately 86 % of the Company’s net revenues, of which Walmart accounted for approximately 42 %, Amazon accounted for approximately 31 % and Fred Meyer accounted for approximately 13 %. No other customer accounted for greater than 10% of the Company's net revenues during the period. For the six months ended September 30, 2024 , the Company’s three largest customers accounted for approximately 84 % of the Company’s net revenues, of which Walmart accounted for approximately 39 %, Amazon accounted for approximately 34 % and Fred Meyer accounted for approximately 11 %. No other customer accounted for greater than 10% of the Company's net revenues during the period. A significant decline in net sales to any of the Company’s key customers would have a material adverse effect on the Company’s business, financial condition and results of operation. 11 Table of Contents Product Concentration For the three and six month periods ended September 30, 2025 , the Company’s gross product sales included microwave ovens, which generated approximately 63 % and 76 %, respectively, of the Company’s gross product sales and audio products, which generated approximately 27 % and 18 %, respectively, of the Company’s gross product sales. No other products accounted for greater than 10% of the Company's gross product sales during the respective periods. For the three and six month periods ended September 30, 2024 , the Company’s gross product sales included microwave ovens, which generated approximately 43 % and 45 %, respectively, of the Company’s gross product sales and audio products, which generated approximately 55 % and 52 %, respectively, of the Company’s gros s product sales. No other products accounted for greater than 10% of the Company's gross product sales during the respective periods. Concentrations of Credit Risk As of September 30, 2025 , the Company’s top two customers accounted for approximately 59 % and 15 %, respectively, of the Company's total trade accounts receivable, net of specific reserves. No other customers accounted for greater than 10% of the Company's total trade accounts receivable, net of specific reserves, as of such date. As of March 31, 2025 , the Company's top two customer's accounted for approximately 59 % and 19 %, respectively, of the Company's total trade accounts receivable, net of specific reserves. No other customers accounted for greater than 10% of the Company's total trade accounts receivable, net of specific reserves, as of such date. 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 allowance for credit losses on the Company's total trade accounts receivable balances was approximately $ 1,113,000 as of September 30, 2025 and $ 1,107,000 as of March 31, 2025 . Due to the high concentration of the Company’s net trade accounts receivables among just two customers, any significant failure by one of these customers to pay the Company the amounts owing against these receivables 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 balances on deposit in the U.S. as of September 30, 2025 and March 31, 2025 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 $ 0.8 million and approximately $ 0.9 million at September 30, 2025 and March 31, 2025 , respectively. The Company also has short term deposits in foreign financial institutions which are not FDIC insured of approximately $ 12.5 million and $ 14.9 million as of September 30, 2025 and March 31, 2025 , respectively. Supplier Concentration During the three month period ended September 30, 2025 , the Company procured 100 % of its products for resale from its three largest factory suppliers, of which approximately 46 % was supplied by its largest supplier and approximately 27 %, and 27 %, respectively, was supplied by the other two suppliers. During the three month period ended September 30, 2024 , the Company procured approximately 91 % of its products for resale from its four largest factory suppliers, of which approximately 47 % was supplied by its largest supplier and approximately 16 %, 16 % and 12 %, respectively, was supplied by the other three suppliers. No other suppliers accounted for greater than 10% for either the three month period ended September 30, 2025 or September 30, 2024 . During the six month period ended September 30, 2025 , the Company procured approximately 93 % of its products for resale from its three largest factory suppliers, of which approximately 41 % was supplied by its largest supplier and approximately 30 %, and 22 %, respectively, was supplied by the other two suppliers. During the six month period ended September 30, 2024 , the Company procured 100 % of its products for resale from its five largest factory suppliers, of which approximately 38 % was supplied by its largest supplier and approximately 19 %, 17 %, 16 % and 10 %, respectively, was supplied by the other four suppliers. No other suppliers accounted for greater than 10% for either the three month period ended September 30, 2025 or September 30, 2024 . 12 Table of Contents NOTE 9 — 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 twenty-three to forty-five months. The 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 the quarter ended September 30, 2025 to indicate that a reassessment or re-measurement of the Company’s existing leases was required. As of September 30, 2025 , the Company’s current operating lease liabilities and finance lease liabilities were $ 153,000 and $ 1,000 , respectively and its non-current operating lease liabilities and finance lease liabilities were $ 243,000 and $ 4,000 , 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 September 30, 2025 was $ 374,000 and $ 5,000 , respectively. As disclosed in "Note 6 - Related Party Transactions", the Company's Hong Kong office space is being leased from VACL, which is a company related to the Company's Chairman. As of September 30, 2025 , the current operating liability of this lease is approximately $ 105,000 and its non-current liability is $ 106,000 . Its right-of-use asset value is approximately $ 211,000 , as of September 30, 2025 . The components of lease costs, which were included in operating expenses in the Company’s unaudited condensed consolidated statements of operations, were as follows: Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 (in thousands) (in thousands) Lease cost Operating lease cost $ 45 $ 48 $ 90 $ 100 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 37 42 83 95 Right-of-use assets obtained in exchange for lease obligations: Operating leases — 313 — 313 Finance leases — 6 — 6 Information relating to the lease term and discount rate are as follows: Weighted average remaining lease term (in months) As of September 30, 2025 As of September 30, 2024 Operating leases 30.2 41.3 Finance leases 44.2 56.2 Weighted average discount rate Operating leases 10.38 % 10.39 % Finance leases 10.50 % 10.50 % As of September 30, 2025 the maturities of lease liabilities were as follows: (in thousands) Operating Leases Finance Leases 2026 $ 93 $ 1 2027 187 2 2028 118 2 2029 51 2 2030 — — Thereafter — — Total lease payments $ 449 $ 7 Less: Imputed interest ( 53 ) ( 1 ) Total $ 396 $ 6 13 Table of Contents NOTE 10 — 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 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. 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. 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. 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 11 — SEGMENT INFORMATION The Company currently operates as one segment which includes two revenue types, product sales and licensing revenue. While the Company discloses product sales and licensing revenue separately, management does not consider these to be separate segments, as all Emerson branded product is sold though similar sales channels and to similar customers. Management's determination for the allocation of resources is not analyzed by revenue streams, but as a single business unit. The determination of a single business segment is consistent with the consolidated financial information provided to the Company's Chief Operating Decision Maker ("CODM"). The Company's CODMs are the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer who review and evaluate consolidated net income for purposes of assessing performance, allocating resources, making operating decisions and for its planning and forecasting processes. Segment expenses are provided to the CODM on the same basis as disclosed in the condensed Consolidated Statements of Operations. The CODM does not evaluate performance nor does it allocate resources based on segment assets and therefore such information is not presented in the notes to the financial statements. NOTE 12 — SUBSEQUENT EVENTS As of the filing date of this Form 10 -Q, there were no subsequent events identified to disclose. 14 Table of Contents Item 2. Management ’ s Discussion and Analysis of Results of Operations and Financial Condition. The following discussion of the Company’s operations and financial condition should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In the following discussions, most percentages and dollar amounts have been rounded to aid presentation. Accordingly, all amounts are approximations. Forward-Looking Information This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning 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”), which are subject to the "safe harbor" created by those sections. Forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Company’s use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “project,” “predict,” “could,” “intend,” “target,” “potential,” or the negative or plural of those terms and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation: ● the Company’s ability to generate sufficient revenue to achieve and maintain profitability; ● the Company’s ability to obtain new customers and retain key existing customers, including the Company’s ability to maintain purchase volumes of the Company’s products by its key customers; ● the Company’s ability to obtain new licensees and distribution relationships and maintain relationships with its existing licensees and distributors; ● the Company’s ability to resist price increases from its suppliers or pass through such increases to its customers; ● changes in consumer spending for retail products, such as the Company’s products, and in consumer practices, including sales over the Internet; ● the Company’s ability to maintain effective internal controls or compliance by its personnel with suc h internal controls; ● the Company’s ability to successfully manage its operating cash flows to fund its operations; ● the Company’s ability to anticipate market trends, enhance existing products or achieve market acceptance of new products; ● the Company’s ability to accurately forecast consumer demand and adequately manage inventory; ● the Company’s dependence on a limited number of suppliers for its components a nd raw materials; ● the Company’s dependence on third party manufacturers to manufacture and deliver its products; ● increases in shipping costs for the Company’s products or other service issues with the Company’s third-party shippers; ● the Company’s dependence on a third party logistics provider for the storage and distribution of its products in the United States; ● the ability of third party sales representatives to adequately promote, market and sell the Company’s products; ● the Company’s ability to maintain, protect and enhance its intellectual property; ● the effects of competition; ● the Company’s ability to distribute its products in a timely fashion, including the impact of labor disputes, public health threats and social unrest, if any; ● evolving cybersecurity threats to the Company’s information technology systems or those of its customers or suppliers; ● changes in foreign laws and regulations and changes in the political and economic conditions in the foreign countries in which the Company operates; ● changes in accounting policies, rules and practices; ● changes in tax rules and regulations or interpretations; ● changes in U.S. and foreign trade regulations and tariffs, including recent and potential future increases of tariffs on goods imported into the U.S., and uncertainty regarding the same; 15 Table of Contents ● limited access to financing or increased cost of financing; ● the effects of currency fluctuations between the U.S. dollar and Chinese renminbi and increases in costs of production in China; and ● the other factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 2025 and other filings with the SEC. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The reader is cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. Except as required by law, the Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, the Company cannot assure the reader that its expectations, beliefs or projections will result or be achieved or accomplished. Results of Operations The following table summarizes certain financial information for the three and six month periods ended September 30, 2025 (fiscal 2026) and September 30, 2024 (fiscal 2025) (in thousands): Three Months Ended September 30, Six Months Ended September 30, 2025 2024 2025 2024 Net product sales $ 1,127 $ 2,670 $ 2,716 $ 4,799 Licensing revenue 88 68 174 137 Net revenues 1,215 2,738 2,890 4,936 Cost of sales 1,216 2,466 2,880 4,470 Selling, general and administrative expenses 1,195 1,389 2,515 2,805 Operating loss (1,196 ) (1,117 ) (2,505 ) (2,339 ) Interest income, net 153 236 322 499 (Loss) before income taxes (1,043 ) (881 ) (2,183 ) (1,840 ) Provision for income taxes — — — 3 Net (loss) $ (1,043 ) $ (881 ) $ (2,183 ) $ (1,843 ) Net product sales — Net product sales for the three month period ended September 30, 2025 were approximately $1.1 million as compared to approximately $2.7 million for the three month period ended September 30, 2024, a decrease of approximately $1.6 million, or 57.8%. The Company’s sales during the three month period ended September 30, 2025 were highly concentrated among its three largest customers – Amazon, Costco and Walmart – comprising in the aggregate approximately 83% of the Company’s total net product sales during the period. The Company’s sales during the three month period ended September 30, 2024, were highly concentrated among its three largest customers – Walmart, Amazon and Fred Meyer – comprising in the aggregate approximately 88% of the Company’s total net product sales during the period. Net product sales for the six month period ended September 30, 2025 were approximately $2.7 million as compared to approximately $4.8 million for the six month period ended September 30, 2024, a decrease of approximately $2.1 million, or 43.4%. The Company’s sales during the six month period ended September 30, 2025 were highly concentrated among its three largest customers – Amazon, Variety and Fred Meyer – comprising in the aggregate approximately 65% of the Company’s total net product sales during the period. The Company’s sales during the six month period ended September 30, 2024, were highly concentrated among its three largest customers – Walmart, Amazon and Fred Meyer – comprising in the aggregate approximately 86% of the Company’s total net product sales during the period. Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period. In the aggregate, these adjustments had the effect of increasing net product sales and operating income by nil and approximately $11,000 for the three month periods ended September 30, 2025 and September 30, 2024, respectively, and by nil and approximately $21,000 for the six month periods ended September 30, 2025 and September 30, 2024, respectively. The major elements which contributed to the overall increase in net product sales were as follows: i) Houseware products: Net sales of houseware products decreased approximately $0.4 million, or 33.1%, to approximately $0.8 million for the three month period ended September 30, 2025 as compared to approximately $1.2 million for the three month period ended September 30, 2024, driven by decreased net sales of microwave ovens. Certain of the Company's key customers refuse to accept price increases from recently imposed tariffs, which negatively impacted net sales during the quarter ended September 30, 2025. Net sales of houseware products decreased $0.1 million, or 3.4%, to approximately $2.2 million for the six month period ended September 30, 2025 as compared to approximately $2.3 million for the six month period ended September 30, 2024, driven by decreased net sales of microwave ovens and compact refrigerators. ii) Audio products: Net sales of audio products decreased approximately $1.2 million, or 78.3%, to approximately $0.3 million for the three month period ended September 30, 2025 as compared to approximately $1.5 million for the three month period ended September 30, 2024, primarily due to a discontinued clock radio at Walmart. Net sales of audio products decreased approximately $2.0 million, or 80.9%, to approximately $0.5 million for the six month period ended September 30, 2025 as compared to approximately $2.5 million for the six month period ended September 30, 2024, primarily due to a discontinued clock radio at Walmart. 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. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products on which the Company has historically focused. The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensi ng Services Pte Limited as an agent to assist in identifying and procuring potential licensees. 16 Table of Contents Emerson’s success is dependent on its ability to anticipate and res pond to changing consumer demands and trends in a timely manner, as well as expanding into new markets and sourcing new products that are profitable to the Company. Geo-political factors may also affect the Company’s operations and demand for the Company’s products, which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions. The Company expects that U.S. tariffs on categories of products that the Company imports from China, and China’s retaliatory tariffs on certain goods imported from the United States, as well as modifications to international trade policy, will continue to affect its product costs going forward. Although the Company is monitoring the trade and political environment and working to mitigate the possible effect of tariffs with its suppliers as well as its customers through pricing and sourcing strategies, the Company cannot be certain how its customers and competitors will react to the actions taken. If the Company's mitigation efforts are unsuccessful, the combination of tariffs will result in significantly increased annualized costs to the Company as all of the Company’s products are currently manufactured by suppliers in China. In addition, heightened tensions between the United States and China over Hong Kong and any resulting retaliatory policies may affect our operations in Hong Kong. At this time the Company is unable to quantify possible effects on its costs arising from the new tariffs, which are expected to increase the Company’s inventory costs and associated costs of sales as tariffs are incurred, and some costs may be passed through to the Company’s customers as product price increases in the future. However, if the Company is unable to successfully pass through the additional costs or otherwise mitigate the effects of these tariffs, or if the higher prices reduce demand for the Company’s products, it will have a negative effect on the Company’s product sales and gross margins. In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures. However, the economic environment remains uncertain. Demand for the Company’s products remains competitive and requires the Company to continue carefully managing inventory. Accordingly, our current results and financial condition discussed herein may not be indicative of our future operating results and trends. For more information on risks associated with the Company’s operations, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025 . 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 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. 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. 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. 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. Licensing revenue — Licensing revenue for the three month period ended September 30, 2025 was approximately $88,000 as compared to approximately $68,000 for the three month period ended September 30, 2024, an increase of approximately $20,000, or 29.4%. The increase for the three month period ended September 30, 2025 was the result of increases of annual guaranteed minimum royalties of the Company's licensees. Licensing revenue for the six month period ended September 30, 2025 was approximately $174,000 as compared to approximately $137,000 for the six month period ended September 30, 2024, an increase of approximately $37,000, or 27.0%. The increase for the six month period ended September 30, 2025 was the result of increases of annual guaranteed minimum royalties of the Company's licensees. Net revenues — Net revenues were approximately $1.2 million for the three month period ended September 30, 2025 as compared to approximately $2.7 million for the three month period ended September 30, 2024, a decrease of approximately $1.5 million, or 55.6%. The decrease in net revenues can be attributed primarily to the discontinuation of a clock radio at Walmart. Net revenues were approximately $2.9 million for the six month period ended September 30, 2025 as compared to approximately $4.9 million for the six month period ended September 30, 2024, a decrease of approximately $2.0 million, or 41.5%. The decrease in net revenues can be attributed primarily to the discontinuation of a clock radio. Cost of sales — Cost of sales decreased approximately $1.3 million, or 50.7%, to approximately $1.2 million for the three month period ended September 30, 2025 as compared to approximately $2.5 million for the three month period ended September 30, 2024. The decrease in absolute terms for the three month period ended September 30, 2025 as compared to the three month period ended September 30, 2024 was primarily related to the discontinuation of a clock radio at Walmart and the negative impact of tariffs on the Company's microwave product line. Cost of sales decreased approximately $1.6 million, or 35.6%, to approximately $2.9 million for the six month period ended September 30, 2025 as compared to approximately $4.5 million for the six month period ended September 30, 2024. The decrease in absolute terms for the six month period ended September 30, 2025 as compared to the six month period ended September 30, 2024 was primarily related to the discontinuation of a clock radio at Walmart and the negative impact of tariffs on the Company's microwave product line. 17 Table of Contents Selling, general and administrative expenses ( “ S,G&A ” ) — S,G&A was approximately $1.2 million for the three month period ended September 30, 2025 as compared to $1.4 million for the three month period ended September 30, 2024, a decrease of approximately $0.2 million or 14.0%. S,G&A, as a percentage of net revenues, was approximately 98.4% for the three month period ended September 30, 2025 as compared to approximately 50.7% for the three month period ended September 30, 2024. The decrease in S,G&A for the three month period ended September 30, 2025 as compared to the three month period ended September 30, 2024 was primarily driven by a decrease in compensation costs of approximately $177,000 and a decrease in advertising costs of approximately $32,000 partially offset by an increase in legal fees of approximately $38,000. Compensation costs for the three month period ended September 30, 2025 were approximately $645,000 as compared to approximately $822,000 for the three month period ended September 30, 2024. Advertising costs for the three month period ended September 30, 2025 were approximately $13,000 as compared to approximately $45,000 for the three month period ended September 30, 2024. Legal fees for the three month period ended September 30, 2025 were approximately $93,000 as compared to approximately $55,000 for the three month period ended September 30, 2024. S,G&A was approximately $2.5 million for the six month period ended September 30, 2025 as compared to approximately $2.8 million for the six month period ended September 30, 2024, a decrease of approximately $0.3 million or 10.3%. S,G&A, as a percentage of net revenues, was approximately 87.0% for the six month period ended September 30, 2025 as compared to approximately 56.8% for the six month period ended September 30, 2024. The decrease in S,G&A for the six month period ended September 30, 2025 as compared to the six month period ended September 30, 2024 was primarily driven by a decrease in compensation costs of approximately $102,000, a decrease in legal fees of approximately $102,000 and a decrease in travel and entertainment costs of approximately $38,000. Compensation costs for the six month period ended September 30, 2025 were approximately $1,415,000 as compared to approximately $1,517,000 for the six month period ended September 30, 2024. Legal fees for the six month period ended September 30, 2025 were approximately $136,000 as compared to approximately $238,000 for the six month period ended September 30, 2024. Travel and entertainment costs for the six month period ended September 30, 2025 were approximately $27,000 as compared to approximately $65,000 for the six month period ended September 30, 2024. Interest income, net — Interest income, net, was approximately $153,000 for the three month period ended September 30, 2025 as compared to approximately $236,000 for the three month period ended September 30, 2024, a decrease of approximately $83,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments. Interest income, net, was approximately $322,000 for the six month period ended September 30, 2025 as compared to approximately $499,000 for the six month period ended September 30, 2024, a decrease of approximately $177,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments. Provision for income taxes — For both three month periods ended September 30, 2025 and September 30, 2024, the Company recorded income tax expense of nil. For the six month period ended September 30, 2025, the Company recorded income tax expense of nil as compared to approximately $3,000 for the six month period ended September 30, 2024. The Company under the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” incurred non-income based state taxes of approximately $9,000 for each of the six month periods ended September 30, 2025 and September 30, 2024, which are now reported as S,G&A. See “Note 5 – Income Taxes”. Although the Company generated a net loss during the three and six months ended September 30, 2025, it is unable to realize an income tax benefit until the Company can demonstrate the ability to generate net income on a sustained basis. Therefore, the Company is obligated to record a 100% valuation allowance against the deferred tax assets. Net loss — As a result of the foregoing factors, the Company realized a net loss of approximately $1,043,000 for the three month period ended September 30, 2025 as compared to a net loss of approximately $881,000 for the three month period ended September 30, 2024. As a result of the foregoing factors, the Company realized a net loss of approximately $2,183,000 for the six month period ended September 30, 2025 as compared to a net loss of approximately $1,843,000 for the six month period ended September 30, 2024. 18 Table of Contents Liquidity and Capital Resources As of September 30, 2025, the Company had cash and cash equivalents of approximately $0.9 million as compared to approximately $1.2 million at March 31, 2025. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of approximately $0.7 million as of September 30, 2025 compared to approximately $0.9 million of such deposits as of March 31, 2025. Working capital decreased to approximately $18.9 million at September 30, 2025 as compared to approximately $21.1 million at March 31, 2025. The decrease in cash and cash equivalents of approximately $0.3 million was due to the net loss generated during the period of approximately $2.2 million, the decrease in income tax payable of approximately $0.7 million, an increase in prepaid expenses and other current assets of approximately $0.1 million and an increase in inventory of approximately $0.1 million, partially offset by a decrease in short term deposits of approximately $2.3 million, a decrease in accounts receivable of approximately $0.3 million and an increase in accounts payable and current liabilities of approximately $0.2 million. Cash Flows Net cash used by operating activities was approximately $2.6 million for the six month period ended September 30, 2025, resulting from the loss generated during the period of approximately $2.2 million, a decrease in income tax payable of approximately $0.7 million, an increase in prepaid expenses and other current assets of approximately $0.1 million and an increase in inventory of approximately $0.1 million, partially offset a decrease in accounts receivable of approximately $0.3 million and an increase in accounts payable and other current liabilities of approximately $0.2 million. Net cash provided by investing activ ities was approximately $2.3 million for t he six month period ended September 30, 2025 due to redemptions of short-term investments. Net cash used by financing ac tivities was approximately $1,000 for the six month period ended September 30, 2025 . Sources and Uses of Funds The Company’s principal existing sources of cash are generated from operations and its existing short-term deposits and investments. The Company believes that its existing cash balance and sources of cash will be sufficient to support existing operations over the next 12 months. Off-Balance Sheet Arrangements As of September 30, 2025, the Company did not have any off-balance sheet arrangements as defined under the rules of the SEC. 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 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. 19 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.