What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-06-26 compared with 2025-06-27 · 52 added, 57 removed, 143 unchanged (43% of the section changed)

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Licensing revenue

Royalty income

Cost of sales

1 unchanged sentence

Operating loss

Settlement of litigation

Interest income, net

(Loss) income before income taxes

(Loss) before income taxes

Provision for income taxes

Net (loss) income

Results of Operations — Fiscal 2026 compared with Fiscal 2025

Net product sales — Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name.

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

Net product sales for fiscal 2026 were $5.9 million as compared to $10.4 million for fiscal 2025 , a decrease of $4.5 million, or 43.3%.

In fiscal 2026 , the Company’s sales were highly concentrated among three customers - Amazon, Fred Meyer and Walmart - representing in the aggregate approximately 67% of the Company’s total gross product sales.

In fiscal 2025 , the Company’s sales were highly concentrated among three customers - Amazon, Walmart and Big Lots - representing in the aggregate approximately 81% 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.

The decrease in net product sales during fiscal 2026 compared to fiscal 2025 was primarily driven by a discontinued clock radio at Walmart.

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

In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approximately $38,000 and $20,000 for fiscal 2025 and fiscal 2024, respectively.

In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approximately nil and $38,000 for fiscal 2026 and fiscal 2025 , respectively.

The major elements which contributed to the overall increase in net product sales were as follows:

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 $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.

Houseware product net sales were $4.4 million in fiscal 2026 compared to $5.6 million in fiscal 2025 , a decrease of $1.2 million, or 21.6%, principally driven by decreased sales of microwave ovens.

Audio product net sales were $1.6 million in fiscal 2026 compared to $4.9 million in fiscal 2025 , a decrease of $3.3 million, or 68.3%, primarily resulting from 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, Canada and Mexico.

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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 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.

Licensing revenue — Licensing revenue in fiscal 2026 was approxim ately $386,000 as compared to approximately $336,000 in fiscal 2025 , an increase of $50,000, or 14.9%.

The increase was primarily due to the increase in guaranteed minimum royalties from the Company's licensees.

Net revenues —T he Company’s net revenues were approximately $6.3 million for fiscal 2026 as compared to $10.8 million for fiscal 2025 , a decrease of $4.5 million, or 41.5%, which was driven primarily by a decrease in audio and houseware product sales.

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 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.

In absolute terms, cost of sales decreased approximately $3.7 million, or 37.1%, to $6.2 million in fiscal 2026 as compared to $9.9 million in fiscal 2025 .

The decrease in absolute terms for fiscal 2026 as compared to fiscal 2025 was primarily related to the decrease in net product sales and by lower year-over-year gross cost of sales as a percentage of gross sales.

The decrease in gross cost of sales as a percentage of gross sales for fiscal 2026 as compared to fiscal 2025 was primarily related to the change in the product mix of audio products compared to houseware products.

Selling, general and administrative expenses ( “ SG&A ” ) — SG&A, as a percentage of net revenues, was 78.7% in fiscal 2026 as compared to 60.4% in fiscal 2025 .

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 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.

In September 2023, the remaining balance of $3.1 million was taken to income after a judgement affirmation by the U.S.

Court of Appeals for the Third Circuit.

See "Settlement of litigation" below and "Note 11 - Legal Proceedings" in the Notes to the Consolidated Financial Statements.

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

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.

Court of Appeals for the Third Circuit, the Company recorded income of $3.1 million, which was the remaining balance of the advanced deposits as of September 30, 2023.

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

In absolute terms, fiscal 2026 SG&A was approximately $5.0 million and fiscal 2025 SG&A was approximately $6.5 million, a decrease of $1.5 million, or 23.8%.

The decrease in SG&A was primarily due to the reduction in bad debt expense and compensation costs.

In fiscal 2026 , the Company recorded bad debt recoveries of approximately $161,000 as compared to bad debt expense of approximately $1,100,000 in fiscal 2025 .

Compensation costs in fiscal 2026 were approximately $2,717,000 as compared to approximately $3,074,000 in fiscal 2025 .

Legal fees were approximately $380,000 in fiscal 2026 as compared to approximately $312,000 in fiscal 2025 .

Advertising costs were approximately $234,000 in fiscal 2026 as compared to approximately $165,000 in fiscal 2025 .

Interest income, net — Interest income, net, was approximately $570,000 in fiscal 2026 as compared to approximately $887,000 in fiscal 2025 , resulting from reduced amounts deposited and a decrease in interest rates earned on the Company’s term deposits during fiscal 2026 .

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 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.

Provision for income tax expense — The Company recorded no income tax expense during fiscal 2026 and recorded its non-income based state taxes of approximately $11,000 to SG&A according to Accounting Standards Update ("ASU") 2019-12.

In fiscal 2025 , the Company recorded approximately $3,000 of income tax expense and recorded its non-income based state taxes of approximately $8,000 to SG&A according to ASU 2019-12.

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

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

Net (loss) — As a result of the foregoing factors, the Company recorded a net loss of approximately $4,300,000 for fiscal 2026 as compared to a net loss of approximately $4,731,000 for fiscal 2025 .

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.

As of March 31, 2026, the Com pany had cash and cash equivalents of approximately $9.2 million as compared to approximately $1.2 million at March 31, 2025 .

Working capital decreased to $16.8 million at March 31, 2026 as compared to $21.1 million at March 31, 2025 .

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.

The increase in cash and cash equivalents of approximately $8.0 million is detailed further in “Cash Flows” below.

Net cash used by operating activities was approximately $3.7 million for fiscal 2026 , compared to approximately $3.6 million for fiscal 2025 , resulting from the $4.3 million loss generated during the period, a decrease of approximately $1.1 million in non-cash reserve charges and a decrease of approximately $0.7 million in income taxes payable, partially offset by a decrease of approximately $1.3 million in gross accounts receivable, a decrease of approximately $0.8 million in inventory and an increase of approximately $0.3 million in accounts payable and other current liabilities.

Net cash provided by investing activities was approximately $11.7 million for fiscal 2026 , as compared to net cash used in investing activities of approximately $15.1 million for fiscal 2025 , due to proceeds from investments of approximately $20.8 million, partially offset from purchases of investments of approximately $9.1 million.

Net cash used by financing activities was approximately $1,000 for fiscal 2026 compared to net cash provided by of approximately $6,000 for fiscal 2025 due to a reduction in the Company's finance lease liabilities.

Credit Arrangements

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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 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.

In fiscal 2026, approxi mately 13% of the Company’s product sales were imported directly to the Company’s customers.

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

As of March 31, 2026, there were no capital expenditure or other commitments other than the normal purchase orders used to secure product.

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Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue.

The Company adopted ASC topic 606 effective April 1, 2018.

The Company adopted ASC topic 606, "Revenue from Contracts with Customers" ("ASC 606") effective April 1, 2018.

Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized.

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Sales Allowance and Marketing Support Accruals.

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

Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items, because that percentage of shipped revenue fails to meet the collectability criteria within ASC topic 606.

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.

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.

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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.

Recently Adopted Accounting Pronouncements

Accounting Standards Update 2025-05 Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets

In July 2025, the Financial Accounting Standards Board ("FASB") issued ASU 2025-05, which provides (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.

The practical expedient allows an entity to assume that, when estimating expected credit losses, current conditions as of the balance sheet date remain unchanged for the remaining life of the asset.

The accounting policy election permits nonpublic entities that elect the practical expedient to also consider collection activity occurring after the balance sheet date when estimating expected credit losses.

The standard is effective for fiscal years beginning after December 15, 2025, and for interim periods within those annual reporting periods.

Early adoption is permitted.

The Company has adopted ASU 2025-05 for the three and nine month periods ended December 31, 2025.

The adoption did not have a material impact on its financial condition, results of operations or cash flows.

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 adopted ASU 2023-09 on a prospective basis effective March 31, 2026.

Accordingly, the enhanced income tax disclosures are presented beginning in fiscal 2026 and prior disclosures have not been recast.

The adoption of this guidance did not have an impact on the Company's consolidated results of operations, financial condition or cash flows, as the amendments relate solely to disclosure requirements.

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):

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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