What changed in this filing

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Item 1. Financial Statements

2021-08-16 compared with 2021-02-16 · 73 added, 87 removed, 222 unchanged (42% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Net revenues:

7 unchanged sentences

Interest income, net

Income from governmental assistance programs

Loss before income taxes

8 unchanged sentences

(In thousands except share data)

December 31, 2020

June 30, 2021

March 31, 2021

7 unchanged sentences

Non-Current Assets:

Property and equipment, net

Right-of-use asset-operating leases

23 unchanged sentences

Common shares — $ 0.01 par value, 75,000,000 shares authorized;

shares issued at December 31, 2020 and March 31, 2020, respectively;

shares outstanding at December 31, 2020 and March 31, 2020, respectively

shares issued at June 30, 2021 and March 31, 2021, respectively;

shares outstanding at June 30, 2021 and March 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Treasury stock, at cost (31,923,145 shares at December 31, 2020

Treasury stock, at cost ( 31,923,145 shares at June 30, 2021

and March 31, 2021, respectively)

6 unchanged sentences

(In thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

(In thousands)

3 unchanged sentences

Depreciation and amortization

Deferred tax assets

Asset allowances and reserves

7 unchanged sentences

Due to affiliate

Income taxes payable

Deferred revenue

1 unchanged sentence

Cash Flows From Investing Activities:

Proceeds from sale of short-term investments

Purchases of short-term investments

Net proceeds (purchases) of short-term investments

Net cash provided by investing activities

2 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the year

9 unchanged sentences

Balance — March 31, 2021

Balance — December 31, 2020

Balance — June 30, 2021

Shareholders’

Balance — March 31, 2020

Balance — December 31, 2019

Balance — June 30, 2020

The accompanying notes are an integral part of the consolidated financial statements.

6 unchanged sentences

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 interim 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 consolidated financial position as of December 31, 2020 and the results of operations for the three and nine month periods ended December 31, 2020 and December 31, 2019.

The unaudited interim 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 consolidated financial position as of June 30, 2021 and the results of operations for the three month period ended June 30, 2021 and June 30, 2020.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included.

4 unchanged sentences

Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended March 31, 2021 (“fiscal 2021”), included in the Company’s annual report on Form 10-K, as amended, for fiscal 2021.

The results of operations for the three and nine month periods ended December 31, 2020 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the full year ending March 31, 2021 (“fiscal 2021”).

The results of operations for the three month period ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the full year ending March 31, 2022 (“fiscal 2022”).

Whenever necessary, reclassifications are made to conform the prior year’s consolidated financial statements to the current year’s presentation.

Revised Financial Statements

Cost of sales includes actual product cost, quality control costs, change in inventory reserves, duty, buying costs, the cost of transportation to the Company’s third party logistics providers’ warehouse from its manufacturers and warehousing costs.

The Company is no longer including an allocation of those selling, general and administrative expenses that are directly related to these activities in Cost of Sales.

The Company reclassified approximately $452,000 for the quarter ended December 31, 2019 and $1,224,000 for the nine months ended December 31, 2019 on its Consolidated Statements of Operations, from Cost of Sales to Selling, General and Administrative expenses to conform to its current presentation.

The reclassifications were made to more accurately present the relationship between the Company’s net product sales and its cost of sales.

The reclassification had no impact on the Company’s previously reported operating losses or net losses, for either the quarter ended or nine months ended December 31, 2019.

Recently Issued 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.

Recently Adopted Accounting Pronouncements

Accounting Standards Update 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” (Issued December 2019)

3 unchanged sentences

This standard is required to take effect in the Company’s first quarter (June 2021) of the Company’s fiscal year ending March 31, 2022.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

The adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses” (Issued June 2016)

3 unchanged sentences

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.

ASU 2016-13 is effective for fiscal years and interim period beginning after December 15, 2022.

Early adoption is permitted.

15 unchanged sentences

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 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.

NOTE 2 — EARNINGS PER SHARE

1 unchanged sentence

Weighted average shares includes the impact of shares held in treasury.

Three Months Ended

Nine Months Ended

Three Months Ended June 30,

Denominator for basic and diluted loss per share —

3 unchanged sentences

NOTE 3 — SHAREHOLDERS’ EQUITY

Outstanding capital stock at December 31, 2020 consisted of common stock and Series A preferred stock.

Outstanding capital stock at June 30, 2021 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 December 31, 2020, the Company had no options, warrants or other potentially dilutive securities outstanding.

At June 30, 2021, the Company had no options, warrants or other potentially dilutive securities outstanding.

NOTE 4 — INVENTORY

1 unchanged sentence

Cost is determined using the first-in, first-out method.

As of December 31, 2020 and March 31, 2020, inventories consisted of the following (in thousands):

December 31, 2020

As of June 30, 2021 and March 31, 2021, inventories consisted of the following (in thousands):

June 30, 2021

March 31, 2021

1 unchanged sentence

NOTE 5 — INCOME TAXES

At December 31, 2020, the Company had $10.6 million of U.S.

At June 30, 2021, the Company had $ 12.2 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 December 31, 2020, the Company had approximately $18.5 million of U.S.

At June 30, 2021, the Company had approximately $ 15.3 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 income of foreign subsidiaries before taxes was $103,000 for the nine months ended December 31, 2020 as compared to income before taxes of $393,000 for the nine months ended December 31, 2019.

The Company analyzed the future reasonability of recognizing its deferred tax assets at December 31, 2020.

income of foreign subsidiaries before taxes was $ 18,000 for the three months ended June 30, 2021 as compared to income before taxes of $ 22,000 for the three months ended June 30, 2020.

The Company analyzed the future reasonability of recognizing its deferred tax assets at June 30, 2021.

As a result, the Company concluded that a 100 % valuation allowance of approximately $ 3,800,000 would be recorded against the assets .

During the three months ended December 31, 2020, the Company recorded income tax expense of approximately $10,000.

During the three months ended December 31, 2019, the Company recorded income tax expense of approximately $4,000, primarily resulting from state income taxes.

During the nine months ended December 31, 2020, the Company recorded income tax expense of $15,000 and for the nine months ended December 31, 2019, the Company recorded income tax expense of $19,000.

During the three months ended June 30, 2021 and June 30, 2020, the Company recorded income tax expense of approximately $ 11,000 and $ 6,300 , respectively, primarily resulting from state income taxes.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions.

As of December 31, 2020, the Company’s open tax years for examination for U.S.

As of June 30, 2021, the Company’s open tax years for examination for U.S.

federal tax are 2016 - 2021 , and for U.S.

2 unchanged sentences

As a result, the Company may be subject to additional tax expense.

As of December 31, 2020 the Company had a federal tax liability of approximately $2,031,000 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 December 31, 2020, the short term portion was approximately $195,000 and the long term portion was approximately $1,836,000.

As of March 31, 2020, the short term portion was approximately $195,000 and the long term portion was approximately $2,033,000.The liability is payable over 8 years.

As of June 30, 2021 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.

At both June 30, 2021 and March 31, 2021, the Company had a federal tax liability of approximately $ 2,031,000 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 .

The Company’s short term portion was approximately $ 195,000 and the long term portion was approximately $ 1,836,000 .

The liability is payable over 8 years .

The first five installments are each 8 % of the liability, the sixth is 15 %, the seventh is 20 % and the final installment is 25 %.

As of December 31, 2020, the Company has made three of the eight installments.

As of June 30, 2021, the Company has made three of the eight installments.

NOTE 6 — RELATED PARTY TRANSACTIONS

3 unchanged sentences

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 December 31, 2020.

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 June 30, 2021.

Accordingly, the Company is a “controlled company” as defined in Section 801(a) of the NYSE American Company Guide.

1 unchanged sentence

Charges of rental and utility fees on office space in Hong Kong

During the three and nine months ended December 31, 2020, the Company was billed approximately $43,000 and $129,000, 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.

As of December 31, 2020 the Company owed nil to VACL related to these charges.

During the three and nine months ended December 31, 2020, the Company was billed approximately $1,400 and $4,000, respectively, for purchases of personal protection equipment from Lafe Strategic Services Ltd (“LSSL”), which is a company related to the Company’s Chairman of the Board.

As of December 31, 2020 the Company owed $1,400 to LSSL related to these charges.

During the three months ended June 30, 2021, the Company was billed approximately $ 43,000 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.

As of June 30, 2021 the Company owed approximately $ 800 to VACL related to these charges.

During the three months ended June 30, 2021, the Company was billed approximately $ 1,000 for purchases of personal protection equipment from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the Board.

Vigers Strategic Services Ltd was formerly known as Lafe Strategic Services Ltd.

As of June 30, 2021 the Company owed $ 1,000 to VSSL related to these charges.

NOTE 7 — SHORT TERM INVESTMENTS

At December 31, 2020 and March 31, 2020, the Company held short term investments totaling nil and $28.1 million, respectively.

The Company held short term investments at the beginning of the quarter totaling $25 million which matured on December 9, 2020.

Upon maturity, the proceeds were re-invested in deposits with terms of 90 days or less which are classified as cash and cash equivalents on the Company’s consolidated balance sheet.

At June 30, 2021 and March 31, 2021, the Company held short term investments in deposits totaling $ 24.1 and $ 25.0 million, respectively.

The Company held $ 1.0 million in deposits which were classified as cash equivalents as of both June 30, 2021 and March 31, 2021.

NOTE 8 — CONCENTRATION RISK

Customer Concentration

For the three months ended December 31, 2020, the Company’s three largest customers accounted for approximately 88% of the Company’s net revenues, of which Walmart accounted for 42%, Amazon accounted for 39% and Fred Meyer accounted for 7%.

For the nine months ended December 31, 2020, the Company’s three largest customers accounted for approximately 81% of the Company’s net revenues, of which Walmart accounted for 39%, Amazon accounted for 29% and Fred Meyer accounted for 13%.

For the three months ended December 31, 2019, the Company’s three largest customers accounted for approximately 88% of the Company’s net revenues, of which Walmart accounted for 45%, Amazon accounted for 30% and Fred Meyer accounted for 13%.

For the nine months ended December 31, 2019, the Company’s three largest customers accounted for approximately 80% of the Company’s net revenues, of which Walmart accounted for 44%, Amazon accounted for 24% and Fred Meyer accounted for 12%.

For the three months ended June 30, 2021, the Company’s three largest customers accounted for approximately 82 % of the Company’s net revenues, of which Walmart accounted for 44 %, Fred Meyer accounted for 24 % and Amazon accounted for 14 %.

For the three months ended June 30, 2020, the Company’s three largest customers accounted for approximately 77 % of the Company’s net revenues, of which Walmart accounted for 46 %, Amazon accounted for 22 % and Kroger accounted for 9 %.

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.

Product Concentration

For the three and nine months ended December 31, 2020, the Company’s gross product sales were comprised of two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 25% and 36%, respectively, of the Company’s gross product sales.

Audio products generated approximately 73% and 62%, respectively, of the Company’s gross product sales.

For the three and nine months ended December 31, 2019, the Company’s gross product sales were comprised of the same two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 28% and 36%, respectively, of the Company’s gross product sales.

Audio products generated approximately 64% and 59%, respectively, of the Company’s gross product sales.

For the three months ended June 30, 2021, the Company’s gross product sales were comprised of two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 39 % of the Company’s gross product sales.

Audio products generated approximately 60 % of the Company’s gross product sales.

For the three months ended June 30, 2020, the Company’s gross product sales were comprised of the same two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 38 % of the Company’s gross product sales.

Audio products generated approximately 58 % of the Company’s gross product sales.

Concentrations of Credit Risk

As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top two customers accounted for 51% and 36% as of December 31, 2020, respectively.

As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top two customers accounted for 73 % and 11 % as of June 30, 2021, respectively.

As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top two customers accounted for 69 % and 28 % as of March 31, 2021, respectively.

1 unchanged sentence

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 and restricted cash balances on deposit in the U.S.

as of June 30, 2021 and March 31, 2021 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 $4.2 million and approximately $5.0 million at June 30, 2021 and March 31, 2021, respectively.

Supplier Concentration

During the three and nine months ended December 31, 2020, the Company procured 95% and 98% of its products for resale from its two largest factory suppliers, of which 57% and 58%, respectively, was supplied by its largest supplier.

During the three and nine months ended December 31, 2019, the Company procured approximately 90% and 86% of its products for resale from its two largest factory suppliers, of which 48% and 52%, respectively, was supplied by its largest supplier.

During the three months ended June 30, 2021, the Company procured 100 % of its products for resale from its two largest factory suppliers, of which 83 % was supplied by its largest supplier.

During the three months ended June 30, 2020, the Company procured 100 % of its products for resale from its two largest factory suppliers, of which 63 % was supplied by its largest supplier.

NOTE 9 — LEASES

1 unchanged sentence

and in Hong Kong as well as a copier in the U.S.

These leases have remaining non-cancellable lease terms of three to five years.

These leases have remaining non-cancellable lease terms of two months to three years .

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 December 31, 2020 to indicate that a reassessment or re-measurement of the Company’s existing leases was required.

There were also no impairment indicators identified during the quarter ended December 31, 2020 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC 360-10.

As of December 31, 2020, the Company’s current operating and finance lease liabilities were $191,000 and $1,000, respectively and its non-current operating and finance lease liabilities were $105,000 and $3,000, respectively.

The Company did not identify any events or conditions during the quarter ended June 30, 2021 to indicate that a reassessment or re-measurement of the Company’s existing leases was required.

There were also no impairment indicators identified during the quarter ended June 30, 2021 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC 360-10.

As of June 30, 2021, the Company’s current operating and finance lease liabilities were $ 113,000 and $ 1,000 , respectively and its non-current operating and finance lease liabilities were $ 57,000 and $ 2,000 , 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 December 31, 2020 was $272,000 and $4,000, respectively.

The net balance of the Company’s operating and finance lease right-of-use assets as of June 30, 2021 was $ 153,000 and $ 3,000 , respectively.

The components of lease costs, which were included in operating expenses in the Company’s condensed consolidated statements of operations, were as follows:

Three Months Ended December 31,

Nine Months Ended December 31,

(in thousands)

Three Months Ended June 30,

(in thousands)

15 unchanged sentences

Weighted average remaining lease term (in months)

As of December 31, 2020

As of December 31, 2019

As of June 30, 2021

As of June 30, 2020

Operating leases

3 unchanged sentences

Finance leases

As of December 31, 2020 the maturities of lease liabilities were as follows:

As of June 30, 2021 the maturities of lease liabilities were as follows:

(in thousands)

3 unchanged sentences

Imputed interest

NOTE 10 — PAYCHECK PROTECTION PROGRAM AND EMPLOYMENT SUPPORT SCHEME

In April and May of 2020, the Company applied for and received aggregate loan proceeds in the amount of approximately $204,000 under the Paycheck Protection Program (”PPP”).

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

Under the CARES Act, loan forgiveness is available as long as the Company used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintained its payroll levels during the eight-week period beginning on the date of the PPP loan approval.

The Company used all of the PPP loan proceeds for qualifying expenses in accordance with terms of the CARES Act and intends to apply for forgiveness of the loan to the extent applicable, although there can be no assurance that such forgiveness will occur.

Any unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months.

As of December 31, 2020, the Company’s PPP loan has accrued approximately $1,350 in unpaid interest.

The Hong Kong government implemented a similar program called the Employment Support Scheme (“ESS”).

It provided grants to companies who retained their employees during the COVID-19 outbreak.

The Company’s Hong Kong subsidiary applied for and was granted approximately $28,000 during the quarter ended December 31, 2020 and $83,000 for the nine months ended December 31, 2020.

The ESS subsidy is presented as other income in the consolidated statements of operations.

NOTE 10 — SUBSEQUENT EVENT-PAYCHECK PROTECTION PROGRAM

On July 5, 2021, the Company’s Paycheck Protection Program (”PPP”) loan of approximately $ 204,000 plus accrued interest of $ 2,400 was forgiven by the Small Business Administration (“SBA”).

The Company will record the impact of its PPP loan forgiveness as other income during the quarter ended September 30, 2021.

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

What changed 10-Q

Item 1. Financial Statements