EMERSON RADIO CORP 10-Q

Item 1. Financial Statements. EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended September 30, Six Months Ended September 30, 2021 2020 2021 2020 Net revenues: Net product sales $ 1,794 $ 2,211 $ 3,781 $ 3,445 Licensing revenue 65 60 130 120 Net revenues 1,859 2,271 3,911 3,565 Costs and expenses: Cost of sales 1,351 1,747 2,960 2,765 Selling, general and administrative expenses 1,363 1,564 2,727 3,041 2,714 3,311 5,687 5,806 Operating loss ( 855 ) ( 1,040 ) ( 1,776 ) ( 2,241 ) Other income: Interest income, net 16 28 33 110 Income from governmental assistance programs 207 55 207 55 Loss before income taxes ( 632 ) ( 957 ) ( 1,536 ) ( 2,076 ) Provision (benefit) for income tax expense — ( 1 ) 11 5 Net loss ( 632 ) ( 956 ) ( 1,547 ) ( 2,081 ) Basic loss per share $ ( 0.03 ) $ ( 0.05 ) $ ( 0.07 ) $ ( 0.10 ) Diluted loss per share $ ( 0.03 ) $ ( 0.05 ) $ ( 0.07 ) $ ( 0.10 ) Weighted average shares outstanding Basic 21,043 21,043 21,043 21,043 Diluted 21,043 21,043 21,043 21,043 The accompanying notes are an integral part of the consolidated financial statements. 3 EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands except share data) September 30, 2021 March 31, 2021 ASSETS Current Assets: Cash and cash equivalents $ 26,025 $ 5,245 Short term investments — 25,045 Accounts receivable, net 1,485 691 Inventory 2,899 1,961 Prepaid purchases 453 361 Prepaid expenses and other current assets 566 289 Total Current Assets 31,428 33,592 Non-Current Assets: Right-of-use asset-operating leases 506 213 Right-of-use asset-finance leases 3 3 Other assets 94 94 Total Non-Current Assets 603 310 Total Assets $ 32,031 $ 33,902 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Accounts payable and other current liabilities 734 788 Paycheck Protection Program loan — 204 Due to affiliate 1 1 Short-term operating lease liability 220 152 Short-term finance lease liability 1 1 Income tax payable, current portion 195 195 Deferred revenue 65 195 Total Current Liabilities 1,216 1,536 Non-Current Liabilities: Long-term operating lease liability 302 82 Long-term finance lease liability 2 3 Income tax payable 1,613 1,836 Total Non-Current Liabilities 1,917 1,921 Total Liabilities $ 3,133 $ 3,457 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, 2021 and March 31, 2021, respectively; 21,042,652 shares outstanding at September 30, 2021 and March 31, 2021, respectively 529 529 Additional paid-in capital 79,792 79,792 Accumulated deficit ( 21,532 ) ( 19,985 ) Treasury stock, at cost ( 31,923,145 shares at September 30, 2021 and March 31, 2021, respectively) ( 33,201 ) ( 33,201 ) Total Shareholders’ Equity 28,898 30,445 Total Liabilities and Shareholders’ Equity $ 32,031 $ 33,902 The accompanying notes are an integral part of the consolidated financial statements. 4 EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended September 30, 2021 2020 (In thousands) Cash Flows from Operating Activities: Net (loss) $ ( 1,547 ) $ ( 2,081 ) Adjustments to reconcile net loss to net cash (used) by operating activities: Loan forgiveness from Paycheck Protection Program ( 207 ) — Amortization of right-of-use assets 113 113 Depreciation and amortization — 1 Asset allowances and reserves 71 10 Changes in assets and liabilities: Accounts receivable ( 865 ) ( 385 ) Inventory ( 938 ) ( 159 ) Prepaid purchases ( 92 ) ( 251 ) Prepaid expenses and other current assets ( 277 ) ( 195 ) Accounts payable and other current liabilities ( 54 ) 313 Right of use assets-operating ( 403 ) — Short term lease liabilities 68 ( 13 ) Long term lease liabilities 219 ( 106 ) Income taxes payable ( 223 ) ( 197 ) Deferred revenue ( 130 ) ( 120 ) Net cash (used) by operating activities ( 4,265 ) ( 3,070 ) Cash Flows From Investing Activities: Net proceeds (purchases) of short-term investments 25,045 3,101 Net cash provided by investing activities 25,045 3,101 Cash Flows from Financing Activities: Proceeds from Paycheck Protection Program loan — 204 Net cash provided by financing activities — 204 Net increase in cash and cash equivalents 20,780 235 Cash and cash equivalents at beginning of the year 5,245 6,276 Cash and cash equivalents at end of the year $ 26,025 $ 6,511 Supplemental disclosures: Cash paid for: Interest $ 4 $ 1 Income taxes $ 222 $ 197 The accompanying notes are an integral part of the consolidated financial statements. 5 EMERSON RADIO CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (In thousands) Common Stock Additional Total Preferred Number Par Paid-In Accumulated Treasury Shareholders’ Stock of Shares Value Capital Deficit Stock Equity Balance — March 31, 2021 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 19,985 ) $ ( 33,201 ) $ 30,445 Net loss — — — — ( 1,547 ) — ( 1,547 ) Balance — September 30, 2021 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 21,532 ) $ ( 33,201 ) $ 28,898 Common Stock Additional Total Preferred Number Par Paid-In Accumulated Treasury Shareholders’ Stock of Shares Value Capital Deficit Stock Equity Balance — March 31, 2020 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 16,009 ) $ ( 33,201 ) $ 34,421 Net loss — — — — ( 2,081 ) — ( 2,081 ) Balance — September 30, 2020 $ 3,310 52,965,797 $ 529 $ 79,792 $ ( 18,090 ) $ ( 33,201 ) $ 32,340 The accompanying notes are an integral part of the consolidated financial statements. 6 EMERSON RADIO CORP. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 — BACKGROUND AND BASIS OF PRESENTATION The 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 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 September 30, 2021 and the results of operations for the three and six month periods ended September 30, 2021 and September 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. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of the unaudited interim 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 interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly do not include all of the disclosures normally made in the Company’s annual consolidated financial statements. 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 six month periods ended September 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. Recently Adopted Accounting Pronouncements Accounting Standards Update 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” (Issued December 2019) In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. 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 adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures. 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. Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses” (Issued June 2016) In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for fiscal years and interim period beginning after December 15, 2022. Early adoption is permitted. The Company does not expect these amendments to have a material impact on its financial statements. 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. Under the Direct Import Program, title passes in the country of origin. Under the Domestic Program, title passes primarily at the time of shipment. Estimates for future expected returns are based upon historical return rates and netted against revenues. 7 Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue is recorded net of customer discounts, promotional allowances, volume rebates and similar charges. When the Company offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue. Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves may be required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve. 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 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, 2021 2020 2021 2020 Numerator: Net loss $ ( 632 ) $ ( 956 ) $ ( 1,547 ) $ ( 2,081 ) Denominator: Denominator for basic and diluted loss per share — weighted average shares 21,043 21,043 21,043 21,043 Net loss per share: Basic and diluted loss per share $ ( 0.03 ) $ ( 0.05 ) $ ( 0.07 ) $ ( 0.10 ) NOTE 3 — SHAREHOLDERS’ EQUITY Outstanding capital stock at September 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 September 30, 2021, 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, 2021 and March 31, 2021, inventories consisted of the following (in thousands): September 30, 2021 March 31, 2021 Finished goods $ 2,899 $ 1,961 8 NOTE 5 — INCOME TAXES At September 30, 2021, the Company had $ 12.5 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, 2021, the Company had approximately $ 16.1 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 $ 34,000 for the three months ended September 30, 2021 as compared to a loss before taxes of $ 22,000 for the three months ended September 30, 2020. The income of foreign subsidiaries before taxes was $ 52,000 for the six months ended September 30, 2021 as compared to income before taxes of nil for the six months ended September 30, 2020. The Company analyzed the future reasonability of recognizing its deferred tax assets at September 30, 2021. As a result, the Company concluded that a 100 % valuation allowance of approximately $ 3,821,000 would be recorded against the assets . During the three months ended September 30, 2021 and September 30, 2020, the Company recorded income tax expense of approximately nil and an income tax benefit of $ 1,000 , respectively, primarily resulting from state income taxes. During the six months ended September 30, 2021 and September 30, 2020, the Company recorded income tax expense of approximately $ 11,000 and $ 5,300 respectively, primarily resulting from state income taxes. The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of September 30, 2021, the Company’s open tax years for examination for U.S. federal tax are 2016 - 2021 , and for U.S. states’ tax are 2015 - 2021 . 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, 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. As of September 30, 2021, the Company had a federal tax liability of approximately $ 1,808,000 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 “Tax Act”) . As of September 30, 2021, the Company’s short term portion was approximately $ 195,000 and the long term portion was approximately $ 1,613,000 . As of 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 Act . As of March 31, 2021 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 equal to 8 % , the sixth is equal to 15 %, the seventh is equal to 20 % and the final installment is equal to 25 % of the liability. As of September 30, 2021, the Company has made four of the eight installments. 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 Chairman of the Board. Set forth below is a summary of such transactions. Controlling Shareholder S&T International Distribution Limited (“S&T”), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd., which is a wholly owned subsidiary of Nimble, collectively have, based on a Schedule 13D/A filed with the SEC on February 15, 2019, the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 72.4 %, of the Company’s outstanding common stock as of September 30, 2021. Accordingly, the Company is a “controlled company” as defined in Section 801(a) of the NYSE American Company Guide. 9 Related Party Transactions Charges of rental and utility fees on office space in Hong Kong During the three and six months ended September 30, 2021, the Company was billed approximately $ 43,000 and $ 86,000 , 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 September 30, 2021 the Company owed approximately $ 800 to VACL related to these charges. During the three and six months ended September 30, 2021, the Company was billed approximately $ 400 and $ 1,400 , respectively, 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 September 30, 2021 the Company owed nil to VSSL related to these charges. NOTE 7 — SHORT TERM INVESTMENTS At September 30, 2021 and March 31, 2021, the Company held short term investments in deposits totaling nil and $ 25.0 million, respectively. The Company held $ 24.1 million in deposits which were classified as cash equivalents as of September 30, 2021 and $ 1.0 million of such deposits as of March 31, 2021. NOTE 8 — CONCENTRATION RISK Customer Concentration For the three months ended September 30, 2021, the Company’s three largest customers accounted for approximately 90 % of the Company’s net revenues, of which Amazon accounted for 39 %, Walmart accounted for 32 % and Fred Meyer accounted for 19 %. For the six months ended September 30, 2021, the Company’s three largest customers accounted for approximately 86 % of the Company’s net revenues, of which Walmart accounted for 38 %, Amazon accounted for 27 % and Fred Meyer accounted for 21 %. For the three months ended September 30, 2020, the Company’s three largest customers accounted for approximately 77 % of the Company’s net revenues, of which Walmart accounted for 32 %, Fred Meyer accounted for 23 % and Amazon accounted for 22 %. For the six months ended September 30, 2020, the Company’s three largest customers accounted for approximately 76 % of the Company’s net revenues, of which Walmart accounted for 37 %, Amazon accounted for 22 % and Fred Meyer accounted for 17 %. 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 six months ended September 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 26 % and 33 %, respectively, of the Company’s gross product sales. Audio products generated approximately 73 % and 67 %, respectively, of the Company’s gross product sales. For the three and six months ended September 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 46 % and 43 %, respectively, of the Company’s gross product sales. Audio products generated approximately 52 % and 54 %, respectively, 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 43 % and 27 % as of September 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. 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. 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. 10 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 September 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 $ 25.8 million and approximately $ 5.0 million at September 30, 2021 and March 31, 2021, respectively. Supplier Concentration During each of the three and six months ended September 30, 2021, the Company procured 100 % of its products for resale from its two largest factory suppliers, of which 84 % and 83 %, respectively, was supplied by its largest supplier. During each of the three and six months ended September 30, 2020, the Company procured 100 % of its products for resale from its two largest factory suppliers, of which 53 % and 58 %, respectively, was supplied by its largest supplier. 11 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 sixteen 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 September 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 September 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 September 30, 2021, the Company’s current operating and finance lease liabilities were $ 220,000 and $ 1,000 , respectively and its non-current operating and finance lease liabilities were $ 302,000 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 September 30, 2021 was $ 506,000 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 September 30, Six Months Ended September 30, 2021 2020 2021 2020 (in thousands) (in thousands) Lease cost Operating lease cost $ 63 $ 64 $ 127 $ 127 Finance lease cost — — — — Amortization of right-of-use assets — — — — Interest on lease liabilities — — — — Variable lease costs — — — — Total lease cost 63 64 127 127 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 64 67 131 133 Operating cash flows from finance leases — — — — Financing cash flows from finance leases — — — — Right-of-use assets obtained in exchange for lease obligations: Operating leases 403 — 403 — Finance leases — — — — Information relating to the lease term and discount rate are as follows: Weighted average remaining lease term (in months) As of September 30, 2021 As of September 30, 2020 Operating leases 29.9 21.1 Finance leases 32.2 44.2 Weighted average discount rate Operating leases 7.50 % 7.50 % Finance leases 7.50 % 7.50 % 12 As of September 30, 2021 the maturities of lease liabilities were as follows: (in thousands) Operating Leases Finance Leases 2022 $ 125 $ 1 2023 234 1 2024 149 1 2025 63 1 Thereafter — — Total lease payments $ 571 $ 4 Less: Imputed interest ( 49 ) ( 1 ) Total $ 522 $ 3 NOTE 10 — PAYCHECK PROTECTION PROGRAM AND EMPLOYMENT SUPPORT SCHEME On July 5, 2021, the Company’s Paycheck Protection Program (”PPP”) loan of approximately $ 204,400 plus accrued interest of $ 2,400 was forgiven by the Small Business Administration (“SBA”). The Company recorded the impact of its PPP loan forgiveness as other income during the quarter ended September 30, 2021. During the quarter ended September 30, 2020, the Company’s Hong Kong subsidiary applied for and was granted approximately $ 55,000 under a governmental program called the Employment Support Scheme (“ESS”). The income realized from the PPP loan forgiveness and the amount granted under the ESS program are presented as Other Income under the description called “Income from governmental assistance programs” in the Consolidated Statements of Operations. 13