EMERSON RADIO CORP

Emerson Radio Corp. designs, sources, imports and markets a variety of houseware and consumer electronic products, and licenses its trademarks to others on a worldwide basis for a variety of products. The Company's core business consists of selling, distributing, and licensing various low and moderately priced houseware and consumer electronic products in various categories, and all of its marketing and sales efforts are currently concentrated in the United States. The Company's current product categories include houseware products such as microwave ovens, compact refrigerators, toaster ovens, heaters and fans, and audio products such as clock radios, Bluetooth speakers, karaoke machines, as well as televisions, security products, massagers, and wireless charging. The Company believes its competitive advantages include recognition of the Emerson brand, its distribution base and established customer relations, its sourcing expertise and established vendor relations, an infrastructure with personnel experienced in servicing and providing logistical support to the domestic mass merchant distribution channel, and its extensive experience in establishing license and distribution agreements on a global basis. The Company's products are manufactured by original equipment manufacturers in accordance with the Company's specifications, and during fiscal 2026 and 2025, 100% of the Company's product purchases consisted of finished goods from foreign manufacturers located in the People's Republic of China.

The Company primarily competes in the low-to-medium-priced sector of the housewares and consumer electronics market, and management estimates that the Company has several dozen competitors that are manufacturers and/or distributors, many of which are much larger and have greater financial resources than the Company. The Company competes primarily on the basis of brand recognition, reliability, quality, price, design, consumer acceptance of the Company's products, and the quality of service and support provided to retailers and their customers. The Company also competes at the retail level for shelf space and promotional displays. The Company's principal trademarks include Emerson, Emerson Research, H.H. Scott, iDEA, IDIVA, Ölevia, Scott, and SmartSet, and the Company considers its trademarks, and in particular the Emerson trademark, to be of material importance to its business.

The Company generates revenue through two primary streams: net product sales from the sale of houseware and audio products bearing the Emerson brand name, and licensing revenue from licensing its trademarks to third parties. The Company's product sales are made through a Domestic Program, where title passes at the time of shipment from U.S. warehoused inventory, and a Direct Import Program, where title passes in the country of origin when the product is shipped by the Company's subsidiary in China. The Company also sells products through third party online marketplaces and its own website. Licensing activities have historically had a positive impact on operating results by generating income with minimal incremental costs and without any working capital requirements. The Company does not have long-term contracts with any of its customers, but rather receives orders on an ongoing basis.

The Company's product categories consist primarily of houseware products, including microwave ovens, compact refrigerators, toaster ovens, heaters and fans, and audio products, including clock radios, Bluetooth speakers, karaoke machines, as well as televisions, security products, massagers, and wireless charging. During fiscal 2026, microwave ovens generated approximately 69% of the Company's gross product sales, and audio products generated approximately 25% of the Company's gross product sales. During fiscal 2025, microwave ovens generated approximately 51% of the Company's gross product sales, and audio products generated approximately 47% of the Company's gross product sales. Net product sales for fiscal 2026 were $5.9 million compared to $10.4 million for fiscal 2025, a decrease of $4.5 million, or 43.3%. 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.

Licensing revenue in fiscal 2026 was approximately $386,000 as compared to approximately $336,000 in fiscal 2025, an increase of $50,000, or 14.9%, primarily due to the increase in guaranteed minimum royalties from the Company's licensees. The Company is currently party to two license agreements with third party licensees which allows the licensee to manufacture and/or sell various products bearing the Company's trademarks into defined geographic areas. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensing Services Pte Limited as an agent to assist in identifying and procuring additional licensing opportunities.

During fiscal 2026, Amazon.com Inc. accounted for approximately 42% and Fred Meyer Inc. accounted for approximately 13% of the Company's net revenues. During fiscal 2025, Amazon accounted for approximately 39% and Walmart Inc. accounted for approximately 31% of the Company's net revenues. As a percentage of the Company's total trade accounts receivable, net of specific reserves, Amazon and Fred Meyer accounted for approximately 64% and 20%, respectively, as of March 31, 2026. As a percentage of the Company's total trade accounts receivable, net of specific reserves, Amazon and Variety Wholesalers, Inc. accounted for approximately 59% and 19%, respectively, as of March 31, 2025. Approximately 82% and 52% of the Company's net revenues for fiscal 2026 and fiscal 2025, respectively, were made through third-party sales representative organizations. In fiscal 2026, the Company utilized six sales representative organizations, two of which were responsible for approximately 68% of the Company's net revenues, including one which represented approximately 43% and another which represented approximately 25% of its net revenues. In fiscal 2025, the Company utilized five sales representative organizations, two of which were responsible for approximately 48% of the Company's net revenues, including one which represented approximately 38% and another which represented approximately 10% of its net revenues. During fiscal 2026 approximately 13% of the Company's product sales were sold under the Direct Import Program, and during fiscal 2025, approximately 11% of the Company's product sales were sold under the Direct Import Program. In fiscal 2026 and 2025, the Company relied on its four largest suppliers to supply approximately 96% and 95%, respectively, of its purchases of products. The Company's three largest factory suppliers in fiscal 2026 were Welly (formerly Weili) at 49%, Midea at 33%, and Itoma at 14% of total product purchases. As of June 4, 2026, the Company had 21 employees, composed of eight in the United States and 13 in China.

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. 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%. 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. Selling, general and administrative expenses were approximately $5.0 million in fiscal 2026 and approximately $6.5 million in fiscal 2025, a decrease of $1.5 million, or 23.8%. Interest income, net, was approximately $570,000 in fiscal 2026 as compared to approximately $887,000 in fiscal 2025. As of March 31, 2026, the Company 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 Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S, Canada and Mexico. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. 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 LMCA and GLSL as an agent to assist in identifying and procuring potential licensees.

The Company expects sales through online marketplaces to continue to be a growth initiative for its business. The Company's website serves as an additional sales channel for products, and provides search capability, detailed product information, online merchant availability, demo videos and downloadable product specification sheets. The Company intends to continue leveraging its core competencies to offer a variety of current and new houseware and consumer electronic products to customers, and to continue entering into licenses for the use of its trade names and trademarks by third parties.

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. If no mitigation steps are taken, or the mitigation is 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. 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. In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures.

The Company's ability to meet customers' demands, process and fulfill orders, and manage inventory depends on the efficient and uninterrupted operation and timely and uninterrupted performance of its suppliers and shipment of its products. The Company's products are manufactured by original equipment manufacturers in accordance with the Company's specifications, and during fiscal 2026 and 2025, 100% of the Company's product purchases consisted of finished goods from foreign manufacturers located in the People's Republic of China. The Company relies on a third-party logistics provider for the storage and distribution of its products in the United States, and its contract with such provider is terminable upon written notice by either party for convenience without cause. The Company has an integrated system to coordinate the purchasing, sales and distribution aspects of its operations, and monitors its inventory levels and goods in transit through the use of an electronic inventory system.

The Company does not maintain any credit facilities (other than, from time to time, certain letters of credit) in connection with the operation of its business. The Company has relied on, and continues to rely on, its cash on hand and cash generated by operations to manage its business. The Company may occasionally utilize the services of one of its banks to issue secured letters of credit on behalf of the Company, as needed, on a 100% cash collateralized basis. At March 31, 2026 and March 31, 2025, the Company had no letters of credit outstanding. The Company has not paid cash dividends on its common stock since an extraordinary dividend paid on September 30, 2014, and does not currently plan to declare dividends on its common stock in the foreseeable future.

The Company's net revenue and operating results may vary significantly from year-to-year and quarter-to-quarter as well as in comparison to the corresponding quarter of the preceding year due to factors including unanticipated changes in market and economic conditions, periods of uncertain economic conditions such as inflation, higher interest rates, recessions or economic slowdowns, the discretionary nature of consumers' demands and spending patterns, variations in the sales of the Company's products to its significant customers, variations in manufacturing and supplier relationships, and competition including competitive price pressures. The Company's dependency on its overseas suppliers could exacerbate risks, and any tariffs on the categories of products the Company imports to the United States could negatively affect the demand for such products, increase the cost of components, delay production or affect the Company's ability to compete against competitors who do not manufacture in China or otherwise are not subject to such tariffs.

The Company faces significant risks from the concentration of its product sales among a limited number of retailers, and the trend toward private label brands could materially reduce the Company's revenues and profitability. The Company's largest customers, including Amazon, Fred Meyer and Walmart, use their own private label brands that compete directly with some of the Company's products. The houseware and consumer electronics industry has undergone substantial consolidation, and further consolidation is likely, which could reduce the Company's ability to successfully secure product placements at key customers and limit its ability to sustain a cost competitive position in the industry. The Company also continues to experience increased transportation costs due to global supply chain challenges, including the cost of ocean freight from China, and shipping rates and surcharges are volatile and subject to market fluctuations.

The Company is highly dependent on a small number of key customers, with Amazon and Fred Meyer accounting for approximately 42% and 13% of net revenues in fiscal 2026, respectively, and Amazon and Walmart accounting for approximately 39% and 31% in fiscal 2025, respectively, and the loss or significant reduction in business with any of these customers would materially and adversely affect revenues and earnings. The Company derives a substantial portion of product revenues from a limited number of products, with microwave ovens generating approximately 69% and audio products generating approximately 25% of gross product sales in fiscal 2026, and a significant decline in pricing or market acceptance of these product types would have a material adverse effect. The Company relies on a limited number of suppliers for its products, with its four largest suppliers accounting for approximately 96% of purchases in fiscal 2026, and all suppliers are based in China, exposing the Company to risks from tariffs and trade restrictions, including cumulative bilateral reciprocal tariffs of 10% agreed between the United States and China in May and October 2025, which could increase costs and reduce margins. The Company's third-party sales representative organizations were responsible for approximately 82% of net revenues in fiscal 2026, with two organizations representing approximately 68% of net revenues, and the loss or reduction of these relationships could significantly decrease revenues. Nimble Holdings Company Limited, through an indirect subsidiary, is the beneficial owner of approximately 72.4% of the Company's outstanding common stock as of March 31, 2026, which substantially reduces the influence of other stockholders and presents potential conflicts of interest.

Management's discussion emphasizes the Company's focus on expanding existing distribution channels, developing and promoting new products with retailers in the U.S., Canada and Mexico, and continuing to invest in products and marketing activities to expand sales through internet and ecommerce channels. Management states that 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. Management also highlights the Company's continuing efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. Management notes that the Company expects that U.S. tariffs on categories of products that the Company imports from China, and China's retaliatory tariffs, as well as modifications to international trade policy, will continue to affect its product costs going forward, and that if no mitigation steps are taken, or the mitigation is unsuccessful, the combination of tariffs will result in significantly increased annualized costs to the Company. Management also states that in light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures, but that the environment remains uncertain and demand for the Company's products remains competitive and requires actions to continue carefully managing inventory.