Emerson Radio Corp: Form 10-Q for the period ended Dec 31, 2025

The following discussion of the Company’s operations and financial condition should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

In the following discussions, most percentages and dollar amounts have been rounded to aid presentation. Accordingly, all amounts are approximations.

Forward-Looking Information

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the "safe harbor" created by those sections.

Forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company’s control, and which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Company’s use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “project,” “predict,” “could,” “intend,” “target,” “potential,” or the negative or plural of those terms and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

• the Company’s ability to generate sufficient revenue to achieve and maintain profitability;
• the Company’s ability to obtain new customers and retain key existing customers, including the Company’s ability to maintain purchase volumes of the Company’s products by its key customers;
• the Company’s ability to obtain new licensees and distribution relationships and maintain relationships with its existing licensees and distributors;
• the Company’s ability to resist price increases from its suppliers or pass through such increases to its customers;
• changes in consumer spending for retail products, such as the Company’s products, and in consumer practices, including sales over the Internet;
• the Company’s ability to maintain effective internal controls or compliance by its personnel with such internal controls;
• the Company’s ability to successfully manage its operating cash flows to fund its operations;
• the Company’s ability to anticipate market trends, enhance existing products or achieve market acceptance of new products;
• the Company’s ability to accurately forecast consumer demand and adequately manage inventory;
• the Company’s dependence on a limited number of suppliers for its components and raw materials;
• the Company’s dependence on third party manufacturers to manufacture and deliver its products;
• increases in shipping costs for the Company’s products or other service issues with the Company’s third-party shippers;
• the Company’s dependence on a third party logistics provider for the storage and distribution of its products in the United States;
• the ability of third party sales representatives to adequately promote, market and sell the Company’s products;
• the Company’s ability to maintain, protect and enhance its intellectual property;
• the effects of competition;
• the Company’s ability to distribute its products in a timely fashion, including the impact of labor disputes, public health threats and social unrest, if any;
• evolving cybersecurity threats to the Company’s information technology systems or those of its customers or suppliers;
• changes in foreign laws and regulations and changes in the political and economic conditions in the foreign countries in which the Company operates;
• changes in accounting policies, rules and practices;
• changes in tax rules and regulations or interpretations;
• changes in U.S. and foreign trade regulations and tariffs, including recent and potential future increases of tariffs on goods imported into the U.S., and uncertainty regarding the same;
• limited access to financing or increased cost of financing;
• the effects of currency fluctuations between the U.S. dollar and Chinese renminbi and increases in costs of production in China; and
• the other factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 2025 and other filings with the SEC.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The reader is cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. Except as required by law, the Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, the Company cannot assure the reader that its expectations, beliefs or projections will result or be achieved or accomplished.

Results of Operations

The following table summarizes certain financial information for the three and nine month periods ended December 31, 2025 and December 31, 2024 (in thousands):

Net product sales — Net product sales for the three month period ended December 31, 2025 were approximately $1.8 million as compared to approximately $3.9 million for the three month period ended December 31, 2024, a decrease of approximately $2.1 million, or 53.6%. The Company’s net product sales during the three month period ended December 31, 2025 were highly concentrated among its three largest customers – Amazon, Bi-Mart and Walmart – comprising in the aggregate approximately 82% of the Company’s total net product sales during the period. The Company’s net product sales during the three month period ended December 31, 2024, were highly concentrated among its three largest customers – Amazon, Walmart and Big Lots – comprising in the aggregate approximately 95% of the Company’s total net product sales during the period.

Net product sales for the nine month period ended December 31, 2025 were approximately $4.5 million as compared to approximately $8.7 million for the nine month period ended December 31, 2024, a decrease of approximately $4.2 million, or 48.0%. The Company’s sales during the nine month period ended December 31, 2025 were highly concentrated among its three largest customers – Amazon, Fred Meyer and Variety – comprising in the aggregate approximately 64% of the Company’s total net product sales during the period. The Company’s sales during the nine month period ended December 31, 2024, were highly concentrated among its three largest customers – Amazon, Walmart and Big Lots – comprising in the aggregate approximately 84% of the Company’s total net product sales during the period.

Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. Net product sales may be periodically impacted by adjustments made to the Company’s sales allowance and marketing support accrual to record unanticipated customer deductions from accounts receivable or to reduce the accrual by any amounts which were accrued in the past but not taken by customers through deductions from accounts receivable within a certain time period. In the aggregate, these adjustments had the effect of increasing net product sales and operating income by approximately $1,000 and approximately $11,000 for the three month periods ended December 31, 2025 and December 31, 2024, respectively, and by nil and approximately $32,000 for the nine month periods ended December 31, 2025 and December 31, 2024, respectively. The major elements which contributed to the overall decrease in net product sales were as follows:

i) Houseware products: Net sales of houseware products decreased approximately $1.0 million, or 46.9%, to approximately $1.1 million for the three month period ended December 31, 2025 as compared to approximately $2.1 million for the three month period ended December 31, 2024, driven by decreased net sales of microwave ovens. Certain of the Company's key customers refuse to accept price increases from recently imposed tariffs, which negatively impacted net sales during the quarter ended December 31, 2025. Net sales of houseware products decreased $ 1.1 million, or 24.3%, to approximately $3.3 million for the nine month period ended December 31, 2025 as compared to approximately $4.4 million for the nine month period ended December 31, 2024, driven by decreased net sales of microwave ovens and compact refrigerators.

ii) Audio products: Net sales of audio products decreased approximately $1.1 million, or 61.7%, to approximately $0.7 million for the three month period ended December 31, 2025 as compared to approximately $1.8 million for the three month period ended December 31, 2024, primarily due to a discontinued clock radio at Walmart. Net sales of audio products decreased approximately $3.1 million, or 72.6%, to approximately $1.1 million for the nine month period ended December 31, 2025 as compared to approximately $4.2 million for the nine month period ended December 31, 2024, primarily due to a discontinued clock radio at Walmart.

Business operations — The Company expects to continue to expand its existing distribution channels and to develop and promote new products with retailers in the U.S and Mexico. The Company is also continuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products on which the Company has historically focused. The Company also is continuing its efforts to identify strategic courses of action related to its licensing activities, including seeking new licensing relationships. The Company has engaged each of Leveraged Marketing Corporation of America and Global Licensing Services Pte Limited as an agent to assist in identifying and procuring potential licensees.

Emerson’s success is dependent on its ability to anticipate and respond to changing consumer demands and trends in a timely manner, as well as expanding into new markets and sourcing new products that are profitable to the Company. Geo-political factors may also affect the Company’s operations and demand for the Company’s products, which are subject to customs requirements and to tariffs and quotas set by governments through mutual agreements and bilateral actions. The Company expects that U.S. tariffs on categories of products that the Company imports from China, and China’s retaliatory tariffs on certain goods imported from the United States, as well as modifications to international trade policy, will continue to affect its product costs going forward. Although the Company is monitoring the trade and political environment and working to mitigate the effects of tariffs with its suppliers as well as its customers through pricing and sourcing strategies, the Company cannot be certain how its customers and competitors will react to the actions taken. If the Company's mitigation efforts are unsuccessful, the impact of tariffs will result in significantly increased annualized costs to the Company as all of the Company’s products are currently manufactured by suppliers in China. In addition, heightened tensions between the United States and China over Hong Kong and any resulting retaliatory policies may affect our operations in Hong Kong. At this time the Company is unable to quantify possible effects on its costs arising from the new tariffs, which are expected to increase the Company’s inventory costs and associated costs of sales as tariffs are incurred, and some costs may be passed through to the Company’s customers as product price increases in the future. However, if the Company is unable to successfully pass through the additional costs or otherwise mitigate the effects of these tariffs, or if the higher prices reduce demand for the Company’s products, it will have a negative effect on the Company’s product sales and gross margins.

In light of the adverse macroeconomic conditions domestically and internationally, the Company has implemented certain cost-reduction actions intended to reduce expenditures. However, the economic environment remains uncertain. Demand for the Company’s products remains competitive and requires the Company to continue carefully managing inventory. Accordingly, our current results and financial condition discussed herein may not be indicative of our future operating results and trends.

For more information on risks associated with the Company’s operations, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025.

Legal Proceedings — On October 10, 2023, the US District Court for the District of Delaware granted final judgment in favor of the Company in its trademark infringement lawsuit against air conditioning and heating products provider Emerson Quiet Kool and wholesaler Home Easy (the “defendants”). Among other things, the court order issues an injunction and directs the US Patent and Trademark Office to cancel the defendants’ existing and proposed "Emerson Quiet Kool" trademarks and prohibits defendants from registering or applying to register, or using the same mark or any other mark or name containing the word "Emerson" going forward. The total judgment awarded to the Company has increased from approximately $6.5 million to approximately $10.4 million, inclusive of disgorgement of wrongful profits, attorney's fees and enhanced damages. The aggregate award to the Company also includes the $4.1 million of advanced deposits previously paid to the Company. The $4.1 million of advanced deposits was reduced by approximately $1 million of incurred legal fees. The remaining balance of $3.1 million was released by the Company to other income during the quarter ended September 30, 2023. Like any judgement, there is no guarantee that the Company will be able to collect the entire judgement or if it is able to collect, how soon it will be able to do so. The defendants have filed separate bankruptcy petitions in the US Bankruptcy Court for the District of New Jersey, and there is no guarantee that those bankruptcy proceedings will not have any effect on the ability of the Company to collect the judgement. In addition, in connection with those bankruptcy proceedings, the Chapter 7 trustee of Home Easy has filed a complaint seeking the return of the $4.1 million of advanced deposits previously paid to the Company and the outcome of such litigation remains uncertain. The Company is not currently a party to any other legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to its business. Management cannot estimate with certainty the Company’s ultimate legal and financial liability with respect to such pending litigation matters. However, management believes, based on its examination of such matters, that the Company’s ultimate liability will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Licensing revenue — Licensing revenue for the three month period ended December 31, 2025 was approximately $87,000 as compared to approximately $111,000 for the three month period ended December 31, 2024, a decrease of approximately $24,000, or 21.6%. The decrease can be attributed to one of the Company's licensees exceeding its annual guaranteed minimum royalties for the three month period ended December 31, 2024 which did not repeat for the three month period ended December 31, 2025.

Licensing revenue for the nine month period ended December 31, 2025 was approximately $261,000 as compared to approximately $248,000 for the nine month period ended December 31, 2024, an increase of approximately $13,000, or 5.2%. The increase for the nine month period ended December 31, 2025 was the result of increases of annual guaranteed minimum royalties of the Company's licensees.

Net revenues — Net revenues were approximately $1.9 million for the three month period ended December 31, 2025 as compared to approximately $4.0 million for the three month period ended December 31, 2024, a decrease of approximately $2.1 million, or 53.6%. The decrease in net revenues can be attributed primarily to the discontinuation of a clock radio at Walmart.

Net revenues were approximately $4.8 million for the nine month period ended December 31, 2025 as compared to approximately $8.9 million for the nine month period ended December 31, 2024, a decrease of approximately $4.1 million, or 46.5%. The decrease in net revenues can be attributed primarily to the discontinuation of a clock radio at Walmart.

Cost of sales — Cost of sales decreased approximately $1.8 million, or 52.0%, to approximately $1.7 million for the three month period ended December 31, 2025 as compared to approximately $3.5 million for the three month period ended December 31, 2024. The decrease in absolute terms for the three month period ended December 31, 2025 as compared to the three month period ended December 31, 2024 was primarily related to the discontinuation of a clock radio at Walmart and the negative impact of tariffs on the Company's microwave product line.

Cost of sales decreased approximately $3.4 million, or 42.8%, to approximately $4.6 million for the nine month period ended December 31, 2025 as compared to approximately $8.0 million for the nine month period ended December 31, 2024. The decrease in absolute terms for the nine month period ended December 31, 2025 as compared to the nine month period ended December 31, 2024 was primarily related to the discontinuation of a clock radio at Walmart and the negative impact of tariffs on the Company's microwave product line.

Selling, general and administrative expenses (“S,G&A”) — S,G&A was approximately $1.0 million for the three month period ended December 31, 2025 as compared to $1.2 million for the three month period ended December 31, 2024, a decrease of approximately $0.2 million or 15.7%. S,G&A, as a percentage of net revenues, was approximately 54.6% for the three month period ended December 31, 2025 as compared to approximately 30.6% for the three month period ended December 31, 2024. The decrease in S,G&A for the three month period ended December 31, 2025 as compared to the three month period ended December 31, 2024 was primarily driven by a decrease in compensation costs of approximately $168,000 and an increase in bad debt recoveries of approximately $164,000, partially offset by an increase in legal fees of approximately $160,000. Compensation costs for the three month period ended December 31, 2025 were approximately $568,000 as compared to approximately $736,000 for the three month period ended December 31, 2024. Bad debt recoveries for the three month period ended December 31, 2025 were approximately $164,000 as compared to nil for the three month period ended December 31, 2024. Legal fees for the three month period ended December 31, 2025 were approximately $123,000 as compared to approximately $37,000 of legal fee recoveries for the three month period ended December 31, 2024.

S,G&A was approximately $3.5 million for the nine month period ended December 31, 2025 as compared to approximately $4.0 million for the nine month period ended December 31, 2024, a decrease of approximately $0.5 million or 11.9%. S,G&A, as a percentage of net revenues, was approximately 74.2% for the nine month period ended December 31, 2025 as compared to approximately 45.1% for the nine month period ended December 31, 2024. The decrease in S,G&A for the nine month period ended December 31, 2025 as compared to the nine month period ended December 31, 2024 was primarily driven by a decrease in compensation costs of approximately $271,000, an increase in bad debt recoveries of approximately $164,000 and a decrease in travel and entertainment costs of approximately $42,000. Compensation costs for the nine month period ended December 31, 2025 were approximately $1,983,000 as compared to approximately $2,254,000 for the nine month period ended December 31, 2024. Bad debt recoveries for the nine month period ended December 31, 2025 were approximately $164,000 as compared to nil for the nine month period ended December 31, 2024. Travel and entertainment costs for the nine month period ended December 31, 2025 were approximately $40,000 as compared to approximately $82,000 for the nine month period ended December 31, 2024.

Interest income, net — Interest income, net, was approximately $132,000 for the three month period ended December 31, 2025 as compared to approximately $206,000 for the three month period ended December 31, 2024, a decrease of approximately $74,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments.

Interest income, net, was approximately $454,000 for the nine month period ended December 31, 2025 as compared to approximately $705,000 for the nine month period ended December 31, 2024, a decrease of approximately $251,000. The decrease was primarily due to lower levels of cash invested on the Company’s short term investments.

Provision for income taxes — For both three month periods ended December 31, 2025 and December 31, 2024, the Company recorded income tax expense of nil. For the nine month period ended December 31, 2025, the Company recorded income tax expense of nil as compared to approximately $3,000 for the nine month period ended December 31, 2024. The Company under the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” incurred non-income based state taxes of approximately $9,000 for each of the nine month periods ended December 31, 2025 and December 31, 2024, which are now reported as S,G&A. See “Note 5 – Income Taxes”.

Although the Company generated a net loss during the three and nine months ended December 31, 2025 , it is unable to realize an income tax benefit until the Company can demonstrate the ability to generate net income on a sustained basis. Therefore, the Company is obligated to record a 100% valuation allowance against the deferred tax assets.

Net loss — As a result of the foregoing factors, the Company realized a net loss of approximately $694,000 for the three month period ended December 31, 2025 as compared to a net loss of approximately $527,000 for the three month period ended December 31, 2024.

As a result of the foregoing factors, the Company realized a net loss of approximately $2,877,000 for the nine month period ended December 31, 2025 as compared to a net loss of approximately $2,370,000 for the nine month period ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2025, the Company had cash and cash equivalents of approximately $4.2 million as compared to approximately $1.2 million at March 31, 2025. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of approximately $3.8 million as of December 31, 2025 compared to approximately $0.9 million of such deposits as of March 31, 2025. Working capital decreased to approximately $18.3 million at December 31, 2025 as compared to approximately $21.1 million at March 31, 2025. The increase in cash and cash equivalents of approximately $3.0 million was due to the decrease in short term investments of approximately $5.8 million, the decrease in inventory of approximately $0.5 million and the increase in accounts payable and other current liabilities of approximately $0.3 million, partially offset by the net loss generated during the period of approximately $2.9 million and the decrease in income tax payable of approximately $0.7 million.

Cash Flows

Net cash used by operating activities was approximately $2.8 million for the nine month period ended December 31, 2025, resulting from the loss generated during the period of approximately $2.9 million and a decrease in income tax payable of approximately $0.7 million, partially offset by a decrease in inventory of approximately $0.5 million and an increase in accounts payable and other current liabilities of approximately $0.3 million.

Net cash provided by investing activities was approximately $5.8 million for the nine month period ended December 31, 2025 due to redemptions of short-term investments.

Net cash used by financing activities was approximately $1,000 for the nine month period ended December 31, 2025.

Sources and Uses of Funds

The Company’s principal existing sources of cash are generated from operations and its existing short-term deposits and investments. The Company believes that its existing cash balance and sources of cash will be sufficient to support existing operations over the next 12 months.

Off-Balance Sheet Arrangements

As of December 31, 2025, the Company did not have any off-balance sheet arrangements as defined under the rules of the SEC.

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 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.

Recent Accounting Pronouncements

The following ASUs were issued by the FASB which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates.

Accounting Standards Update 2024-03 Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): "Disaggregation of Income Statement Expenses” (Issued November 2024)

In November 2024, the FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Entities are permitted to apply either the prospective or retrospective transition methods. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

Accounting Standards Update 2023-09 Income Taxes (Topic 740): "Improvements to Income Tax Disclosures" Income Statement Expenses" (Issued December 2023)

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

(a) Disclosure controls and procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d — 15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Our controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of December 31, 2025, are effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors contained in Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended March 31, 2025.