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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

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

EMERSON RADIO CORP. ANDSUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)

(Not Reviewed)

(Not Reviewed)

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

EMERSON RADIO CORP. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)(Unaudited and Not Reviewed)

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 December 31, 20172023 and the results of operations for the three and nine month periods ended December 31, 2017 2023 and December 31, 2016.2022. 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 CommissionSEC 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, 20172023 (“fiscal 2017”2023”), included in the Company’s annual reportAnnual Report on Form 10-K,10-K, as amended, for fiscal 2017.2023.

The results of operations for the three and nine month periods ended December 31, 20172023 are not necessarily indicative of the results of operations that may be expected for any other interim periodsperiod or for the full year ending March 31, 20182024 (“fiscal 2018”2024”).

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

Unless otherwise disclosed in the notes to these financial statements, the estimated fair value of the financial assets and liabilities approximates the carrying value.

Sales Allowance and Marketing Support Expenses

Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic 605, “Revenue Recognition”, subtopic 50 “Customer Payments and Incentives” and Securities and Exchange Commission Staff Accounting Bulletins 101 “Revenue Recognition in Financial Statements,” and 104 “Revenue Recognition, corrected copy” (“SAB’s 101 and 104”).

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 605, “Revenue Recognition”, subtopic 15 “Products”, (i) sales incentives offered to customers that meet the criteria for accrual under ASC topic 605, subtopic 50 and (ii) under SAB’s 101 and 104, an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers which it does not expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items because that percentage of shipped revenue fails to meet the collectability criteria within SAB 104’s and 101’s four revenue recognition criteria, all of which are required to be met in order to recognize revenue.

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.

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. These are not yet effective for this financial period.

Accounting Standards Update 2014-09 “Revenue from Contracts with Customers”2019-12“Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” (Issued May 2014)December 2019)

In May 2014, December 2019, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers" in order2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which is intended to ensure that revenue recognition requirements are the same under both US GAAP and International Financial Reporting Standards ("IFRS").simplify various aspects related to accounting for income taxes. ASU 2014-092019-12 removes inconsistencies and provides a more robust framework for addressing revenue issues. ASU 2014-09 was effective for reporting periods and interim periods beginning on or after December 15, 2016. In August 2015, the FASB issued ASU 2015-14 "Deferral of the Effective Date" to delay the implementation of ASU 2014-09 by one year, in response to feedback from preparers, practitioners and users of financial statements. Accordingly, ASU 2014-09 is now effective for reporting periods and interim periods beginning on or after December 15, 2017. Early adoption is permitted for reporting and interim periods beginning on or after December 15, 2016. The Company does not expect these amendments to have a material impact on its financial statements, as it is primarily a seller of tangible personal property whose contracts with customers and the related transaction prices and performance obligations will be minimally affected by the amendments.

Accounting Standards Update 2016-02 “Leases” (Issued February 2016)

In February 2016, the FASB issued ASU 2016-02 "Leases" to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 creates a new Accounting Standards Codification Topic 842 "Leases" to replace the previous Topic 840 "Leases." ASU 2016-02 affects both lessees and lessors, although for the latter the provisions are similarcertain exceptions to the previous model, but updated to align with certain changes to the lessee modelgeneral principles in Topic 740 and also the new revenue recognition provisions contained inclarifies and amends existing guidance to improve consistent application. ASU 2014-09 (see above). ASU 2016-022019-12 is effective for fiscal years and interim periods beginning after December 15, 2018. Early2020. This standard took effect in the first quarter ( June 2021) of the Company’s fiscal year ending March 31, 2022. The adoption is permitted. The Company is assessing the standard to determine ifof ASU 2016-02 will have a2019-12 had no material impact on itsthe Company’s consolidated financial statements.statements and related disclosures.

Accounting Standards Update 2016-13 “Financial2016-13“Financial Instruments – Credit Losses”Losses” (Issued June 2016)

In June 2016, the FASB issued ASU 2016-13 "Financial2016-13 “Financial Instruments - Credit Losses"Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-132016-13 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, the ASU 2016-132016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-132016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early2022. The adoption is permitted. The Company does not expect these amendments to have aof ASU 2016-13 had no material impactimpacts on itsthe Company's 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. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good. Under the Direct Import Program, title passes in the country of origin when the goods are passed over the rail of the customer’s vessel. 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.

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.

Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic 606, “Revenue from Contracts with Customers” (“ASC 606”).

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC 606, (i) sales incentives offered to customers that meet the criteria for accrual and (ii) an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers, which it does not expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items, because that percentage of shipped revenue fails to meet the collectability criteria within ASC 606.

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.

Licensing:In addition to the distribution of products, the Company grants licenses for the right to access the Company’s intellectual property, specifically the Company’s trademarks, for a stated term for the manufacture and/or sale of consumer electronics and other products under agreements which require payment of either (i) a non-refundable minimum guaranteed royalty or, (ii) the greater of (a) the actual royalties due (based on a contractual calculation, normally comprised of actual product sales by the licensee multiplied by a stated royalty rate, or “Sales Royalties”) or (b) a minimum guaranteed royalty amount. In the case of the foregoing clause (i), such amounts are recognized as revenue on a straight-line basis over the term of the license agreement. In the case of the foregoing clause (ii), Sales Royalties in excess of guaranteed minimums are accounted for as variable fees and are not recognized as revenue until the Company has ascertained that the licensee’s sales of products have exceeded the guaranteed minimum. In effect, the Company recognizes the greater of Sales Royalties earned to date or the straight-line amount of minimum guaranteed royalties to date. In the case where a royalty is paid to the Company in advance, the royalty payment is initially recorded as a liability and recognized as revenue as the royalties are deemed to be earned according to the principles outlined above.

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.

NOTE 3— SHAREHOLDERS’ EQUITY

NOTE 3 — SHAREHOLDERS’ EQUITY

Outstanding capital stock at December 31, 20172023 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, 2017,2023, the Company had no options, warrants or other potentially dilutive securities outstanding.

In December 2016, the Company publicly announced the approval by the Board of Directors of the repurchase of up to $5 million of its common stock, that the repurchases may be effected from time to time at prevailing market prices, through open market or in privately negotiated transactions, which may include, in whole or in part, the establishment of a purchase program pursuant to the safe harbor provided by Rule 10b5-1 under the Securities Exchange Act of 1934, through block purchases or through accelerated or forward or similar stock purchases, and that the Company intends to run the repurchase program through the end of calendar 2017, unless the period is extended or shortened by the Board of Directors.

In September 2017, the Company’s Board of Directors approved an additional $5 million, bringing the total authorized stock repurchases under the program to $10 million and extended the program to June 30, 2018. Under the program, repurchases will be funded from available working capital and any repurchased shares will be held in the treasury as authorized and issued shares available for general corporate purposes. During the three months ended December 31, 2017, 669,357 shares for $991,972 were repurchased. As of December 31, 2017, the Company had repurchased 3,226,388 shares for $4,710,572 under this program. The remaining balance of the program is $5,289,428 as of December 31, 2017.    NOTE 4— INVENTORY

NOTE 4 — INVENTORY

Inventories, which consist primarily of finished goods, are stated at the lower of cost or market.net realizable value. Cost is determined using the first-in, first-outfirst-in, first-out method. As of December 31, 20172023 and March 31, 2017,2023, inventories consisted of the following (in thousands):

NOTE 5— INCOME TAXES

NOTE 5 — INCOME TAXES

At December 31, 2017,2023, the Company had $3.1$14.0 million of U.S. federal net operating loss (“NOL”) carry forwards andforwards. These losses do not expire but are limited to utilization of 80% of taxable income in any one year. At December 31, 2023, the Company had approximately $5.6$16.1 million of U.S. state net operating lossNOL carry forwards. The tax benefits related to these state NOL carry forwards included in net deferred tax assets thatand future deductible temporary differences are availablerecorded to offset future taxable income and can be carried forward for 20 years. Managementthe extent management believes it is lessmore likely than likelynot that all of the net deferred tax assetssuch benefits will be realized through tax planning strategies available in future periods and through future profitable operating results, therefore management has increased its valuation allowance by $712,000 to a totalrealized.

The income of $1,000,700 as of foreign subsidiaries before taxes was $293,000 for the three month period ended December 31, 2017.2023 as compared to income of foreign subsidiaries before taxes of $247,000 for the three month period ended December 31, 2022. The gross amountincome of foreign subsidiaries before taxes was $892,000 for the Company’snine month period ended December 31, 2023 as compared to income of foreign subsidiaries before taxes of $489,000 for the nine month period ended December 31, 2022.

The Company analyzed the future reasonability of recognizing its deferred tax assets at December 31, 2017 was $1,570,000 as compared to $1,080,000 as2023. As a result, the Company concluded that a 100% valuation allowance of March 31, 2017.approximately $4,287,000 would be recorded against the assets.

Due to a change in ownership of Grande by Wealth Warrior Global Limited, as disclosed in a Schedule 13D filing on October 10, 2017, the Company’s ability to use a portion of its domestic NOL and tax carryforwards may be limited in future periods under the change of ownership provisions of the Tax Reform Act of 1986 (Internal Revenue Code Section 382). Furthermore, a portion of the carryforwards may expire before being applied to reduce future

The Company recorded an income tax liabilities (see Item 1A. Risk Factors).

The Company’s effective tax rate differs from the federal statutory rate primarily due tobenefit of $14,000 and income and losses incurred in foreign jurisdictions and taxed at locally applicable tax rates, subpart F income included in the Company’s tax expense expenses that are not deductible for federalof $74,000, respectively, during the three and nine month periods ended December 31, 2023. During the three and nine month periods ended December 31, 2022, the Company recorded income tax purposes, increases to the valuation allowanceexpense of nil and $10,950, respectively, primarily resulting from state income taxes. After the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes”during fiscal 2022, these non-income based state taxes are now reported within selling, general and administrative expenses.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of December 31, 2017,2023, the Company’s open tax years for examination for U.S. federal tax are fiscal 2015-fiscal 20172018-2023, and for U.S. statesstates’ tax are fiscal 2012-fiscal 2016.

2017-2023.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.

On

As of December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21%. As a result of the enacted law,31, 2023, the Company was required to revalue its deferred tax assets and liability at the rate in effect during their scheduled reversal. This revaluation resulted in an additionis asserting under ASC 740-30 that all of $665,600 on a gross basis, to income tax expense in continuing operations and a corresponding reduction in the deferred tax asset. However, the net impact of the revaluation resulted in income tax expense of $223,000, after adjustments to the valuation allowance against the Company’s deferred tax assets. The new legislation will require the Company to pay tax on the unremitted earnings of its foreign subsidiaries though 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 December 31, 2017. Because2023 and March 31, 2023, the Company had a federal tax liability of approximately $1,202,000 and $1,603,000, respectively, related to the repatriation of the complexities involved in determining the previously unremittedCompany’s undistributed earnings and profits of all ourits foreign subsidiaries the Company is still in the process of obtaining, preparing, and analyzing theas required information and expects to

record an initial estimate of the impact on our Consolidated Financial Statements in the 4th quarter. The other provisions ofby the Tax Cuts and Jobs Act are not expected to have a material impact on of 2017 (the “Tax Act”). As of December 31, 2023 and March 31, 2023, the fiscal 2018 consolidated financial statements.Company’s short term portion was approximately $534,000 and $401,000, respectively, and the long term portion was approximately $668,000 and $1,202,000, respectively.

The liability is payable over 8 years. The firstfive 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 December 31, 2023, the Company has paid six of the eight installments. Each installment must be remitted on or before July 15^th of the year in which such installment is due. On July 12, 2023, the Company paid its sixth installment of approximately $401,000.

In addition to the federal tax liabilities recorded under the Tax Act mentioned above, the Company incurred approximately $74,000 of additional federal tax liabilities resulting from the net income generated during the nine months ended December 31, 2023. Under the Tax Act, the Company was limited to 80% utilization of NOLs against taxable income in any one year. This limitation generated the additional $74,000 of federal tax liabilities as of December 31, 2023.

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 Grande’sNimble’s direct and indirect subsidiaries, and companiesor with entities related to the Company’s Chairman of the Board.Chief Executive Officer. 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 Grande,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 63.8%72.4%, of the Company’s outstanding common stock.stock as of December 31, 2023. Accordingly, the Company is a “controlled company” as defined in Section 801(a)801(a) of the NYSE American Company Guide.

On September 26, 2017, Wealth Warrior Global Limited

Related Party Transactions

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

During the three and nine month periods ended December 31, 2023, the Company was billed approximately $40,000 and $119,000, respectively, for rental and utility fees from Vigers Appraisal and Consulting Ltd (“Wealth Warrior”VACL”) acquired approximately 65.9% of the outstanding share capital of Grande from Sino Bright Enterprises Co., Ltd.,which is a company related to the Company’s Chairman of the Board. Based upon disclosures filed by Wealth Warrior on a Schedule 13D on October 10, 2017, Wealth Warrior, together with its affiliates, collectively hold 73.9%Board of the outstanding share capitalDirectors. As of Grande as of October 10, 2017. Accordingly, a change of control ofDecember 31, 2023 the Company was deemedowed approximately $1,000 to have occurred as Wealth Warrior may be deemedVACL related to be a controlling personthese charges.  

NOTE 7— SHORT TERM DEPOSITS AND INVESTMENTS

As of Grande,December 31, 2023 and March 31, 2023, the Company held $2.7 million and $23.1 million, respectively, in term deposits. Such term deposits had maturity dates of 90 days or less and, as a result, maywere classified as cash equivalents. As of December 31, 2023 and March 31, 2023, the Company held $18.5 million and nil, respectively, in short term investments which had maturity dates greater than 90 days. 

NOTE 8— CONCENTRATION RISK

Customer Concentration

For the three month period ended December 31, 2023, the Company’s two largest customers accounted for approximately 84% of the Company’s net revenues, of which Walmart accounted for approximately 65% and Amazon accounted for approximately 19%. No other customer accounted for greater than 10% of the Company's net revenues during the period. 

For the nine month period ended December 31, 2023, the Company’s three largest customers accounted for approximately 89% of the Company’s net revenues, of which Walmart accounted for approximately 58%, Amazon accounted for approximately 21% and Fred Meyer accounted for approximately 10%. No other customer accounted for greater than 10% of the Company's net revenues during the period.

For the three month period ended December 31, 2022, the Company’s two largest customers accounted for approximately 84% of the Company’s net revenues, of which Walmart accounted for approximately 50% and Amazon accounted for approximately 34%. No other customer accounted for greater than 10% of the Company's net revenues during the period.

For the nine month period ended December 31, 2022, the Company’s three largest customers accounted for approximately 74% of the Company’s net revenues, of which Walmart accounted for approximately 42%, Amazon accounted for approximately 21% and Fred Meyer accounted for approximately 11%. No other customer accounted for greater than 10% of the Company's net revenues during the period.

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 month periods ended December 31, 2023, the Company’s gross product sales included microwave ovens, which generated approximately 22% and 28%, respectively, of the Company’s gross product sales and audio products, which generated approximately 76% and 70%, respectively, of the Company’s gross product sales. No other products accounted for greater than 10% of the Company's gross product sales during the period.

For the three and nine month periods ended December 31, 2022, the Company’s gross product sales included microwave ovens, which generated approximately 9% and 24%, respectively, of the Company’s gross product sales and audio products, which generated approximately 91% and 75%, respectively, of the Company’s gross product sales. No other products accounted for greater than 10% of the Company's gross product sales during the period.    

Concentrations of Credit Risk

As a percentage of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top three customers accounted for approximately 48%, 20% and 15%, respectively, as of December 31, 2023. No other customers accounted for greater than 10% of the Company's total trade accounts receivable, net of specific reserves, as of such date. As a percentage of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top three customers accounted for approximately 43%, 35% and 11%, respectively, as of March 31, 2023. No other customers accounted for greater than 10% of the Company's total trade accounts receivable, net of specific reserves, as of such date. 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.

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 December 31, 2023 and March 31, 2023 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 $3.4 million and approximately $25.0 million at December 31, 2023 and March 31, 2023, respectively.

Supplier Concentration

During the three month period ended December 31, 2023, the Company procured approximately 86% of its products for resale from its three largest factory suppliers, of which approximately 37% was supplied by its largest supplier and approximately 28% and 21%, respectively, by the other two suppliers. During the three month period ended December 31, 2022, the Company procured approximately 95% of its products for resale from its two largest factory suppliers, of which approximately 74% was supplied by its largest supplier and approximately 21% by another supplier. No other suppliers accounted for greater than 10% for either three month periods ended December 31, 2023 or December 31, 2022.

During the nine month period ended December 31, 2023, the Company procured approximately 93% of its products for resale from its four largest factory suppliers, of which approximately 29% was supplied by its largest supplier and approximately 26%, 23% and 15%, respectively, by the other three suppliers. During the nine month period ended December 31, 2022, the Company procured approximately 99% of its products for resale from its two largest factory suppliers, of which approximately 71% was supplied by its largest supplier and approximately 28% by another supplier. No other suppliers accounted for greater than 10% for either nine month periods ended December 31, 2023 or December 31, 2022. 

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 six to sixty months. 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, 2023 to indicate that a reassessment or re-measurement of the Company’s existing leases was required.

As of December 31, 2023, the Company’s current operating lease liabilities and finance lease liabilities were $128,000 and $1,000, respectively and its non-current operating lease liabilities and finance lease liabilities were $208,000 and nil, 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, 2023 was $327,000 and $1,000, respectively.

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

Information relating to the lease term and discount rate are as follows:

As of December 31, 2023 the maturities of lease liabilities were as follows:

NOTE 10— GOVERNMENTAL ASSISTANCE PROGRAMS

During the three month periods ended December 31, 2023 and December 31, 2022, the Company’s Hong Kong subsidiary recorded income of nil and $4,000, respectively, under the governmental program called the Employment Support Scheme (“ESS”). During the nine month periods ended December 31, 2023 and December 31, 2022, the Company’s Hong Kong subsidiary recorded income of nil and $34,000, respectively, under the ESS program. The proceeds were required to be deemedused for payroll expenses and the Company was subject to sharegovernment-appointed random reviews to verify the power to vote or directinformation submitted by the voteapplicant. 

The income realized from the amount granted under the ESS program is presented as Other Income under the description called “Income from governmental assistance programs” in the Consolidated Statements of (and to share Operations.

NOTE 11— LEGAL PROCEEDINGS

On April 19, 2022, the power to dispose or directU.S. District Court for the disposition of) the sharesDistrict of Delaware (the "District Court") granted judgment in favor of the Company heldin its trademark infringement lawsuit against air conditioning and heating products provider Emerson Quiet Kool and wholesaler Home Easy (the “Defendants”). Among other things, the District Court's order included an injunction prohibiting Defendants’ distribution, manufacturing, and sales of EMERSON QUIET KOOL branded products or use of that trademark and directed the U.S. Patent and Trademark Office to cancel Defendants’ trademark registration for the account of S&T.

On February 9, 2018, Grande announcedEMERSON QUIET KOOL trademark and prohibited Defendants from attempting to register that it will change its namemark or any other confusingly similar mark in the future. The judgment also awards $6.5 million to Nimble Holdings Company Limited, subject tothe Company. The Defendants, through a third party, made certain regulatory approvals.

Related Party Transactions

Return of Pledged Collateral to S&T

In April 2016, the Company, upon a request made by S&T, considered and agreed to return to S&T the $500,000 of collateral which S&T had paidpayments to the Company, including certain advances towards a portion of their liability. Those amounts were previously reflected as advanced deposits in September 2014 as a partthe Consolidated Balance Sheets. The aggregate amount of the indemnification agreement between S&T, Grandepayments is $4.1 million, which has been reduced by approximately $784,000 for legal fees incurred in fiscal 2023 and approximately $216,000 for legal fees incurred in fiscal 2024, in pursuit of the advanced deposits. Separately, on July 11, 2023, the U.S. Court of Appeals for the Third Circuit affirmed the District Court's judgment against the Defendants. On September 29, 2023, the District Court granted the Company’s request for final judgement including approximately $3.16 million in legal fees and $700,000 in enhanced damages, along with the prospect of additional damages due to Defendants’ alleged contempt of court. The Company is pursuing all available remedies against the Defendants and those acting in concert with them. There is no guarantee that the Company pertainingwill be able to an Internal Revenue Service challengecollect the entire judgment or that any negotiated resolution regarding these matters will ever be agreed among the parties or, if agreed, how soon the parties might be able to do so. Due to the legal judgement having been affirmed as stated above, the Company released the balance of the Company’s March 31, 2010 earnings and profits calculations underlyingadvanced deposits of approximately $3,100,000, to other income during the taxability of a dividend paid during March 2010 to all of its stockholders, net of the $79,000 in expenses incurred by the Company in defending the IRS challenge. On April 29, 2016, the Company paid $421,000 to S&T to effectuate the release of the collateral net of the aforementioned expenses incurred by the Company. From quarter ended September 30, 2014 through March 31, 2016, this pledged collateral had been recorded by the Company as restricted cash on its balance sheet.

Ancillary Expenses Pertaining to Rented Office Space in Hong Kong

During the three and nine months ended December 31, 2017, the Company was billed approximately $4,000 and $13,000 for utility and service charges from The Grande Properties Management Limited (“GPML”) and Lafe Strategic Services Limited (“LSSL”), which are companies related to the Company’s Chairman of the Board, in connection with the Company’s rented office space in Hong Kong. The Company owed nil to both GPML and LSSL related to these charges at December 31, 2017.

Administrative service fees charged to related parties

During the three and nine months ended December 31, 2017, the Company billed approximately $6,000 and $17,000 for administrative fees to Phenomenon Agents Ltd (“PAL”), Sansui Acoustics Research Corporation (“SARC”) and TWD Industrial Co. Ltd. (“TICL"), which are subsidiaries of Grande. The Company was owed nil from PAL, SARC and TICL related to these charges at December 31, 2017.2023. 

NOTE 7 — SHORT TERM INVESTMENTS

At December 31, 2017 and March 31, 2017, the Company held short term investments totaling $22.2 million and $25.1 million, respectively. These investments were comprised

Item2. Management’sManagement’s Discussion and Analysis of Results of Operations and Financial Condition.

The following discussion of the Company’s operations and financial condition should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this Quarterly Report.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 report contains forward lookingforward-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.amended (the “Exchange Act”).

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,” 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:

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. 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. ManagementThe Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, managementthe 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, 20172023 (fiscal 2018)2024) and December 31, 20162022 (fiscal 2017)2023) (in thousands):

Net product sales — Net product sales for the third quarter of fiscal 2018three month period ended December 31, 2023 were $4.1$2.6 million as compared to $3.8$1.7 million for the third quarter of fiscal 2017,three month period ended December 31, 2022, an increase of $0.3$0.9 million, or 8.3%52.5%. The Company’s sales during the third quarters of fiscal 2018three month periods ended December 31, 2023 and fiscal 2017 December 31, 2022 were highly concentrated among the Company’s two largest customers – Wal-Mart and Amazon for– comprising in the third quarter of fiscal 2018aggregate approximately 85% and Wal-Mart and Fred Meyer for the third quarter of fiscal 2017, where gross product sales comprised approximately 79.5% and 79.0%95%, respectively, of the Company’s total gross product sales.

For the nine month period of fiscal 2018, net product sales were $10.4 million as compared to $14.1 millionfor such periods.

Net product sales for the nine month period ended December 31, 2023 were $6.7 million as compared to $4.3 million for the nine month period ended December 31, 2022, an increase of fiscal 2017, a decrease of $3.7$2.4 million, or 26.0%55.6%. The Company’s sales during the nine month periods of fiscal 2018ended December 31, 2023 and fiscal 2017December 31, 2022 were highly concentrated among the Company’s twothree largest customers – Wal-Mart, and Amazon for the nine month period of fiscal 2018 and Wal-Mart and Fred Meyer for– comprising in the nine month period of fiscal 2017, where gross product sales comprisedaggregate approximately 76.2% and 85.8%91% of the Company’s total grossnet product sales.sales for both periods.

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 $18,000approximately $3,000 and $40,000$10,000 for the third quarters of fiscal 2018three month periods ended December 31, 2023 and fiscal 2017,December 31, 2022, respectively, and by approximately $41,000$9,000 and $121,000$15,000 for the nine month periods of fiscal 2018ended December 31, 2023 and fiscal 2017December 31, 2022, respectively. Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson^® brand name. The major elements which contributed to the overall decreaseincrease in net product sales were as follows:

i)    Houseware products:Net sales increased $0.4 million, or 313.4%, to $0.6 million for the three month period ended December 31, 2023 as compared to $0.2 million for the three month period ended December 31, 2022, driven by increased net sales of microwave ovens and refrigerators. Net sales increased $0.9 million, or 89.9%, to $2.0 million for the nine month period ended December 31, 2023 as compared to $1.1 million for the nine month period ended December 31, 2022, driven by increased net sales of microwave ovens and refrigerators. 

ii)Audio products:            Net sales increased $0.4 million, or 27.4%, to $2.0 million for the three month period ended December 31, 2023 as compared to $1.6 million for the three month period ended December 31, 2022, resulting from increased net sales of clock radios. Net sales increased $1.4 million, or 44.4%, to $4.7 million for the nine month period ended December 31, 2023 as compared to $3.3 million for the nine month period ended December 31, 2022, resulting from increased net sales of clock radios. 

Business operations —Emerson will — The Company expects to continue to expand theits existing distribution channels and to develop and promote new products to regain shelf spaces with retailers in the USA. EmersonU.S. The Company is also investingcontinuing to invest in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts would 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 Emersonthe 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 has taken active steps

Emerson’s success is dependent on its ability to manageanticipate and control its operating costs. The operating costsrespond 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 thirdCompany’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. 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 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.

Starting in the fourth quarter of fiscal 20182020, the global COVID-19 pandemic has presented significant challenges and impacted the Company’s business and operating results, and the operations and production capabilities of the Company’s suppliers in China. The pandemic has directly and indirectly disrupted certain sales and supply chain activities. Global component shortages, in particular semiconductor chips, arising from changes in consumer demand and reduced manufacturing capacity related to the COVID-19 pandemic may cause price fluctuations and longer lead times in the supply of these components. Although the Company is seeking alternate suppliers for these components, developing alternate sources of supply will be time consuming, difficult and costly, and may require the re-tooling of products to accommodate components from different suppliers. In addition to increasing cost trends, the Company’s suppliers are not equipped to hold meaningful amounts of inventory and could pause manufacturing, which could ultimately impact the Company’s ability to fulfill customer orders on a timely basis. These impacts on the Company’s supply chain may continue to impact the Company’s ability to meet product demand, which could result in additional costs, customer dissatisfaction in the event of inventory shortages or may otherwise adversely impact the Company’s business and results of operations.

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

For more information on risks associated with the Company’s operations, including tariffs, please see the risk factors within Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, for the year ended March 31, 2023.

Legal Proceedings— On April 19, 2022, the U.S. District Court for the District of Delaware (the "District Court") granted 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 District Court’s order included an injunction prohibiting Defendants’ distribution, manufacturing, and sales of EMERSON QUIET KOOL branded products or use of that trademark and directed the U.S. Patent and Trademark Office to cancel Defendants’ trademark registration for the EMERSON QUIET KOOL trademark and prohibited Defendants from attempting to register that mark or any other confusingly similar mark in the future. The judgment also awards $6.5 million to the Company. The Defendants, through a third party, made certain payments to the Company, including certain advances towards a portion of their liability. Those amounts were $1.1previously reflected as advanced deposits in the Consolidated Balance Sheets. The aggregate amount of the payments is $4.1 million, which has been reduced by approximately $784,000 for legal fees incurred in fiscal 2023 and approximately $216,000 for legal fees incurred in fiscal 2024, in pursuit of the advanced deposits. Separately, on July 11, 2023, the U.S. Court of Appeals for the Third Circuit affirmed the District Court's judgment against the Defendants. On September 29, 2023, the District court granted the Company’s request for final judgement including approximately $3.16 million in legal fees and $700,000 in enhanced damages, along with the prospect of additional damages due to Defendants’ alleged contempt of court. The Company is pursuing all available remedies against the Defendants and those acting in concert with them. There is no guarantee that the Company will be able to collect the entire judgment or that any negotiated resolution regarding these matters will ever be agreed among the parties or, if agreed, how soon the parties might be able to do so. Due to the legal judgement having been affirmed as stated above, the Company has released the balance of the advanced deposits of approximately $3,100,000, to other income during the quarter ended September 30, 2023.

Licensing revenue — Licensing revenue for the three month period ended December 31, 2023 was $23,000 as compared to $1.2 million$123,000 for the third quarter of fiscal 2017. However, operating costs in the third quarter of fiscal 2018 included $76,000 of legal fees related to a trademark infringement suit taken by Emerson against a third party.

For the ninethree month period of fiscal 2018, operating costs were $3.8 million as compared to $3.9 million for the nine month period of fiscal 2017. However, operating costs for the nine month period of fiscal 2018 included $469,000 of legal fees related to a trademark infringement suit taken by Emerson against a third party.

Licensing revenue — Licensing revenue in the third quarter of fiscal 2018 was $0.2 million as compared to $1.2 million in the third quarter of fiscal 2017,ended December 31, 2022, a decrease of $1.0 million$100,000, or 86.2% which can be primarily attributed to the loss of the license agreement with Funai which ended on December 31, 2016.

81.0%. Licensing revenue for the nine month period of fiscal 2018ended December 31, 2023 was $0.5 million$124,000 as compared to $3.5 million$271,000 for the nine month period of fiscal 2017,ended December 31, 2022, a decrease of $3.0 million$147,000, or 84.5% which can be primarily attributed to54.2%. The decreases for the lossthree and nine month periods ended December 31, 2023 were a result of thean expiring license agreement with Funai which ended on December 31, 2016.2022.