TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item1. Financial Statements.

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

	*Three Months Ended December 31,*						*Nine Months Ended December 31,*
	*2022*			*2021*			*2022*			*2021*

Net revenues:
Net product sales	$	1,704		$	2,509		$	4,335		$	6,290
Licensing revenue		228			65			971			195
Net revenues		1,932			2,574			5,306			6,485
Costs and expenses:
Cost of sales		1,361			1,826			3,549			4,786
Selling, general and administrative expenses		1,051			1,469			3,686			4,207
		2,412			3,295			7,235			8,993
Operating loss		(480	)		(721	)		(1,929	)		(2,508	)
Other (loss) income:
Loss on settlement of litigation		—			(450	)		—			(450	)
Interest income, net		235			7			424			40
Income from governmental assistance programs		4			—			34			207
Loss before income taxes		(241	)		(1,164	)		(1,471	)		(2,711	)
Provision for income tax expense		—			—			—			—
Net loss		(241	)		(1,164	)		(1,471	)		(2,711	)
Basic loss per share	$	(0.01	)	$	(0.06	)	$	(0.07	)	$	(0.13	)
Diluted loss per share	$	(0.01	)	$	(0.06	)	$	(0.07	)	$	(0.13	)
Weighted average shares outstanding
Basic		21,043			21,043			21,043			21,043
Diluted		21,043			21,043			21,043			21,043

Three Months Ended December 31,

Nine Months Ended December 31,

2021

2020

2021

2020

Net revenues:

Net product sales

$
2,509

$
2,273

$
6,290

$
5,718

Licensing revenue

65

60

195

180

Net revenues

2,574

2,333

6,485

5,898

Costs and expenses:

Cost of sales

1,826

1,754

4,786

4,519

Selling, general and administrative expenses

1,469

1,560

4,196

4,601

3,295

3,314

8,982

9,120

Operating loss

(721
)

(981
)

(2,497
)

(3,222
)
Other (loss) income:

Loss on settlement of litigation

(450
)

—

(450
)

—

Interest income, net

7

18

40

128

Income from governmental assistance programs

—

28

207

83

Loss before income taxes

(1,164
)

(935
)

(2,700
)

(3,011
)
Provision for income tax expense

—

10

11

15

Net loss

(1,164
)

(945
)

(2,711
)

(3,026
)
Basic loss per share

$
(0.06
)

$
(0.04
)

$
(0.13
)

$
(0.14
)
Diluted loss per share

$
(0.06
)

$
(0.04
)

$
(0.13
)

$
(0.14
)
Weighted average shares outstanding

Basic

21,043

21,043

21,043

21,043

Diluted

21,043

21,043

21,043

21,043

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

	*December 31, 2022*			*March 31, 2022*

ASSETS
Current Assets:
Cash and cash equivalents	$	27,294		$	25,576
Accounts receivable, net		927			1,294
Licensing receivable		191			—
Inventory		2,345			2,112
Prepaid purchases		644			141
Prepaid expenses and other current assets		254			390
Total Current Assets		31,655			29,513
Non-Current Assets:
Property and equipment, net		2			2
Right-of-use asset-operating leases		244			403
Right-of-use asset-finance leases		2			2
Other assets		90			90
Total Non-Current Assets		338			497
Total Assets	$	31,993		$	30,010
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other current liabilities		514			758
Due to affiliate		1			—
Short-term operating lease liability		145			211
Short-term finance lease liability		1			1
Income tax payable, current portion		401			195
Advanced deposits		4,100			—
Deferred revenue		182			210
Total Current Liabilities		5,344			1,375
Non-Current Liabilities:
Long-term operating lease liability		98			201
Long-term finance lease liability		1			2
Income tax payable		1,202			1,613
Total Non-Current Liabilities		1,301			1,816
Total Liabilities	$	6,645		$	3,191
Shareholders’ Equity:
Series A Preferred shares — 10,000,000 shares authorized; 3,677 shares issued and outstanding; liquidation preference of $3,677,000		3,310			3,310
Common shares — $0.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at December 31, 2022 and March 31, 2022, respectively; 21,042,652 shares outstanding at December 31, 2022 and March 31, 2022, respectively		529			529
Additional paid-in capital		79,792			79,792
Accumulated deficit		(25,082	)		(23,611	)
Treasury stock, at cost (31,923,145 shares at December 31, 2022 and March 31, 2022, respectively)		(33,201	)		(33,201	)
Total Shareholders’ Equity		25,348			26,819
Total Liabilities and Shareholders’ Equity	$	31,993		$	30,010

December 31, 2021

March 31, 2021

ASSETS

Current Assets:

Cash and cash equivalents

$
24,744

$
5,245

Short term investments

—

25,045

Accounts receivable, net

2,619

691

Inventory

2,574

1,961

Prepaid purchases

287

361

Prepaid expenses and other current assets

383

289

Total Current Assets

30,607

33,592

Non-Current Assets:

Property and equipment, net

2

—

Right-of-use asset-operating leases

455

213

Right-of-use asset-finance leases

3

3

Other assets

90

94

Total Non-Current Assets

550

310

Total Assets

$
31,157

$
33,902

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable and other current liabilities

1,142

788

Paycheck Protection Program loan

—

204

Due to affiliate

1

1

Short-term operating lease liability

225

152

Short-term finance lease liability

1

1

Income tax payable, current portion

195

195

Deferred revenue

—

195

Total Current Liabilities

1,564

1,536

Non-Current Liabilities:

Long-term operating lease liability

244

82

Long-term finance lease liability

2

3

Income tax payable

1,613

1,836

Total Non-Current Liabilities

1,859

1,921

Total Liabilities

$
3,423

$
3,457

Shareholders’ Equity:

Series A Preferred shares — 10,000,000 shares authorized; 3,677 shares issued
   and outstanding; liquidation preference of $3,677,000

3,310

3,310

Common shares — $0.01 par value, 75,000,000 shares authorized; 52,965,797
   shares issued at December 31, 2021 and March 31, 2021, respectively; 21,042,652
   shares outstanding at December 31, 2021 and March 31, 2021, respectively

529

529

Additional paid-in capital

79,792

79,792

Accumulated deficit

(22,696
)

(19,985
)
Treasury stock, at cost (31,923,145 shares at December 31, 2021
   and March 31, 2021, respectively)

(33,201
)

(33,201
)
Total Shareholders’ Equity

27,734

30,445

Total Liabilities and Shareholders’ Equity

$
31,157

$
33,902

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	*Nine Months Ended December 31,*
	*2022*			*2021*
	(In thousands)
Cash Flows from Operating Activities:
Net (loss)	$	(1,471	)	$	(2,711	)
Adjustments to reconcile net loss to net cash (used) by operating activities:
Loan forgiveness from Paycheck Protection Program		—			(207	)
Amortization of right-of-use assets		159			164
Asset valuation allowances		39			149
Changes in assets and liabilities:
Accounts receivable		328			(2,077	)
Licensing receivable		(191	)		—
Inventory		(233	)		(613	)
Prepaid purchases		(503	)		74
Prepaid expenses and other current assets		136			(94	)
Other assets		—			4
Accounts payable and other current liabilities		(244	)		354
Right of use assets-operating		—			(403	)
Short term lease liabilities		(66	)		73
Long term lease liabilities		(104	)		161
Due to affiliate		1			—
Income taxes payable		(205	)		(223	)
Advanced deposits		4,100			—
Deferred revenue		(28	)		(195	)
Net cash provided (used) by operating activities		1,718			(5,544	)
Cash Flows From Investing Activities:
Proceeds from sale of short-term investments		—			25,045
Additions to property and equipment		—			(2	)
Purchases of short-term investments		—			—
Net cash provided by investing activities		—			25,043
Cash Flows from Financing Activities:
		—			—
Net cash provided by financing activities		—			—
Net increase in cash and cash equivalents		1,718			19,499
Cash and cash equivalents at beginning of the year		25,576			5,245
Cash and cash equivalents at end of the year	$	27,294		$	24,744
Supplemental disclosures:
Cash paid for:
Interest	$	8		$	8
Income taxes	$	205		$	222

Nine Months Ended December 31,

2021

2020

(In thousands)

Cash Flows from Operating Activities:

Net (loss)

$
(2,711
)

$
(3,026
)
Adjustments to reconcile net loss to net cash (used) by operating
activities:

Loan forgiveness from Paycheck Protection Program

(207
)

—

Amortization of right-of-use assets

164

171

Depreciation and amortization

—

2

Asset allowances and reserves

149

13

Changes in assets and liabilities:

Accounts receivable

(2,077
)

(994
)
Inventory

(613
)

42

Prepaid purchases

74

(259
)
Prepaid expenses and other current assets

(94
)

(57
)
Other assets

4

—

Accounts payable and other current liabilities

354

336

Right of use assets-operating

(403
)

—

Short term lease liabilities

73

(50
)
Long term lease liabilities

161

(130
)
Due to affiliate

—

1

Income taxes payable

(223
)

(197
)
Deferred revenue

(195
)

80

Net cash (used) by operating activities

(5,544
)

(4,068
)
Cash Flows From Investing Activities:

Proceeds from sale of short-term investments

25,045

28,101

Purchases of short-term investments

—

—

Additions to property and equipment

(2
)

—

Net cash provided by investing activities

25,043

28,101

Cash Flows from Financing Activities:

Proceeds from Paycheck Protection Program loan

—

204

Net cash provided by financing activities

—

204

Net increase in cash and cash equivalents

19,499

24,237

Cash and cash equivalents at beginning of the year

5,245

6,276

Cash and cash equivalents at end of the year

$
24,744

$
30,513

Supplemental disclosures:

Cash paid for:

Interest

$
8

$
6

Income taxes

$
222

$
197

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

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EMERSON RADIO CORP. ANDSUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Common Stock

Additional

Total

Preferred

Number

Par

Paid-In

Accumulated

Treasury

Shareholders’

Stock

of Shares

Value

Capital

Deficit

Stock

Equity

Balance — March 31, 2021

$
3,310

52,965,797

$
529

$
79,792

$
(19,985
)

$
(33,201
)

$
30,445

Net loss

—

—

—

—

(2,711
)

—

(2,711
)
Balance — December 31, 2021

$
3,310

52,965,797

$
529

$
79,792

$
(22,696
)

$
(33,201
)

$
27,734

			*Common Stock*				*Additional*								*Total*
	*Preferred*		*Number*		*Par*		*Paid-In*		*Accumulated*			*Treasury*			*Shareholders’*
	*Stock*		*of Shares*		*Value*		*Capital*		*Deficit*			*Stock*			*Equity*
Balance — March 31, 2022	$	3,310		52,965,797	$	529	$	79,792	$	(23,611	)	$	(33,201	)	$	26,819
Net loss		—		—		—		—		(1,471	)		—			(1,471	)
Balance — December 31, 2022	$	3,310		52,965,797	$	529	$	79,792	$	(25,082	)	$	(33,201	)	$	25,348

Common Stock

Additional

Total

Preferred

Number

Par

Paid-In

Accumulated

Treasury

Shareholders’

Stock

of Shares

Value

Capital

Deficit

Stock

Equity

Balance — March 31, 2020

$
3,310

52,965,797

$
529

$
79,792

$
(16,009
)

$
(33,201
)

$
34,421

Net loss

—

—

—

—

(3,026
)

—

(3,026
)
Balance — December 31, 2020

$
3,310

52,965,797

$
529

$
79,792

$
(19,035
)

$
(33,201
)

$
31,395

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

			*Common Stock*				*Additional*								*Total*
	*Preferred*		*Number*		*Par*		*Paid-In*		*Accumulated*			*Treasury*			*Shareholders’*
	*Stock*		*of Shares*		*Value*		*Capital*		*Deficit*			*Stock*			*Equity*
Balance — March 31, 2021	$	3,310		52,965,797	$	529	$	79,792	$	(19,985	)	$	(33,201	)	$	30,445
Net loss		—		—		—		—		(2,711	)		—			(2,711	)
Balance — December 31, 2021	$	3,310		52,965,797	$	529	$	79,792	$	(22,696	)	$	(33,201	)	$	27,734

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1— BACKGROUND AND BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Emerson Radio Corp. and its subsidiaries (“Emerson” or the “Company”). The Company designs, sources, imports and markets certain houseware and consumer electronic products, and licenses the Company’s trademarks for a variety of products.

The unaudited interim consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary to present a fair statement of the Company’s consolidated financial position as of December 31, ~~2021~~2022 and the results of operations for the three and nine month periods ended December 31, 2022 and December 31, 2021 ~~and December 31, 2020.~~. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of the unaudited interim consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes; actual results could materially differ from those estimates. The unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly do not include all of the disclosures normally made in the Company’s annual consolidated financial statements. Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended March 31, ~~2021~~2022 (“fiscal ~~2021”~~2022”), included in the Company’s ~~annual report~~Annual Report on Form ~~10-K,~~10-K, as amended, for fiscal ~~2021.~~2022.

The results of operations for the three and nine month periods ended December 31, ~~2021~~2022 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the full year ending March 31, ~~2022~~2023 (“fiscal ~~2022”~~2023”).

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

Recently Adopted Accounting Pronouncements

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

In December 2019, the FASB issued ASU ~~2019-12,~~2019-12, “Income Taxes (Topic ~~740)~~740) - Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU ~~2019-12~~2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU ~~2019-12~~2019-12 is effective for fiscal years beginning after December 15, 2020. This standard took effect in the first quarter ~~(June~~( June 2021) of the Company’s fiscal year ending March 31, ~~2022.~~2022. The adoption of ASU ~~2019-12~~2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

The following Accounting Standards Updates (“ASUs”) were issued by the Financial Accounting Standards Board (“FASB”) which relate to or could relate to the Company as concerns the Company’s normal ongoing operations or the industry in which the Company operates.

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

In June 2016, the FASB issued ASU ~~2016-13~~2016-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU ~~2016-13~~2016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU ~~2016-13~~2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU ~~2016-13~~2016-13 is effective for fiscal years and interim ~~period~~periods beginning after December 15, 2022. Early adoption is permitted. The Company does not expect these amendments to have a material impact on its financial statements.

Revenue recognition: Sales to customers and related cost of sales are primarily recognized at the point in time when control of goods transfers to the customer. 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.~~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.

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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.

	Three Months Ended December 31,						Nine Months Ended December 31,						*Three Months Ended December 31,*						*Nine Months Ended December 31,*
	2021			2020			2021			2020			*2022*			*2021*			*2022*			*2021*

Numerator:
Net loss	$	(1,164	)	$	(945	)	$	(2,711	)	$	(3,026	)	$	(241	)	$	(1,164	)	$	(1,471	)	$	(2,711	)
Denominator:
Denominator for basic and diluted loss per share — weighted average shares		21,043			21,043			21,043			21,043			21,043			21,043			21,043			21,043
Net loss per share:
Basic and diluted loss per share	$	(0.06	)	$	(0.04	)	$	(0.13	)	$	(0.14	)	$	(0.01	)	$	(0.06	)	$	(0.07	)	$	(0.13	)

NOTE 3— SHAREHOLDERS’ EQUITY

~~NOTE 3 — SHAREHOLDERS’ EQUITY~~

Outstanding capital stock at December 31, ~~2021~~2022 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, ~~2021,~~2022, the Company had 0no options, warrants or other potentially dilutive securities outstanding.

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NOTE 4— INVENTORY

~~NOTE 4 — INVENTORY~~

Inventories, which consist primarily of finished goods, are stated at the lower of cost or net realizable value. Cost is determined using the ~~first-in, first-out~~first-in, first-out method. As of December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, inventories consisted of the following (in thousands):

		*December 31, 2022*				*March 31, 2022*
Finished goods		$	2,345			$	2,112

December 31, 2021

March 31, 2021

Finished goods

$
2,574

$
1,961

NOTE 5— INCOME TAXES

~~NOTE 5 — INCOME TAXES~~

At December 31, ~~2021,~~2022, the ~~Company~~Company had ~~$13.2~~$16.0 million of U.S. federal net operating loss (“NOL”) carry forwards. These losses do not expire but are limited to utilization of 80% of taxable income in any one year. At December 31, ~~2021,~~2022, the Company had approximately ~~$16.3~~$18.7 million of U.S. state NOL carry forwards. The tax benefits related to these state NOL carry forwards and future deductible temporary differences are recorded to the extent management believes it is more likely than not that such benefits will be realized.

The income of foreign subsidiaries before taxes was $247,000 for the three month period ended December 31, 2022 as compared to income of foreign subsidiaries before taxes of $19,000 for the three month period ended December 31, 2021. The income of foreign subsidiaries before taxes was ~~$19,000~~$489,000 for the ~~three~~nine month period ended December 31, ~~2021~~2022 as compared to ~~income before taxes of $103,000 for the three month period ended December 31, 2020. The~~ income of foreign subsidiaries before taxes ~~was~~of $71,000 for the nine month period ended December 31, 2021 ~~as compared to income before taxes of $103,000 for the nine month period ended December 31, 2020.~~ .

The Company analyzed the future reasonability of recognizing its deferred tax assets at December 31, ~~2021.~~2022. As a result, the Company concluded that a 100% valuation allowance of ~~approximately $4,152,000 would~~$4,800,000 would be recorded against the assets.

~~During~~

Although the Company generated a net operating loss, it recorded income tax expense of nil and $10,500, respectively, during the three and nine month periods ended December 31, 2022, primarily resulting from state income taxes. During the three and nine month periods ended December 31, 2021 ~~and December 31, 2020,~~, the Company recorded income tax expense of nil and ~~$9,900,~~$10,500, respectively, primarily resulting from state income taxes. ~~During~~After the ~~nine month periods ended December 31, 2021~~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 ~~December 31, 2020, the Company recorded income tax expense of approximately $11,000 and $15,200 respectively, primarily resulting from state income taxes.~~administrative expenses.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of December 31, ~~2021,~~2022, the Company’s open tax years for examination for U.S. federal tax are ~~2016-2021,~~2017-2021, and for U.S. states’ tax are ~~2015-2021.~~2016-2021. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense.

As of December 31, ~~2021~~2022, the Company is asserting under ASC ~~740-30~~740-30 that all of the unremitted earnings of its foreign subsidiaries are indefinitely invested. The Company evaluates this assertion each period based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S.

As of December 31, ~~2021,~~2022 and March 31, 2022, the Company had a federal tax liability of ~~approximately $1,808,000~~approximately $1,603,000 and $1,808,000, respectively, related to the repatriation of the Company’s undistributed earnings of its foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As of December 31, ~~2021,~~2022, the Company’s short term portion was approximately ~~$195,000~~$401,000 and the long term portion was approximately ~~$1,613,000.~~$1,202,000.

~~As of March 31, 2021,~~ ~~the Company had a federal tax liability of approximately $2,031,000 related to the~~ ~~repatriation of the Company’s undistributed earnings of its foreign subsidiaries~~ ~~as required by the Tax Act. As of March 31, 2021 the Company’s short term portion was approximately $195,000 and the long term portion was approximately $1,836,000.~~

The liability is payable over 8 years. The 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, ~~2021,~~2022, the Company has ~~made 4~~paid five of the 8eight installments. Each installment ~~is due~~must be remitted on or before July 15^th of the year in which such installment is due.

NOTE 6— RELATED PARTY TRANSACTIONS

From time to time, Emerson engages in business transactions with its controlling shareholder, Nimble Holdings Company Limited (“Nimble”), formerly known as The Grande Holdings Limited (“Grande”), and one or more of Nimble’s direct and indirect subsidiaries, or with entities related to the Company’s Chairman of the ~~Board.~~ Board of Directors. Set forth below is a summary of such transactions.

Controlling Shareholder

S&T International Distribution Limited (“S&T”), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd., which is a wholly owned subsidiary of Nimble, collectively have, based on a Schedule 13D/A filed with the SEC on February 15, 2019, the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 72.4%, of the Company’s outstanding common stock as of December 31, ~~2021.~~2022. Accordingly, the Company is a “controlled company” as defined in Section ~~801(a)~~801(a) of the NYSE American Company Guide.

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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, ~~2021,~~2022, the Company was billed approximately $40,000 and ~~$126,000,~~$119,000, respectively, for rental and utility fees from Vigers Appraisal and Consulting Ltd (“VACL”), which is a company related to the Company’s Chairman of the ~~Board.~~Board of Directors. As of December 31, ~~2021~~2022 the Company owed approximately $800 to VACL related to these charges.

During the three and nine month periods ended December 31, 2021, the Company was billed approximately ~~$600~~$500 and ~~$2,000,~~$1,100, respectively, for purchases of personal protection equipment from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the ~~Board. Vigers Strategic Services Ltd~~Board of Directors. VSSL was formerly known as Lafe Strategic Services Ltd. As of December 31, ~~2021~~2022 the Company owed ~~nil~~approximately $500 to VSSL related to these charges.

NOTE 7— SHORT TERM INVESTMENTS

~~NOTE 7 — SHORT TERM INVESTMENTS~~

At both December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, the Company held short term investments in deposits totaling nil ~~and $25.0 million, respectively.~~. The Company held ~~$22.0~~$25.5 million in deposits which were classified as cash equivalents as of December 31, ~~2021~~2022 and ~~$1.0~~$22.0 million of such deposits as of March 31, ~~2021.~~ 2022.

NOTE 8— CONCENTRATION RISK

~~NOTE 8 — CONCENTRATION RISK~~

Customer Concentration

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.

For the ~~three~~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%.

For the three month period ended December 31, 2021, the Company’s three largest customers accounted for approximately 92% of the Company’s net revenues, of which Amazon accounted for approximately 50%, Walmart accounted for approximately 37% and Fred Meyer accounted for approximately 5%.

For the nine month period ended December 31, 2021, the Company’s three largest customers accounted for approximately 88% of the Company’s net revenues, of which Walmart accounted for approximately 37%, Amazon accounted for approximately 36% and Fred Meyer accounted for approximately 15%.

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

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

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, ~~2021,~~2022, the Company’s gross product sales ~~were comprised~~included microwave ovens, which generated approximately 9% and 24%, respectively, of ~~two~~the Company’s gross product ~~types within two categories — housewares products~~sales and audio products, which generated approximately 91% and 75%, respectively, of ~~which~~the Company’s gross product sales.

For the three and nine month periods ended December 31, 2021, the Company’s gross product sales included microwave ovens, which generated approximately 10% and 24%, respectively, of the Company’s gross product ~~sales. Audio~~sales and audio products, which generated approximately 89% and 76%, respectively, of the Company’s gross product sales.

For the three and nine month periods ended December 31, 2020, the Company’s gross product sales were comprised of the same two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 25% and 36%, respectively, of the Company’s gross product sales. Audio products generated approximately 73% and 62%, respectively, of the Company’s gross product sales.

Concentrations of Credit Risk

As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top two customers accounted for ~~56%~~approximately 51% and ~~27%~~48%, respectively, as of December 31, ~~2021, respectively.~~ 2022. No other customers accounted for greater than 10% of the Company's total trade accounts receivable, net of specific reserves as of December 31, 2022. As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top ~~two~~three customers accounted for approximately 69%, 17% and ~~28%~~11%, respectively, as of March 31, ~~2021, respectively.~~2022. 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, ~~2021~~2022 and March 31, ~~2021~~2022 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 ~~$24.5~~$27.0 million and approximately ~~$5.0~~$25.3 million at December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, respectively.

Supplier Concentration

During the three and nine month periods ended December 31, ~~2021,~~2022, the Company procured 100% of its products for resale from its ~~two~~three largest factory suppliers, of which approximately 74% and 71%, respectively, was supplied by its largest supplier. During the three and nine month periods ended December 31, 2021, the Company procured 100% of its products for resale from its two largest factory suppliers, of which approximately 81% and 83%, respectively, was supplied by its largest supplier. During the three and nine month periods ended December 31, 2020, the Company procured 95% and 98% of its products for resale from its two largest factory suppliers, of which 57% and 58%, respectively, was supplied by its largest supplier.

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NOTE 9— LEASES

~~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 ~~thirteen~~four months to ~~three years.~~twenty-two 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, ~~2021~~2022 to indicate that a reassessment or re-measurement of the Company’s existing leases was required. There were also no impairment indicators identified during the quarter ended December 31, ~~2021~~2022 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC ~~360-10.~~topic 360-10, “Impairment and Disposal of Long-Lived Assets”.

As of December 31, ~~2021,~~2022, the Company’s current operating lease liabilities and finance lease ~~liabilities~~liabilities were ~~$225,000~~$145,000 and $1,000, respectively and its non-current operating lease liabilitiesand finance lease liabilities were ~~$244,000~~$98,000 and ~~$2,000,~~$1,000, respectively. The Company’s operating and finance lease right-of-use asset balances are presented in non-current assets. The net balance of the Company’s operating and finance lease right-of-use assets as of December 31, ~~2021~~2022 was ~~$455,000~~$244,000 and ~~$3,000, respectively.~~$2,000, respectively.

In January 2023, the Company relocated its headquarters to a temporary office space. The Company's new landlord has yet to receive the proper permits to build out the agreed-upon space. The commencement date on the new lease will not begin until the Company moves into the agreed-upon space. The Company is not obligated to pay rent while it resides in the temporary office space. Due to the uncertainty of the commencement date, the right-of-use asset and lease liabilities cannot be calculated at this time.

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

	Three Months Ended December 31,				Nine Months Ended December 31,				*Three Months Ended December 31,*				*Nine Months Ended December 31,*
	2021		2020		2021		2020		*2022*		*2021*		*2022*		*2021*
	(in thousands)				(in thousands)				(in thousands)				(in thousands)
Lease cost
Operating lease cost	$	64	$	64	$	191	$	191	$	60	$	64	$	185	$	191
Finance lease cost		0		0		0		0		—		—		—		—
Amortization of right-of-use assets		0		0		0		0		—		—		—		—
Interest on lease liabilities		0		0		0		0		—		—		—		—
Variable lease costs		0		0		0		0		—		—		—		—
Total lease cost		64		64		191		191		60		64		185		191

The supplemental cash flow information related to leases are as follows:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		63		67		194		200		62		63		187		194
Operating cash flows from finance leases		0		0		0		0		—		—		—		—
Financing cash flows from finance leases		0		0		0		0		—		—		—		—

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		403		0		403		0		—		403		—		403
Finance leases		0		0		0		0		—		—		—		—

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

Weighted average remaining lease term (in months)	*As of December 31, 2022*			*As of December 31, 2021*
Operating leases		18.8			27.3
Finance leases		17.2			29.2

Weighted average discount rate
Operating leases		7.50	%		7.50	%
Finance leases		7.50	%		7.50	%

As of December 31, 2022 the maturities of lease liabilities were as follows:

(in thousands)	Operating Leases			Finance Leases

2023	$	46		$	1
2024		149			1
2025		62			—
2026		—			—
Thereafter		—			—
Total lease payments	$	257		$	2
Less: Imputed interest		(14	)		—
Total	$	243		$	2

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

Weighted average remaining lease term (in months)

As of December 31, 2021

As of December 31, 2020

Operating leases

27.3

19.0

Finance leases

29.2

41.2

Weighted average discount rate

Operating leases

7.50
%

7.50
%
Finance leases

7.50
%

7.50
%

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As of December 31, 2021 the maturities of lease liabilities were as follows:

(in thousands)

Operating Leases

Finance Leases

2022

$
63

$
1

2023

233

1

2024

149

1

2025

63

1

Thereafter

—

—

Total lease payments

$
508

$
4

Less: Imputed interest

(39
)

(1
)
Total

$
469

$
3

NOTE 10— GOVERNMENTAL ASSISTANCE PROGRAMS

~~NOTE 10 —~~ ~~PAYCHECK PROTECTION PROGRAM AND EMPLOYMENT SUPPORT SCHEME~~

On July 5, 2021, the Company’s Paycheck Protection Program (”PPP”) loan of approximately $204,400 plus accrued interest of $2,400 was forgiven by the Small Business Administration. The Company recorded the impact of its PPP loan forgiveness as other income during the quarter ended September 30, 2021.

During the three ~~months~~ month periods ended December 31, 2022 and December 31, 2021 ~~and December 31, 2020,~~, the Company’s Hong Kong subsidiary recorded $4,000 and nil, ~~and~~ ~~$28,000,~~ respectively, under the governmental program called the Employment Support Scheme (“ESS”). The proceeds must be used for payroll expenses and the Company may be subject to government-appointed random reviews to verify the information submitted by the applicant.

During the nine ~~months~~ month periods ended December 31, 2022 and December 31, 2021 ~~and December 31, 2020,~~ , the Company’s Hong Kong subsidiary recorded ~~nil~~$34,000 and ~~$83,000,~~nil, respectively, under the ~~ESS program.~~ESS. During the nine month periods ended December 31, 2022 and December 31, 2021, the Company recorded nil and $207,000, respectively, related to forgiveness of the Company's Paycheck Protection Program (”PPP”) loan.

The income realized from ~~the PPP loan forgiveness and~~ the amount granted under the ESS program and the PPP loan forgiveness are presented as Other Income under the description called “Income from governmental assistance programs” in the Consolidated Statements of Operations.

NOTE 11— ~~SUBSEQUENT EVENT~~ LEGAL PROCEEDINGS

On ~~January 3,~~April 19, 2022, ~~a legal settlement was entered into between~~the US District Court for the District of Delaware granted judgment in favor of the Company in its trademark infringement lawsuit against air conditioning and ~~one of its former directors that resolved certain disputes,~~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 the same mark or any other mark or name containing the word “Emerson” going forward. The judgment also awards $6.5 million to the Company. The defendants have to date conditionally made payments, including certain ~~claims against the former director~~advances and ~~an indemnification claim made by the former director. The amount~~a portion of ~~the settlement was $450,000 and is presented separately~~their liability, which are reflected as advanced deposits in the Consolidated ~~Statements of Operations as~~Balance Sheets, in connection with ongoing negotiations among the parties. There is no guarantee that the Company will be able to collect the entire judgment or that a ~~loss on settlement of litigation for~~negotiated resolution regarding these matters will ever be agreed among the ~~three and nine month periods ended December 31, 2021.~~parties or, if agreed, how soon the parties will be able to do so.

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Item2. ~~Management’s~~Management’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.

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-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:

●

•

the ongoing effects of the coronavirus (COVID-19) pandemic-related business disruption and economic uncertainty on both the Company’s projected customer demand and supply chain, as well as its operations and financial performance;

•

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 as a result of labor disputes and public health threats and social unrest;

●

•

evolving cybersecurity threats to the Company’s information technology systems or those of its customers or suppliers;

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●

•

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 potential 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 relative to the dollar 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, ~~2021~~2022 and other filings with the SEC.

Furthermore, the situation surrounding the COVID-19 pandemic remains ~~fluid and the potential for a material~~fluid. The extent of any impact on the Company’s results of operations and financial condition increases the longer the COVID-19 pandemic affects activity levels in the United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on itsCompany's business, results of operations or financial ~~position. The extent of any impact~~position will depend on future developments, including the duration of the outbreak, duration of the measures taken to control the spread, the effectiveness of actions taken to contain and treat the disease, and demand for the Company’s products.

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. 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, ~~2021~~2022 (fiscal ~~2022)~~2023) and December 31, ~~2020~~2021 (fiscal ~~2021)~~2022) (in thousands):

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2020			2021			2020			2022			2021			2022			2021
Net product sales	$	2,509		$	2,273		$	6,290		$	5,718		$	1,704		$	2,509		$	4,335		$	6,290
Licensing revenue		65			60			195			180			228			65			971			195
Net revenues		2,574			2,333			6,485			5,898			1,932			2,574			5,306			6,485
Cost of sales		1,826			1,754			4,786			4,519			1,361			1,826			3,549			4,786
Selling, general and administrative expenses		1,469			1,560			4,196			4,601			1,051			1,469			3,686			4,207
Operating loss		(721	)		(981	)		(2,497	)		(3,222	)		(480	)		(721	)		(1,929	)		(2,508	)
Loss on settlement of litigation		(450	)		-			(450	)		-			-			(450	)		-			(450	)
Interest income, net		7			18			40			128			235			7			424			40
Income from governmental assistance programs		-			28			207			83			4			-			34			207
Loss before income taxes		(1,164	)		(935	)		(2,700	)		(3,011	)		(241	)		(1,164	)		(1,471	)		(2,711	)
Provision for income taxes		-			10			11			15			—			—			—			—
Net loss	$	(1,164	)	$	(945	)	$	(2,711	)	$	(3,026	)	$	(241	)	$	(1,164	)	$	(1,471	)	$	(2,711	)

Net product sales — Net product sales for the three month period ended December 31, 2022 were $1.7 million as compared to $2.5 million for the three month period ended December 31, 2021 ~~were $2.5 million as compared to $2.3 million for the~~ ~~three month period ended December 31, 2020~~, ~~an increase~~a decrease of ~~$0.2~~$0.8 million, or ~~10.4%~~32.1%. The Company’s sales during the three month periods endedDecember 31, 2022 and December 31, 2021 ~~and December 31, 2020~~ were highly concentrated among the Company’s three largest customers – Wal-Mart, Amazon and Fred Meyer – comprising in the aggregate ~~approximately~~approximately 99% and 94% ~~and 90%~~, respectively, of the Company’s total net product sales. for such periods.

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Net product sales for the nine month period ended December 31, ~~2021~~2022 were ~~$6.3~~$4.3 million as compared to ~~$5.7~~$6.3 million for the nine month period ended December 31, ~~2020, an increase~~2021, a decrease of ~~$0.6~~$2.0 million, or ~~10.0%~~31.1%. The Company’s sales during ~~such~~the nine month periods ended December 31, 2022 and December 31, 2021 were highly concentrated among the Company’s three largest customers – Wal-Mart, ~~Amazon and~~ Fred Meyer and Amazon – comprising in the aggregate approximatel~~approximately~~y 91% and ~~83%~~91%, ~~respectively,~~ respectively, of the Company’s total net product ~~sales.~~sales for such 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~~approximately $10,000 and $6,000 ~~and $3,000~~ for the three month periods ended December 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and ~~approximately $12,000~~by approximately $16,000 and ~~$46,000~~nil for ~~the~~the nine month periods ended December 31, ~~2021~~2022 and December 31, ~~2020, respectively. Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson~~^® ~~brand name.~~2021, respectively. The major elements which contributed to the overall ~~increase~~decrease in net product sales were as follows:

i) Houseware products:Net sales decreased $0.1 million, or 43.9%, to $0.2 million for the three month period ended December 31, 2022 as compared to $0.3 million for the three month period ended December 31, 2021, driven by reduced demand for microwave ovens. For the nine month period ended December 31, 2022, houseware net product sales were $1.1 million, a decrease of $0.4 million, or 29.6%, from $1.5 million for the nine month period ended December 31, 2021, driven by a decrease in year-over-year sales of microwave ovens.

~~Houseware products:~~ ~~Net sales decreased $0.3 million, or 54.2%, to $0.3 million for the three month period ended December 31, 2021 as compared to $0.6 million for the three month period ended December 31, 2020,~~ ~~driven by a decrease in year-over-year sales of microwave ovens. For the nine month period~~ ~~ended December 31, 2021~~, houseware net product sales were $1.5 million, a decrease of $0.6 million, or 29.6%, from $2.1 million for the nine month period ended December 31, 2020, driven by a decrease in year-over-year sales of microwave ovens.

~~ii)~~

~~Audio products:~~ ~~Net sales increased $0.5 million, or 32.8%, to $2.2 million for the~~ ~~three month period ended December 31, 2021~~ ~~as compared to $1.7 million for the~~ ~~three month period ended December 31, 2020, resulting from increased net sales of clock radios.For the nine month period~~ ~~ended December 31, 2021~~, audio product net sales were $4.8 million, an increase of $1.2 million or 33.9%, from $3.6 million for the nine month period ended December 31, 2020 resulting from increased net sales of clock radios.

ii) Audio products: Net sales decreased $0.7 million, or 30.7%, to $1.5 million for the three month period ended December 31, 2022 as compared to $2.2 million for the three month period ended December 31, 2021, resulting from decreased net sales of clock radios. For the nine month period ended December 31, 2022, audio net product sales were $3.3 million, a decrease of $1.5 million or 31.6%, from to $4.8 million for the nine month period ended December 31, 2021, driven by a decrease in year-over-year sales of clock radios.

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. 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 ~~LMCA~~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 current and proposed 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 2020, 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 and the distribution capabilities of the Company’s third party logistics provider, including as a result of quarantine or closure. The pandemic has directly and indirectly disrupted certain sales and supply chain activities and affected the Company’s ability to address those challenges. Although the Company has since experienced increased demand in certain of its product categories and favorable impacts on its online channels as a result of the COVID-19 pandemic, the Company expects that the pandemic will continue to impact its business and operations over the coming quarters, including with respect to the magnitude and timing of orders by retailers, resellers, distributors and consumers. Additionally, surges in demand and shifts in shopping patterns related to the COVID-19 pandemic have strained the global freight network and availability of shipping containers, which has been further exacerbated by COVID-19 outbreaks and protocols at many port locations, resulting in carrier-imposed capacity restrictions, carrier delays and longer lead times, including shipment receiving and unloading backlogs at many U.S. ports. As a result, the Company’s shipping costs have recently increased by several multiples compared to fiscal 2021 averages. Global component shortages, in particular semiconductor chips, arising from these changes in consumer demand and reduced manufacturing capacity related to the COVID-19 pandemic have also caused and are likely to continue to result in significant price fluctuations and long 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 if shipping container capacity remains limited or unavailable, they 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 have and 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 ~~effects of the COVID-19 pandemic on~~ macroeconomic conditions domestically and internationally, ~~along with the uncertainty associated with a potential recovery,~~ the Company has implemented certain cost-reduction actions intended to reduce ~~expenditures in light of the effects of the COVID-19 pandemic to the business.~~expenditures. However, the environment remains highly uncertain and demand for the Company’s products remains difficult to assess due to many factors including the pace of economic recovery around the world, the status of various government stimulus programs, competitive intensity and retailer actions to continue carefully managing inventory. As a result, the Company is unable at this time to predict the full impact of the COVID-19 pandemic on its operations and financial results, and, depending on the magnitude and duration of the pandemic, including the further spread and severity of COVID-19 cases in areas in which the Company operates and the availability and distribution of effective vaccines, such impact may be material. Accordingly, current results and financial condition discussed herein may not be indicative of future operating results and ~~trends~~trends.

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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, ~~2021.~~2022.

Legal Proceedings — On April 19, 2022, the US District Court for the District of Delaware 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 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 the same mark or any other mark or name containing the word “Emerson” going forward. The judgment also awards $6.5 million to the Company. The defendants have to date conditionally made payments, including certain advances and a portion of their liability, which are reflected as advanced deposits in the Consolidated Balance Sheets, in connection with ongoing negotiations among the parties. There is no guarantee that the Company will be able to collect the entire judgment or that a negotiated resolution regarding these matters will ever be agreed among the parties or, if agreed, how soon the parties will be able to do so.

Licensing revenue — Licensing revenue for the three month period ended December 31, 2022 was $228,000 as compared to $65,000 for the three month period ended December 31, 2021, ~~was $65,000 as compared to $60,000~~ an increase of $163,000, or 251.4%. Licensing revenue for the ~~three~~nine month period ended December 31, ~~2020~~,2022 was $971,000 as compared to $195,000 for the nine month period ended December 31, 2021, an increase of ~~$5,000,~~$776,000 or ~~8.3%~~398.0%. ~~The~~For the three and nine month periods ended December 31, 2022 the Company recorded $105,000 and $700,000, respectively, in royalty income derived from sell-off agreements made with customers of Emerson Quiet Kool. Also contributing were year-over-year ~~increase can be~~increases attributed to the signing of new licensing agreements as well as an escalation in the annual minimum royalty earned by the Company from one of its ~~licensee.~~existing licensees.

~~Licensing revenue~~

Net revenues — Net revenues were $1.9 million for the three month period ended December 31, 2022 as compared to $2.6 million for the three month period ended December 31, 2021, a decrease of $0.7 million, or 24.9% and $5.3 million for the nine month period ended December 31, ~~2021 was $195,000~~2022 as compared to $180,000 for the nine month period ended December 31, 2020, an increase of $15,000, or 8.3%. The year-over-year increase can be attributed to the escalation in the annual minimum royalty earned by the Company from its licensee.

~~Net revenues~~ ~~— As a result of the foregoing factors, the Company’s net revenues were $2.6 million for the~~ ~~three month period ended December 31, 2021~~ ~~as compared to $2.3 million for the~~ ~~three month period ended December 31, 2020, an increase of $0.3 million, or 10.3%,~~ ~~and~~ $6.5 million for the nine month period ended December 31, 2021 ~~as compared~~, a decrease of $1.2 million, or 18.2%.

Cost of sales — Cost of sales decreased $0.5 million, or 25.5% to ~~$5.9~~$1.3 million for the ~~nine~~three month period ended December 31, ~~2020, an increase of $0.6 million, or 10.0%~~

~~Cost of sales~~ ~~— In absolute terms, cost of sales increased $0.1 million, or 4.1%,~~2022 as compared to $1.8 million for the three month period ended December 31, 2021. The decrease in absolute terms for the three month period ended December 31, 2022 as compared to the three month period ended December 31, 2021 ~~as compared to $1.7 million for the~~ ~~three month period ended December 31, 2020. The increase in absolute terms for the~~ ~~three month period ended December 31, 2021~~ ~~as compared to the~~ ~~three month period ended December 31, 2020~~ was primarily related to ~~an increase~~a decrease in net product sales partially offset by ~~lower~~higher year-over-year gross cost of sales as a percentage of gross sales.

~~In absolute terms, cost~~

Cost of sales ~~increased $0.3~~decreased $1.2 million, or ~~5.9%,~~25.9% to $3.6 million for the nine month period ended December 31, 2022 as compared to $4.8 million for the nine month period ended December 31, ~~2021 as compared to $4.5 million for the nine month period ended December 31, 2020.~~2021. The ~~increase~~decrease in absolute terms for the nine month period ended December 31, ~~2021~~2022 as compared to the ~~nine~~three month period ended December 31, ~~2020~~2021 was primarily related to ~~an increase~~a decrease in net product sales partially offset by ~~lower~~higher year-over-year gross cost of sales as a percentage of gross sales.

The Company purchases the products it sells from a limited number of factory suppliers. ~~For~~In each of the three ~~month periods ended December 31, 2021~~and ~~December 31, 2020, the Company purchased 100% and 95%, respectively, from its two largest suppliers. For the~~ nine month periods ended December 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company purchased 100% ~~and 98%, respectively,~~of its products from its ~~two~~three largest suppliers.

Selling, general and administrative expenses (“(“S,G~~&A”~~&A”) — S,G&A ~~in absolute terms,~~ was $1.1 million for the three month period ended December 31, 2022 as compared to $1.5 million for the three month period ended December 31, 2021, ~~as compared to $1.6 million for~~ ~~three month period ended December 31, 2020~~, a decrease of ~~$0.1~~$0.4 million or ~~5.8%~~28.5%. S,G&A, as a percentage of net revenues, was ~~57.1%~~54.4% for the three month period ended December 31, ~~2021~~2022 as compared to ~~66.9%~~57.1% for the three month period ended December 31, ~~2020~~.2021. The decrease in S,G&A was primarily ~~attributed~~attributable to a decrease in legal fees of $333,000, a decrease in compensation costs of ~~approximately $113,000. Compensation costs~~$42,000, a decrease in insurance expense of $43,000 and a decrease in director’s fees of $15,000. Legal fees for the three month period ended December 31, ~~2021~~2022 were ~~$531,000~~$169,000 as compared to ~~$644,000~~$502,000 for the three month period ended December 31, ~~2020~~.2021. Compensation costs for the three month period ended December 31, 2022 were $489,000 as compared to $531,000 for the three month period ended December 31, 2021. Insurance expense for the three month period ended December 31, 2022 was $111,000 as compared to $154,000 for the three month period ended December 31, 2021. Director’s fees for the three month period ended December 31, 2022 were $33,000 as compared to $48,000 for the three month period ended December 31, 2021.

S,G&A ~~in absolute terms,~~ was $3.7 million for the nine month period ended December 31, 2022 as compared to $4.2 million for the nine month period ended December 31, 2021, ~~as compared to $4.6 million for the nine month period ended December 31, 2020,~~ a decrease of ~~$0.4~~$0.5 million or ~~8.8%~~12.4%. S,G&A, as a percentage of net revenues, was ~~64.7%~~69.5% for the nine month period ended December 31, ~~2021~~2022 as compared to ~~78.0%~~64.9% for the nine month period ended December 31, ~~2020.~~2021. The decrease in S,G&A was primarily ~~attributed~~attributable to a decrease in compensation costs of $247,000, a decrease in legal fees of ~~approximately $245,000~~$93,000, a decrease in insurance expense of $71,000, a decrease in director’s fees of $63,000, a decrease in commission expense of $30,000 and a decrease in ~~compensation~~bad debt expense of $25,000. Compensation costs ~~of approximately $126,000.~~for the nine month period ended December 31, 2022 were $1,524,000 as compared to $1,771,000 for the nine month period ended December 31, 2021. Legal fees for the nine month period ended December 31, ~~2021~~2022 were ~~approximately $1,100,000~~$1,007,000 as compared to ~~approximately $1,345,000~~$1,100,000 for the nine month period ended December 31, ~~2020. The majority of the decrease in legal fees concerned the protection of the Emerson® trademark. Compensation costs~~2021. Insurance expense for the nine month period ended December 31, ~~2021 were approximately $1,770,000~~2022 was $388,000 as compared to ~~approximately $1,896,000~~$459,000 for the nine month period ended December 31, ~~2020. The majority of~~2021. Director’s fees for the ~~decrease in compensation costs~~nine month period ended December 31, 2022 were ~~due~~$97,000 as compared to ~~headcount reductions.~~$160,000 for the nine month period ended December 31, 2021. Commission expense for the nine month period ended December 31, 2022 was $33,000 as compared to $63,000 for the nine month period ended December 31, 2021. Bad debt expense for the nine month period ended December 31, 2022 was $2,000 as compared to $27,000 for the nine month period ended December 31, 2021.

~~Loss on settlement of litigation~~Interest income, net — ~~During~~Interest income, net, was $235,000 for the three month period ended December 31, 2022 as compared to $7,000 for the three month period ended December 31, 2021, ~~a settlement agreement between the Company and one~~an increase of ~~its former directors was entered into regarding an indemnification claim.~~$228,000. The ~~amount of the settlement was $450,000. See “Note 11 – Subsequent Event”.~~

~~Interest income, net~~ ~~— Interest income, net, was $7,000 for the~~ ~~three month period ended December 31, 2021~~ ~~as compared to $18,000 for the~~ ~~three month period ended December 31, 2020, a decrease of $11,000. The decrease~~increase was primarily due to ~~lower average interest rates earned on the Company’s short term investments.~~

Interest income, net, was $40,000 for the nine month period ended December 31, 2021 as compared to $128,000 for the nine month period ended December 31, 2020, a decrease of $88,000. The decrease was primarily due to lowerhigher average interest rates earned on the Company’s short term investments.

Interest income, net, was $424,000 for the nine month period ended December 31, 2022 as compared to $40,000 for the nine month period ended December 31, 2021, an increase of $384,000. The increase was primarily due to higher average interest rates earned on the Company’s short term investments.

Income from governmental assistance programs— For the three ~~and nine~~ month ~~periods~~period ended December 31, ~~2021,~~2022, the Company recorded income of approximately nil and $207,000, respectively, related to its PPP loan forgiveness. For the three and nine month periods ended December 31, 2020, the Company recorded income of approximately $28,000 and $83,000, respectively, related to assistance received from the Hong Kong government$4,000 under the ESS program. See “Note 10 ~~- Paycheck Protection Program and Employment Support Scheme”~~– Governmental Assistance Programs”.

~~Provision (benefit) for income taxes~~ —

For the ~~three~~nine month period ended December 31, ~~2021~~,2022, the Company recorded income ~~tax expense~~ of ~~nil as compared to income tax expense of $9,900 for~~approximately $34,000 under the ~~three month period ended December 31, 2020. See “Note 5 – Income Taxes”.~~

ESS program. For the nine month period ended December 31, 2021, the Company recorded income ~~tax expense~~ of ~~$11,000~~$207,000 as ~~compared to~~loan forgiveness in respect of its PPP loan. See “Note 10 – Governmental Assistance Programs”.

Provision (benefit) for income taxes — For both of the three month periods ended December 31, 2022 and December 31, 2021, the Company recorded income tax expense of ~~$15,200 for~~nil. For both of the nine month ~~period~~periods ended December 31, ~~2020.~~2022 and December 31, 2021, the Company under the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” incurred $10,950 of non-income based state taxes, which are now reported as S,G &A. See “Note 5 – Income Taxes”.

Although the Company generated net losses during fiscal ~~2022~~2023 and fiscal ~~2021,~~2022, it was unable to realize an income tax benefit due to valuation allowances recorded against its deferred tax assets.

Net (loss) — As a result of the foregoing factors, the Company realized a net loss of ~~$1,164,000~~$241,000 for the three month period ended December 31, ~~2021~~2022 as compared to a net loss of ~~$945,000~~$1,164,000 for the three month period ended December 31, ~~2020~~.2021.

For the nine month period ended December 31, ~~2021,~~2022, the Company realized a net loss of ~~$2,711,000~~$1,471,000 as compared to a net loss of ~~$3,026,000~~$2,711,000 for the nine month period ended December 31, ~~2020.~~2021.

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Liquidity and Capital Resources

As of December 31, ~~2021,~~2022, the Company had cash and cash equivalents of approximately ~~$24.7~~$27.3 million as compared to approximately ~~$5.2~~$25.6 million at March 31, ~~2021.~~2022. Cash and cash equivalents includes short term investments in deposits which were classified as cash equivalents of $25.5 million as of December 31, 2022 compared to $22.0 million of such deposits as of March 31, 2022. Working capital decreased to ~~$29.0~~$26.3 million at December 31, ~~2021~~2022 as compared to ~~$32.1~~$28.1 million at March 31, ~~2021.~~2022. The increase in cash and cash equivalents of approximately ~~$19.5~~$1.7 million was due to ~~the~~an increase in advanced deposits of $4.1 million (representing conditional payments received in connection with ongoing settlement negotiations) and a decrease in ~~short term investments of $25.0 million, an increase~~accounts receivable of $0.4 million ~~in accounts payable and other current liabilities and the increase in long term lease liabilities of $0.2 million~~partially offset by the net loss generated during the period of ~~$2.7~~$1.5 million, an increase in prepaid purchases of $0.5 million, a decrease in accounts ~~receivable~~payable and other current liabilities of ~~$1.9~~$0.2 million, an increase in inventory of ~~$0.6~~$0.2 million and a decrease in federal taxes payable of $0.2 million and an increase in licensing receivables of $0.2 million.

Cash Flows

Net cash provided by operating activities was approximately $1.7 million for the nine month period ended December 31, 20221, resulting from an increase in advanced deposits of $4.1 million and a decrease in accounts receivable of $0.3 million and a decrease in prepaid expenses and other current assets of $0.1 million partially offset by the $1.5 million net loss generated during the period, an increase in prepaid purchases of $0.5 million, a decrease in accounts payable and other current liabilities of $0.2 million, an increase in ~~right of use assets~~inventory of $0.2 million, a decrease in federal taxes payable of $0.2 million ~~a decrease in PPP loan payable of $0.2 million, a decrease in deferred revenue of $0.2 million~~ and an increase in ~~prepaid expenses and other current assets~~licensing receivables of ~~$0.1~~$0.2 million.

~~Cash Flows~~

Net cash used by ~~operating~~investing activities was ~~approximately $5.5 million~~nil for the nine month period ended December 31, 2021, resulting from a $2.7 million net loss generated during the period, an increase in accounts receivable of $2.1 million, an increase in inventory of $0.6 million, an increase in right of use assets of $0.4 million, a decrease in federal taxes payable of $0.2 million, the impact of the PPP loan forgiveness of $0.2 million partially offset by an increase in accounts payable and other current liabilities of $0.4 million, an increase in long-term lease liabilities of $0.2 million and a decrease in prepaid purchases of $0.1 million.2022.

~~Net cash provided by investing activities was approximately $25.0 million for the nine month period ended December 31, 2021 due to a decrease in short term deposits.~~

Net cash used by financing activities was nil for the nine month period ended December 31, ~~2021.~~2022.

Sources and Uses of Funds

The Company’s principal existing sources of cash are generated from operations and its existing short-term 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.

~~Paycheck Protection Program Loan~~

In April and May of 2020, the Company applied for and received aggregate loan proceeds of approximately $0.2 million under the PPP. The PPP loan accrued interest at 1% and matures two years from the date of issuance, with a deferral of payments for the first six months. The Company used all of the PPP loan proceeds for qualifying expenses in accordance with terms of the CARES Act and applied for forgiveness of the loan to the extent applicable. On July 5, 2021, the Company’s PPP loan was completely forgiven by the Small Business Administration. See Note 10 of the Notes to the Interim Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As of December 31, ~~2021,~~2022, 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 2019-12 ~~“Income~~“Income Taxes ~~(Topic~~(Topic 740)– Simplifying the Accounting for Income ~~Taxes”~~Taxes” (Issued December 2019)

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. This standard took effect in the first quarter (June 2021) of the Company’s fiscal year ending March 31, 2022. The adoption of ASU 2019-12 had no material impact on the Company’s consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

The following 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 2016-13 ~~“Financial~~“Financial Instruments – Credit ~~Losses”~~Losses” (Issued June 2016)

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2022. Early adoption is permitted. The Company does not expect these amendments to have a material impact on its financial statements.

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Item3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item4. Controls and Procedures.

(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 ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”))~~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, ~~2021,~~2022, 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 that occurred during the fiscal quarter ended December 31, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item1. Legal Proceedings.

The Company is, ~~not currently a party~~and from time to ~~any~~time may become, involved in 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 any such pending litigation matters. However, management believes, based on its examination of such matters, that the ~~Company’s ultimate liability will~~Company is not currently involved in any legal proceedings that, if determined adversely to the Company, would have a material adverse effect on the Company’s financial position, results of operations or cash flows. Information relating to our ongoing legal proceedings is described in Note 11 to our condensed consolidated financial statements in Part I, Item I of this Quarterly Report on Form 10-Q.

Item1A. Risk Factors.

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, as amended, for the year ended March 31, ~~2021.~~2022.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item3. Defaults Upon Senior Securities.

(a) None

(b) None

Item4. Mine Safety Disclosure.

Not applicable.

Item5. Other Information.

None

Item6. Exhibits.


31.1		Certification of the ~~Company’s~~Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Certification of the ~~Company’s~~Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32		Certification of the ~~Company’s~~Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.*

101.SCH		Inline XBRL Taxonomy Extension Schema Document.*

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~filed herewith

**	furnished herewith

*	~~filed herewith~~

**	~~furnished herewith~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EMERSON RADIO CORP.
			(Registrant)

			/s/ Christopher W. Ho
Date: February 14, ~~2022~~		2023	Christopher W. Ho
			Chief Executive Officer (Principal Executive Officer)

			/s/ Richard Li
Date: February 14, ~~2022~~		2023	Richard Li
	Chief Financial Officer (Principal Financial and Accounting Officer)		~~Chief Financial Officer~~ ~~(Principal Financial and Accounting Officer)~~

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Delaware		22-3285224
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~35 Waterview Blvd.,~~959 Route 46 East, Suite ~~140,~~210, Parsippany, NJ		07054
(Address of principal executive offices)	(Zip code)	~~(Zip code)~~


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share	MSN	~~MSN~~NYSE American	~~NYSE American~~

Large accelerated filer	☐	Accelerated filer		☐

Non-accelerated filer	☒	Smaller reporting company		☒

		Emerging growth company	☐	☐

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		3
~~Item 1. Financial Statements~~		3
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		1413
Item 3. Quantitative and Qualitative Disclosures About Market Risk		1918
Item 4. Controls and Procedures		1918
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		19
Item ~~1. Legal Proceedings~~1A. Risk Factors		2119
~~Item 1A. Risk Factors~~		21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2119
Item 3. Defaults Upon Senior Securities		2119
Item 4. Mine Safety Disclosure		2119
Item 5. Other Information		2119
Item 6. Exhibits		2119
SIGNATURES	20	22

	December 31, 2021			March 31, 2021

ASSETS
Current Assets:
Cash and cash equivalents	$	24,744		$	5,245
Short term investments		—			25,045
Accounts receivable, net		2,619			691
Inventory		2,574			1,961
Prepaid purchases		287			361
Prepaid expenses and other current assets		383			289
Total Current Assets		30,607			33,592
Non-Current Assets:
Property and equipment, net		2			—
Right-of-use asset-operating leases		455			213
Right-of-use asset-finance leases		3			3
Other assets		90			94
Total Non-Current Assets		550			310
Total Assets	$	31,157		$	33,902
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and other current liabilities		1,142			788
Paycheck Protection Program loan		—			204
Due to affiliate		1			1
Short-term operating lease liability		225			152
Short-term finance lease liability		1			1
Income tax payable, current portion		195			195
Deferred revenue		—			195
Total Current Liabilities		1,564			1,536
Non-Current Liabilities:
Long-term operating lease liability		244			82
Long-term finance lease liability		2			3
Income tax payable		1,613			1,836
Total Non-Current Liabilities		1,859			1,921
Total Liabilities	$	3,423		$	3,457
Shareholders’ Equity:
Series A Preferred shares — 10,000,000 shares authorized; 3,677 shares issued and outstanding; liquidation preference of $3,677,000		3,310			3,310
Common shares — $0.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at December 31, 2021 and March 31, 2021, respectively; 21,042,652 shares outstanding at December 31, 2021 and March 31, 2021, respectively		529			529
Additional paid-in capital		79,792			79,792
Accumulated deficit		(22,696	)		(19,985	)
Treasury stock, at cost (31,923,145 shares at December 31, 2021 and March 31, 2021, respectively)		(33,201	)		(33,201	)
Total Shareholders’ Equity		27,734			30,445
Total Liabilities and Shareholders’ Equity	$	31,157		$	33,902

			Common Stock				Additional								Total
	Preferred		Number		Par		Paid-In		Accumulated			Treasury			Shareholders’
	Stock		of Shares		Value		Capital		Deficit			Stock			Equity
Balance — March 31, 2021	$	3,310		52,965,797	$	529	$	79,792	$	(19,985	)	$	(33,201	)	$	30,445
Net loss		—		—		—		—		(2,711	)		—			(2,711	)
Balance — December 31, 2021	$	3,310		52,965,797	$	529	$	79,792	$	(22,696	)	$	(33,201	)	$	27,734

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

Weighted average remaining lease term (in months)	As of December 31, 2021			As of December 31, 2020
Operating leases		27.3			19.0
Finance leases		29.2			41.2

Weighted average discount rate
Operating leases		7.50	%		7.50	%
Finance leases		7.50	%		7.50	%