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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

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

EMERSON RADIO CORP. ANDSUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands)

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

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 JuneSeptember 30, 2022 and the results of operations for the three and six month periods ended JuneSeptember 30, 2022 and JuneSeptember 30, 2021.2021. 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, 2022 (“fiscal 2022”), included in the Company’s Annual Report on Form 10-K,10-K, as amended, for fiscal 2022.

The results of operations for the three and six month periodperiods ended JuneSeptember 30, 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 31,2023 (“fiscal 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 “Income2019-12“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 2019-122019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-122019-12 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 2019-122019-12 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 “Financial2016-13“Financial Instruments – Credit Losses”Losses” (Issued June 2016)

In June 2016, the FASB issued ASU 2016-132016-13 “Financial Instruments - Credit Losses” to introduce new guidance for the accounting for credit losses on instruments within its scope. ASU 2016-132016-13 requires among other things, the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-132016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-132016-13 is effective for fiscal years and interim periods beginning after December 15, 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 when the goods are passed over the rail of the customer’s vessel. Under the Domestic Program, title passes primarily at the time of shipment. Estimates for future expected returns are based upon historical return rates and netted against revenues.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. Revenue is recorded net of customer discounts, promotional allowances, volume rebates and similar charges. When the Company offers the right to return product, historical experience is utilized to establish a liability for the estimate of expected returns. Sales and other tax amounts collected from customers for remittance to governmental authorities are excluded from revenue.

Management must make estimates of potential future product returns related to current period product revenue. Management analyzes historical returns, current economic trends and changes in customer demand for the Company’s products when evaluating the adequacy of the reserve for sales returns. Management judgments and estimates must be made and used in connection with establishing the sales return reserves in any accounting period. Additional reserves may be required if actual sales returns increase above the historical return rates. Conversely, the sales return reserve could be decreased if the actual return rates are less than the historical return rates, which were used to establish the reserve.

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

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

If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves may be required and are accrued for when such support is offered.

The Company offers limited warranties for its consumer electronics, comparable to those offered to consumers by the Company’s competitors in the United States. Such warranties typically consist of a one year period for microwaves and a 90 day period for audio products, under which the Company pays for labor and parts, or offers a new or similar unit in exchange for a non-performing unit.

NOTE 2— EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts). Weighted average shares includes the impact of shares held in treasury.

NOTE 3— SHAREHOLDERS’ EQUITY

NOTE 3 — SHAREHOLDERS’ EQUITY

Outstanding capital stock at JuneSeptember 30, 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 JuneSeptember 30, 2022, the Company had 0no options, warrants or other potentially dilutive securities outstanding.

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-outfirst-in, first-out method. As of JuneSeptember 30, 2022 and March 31, 2022, inventories consisted of the following (in thousands):

NOTE 5— INCOME TAXES

NOTE 5 — INCOME TAXES

At JuneSeptember 30, 2022, the CompanyCompany had $15.3$15.6 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 JuneSeptember 30, 2022, the Company had approximately $18.1$18.4 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 $83,000$159,000 for the three month period ended JuneSeptember 30, 2022 as compared to income of foreign subsidiaries before taxes of $18,000$34,000 for the three month period ended JuneSeptember 30, 2021.2021. The income of foreign subsidiaries before taxes was $242,000 for the six month period ended September 30, 2022 as compared to income of foreign subsidiaries before taxes of $52,000 for the six month period ended September 30, 2021.  

The Company analyzed the future reasonability of recognizing its deferred tax assets at JuneSeptember 30, 2022.2022. As a result, the Company concluded that a 100% valuation allowance of $4,658,000 would$4,700,000 would be recorded against the assets.assets.

Although the Company generated a net operating loss, it recorded income tax expense of approximately $11,000nil and $10,500, respectively, during the three and six month periodperiods ended JuneSeptember 30, 2022, primarily resulting from state income taxes. During the three and six month periodperiods ended JuneSeptember 30, 2021, the Company recorded income tax expense of $11,000.nil and $10,500, respectively, primarily resulting from state income taxes. After the adoption of ASU 2019-122019-12 “Income Taxes (Topic 740)740) – Simplifying the Accounting for Income Taxes”during fiscal 2022, these non-income based state taxes are now reported within selling, general and administrative expenses.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of JuneSeptember 30, 2022, the Company’s open tax years for examination for U.S. federal tax are 2016-2021,2016-2021, and for U.S. states’ tax are 2015-2021.2015-2021. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense.

As of JuneSeptember 30, 2022 and March 31, 2022, the Company had a federal tax liability of approximately $1,808,000approximately $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 JuneSeptember 30, 2022, the Company’s short term portion was approximately $205,000$401,000 and the long term portion was approximately $1,603,000.$1,202,000.

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 JuneSeptember 30, 2022, the Company has paid 4 five of the 8eight installments. Each installment 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 JuneSeptember 30, 2022.2022. Accordingly, the Company is a “controlled company” as defined in Section 801(a)801(a) of the NYSE American Company Guide.

Related Party Transactions

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

During the three and six month periodperiods ended JuneSeptember 30, 2022, the Company was billed approximately $40,000 and $43,000, 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 JuneSeptember 30, 2022 the Company owed nil to VACL related to these charges.  

During the three and six month periodperiods ended JuneSeptember 30, 2022,2021, the Company was billed approximately $200 and $400, respectively, for purchases of personal protection equipment from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the Board.Board of Directors. VSSL was formerly known as Lafe Strategic Services Ltd. As of JuneSeptember 30, 2022 the Company owed nil to VSSL related to these charges.  

NOTE 7— SHORT TERM INVESTMENTS

At both JuneSeptember 30, 2022 and March 31, 2022, the Company held short term investments in deposits totaling nilnil.. The Company held $21.1$25.2 million in deposits which were classified as cash equivalents as of JuneSeptember 30, 2022 and $22.0 million of such deposits as of March 31, 2022.   2022.   

NOTE 8— CONCENTRATION RISK

NOTE 8 — CONCENTRATION RISK

Customer Concentration

For the three month period ended JuneSeptember 30, 2022, the Company’s three largest customers accounted for approximately 73%90% of the Company’s net revenues, of which Walmart accounted for 42%48%, Fred Meyer accounted for 19%24% and Amazon accounted for 12%18%.

For the threesix month period ended JuneSeptember 30, 2021,2022, the Company’s three largest customers accounted for approximately 82%83% of the Company’s net revenues, of which Walmart accounted for 44%45%, Fred Meyer accounted for 24%22% and Amazon accounted for 14%16%.

For the three month period ended September 30, 2021, the Company’s three largest customers accounted for approximately 90% of the Company’s net revenues, of which Amazon accounted for 39%, Walmart accounted for 32% and Fred Meyer accounted for 19%.

For the six month period ended September 30, 2021, the Company’s three largest customers accounted for approximately 86% of the Company’s net revenues, of which Walmart accounted for 38%, Amazon accounted for 27% and Fred Meyer accounted for 21%.

A significant decline in net sales to any of the Company’s key customers would have a material adverse effect on the Company’s business, financial condition and results of operation.             

Product Concentration

For the three and six month periodperiods ended JuneSeptember 30, 2022, the Company’s gross product sales were comprised of two product types within two categories — housewares products and audio products, of which microwave ovens generated approximately 42%29% and 34%, respectively, of the Company’s gross product sales. Audio products generated approximately 57%70% and 65%, respectively, of the Company’s gross product sales. 

For the three and six month periodperiods ended JuneSeptember 30, 2021, 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 39%26% and 33%, respectively, of the Company’s gross product sales. Audio products generated approximately 60%73% and 67%, 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 47% and 21% as of June 30, 2022, respectively.

As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top three customers accounted for 42%, 30% and 22% as of September 30, 2022, respectively. As a percent of the Company’s total trade accounts receivable, net of specific reserves, the Company’s top three customers accounted for 69%, 17% and 11% as of March 31, 2022, respectively. The Company periodically performs credit evaluations of its customers but generally does not require collateral, and the Company provides for any anticipated credit losses in the financial statements based upon management’s estimates and ongoing reviews of recorded allowances. Due to the high concentration of the Company’s net trade accounts receivables among just two customers, any significant failure by one of these customers to pay the Company the amounts owing against these receivables would result in a material adverse effect on the Company’s business, financial condition and results of operations.

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 JuneSeptember 30, 2022 and March 31, 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 $24.7$27.5 million and approximately $25.3 million at JuneSeptember 30, 2022 and March 31, 2022, respectively.

Supplier Concentration

During the three and six month periodperiods ended JuneSeptember 30, 2022, the Company procured 100% of its products for resale from its two largest factory suppliers, of which 76%64% and 70%, respectively, was supplied by its largest supplier. During the three and six month periodperiods ended JuneSeptember 30, 2021, the Company procured 100% of its products for resale from its two largest factory suppliers, of which 84% and 83%, respectively, was supplied by its largest supplier.

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 sevenfour 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 JuneSeptember 30, 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 JuneSeptember 30, 2022 that required an impairment test for the Company’s right-of-use assets or other long-lived assets in accordance with ASC topic 360-10,360-10, “Impairment and Disposal of Long-Lived Assets”.

As of JuneSeptember 30, 2022, the Company’s current operating and finance lease liabilitiesliabilities were $189,000$167,000 and $1,000, respectively and its non-current operating and finance lease liabilities were $167,000$132,000 and $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 JuneSeptember 30, 2022 was $350,000$297,000 and $2,000, respectively.respectively.

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

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

As of September 30, 2022 the maturities of lease liabilities were as follows:

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NOTE 10—GOVERNMENTAL ASSISTANCE PROGRAMS

During the three month periods ended JuneSeptember 30, 2022 and JuneSeptember 30, 2021, the Company’s Hong Kong subsidiary recorded $22,000$8,000 andnil, 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 three month periods ended September 30, 2022 and September 30, 2021, the Company recorded nil and $207,000, respectively, related to forgiveness of the Company's Paycheck Protection Program (”PPP”) loan.

During the six month periods ended September 30, 2022 and September 30, 2021, the Company’s Hong Kong subsidiary recorded $30,000 and nil, respectively, under the ESS. During the six month periods ended September 30, 2022 and September 30, 2021, the Company recorded nil and $207,000, respectively, related to forgiveness of the Company's PPP loan.

The income realized from 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— 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. Like any judgment, thereThe 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 it is able to collect,agreed, how soon itthe parties will be able to do so.  The Company is pursuing various post-judgment motions against defendants. The defendants have filed a notice

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

The following discussion of the Company’s operations and financial condition should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this Quarterly Report.

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 (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: