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Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Annual Report on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under Item 1A – “Risk Factors” and “Forward-Looking Information” and in other parts of this Annual Report on Form 10-K.

In the following discussion, most percentages and dollar amounts have been rounded to aid presentation. As a result, all figures are approximations.

Results of Operations:

The following table summarizes certain financial information for the fiscal years ended March 31, 2022 and 2021 (in thousands):

Twelve Months Ended March 31,

Selling, general and administrative expenses 5,409 5,906

Loss on settlement of litigation (450 ) -

Interest income, net 57 151

Income from governmental assistance programs 207 83

Loss before income taxes (3,626 ) (3,976 )

Provision for income taxes - -

Results of Operations — Fiscal 2022 compared with Fiscal 2021

Net product sales — Net product sales for fiscal 2022 were $7.9 million as compared to $7.2 million for fiscal 2021, an increase of $0.7 million, or 10.3% as detailed below. The Company’s sales were highly concentrated among three customers - Walmart, Amazon.com and Fred Meyer, where gross product sales to these three customers were in the aggregate approximately 90.5% and 82.1% of the Company’s total gross product sales in fiscal 2022 and fiscal 2021, respectively. The increase in net product sales during fiscal 2022 was primarily driven by increased consumer demand for certain of the Company’s products offered by these customers, in particular clock radios as consumers spent more time at home and shopped online, and the Company’s and its core customers’ ability to continue to sell products under difficult economic conditions, including through online channels. 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 nil and $53,000 for fiscal 2022 and fiscal 2021, respectively. Net product sales are comprised primarily of the sales of houseware and audio products which bear the Emerson® brand name. The major elements which contributed to the overall increase in net product sales were as follows:

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 each of LMCA and GLSL 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. 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.

For more information on risks associated with the Company’s operations, including tariffs and the COVID-19 pandemic, please see the risk factors within Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Recent Developments — 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, there is no guarantee that the Company will be able to collect the judgment or, if it is able to collect, how soon it will be able to do so. The Company is pursuing various post-judgment motions against defendants. The defendants have filed a notice of appeal of the judgment.

Licensing revenue — Licensing revenue in fiscal 2022 was approximately $265,000 as compared to $245,000 for fiscal 2021, an increase of $20,000, or 8.2%, which was driven primarily by the escalation of the annual minimum royalty of the Company’s licensee.

Net revenues —The Company’s net revenues were $8.2 million for fiscal 2022 as compared to $7.4 million for fiscal 2021, an increase of $0.8 million, or 10.2%, which was driven primarily by the increase in audio product net sales, offset by the decrease in houseware product net sales.

Cost of sales — Cost of sales includes the components described in Note 1 “Cost of Sales” of the Notes to the Consolidated Financial Statements. In absolute terms, cost of sales increased $0.6 million, or 11.8%, to $6.2 million in fiscal 2022 as compared to $5.7 million in fiscal 2021. The increase in absolute terms for fiscal 2022 as compared to fiscal 2021 was primarily related to the improvement in net product sales partially offset by lower year-over-year gross cost of sales as a percentage of gross sales. The decrease in gross cost of sales as a percentage of gross sales for fiscal 2022 as compared to fiscal 2021 was primarily related to the change in product mix as described above, partially offset by increased year-over-year shipping costs. The amounts presented are based on the change in methodology regarding the Company’s definition of Cost of Sales. See Note 1 “Significant Accounting Policies”of the Notes to the Consolidated Financial Statements.

Selling, general and administrative expenses (“S,G&A”) — S,G&A, as a percentage of net revenues, was 65.8% in fiscal 2022 as compared to 79.1% in fiscal 2021. Fiscal 2022 S,G&A, in absolute terms, was $5.4 million and in fiscal 2021 S,G&A, in absolute terms, was $5.9 million, an increase of $0.5 million, or 8.4%. The decrease in S,G&A was primarily due to reduced legal fees of approximately $249,000 or 16.4%. Legal fees during fiscal 2022 were approximately $1,273,000 as compared to $1,522,000 during fiscal 2021. The majority of the decrease in legal fees concerned the protection of the Emerson® trademark. The Company also benefitted by reductions in compensation costs of $127,000 and commission fees of $52,000.

Loss on settlement of litigation — On January 3, 2022, a legal settlement was entered into between the Company and one of its former directors that resolved certain disputes, including certain claims against the former director and an indemnification claim made by the former director. The amount of the settlement was $450,000.

Interest income, net — Interest income, net, was $57,000 in fiscal 2022 as compared to $151,000 in fiscal 2021, resulting from a decrease in interest rates earned on the Company’s short term investments during fiscal 2022.

Income from governmental assistance programs — During fiscal 2022, the Company recorded income of approximately $207,000, related to its Paycheck Protection Program (“PPP”) loan forgiveness. During fiscal 2021, the Company recorded income of approximately $83,000, related to assistance received from the Hong Kong government under a similar program called the Employment Support Scheme. See “Note 15 - Paycheck Protection Program and Employment Support Scheme”.

Provision for income tax expense— The Company adopted ASU 2019-12 during fiscal 2022 and recorded its non-income based state taxes of approximately $11,000 to S,G&A. In order to conform fiscal 2021 to the current presentation, approximately $15,000 of non-income based state taxes were reclassified to S,G&A. In fiscal 2022 and fiscal 2021, the Company recorded a full valuation allowance against its deferred tax assets of approximately $844,000 and $615,000, respectively. See Note 5 “Income Taxes” of the Notes to the Consolidated Financial Statements.

Net (loss) — As a result of the foregoing factors, the Company recorded a net loss of $3.6 million for fiscal 2022 as compared to a net loss of $4.0 million for fiscal 2021.

Liquidity and Capital Resources

General

As of March 31, 2022, the Company had cash and cash equivalents of approximately $25.6 million as compared to approximately $5.2 million at March 31, 2021. Working capital decreased to $28.1 million at March 31, 2022 as compared to $32.1 million at March 31, 2021. The increase in cash and cash equivalents of approximately $20.4 million is set out in “Cash Flows” below.

Cash Flows

Net cash used by operating activities was approximately $4.7 million for fiscal 2022, compared to approximately $4.3 million for fiscal 2021, resulting from a $3.6 million loss generated during the period, a $0.6 million increase in accounts receivable, a $0.4 million increase in right of use assets, a $0.2 million decrease in income taxes payable, a $0.2 million increase in the Company’s PPP loan forgiveness and a $0.2 million increase in inventory partially offset by a $0.2 million decrease in prepaid purchases, a $0.2 million increase in amortization of right-of-use assets and a $0.1 million increase in long term lease liabilities.

Net cash provided by investing activities was $25.0 million for fiscal 2022, compared to $3.0 million for fiscal 2021, primarily due to a decrease of investments in short term deposits.

Net cash provided by financing activities was nil for fiscal 2022 for fiscal 2022, compared to $0.2 million for fiscal 2021.

Credit Arrangements

Letters of Credit— The Company utilizes the services of one of its banks to issue secured letters of credit on behalf of the Company, as needed, on a 100% cash collateralized basis. At March 31, 2022 and March 31, 2021, the Company had no letters of credit outstanding.

Short-term Liquidity

The Company’s principal existing sources of cash are generated from operations. The Company believes that its cash on hand and existing sources of cash will be sufficient to support its existing operations over the next 12 months.

Historically, a significant percentage of the Company’s product sales were made under the Direct Import Program. The direct importation of product by the Company to its customers can significantly benefit the Company’s liquidity because this inventory does not need to be financed by the Company. In fiscal 2022, approximately 9% of the Company’s product sales were imported directly to the Company’s customers. In fiscal 2021, less than 1% of the Company’s product sales were imported directly to the Company’s customers.

As of March 31, 2022, there were no capital expenditure or other commitments other than the normal purchase orders used to secure product.

Paycheck Protection Program Loan

In April and May of 2020, the Company applied for and received aggregate PPP loan proceeds of approximately $204,000 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 Coronavirus Aid, Relief, and Economic Security 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 15 “Paycheck Protection Program and Employment Support Scheme” of the Notes to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

As of March 31, 2022, the Company did not have any off-balance sheet arrangements as defined under the rules of the Securities and Exchange Commission.

Legal Matters

The Company is subject to various legal proceedings, the outcomes of which are inherently uncertain. The Company records any potential gains related to legal proceedings only after cash is collected. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results. See Note 11 in the Notes to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles that are generally accepted within the United States. The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management considers certain accounting policies related to inventories, trade accounts receivables, impairment of long-lived assets, valuation of deferred tax assets, sales return reserves and sales allowance accruals to be critical policies due to the estimation processes involved in each.

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. Under the Direct Import Program, title passes in the country of origin. Under the Domestic Program, title passes primarily at the time of shipment. Under both programs, the Company recognizes revenues at the time title passes to the customer as this is when the Company satisfies its performance obligation under the contracts with its customers. 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.

The Company adopted ASC topic 606 effective April 1, 2018. 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. Prior to the adoption of ASC topic 606, the Company followed the provisions of ASC topic 605. The adoption of ASC topic 606 did not have a material impact on revenue recognition as compared to revenue recognition provided under ASC topic 605.

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.

Inventory. Inventory is valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out basis and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs.

Trade Accounts Receivable. The Company extends credit based upon evaluations of a customer’s financial condition and provides for any anticipated credit losses in the Company’s financial statements based upon management’s estimates and ongoing reviews of recorded allowances. If the financial condition of a customer deteriorates, resulting in an impairment of that customer’s ability to make payments, additional reserves may be required. Conversely, reserves are reduced to reflect credit and collection improvements.

Income Taxes. The Company records a valuation allowance to reduce the amount of its deferred tax assets to the amount that management estimates is more likely than not to be realized. While management considers future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance, in the event that management determines that a deferred tax asset will likely be realized in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, if it is determined that all or part of a net deferred tax asset will likely not be realized in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made.

Sales Return Reserves. 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 Allowance and Marketing Support Accruals. 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”.

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 606, “Revenue from Contracts with Customers,” (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 topic 606.

Recently Adopted Accounting Pronouncements

Accounting Standards Update 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income 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 is required to take effect in the Company’s first quarter (June 2021) of the Company’s fiscal year ending March 31, 2022. The impact of ASU 2019-12 on the Company’s consolidated financial statements is limited. The Company is currently only subject to non-income based state taxes.

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 Instruments – Credit 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.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Page No.

Report of Independent Registered Public Accounting Firm 28

Notes to Consolidated Financial Statements 34

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To: the Board of Directors and Stockholders

of Emerson Radio Corp. and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Emerson Radio Corp. and Subsidiaries (the “Company”) as of March 31, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows, for each of the years in the two -year period ended March 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the results of their operations and their cash flows for each of the two-year period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below arise from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relates.

Inventories

As described in Note 1 of the consolidated financial statements, inventory is valued at the lower of cost or net realizable value (determined on a first-in, first-out basis) and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs.

We identified valuation adjustments for slow-moving and obsolete inventories as a critical audit matter because of the significant judgment required by management in developing its assumptions about forecasted consumption and sales, and in determining the estimated net realizable value adjustments applied to individual inventory items. Testing management’s assumptions and estimates used in calculating the valuation adjustments required a high degree of auditor judgment and the use of more experienced audit professionals.

Our audit procedures related to valuation adjustments for slow-moving inventories included the following, among others:

• We tested the reliability of system-generated reports used by management on a sample basis by agreeing the selected items to the underlying records.

• We observed the physical condition of inventories during physical inventory counts.

• We tested the accuracy of the valuation adjustments by selecting a sample of inventory items and recalculating the estimated net realizable value based upon subsequent period transactions.

• We tested the reasonableness of management’s assumptions about forecasted sales by:

• Performing a retrospective review to assess management’s estimated percentages by comparing the prior year inventory to current year consumption and sales.

• Corroborating the assumptions related to slow-moving products and forecasted sales with management.

/s/ MSPC

Certified Public Accountants and Advisors,

A Professional Corporation

We have served as the Company’s auditor since 2005.

New York, New York

June 23, 2022

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For The Years Ended March 31, 2022 and 2021

(In thousands, except per share data)

Net revenues:

Costs and expenses:

Selling, general and administrative expenses 5,409 5,906

Other (loss) income:

Loss on settlement of litigation (450 ) —

Interest income, net 57 151

Income from governmental assistance programs 207 83

Loss before income taxes (3,626 ) (3,976 )

Provision for income tax expense — —

Basic loss per share $ (0.17 ) $ (0.19 )

Diluted loss per share $ (0.17 ) $ (0.19 )

Weighted average shares outstanding

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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of March 31, 2022 and 2021

(In thousands)

ASSETS

Current Assets:

Short term investments — 25,045

Prepaid expenses and other current assets 390 289

Non-Current Assets:

Property and equipment, net 2 —

Right-of-use asset-operating leases 403 213

Right-of-use asset-finance leases 2 3

Total Non-Current Assets 497 310

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable and other current liabilities 758 788

Paycheck Protection Program loan — 204

Due to affiliate — 1

Short-term operating lease liability 211 152

Short-term finance lease liability 1 1

Income tax payable, current portion 195 195

Non-Current Liabilities:

Long-term operating lease liability 201 82

Long-term finance lease liability 2 3

Total Non-Current Liabilities 1,816 1,921

Shareholders’ Equity:

Total Liabilities and Shareholders’ Equity $ 30,010 $ 33,902

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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For The Years Ended March 31, 2022 and 2021

(In thousands)

Common Stock Additional Total

Preferred Number Par Paid-In Accumulated Treasury Shareholders’

Stock of Shares Value Capital Deficit Stock Equity

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

EMERSON RADIO CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended March 31, 2022 and 2021

(In thousands)

Cash Flows from Operating Activities:

Adjustments to reconcile net loss to net cash (used) by operating activities:

Loan forgiveness from Paycheck Protection Program (204 ) —

Amortization of right-of-use assets 214 231

Depreciation and amortization — 2

Asset valuation allowances 6 (22 )

Changes in assets and liabilities:

Accounts receivable (609 ) (185 )

Prepaid expenses and other current assets (101 ) 38

Other assets 4 —

Accounts payable and other current liabilities (30 ) 196

Right of use assets-operating (403 ) —

Short term lease liabilities 59 (89 )

Long term lease liabilities 118 (153 )

Due to affiliate (1 ) 1

Income taxes payable (223 ) (197 )

Deferred revenue 15 15

Net cash (used) by operating activities (4,712 ) (4,293 )

Cash Flows From Investing Activities:

Proceeds from sale of short-term investments 25,045 28,101

Purchases of short-term investments — (25,045 )

Disposals to property and equipment 2

Additions to property and equipment (2 ) —

Net cash provided by investing activities 25,043 3,058

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 20,331 (1,031 )

Cash and cash equivalents at beginning of the year 5,245 6,276

Cash and cash equivalents at end of the year $ 25,576 $ 5,245

Supplemental disclosures:

Cash paid for:

Interest $ 11 $ 7

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

EMERSON RADIO CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES:

Description of the Business

The consolidated financial statements include the accounts of Emerson Radio Corp. (“Emerson”, consolidated — the “Company”), and its subsidiaries. The Company designs, sources, imports and markets a variety of houseware and consumer electronic products, and licenses the Emerson trademark for a variety of products domestically and internationally.

Basis of Presentation

It is the Company’s policy to prepare its consolidated financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”). The consolidated financial statements include the accounts of the Company and its wholly-owned or controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

Certain items in prior year financials may have been reclassified to conform to current year presentation.

Use of Estimates

In preparing consolidated financial statements in conformity with generally accepted accounting principles, the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Highly liquid investments with original maturities of three months or less at the time of purchase are considered to be cash equivalents.

Fair Values of Financial Instruments

The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term maturity of these financial instruments.

Long-Lived Assets

The Company’s long-lived assets include property and equipment. At March 31, 2022, the Company had approximately $2,000 of property and equipment, net of accumulated depreciation. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC Topics 350 “Intangibles” and 360 “Property, Plant and Equipment”. The recoverability of assets held and used is measured by a comparison of the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Future events could cause the Company to conclude that impairment indicators exist and that long-lived assets may be impaired. If impairment is deemed to exist, the asset will be written down to fair value. Any such impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets being depreciated. The cost of maintenance and repairs is charged to expense as incurred. Significant renewals and betterments are capitalized and depreciated over the remaining estimated useful lives of the related assets. At time of disposal, the cost and related accumulated depreciation are removed from the Company’s records and the difference between net carrying value of the asset and the sale proceeds is recorded as a gain or loss.

Depreciation of property and equipment is provided by the straight-line method as follows:

• Computer, Equipment and Software Three years to seven years

• Furniture and Fixtures Seven years

Revenue Recognition

Distribution of products

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.

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 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 a minimum guaranteed royalty amount. In the case of (i), such amounts are recognized as revenue on a straight-line basis over the term of the license agreement. In the case of (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.

Inventory

Inventory is valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out basis and includes inventory purchase costs and allocated overhead. The Company records valuation adjustments for the excess cost of inventory over the estimated net realizable value. Valuation adjustments for slow-moving and obsolete inventory are calculated on an individual product basis based on physical inspection of the product in connection with a physical inventory, review of slow-moving products, forecasted sales, and consideration of active marketing programs.

Accounts Receivable

The Company extends credit based upon evaluations of a customer’s financial condition and provides for any anticipated credit losses in the Company’s financial statements based upon management’s estimates and ongoing reviews of recorded allowances. Credit is extended for periods between 10 and 90 days, on a net basis. If the financial condition of a customer deteriorates, resulting in an impairment of that customer’s ability to make payments, additional reserves may be required. Conversely, reserves are reduced to reflect credit and collection improvements. Receivables are written off once they are considered uncollectible. The allowance for doubtful accounts receivable increased $1,600 for the year ended March 31, 2022 and decreased by $2,400 for the year ended March 31, 2021.

Cost of Sales

Cost of sales includes actual product cost, quality control costs, change in inventory reserves, duty, buying costs, the cost of transportation to the Company’s third party logistics providers’ warehouse from its manufacturers and warehousing costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include all operating costs of the Company that are not directly related to the cost of procuring product or costs not included in other operating costs and expenses.

Sales Return Reserves

Foreign Currency

The assets and liabilities of foreign subsidiaries, whose functional currencies are other than the United States Dollar, have been translated at current exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the year. Related translation adjustments are reported as a separate component of shareholders’ equity. Losses and gains resulting from foreign currency transactions are included in the results of operations.

The Company generally does not enter into foreign currency exchange contracts to hedge its exposures related to foreign currency fluctuations and there were no foreign exchange forward contracts held by the Company at March 31, 2022 or March 31, 2021.

Advertising Expenses

Advertising expenses are charged against earnings as incurred and are included in selling, general and administrative expenses. The Company incurred $42,000 of advertising expenses during fiscal 2022 and $23,000 during fiscal 2021.

Sales Allowance and Marketing Support Expenses

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

At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 606, “Revenue from Contracts with Customers.” (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 topic 606.

The sales and marketing support accrual activity for fiscal 2022 and fiscal 2021 was as follows (in thousands):

adjustments (53 )

adjustments 18

Interest income, net

The Company records interest income as earned and interest expense as incurred. The net interest income for fiscal 2022 and 2021 consists of:

(In thousands)

Interest expense $ (11 ) $ (7 )

Interest income, net $ 57 $ 151

Income Taxes

Deferred income taxes are recorded to account for the tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets have been recorded net of an appropriate valuation allowance, to the extent management believes it is more likely than not that such assets will be realized. (See Note 5 “Income Taxes.”) Any tax penalties are recorded as part of selling, general and administrative expenses and any interest to which the Company is subject, is recorded as a part of income tax expense. Penalties and interest incurred during fiscal 2022 and fiscal 2021 were approximately nil.

Comprehensive Income

Comprehensive income is net income adjusted for foreign currency translation adjustments.

Earnings Per Common Share

Earnings per common share are based upon the weighted average number of common and common equivalent shares outstanding. Outstanding stock options and warrants are treated as common stock equivalents when dilution results from their assumed exercise.

Recently Adopted Accounting Pronouncements

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

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 Instruments – Credit Losses” (Issued June 2016)

NOTE 2 — INVENTORIES:

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. As of March 31, 2022 and March 31, 2021, inventories consisted exclusively of purchased finished goods.

NOTE 3 — 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, and one or more of Nimble’s direct and indirect subsidiaries, or with entities related to the Company’s Chairman of the Board. 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 Securities and Exchange Commission (“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 March 31, 2022. Accordingly, the Company is a “controlled company” as defined in Section 801(a) of the NYSE American Company Guide.

Related Party Transactions

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

During fiscal 2022 and fiscal 2021, the Company was billed approximately $166,000 and $172,000, 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. The Company owed nil to VACL related to rental charges as of March 31, 2022 and March 31, 2021.

During fiscal 2022 and fiscal 2021, the Company was billed approximately $2,000 and $5,000, respectively, for its share of installation charges related to an air conditioning system, and purchase of protective materials for coronavirus from Vigers Strategic Services Ltd (“VSSL”), which is a company related to the Company’s Chairman of the Board. Vigers Strategic Services Ltd is formerly known as Lafe Strategic Services Ltd. The Company owed approximately nil and $1,000 to VSSL related to these charges as at March 31, 2022 and March 31, 2021, respectively.

NOTE 4 — PROPERTY AND EQUIPMENT:

As of March 31, 2022 and 2021, property and equipment is comprised of the following:

(In thousands)

Computer equipment and software $ 219 $ 217

Leasehold improvements 8 8

Less accumulated depreciation and amortization (388 ) (388 )

$ 2 $ —

Depreciation of property and equipment amounted to approximately $300 and $2,000 for the twelve months ended March 31, 2022 and 2021, respectively. During fiscal 2022, the Company did not dispose of any property and equipment.During fiscal 2021, the Company disposed of property and equipment with gross book values totaling approximately $4,000. The Company recognized a total net loss of $2,000 on these disposals in fiscal 2021.

NOTE 5 — INCOME TAXES:

The Company’s provision for income tax expense for fiscal 2022 and fiscal 2021 was as follows:

(In thousands)

Current:

Federal $ — $ —

Foreign, state and other — —

Deferred:

Federal — —

Foreign, state and other — —

Provision for income tax expense $ — $ —

The Company adopted ASU 2019-12 (Topic 740) Simplifying the Accounting for Income Taxes during fiscal 2022. In the table above, the income tax expense of $11,000 in fiscal 2022 and $15,000 in fiscal 2021, was removed as it represented non-income based taxes.

The Company files a consolidated federal return and certain state and local income tax returns.

The difference between the effective rate reflected in the provision for income taxes and the amounts determined by applying the statutory federal rate of 21% to earnings before income taxes for fiscal 2022 and fiscal 2021 is analyzed below:

(In thousands)

Statutory provision $ (765 ) $ (832 )

Foreign subsidiary (4 ) (14 )

Permanent differences 12 31

Adjustment to prior year taxes 93 399

Provision for income tax expense $ — $ —

As of March 31, 2022 and March 31, 2021, the significant components of the Company’s deferred tax assets which were classified as non-current, were as follows:

(In thousands)

Deferred tax assets:

Accounts receivable reserves $ 34 $ 32

Property and equipment and intangible assets 39 67

Net operating loss and credit carry forwards 4,064 3,237

Total deferred tax assets $ — $ —

The Company has $14.4 million of U.S. federal net operating loss carry forwards (“NOLs”) as of March 31, 2022.

The Company has $17.6 million of state NOLs as of March 31, 2022 as follows:

Loss Year (Fiscal) Included in DTA Expiration Year (Fiscal)

Total $17.6 million

The tax benefits related to these state NOLs 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 $99,000 for the fiscal year ended March 31, 2022 as compared to income before taxes of $123,000 for the fiscal year ended March 31, 2021, respectively.

The Company analyzed the future reasonability of recognizing its deferred tax assets at March 31, 2022. As a result, the Company concluded that a valuation allowance of approximately $4,360,000 would be recorded against the assets.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of March 31, 2022, the Company’s open tax years for examination for U.S. federal tax are 2017-2020, and for U.S. states’ tax are 2012-2020. 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 March 31, 2022 the Company is asserting under ASC 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.

The Tax Cut and Job Act (“TCJA”) establishes new tax rules designed to tax U.S. companies on global intangible low-taxed income (GILTI) earned by foreign subsidiaries. The Company has evaluated this provision of the TCJA and the application of ASC 740 and its impact is reflected in the financial statements as of March 31, 2022.

NOTE 6 — COMMITMENTS AND CONTINGENCIES:

The Company’s ERP software provider is subscription based with annual commitments as follows (in thousands).

Fiscal Years Amount

Thereafter —

Rent expense resulting from leases with non-affiliated companies aggregated $92,000 for both fiscal 2022 and 2021.

Letters of Credit:

The Company utilizes the services of one of its banks to issue secured letters of credit on behalf of the Company, as needed, on a 100% cash collateralized basis. At March 31, 2022 and March 31, 2021, the Company had no letters of credit outstanding.

Capital Expenditure:

As of March 31, 2022 and March 31, 2021, there were no capital expenditures or other commitments other than the normal purchase orders used to secure product.

Employee Benefit Plan:

The Company currently sponsors a defined contribution 401(k) retirement plan which is subject to the provisions of the Employee Retirement Income Security Act. The Company matches a percentage of the participants’ contributions up to a specified amount. These contributions to the plan for fiscal 2022 and 2021 were $22,000 and $21,000, respectively, and were charged against earnings for the periods presented.

NOTE 7 — SHAREHOLDERS’ EQUITY:

Common Shares:

Authorized common shares total 75,000,000 with a par value $0.01 per share, of which 21,042,652 were outstanding as of March 31, 2022 andMarch 31, 2021. Shares held in treasury at March 31, 2022 and March 31, 2021 were 31,923,145.

Series A Preferred Stock:

The Company has issued and outstanding 3,677 shares of Series A Preferred Stock, $.01 par value (“Preferred Stock”), with a face value of $3,677,000, which had no determinable market value as of March 31, 2022. The Preferred Stock is non-voting, has no dividend preferences and has not been convertible since March 31, 2002; however, it retains a liquidation preference.

NOTE 8 — SHORT TERM INVESTMENTS:

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

NOTE 9 — NET LOSS PER SHARE:

The following table sets forth the computation of basic and diluted loss per share for the years ended March 31, 2022 and March 31, 2021:

Twelve Months Ended March 31,

Numerator:

Denominator:

Net loss per share:

Basic and diluted loss per share $ (0.17 ) $ (0.19 )

For the years ended March 31, 2022 and March 31, 2021, there were no outstanding instruments which were potentially dilutive.

NOTE 10 — LICENSE AGREEMENTS:

The Company is currently party to one license agreement that allows the licensee to access the Company’s trademarks for the manufacture and/or the sale of consumer electronics and other products. The license agreement (i) allows the licensee to use the Company’s trademarks for a specific product category, or for sales within specific geographic areas, or for sales to a specific customer base, or any combination of the above, or any other category that might be defined in applicable license agreement and (ii) may be subject to renewal at the initial expiration of applicable agreement and is governed by the laws of the United States. The Company recorded licensing revenues of $265,000 in fiscal 2022 and $245,000 in fiscal 2021 under the license agreement. The licensing agreement expires on December 31, 2022. A renewal agreement between the parties has yet to be determined.

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, there is no guarantee that the Company will be able to collect the judgment or, if it is able to collect, how soon it will be able to do so. The Company is pursuing various post-judgment motions against defendants. The defendants have filed a notice of appeal of the judgment.

The Company is not currently a party to any other legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to its business. Management cannot estimate with certainty the Company’s ultimate legal and financial liability with respect to such pending litigation matters. However, management believes, based on its examination of such matters, that the Company’s ultimate liability will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

NOTE 12 — RISKS AND UNCERTAINTIES:

Customer Concentration

For fiscal 2022, the Company’s three largest customers accounted for approximately 90% of the Company’s net revenues, with Walmart accounting for 45%, Amazon.com accounting for 32% and Fred Meyer accounting for 13%. For fiscal 2021, the Company’s three largest customers accounted for approximately 81% of the Company’s net revenues with Walmart accounting for 37%, Amazon.com accounting for 33% and Fred Meyer accounting for 11%.

Product Concentration

For fiscal 2022, the Company’s gross product sales were comprised of two product types within two categories — housewares products and audio products. Microwave ovens, which product type is within the housewares category, generated approximately 21% of the Company’s gross product sales. Audio products generated approximately 79% of the Company’s gross product sales during fiscal 2022.

For fiscal 2021, the Company’s gross product sales were comprised of the same two product types within the same two categories — housewares products and audio products. Microwave ovens, which product type is within the housewares category, generated approximately 35% of the Company’s gross product sales. Audio products generated approximately 63% of the Company’s gross product sales during fiscal 2021.

As a result of this dependence, a significant decline in pricing of, or market acceptance of these product types and categories, either in general or specifically as marketed by the Company, would have a material adverse effect on the Company’s business, financial condition and results of operations. Because the market for these product types and categories is characterized by periodic new product introductions, the Company’s future financial performance will depend, in part, on the successful and timely development and customer acceptance of new and enhanced versions of these product types and other products distributed by the Company. There can be no assurance that the Company will continue to be successful in marketing these products types within these categories or any other new or enhanced products.

Concentrations of Credit Risk

As a percent of the Company’s total trade accounts receivable, net of specific reserves, Walmart, Amazon.com and Fred Meyer accounted for 69%, 17% and 11%, respectively, as of March 31, 2022. As a percent of the Company’s total trade accounts receivable, net of specific reserves, Amazon.com and Walmart accounted for 69% and 28%, respectively, as of March 31, 2021. No other

customer accounted for more than 10% of the Company’s total trade accounts receivable, net of specific reserves, as of March 31, 2022 or March 31, 2021. 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. The accounts receivable allowance for doubtful accounts on the Company’s total trade accounts receivable balances was approximately $4,000 at March 31, 2022 and approximately $2,000 at March 31, 2021. 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 March 31, 2022 and March 31, 2021 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 $25.3 million and approximately $5.0 million at March 31, 2022 and March 31, 2021, respectively.

Supplier Concentration

During fiscal 2022, the Company procured 100% of its products for resale from its two largest factory suppliers, both of which are located in China, and of these, the Company procured approximately 83% of these products from one of them and approximately 17% from the other. During fiscal 2021, the Company procured approximately 99% of its products for resale from its two largest factory suppliers, and of these, the Company procured approximately 59% of these products from one of them and approximately 40% from the other.

No assurance can be given that ample supply of product would be available at current prices and on current credit terms. This is if the Company were required to seek alternative sources of supply, without adequate notice by a supplier or a reasonable opportunity to seek alternate production facilities and component parts. Any resulting significant shortage of product supply would have a material adverse effect on the Company’s business, financial condition and results of operation.

NOTE 13 — GEOGRAPHIC INFORMATION:

Net revenues and long-lived assets of the Company for the fiscal years ended March 31, 2022 and March 31, 2021 are summarized below by geographic area (in thousands). Net revenues are attributed to geographic area based on the location of the customer.

U.S. Foreign Consolidated

NOTE 14 — 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 ten to twenty-nine 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 fiscal 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 fiscal 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.

As of March 31, 2022, the Company’s current operating and finance lease liabilities were $211,000 and $1,000, respectively, and its non-current operating and finance lease liabilities were approximately $201,000 and $2,000, 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 March 31, 2022 were approximately $403,000 and $2,000, respectively.

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

Twelve Months Ended March 31,

(in thousands)

Lease cost

Operating lease cost $ 255 $ 255

Finance lease cost — —

Amortization of right-of-use assets — —

Interest on lease liabilities — —

Variable lease costs — —

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 257 266

Operating cash flows from finance leases — —

Financing cash flows from finance leases — —

Right-of-use assets obtained in exchange for lease obligations:

Operating leases 403 —

Finance leases — —

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

Weighted average discount rate

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

(in thousands) Operating Leases Finance Leases

Thereafter — —

Total lease payments $ 444 $ 3

Less: Imputed interest (32 ) —

NOTE 15 — PAYCHECK PROTECTION PROGRAM AND EMPLOYMENT SUPPORT SCHEME:

On July 5, 2021, the Company’s Paycheck Protection Program (”PPP”) loan of approximately $204,400plus accrued interest of $2,400 was completely forgiven by the Small Business Administration. The Company recorded the impact of its PPP loan forgiveness as other income during fiscal 2022.

The Hong Kong government implemented a similar program called the Employment Support Scheme (“ESS”). It provided grants to companies who retained their employees during the COVID-19 outbreak. The Company’s Hong Kong subsidiary applied for and was granted approximately $83,000 during fiscal 2021.

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

NOTE 16 — SUBSEQUENT EVENT

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d — 15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in its Exchange Act reports are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’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. 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. The Company’s controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

As a result of its internal assessment, the Company’s management 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 the end of the period covered by this Annual Report on Form 10-K, are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to ensure that such information is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’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.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under this framework, management concluded that the Company’s internal control over financial reporting was effective.

This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm. This is pursuant to the rules of the Securities and Exchange Commission for smaller reporting companies, that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended March 31, 2022 there were no changes in the Company’s internal control that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required is incorporated herein by reference to Emerson’s definitive Proxy Statement, or an amendment to this Annual Report on Form 10-K, to be filed with the Securities and Exchange Commission on or before July 29, 2022.

Item 11. EXECUTIVE COMPENSATION

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) List of Financial Statements, Financial Statement Schedules, and Exhibits.

1. Financial Statements. The following financial statements of Emerson Radio Corp. are included in Item 8 of Part II of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for the years ended March 31, 2022 and 2021

Consolidated Balance Sheets as of March 31, 2022 and 2021

Consolidated Statements of Changes in Shareholders’ Equity for the years ended March 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended March 31, 2022 and 2021

Notes to Consolidated Financial Statements

2. Financial Statement Schedules. All financial statement schedules are omitted from this Annual Report on Form 10-K, as they are not required or applicable or the required information is included in the financial statements or notes thereto.

3. Exhibits. The following exhibits are filed with this Annual Report on Form 10-K or are incorporated herein by reference, as indicated.

Exhibit Number

21.1 Principal Subsidiaries of the Company as of March 31, 2022.*

101.INS XBRL Instance Document. *

101.SCH XBRL Taxonomy Extension Schema Document. *

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB XBRL Taxonomy Extension Label Linkbase Document. *

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. *

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

* Filed herewith.

** Furnished herewith.

† Management contract or compensatory plan or arrangement.

Item 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EMERSON RADIO CORP.

By: /s/ Christopher W. Ho

Christopher W. Ho

Chief Executive Officer

Principal Executive Officer

By: /s/ Richard Li

Richard Li

Chief Financial Officer

Principal Financial and Accounting Officer

Dated: June 23, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Christopher W. Ho Chairman of the Board and June 23, 2022

Christopher W. Ho Chief Executive Officer

/s/ Richard Li Chief Financial Officer June 23, 2022

Richard Li

/s/ Michael Binney Chief Operating Officer and Director June 23, 2022

Michael Binney

/s/ Kareem E. Sethi Director June 23, 2022

Kareem E. Sethi

/s/ Kin Yuen Director June 23, 2022

Kin Yuen

MSN US Equity

MSN · 10-K · period ended 2022-03-31

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9A. CONTROLS AND PROCEDURES

Item 9B. OTHER INFORMATION

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11. EXECUTIVE COMPENSATION

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

MSN US Equity☆

MSN · 10-K · period ended 2022-03-31

Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9A. CONTROLS AND PROCEDURES

Item 9B. OTHER INFORMATION

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11. EXECUTIVE COMPENSATION

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

Item 16. FORM 10-K SUMMARY

MSN US Equity