EMERSON RADIO CORP

Item 1A. RISK FACTORS

The reader should carefully consider these risk factors in addition to those set forth in the Companys financial statements or the notes thereto. Additional risks about which the Company is not yet aware or that the Company currently believes to be immaterial also may adversely affect the Companys business operations. If any of the following occur, the Companys business, financial condition or operating results may be adversely affected. In that case, the price of the Companys common stock may decline.

Business, Operational and Strategic Risks

The Company relies on a small number of key customers for the majority of its business, and the loss or significant reduction in business with any of these key customers would materially and adversely affect the Companys revenues and earnings.

Certain customers have historically made up a significant percentage of the Companys product sales and net revenues. For fiscal 2024, Walmart, 5, Amazon and Fred MeyerWalmart accounted for approximately 53%, 2039% and 1031%, respectively, of the Companys net revenues. For fiscal 20234, Walmart, Amazon and Fred Meyer accounted for approximately 4253%, 230% and 120%, respectively, of the Companys net revenues. No other customer accounted for more than 10% of the Companys net revenues during these periods. All customer purchases are made through individual purchase orders and the Company does not have any long-term supply contracts with its customers. Accordingly, sales from customers that have accounted for a significant portion of the Companys net product sales and net revenues in past periods, individually or as a group, may not continue in future periods, or if continued, may not reach or exceed historical levels in any period, which has happened in the past and could happen in the future. Some of the Companys key customers may also experience economic difficulties or otherwise default on their obligations to the Company. The complete loss of, or significant reduction in business from, or a material adverse change in the financial condition of, any of the Companys key customers would cause a material and adverse change in the Companys revenues and operating results.

The Company is dependent on a limited number of products for its sales.

The Company derives a substantial portion of its product revenues from a limited number of products, and the Company expects these products to continue to account for a large percentage of its product revenues in the near term. For the twelve months ended March 31, 20245, the Companys gross product sales were comprised principally of two product types within two categories housewares products and audio products. Microwave ovens, which product type is within the housewares category, generated approximately 3351% of the Companys gross product sales. Audio products generated approximately 6647% of the Companys gross product sales during fiscal 20245. For the twelve months ended March 31, 20234, the Companys gross product sales were comprised principally 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, gDuring fiscal 2024, microwave ovens generated approximately 2732% of the Companys gross product sales. and

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Aaudio products generated approximately 7366% of the Companys gross product sales during fiscal 2023. Because the market for these product types and categories is characterized by periodic new product introductions, the Companys 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 product types within these categories or any other new or enhanced products. For example, certain of the Companys key customers perform periodic line reviews to assess their product offerings, which have in the past and may in the future lead to loss of business and pricing pressures. 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 Companys business, financial condition and results of operation.

The loss or reduction of business of one or a combination of its houseware and audio product lines could materially adversely affect the Companys revenues, financial condition and results of operations.

If the Companys third party sales representatives fail to adequately promote, market and sell the Companys products, the Companys revenues could significantly decrease.

A significant portion of the Companys product sales are made through third party sales representative organizations, whose members are not employees of the Company. The Companys level of sales depends on the effectiveness of these organizations, as well as the effectiveness of its own employees. Some of these third party representatives may sell (and do sell), with the Companys permission, competitive products of third parties as well as the Companys products. During fiscal 20245 and fiscal 20234, these organizations were responsible for approximately 4052% and 3940%, respectively, of the Companys net revenues. In addition, in fiscal 20245 one of these representative organizations was responsible for approximately 38% and another was responsible for approximately 10% of the Companys net revenues and i. In fiscal 20234 one of these representative organizations was responsible for approximately 380% of the Companys net revenues. No other representative was responsible for greater than 10% of the Company's net revenues in either fiscal 2025 or fiscal 2024. If any of the Companys third party sales representative organizations engaged by the Company, especially the Companys largest, fails to adequately promote, market and sell its products, the Companys revenues could be significantly decreased until a replacement organization or distributor could be retained by the Company, which has happened in the past and could happen in the future. The loss or reduction of product sales made through third party sales representative organizations could have a material adverse effect on the Companys business and results of operations. Finding replacement organizations and distributors could be a time consuming process during which the Companys revenues could be negatively impacted.

The concentration of product sales among a limited number of retailers and the trend toward private label brands could materially reduce the Companys revenues and profitability.

With the concentration of the Companys product sales among a limited number of retailers, the Company is dependent upon a small number of customers whose bargaining strength is substantial and growing. Brick-and-mortar retailers generally purchase a limited selection of houseware and consumer electronics products. As a result, there is significant competition for retail shelf space. In addition, the Companys two largest customers, including Walmart and Amazon, use their own private label brands that compete directly with some of the Companys products. As the retailers in the houseware and consumer electronics industry become more concentrated, competition for sales to these retailers may increase, which could materially reduce the Company's revenues and profitability. Additionally, as large traditional retail and online customers grow even larger and become more sophisticated, they may continue to demand lower pricing, special packaging, shorter lead times for the delivery of products, smaller more frequent shipments, or impose other requirements on product suppliers. These business demands may relate to inventory practices, logistics or other aspects of the customer-supplier relationship. If we do not effectively respond to these demands, these customers could decrease their purchases from us. A reduction in the demand for our products by these customers and the costs of complying with their business demands could have a material adverse effect on our business, operating results and financial condition.

The houseware and consumer electronics industry is consolidating, which could reduce the Companys ability to successfully secure product placements at key customers and limit its ability to sustain a cost competitive position in the industry.

Over the past several years, the houseware and consumer electronics industry has undergone substantial consolidation, and further consolidation is likely. As a result of this consolidation, the houseware and consumer electronics industry primarily consists of a limited number of large retailers and distributors. The Companys ability to gain or maintain its market share or maintain or enhance its relationships with key customers may be limited as a result of actions by competitors or the retailers increasing use of private label brands.

The failure to obtain new licensees and distribution relationships or to maintain relationships with its existing licensees and distributors could materially and adversely affect the Companys revenues, earnings and business.

The Company maintains agreements that allow licensees to use the Companys trademarks for the manufacture and sale of specific consumer electronics and other products into defined geographic areas. These agreements typically are for a limited period of time and, upon expiration, the Company cannot assure that its agreements with its licensees will be renewed in the future or that the Companys relationships with its licensees or distributors will be maintained on satisfactory terms or at all. Although the Company has engaged each of LMCA and GLSL as an agent to assist the Company in identifying and procuring licensing opportunities, there can be no assurance that the Company will find and secure suitable licensees or distribution relationships. If the Company is unable to maintain its relationships with its licensees and distributors on terms satisfactory to the Company, or if it fails to obtain new licensees or distribution relationships or the Companys licensees fail to protect the integrity and reputation of the Companys trademarks, the value of the Emerson brand and the Companys licensing revenues and earnings could be materially and adversely affected.

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The Company depends on a limited number of suppliers for its products. If its relationships with such suppliers terminate or are otherwise impaired, the Company would likely experience increased costs, disruptions in the manufacture and shipment of its products and a material loss of net sales.

Although there are multiple potential suppliers for each of the Companys products, the Company relies and is dependent on a limited number of suppliers for its main products, all of which are located outside of the United States.

The Company does not have any long-term or exclusive purchase commitments with any of its suppliers. In fiscal 20245 and 2024, the Company reduced its reliancelied on its 4 largest supplier froms to supply approximately 795% to 38% of the Companyof its purchases of products. The Company also increased its number of significant suppliers from 2 to 4, each of which supplied over 10% of the Company's purchased products. The Companys failure to s failure to maintain existing relationships with its suppliers or to establish new relationships on similar pricing and credit terms in the future could negatively affect the Companys ability to obtain products in a timely manner. If the Company is unable to obtain an ample supply of product from its existing suppliers or secure alternative sources of supply, it may be unable to satisfy its customers orders, which could materially and adversely affect the Companys revenues and relationships with its customers. Finding replacement suppliers could be a time consuming process during which the Companys revenues and liquidity could be negatively impacted.

The Companys products use raw materials and components that may be subject to price fluctuations, shortages or interruptions of supply, and if the Company is unable to maintain supply sources for such raw materials and components, or if such sources fail to satisfy the Companys supply requirements, the Company may experience a loss of sales, increased component costs and reduced profitability.

The Companys products use raw materials and components that have been and may continue to be subject to price surges, shortages or interruptions of supply, and the Company may not be able to pass those costs on to its customers. Factors that are largely beyond the Company's control, such as the cost, quality and availability of the raw materials and components needed by suppliers of the Company's products are essential to the successful production and sale of the Companys products. If the Company is unable to maintain supply sources of these raw materials and components, or if such sources fail to satisfy the Companys supply requirements, the Company's operating results, cost of goods sold and operating expenses could be adversely affected by increases in these costs. In particular, the Company utilizes semiconductor chips in its housewares products and audio products. Because semiconductor chips have been recently subject to an ongoing significant shortage, the Companys ability to source these important components that use semiconductor chips has been adversely affected. These supply interruptions have resulted in increased component delivery lead times, delays in product production and increased costs to obtain components with available semiconductor chips. To the extent this semiconductor chip shortage continues, the production ability of the Companys suppliers may continue to be impacted. Although the Company is seeking alternate sources of supply of these components, it may take several months to locate alternative suppliers or require the re-tooling of products to accommodate components from different suppliers. If the Company or its suppliers are unable to obtain components from third parties in the quantities and of the quality that the Company requires, on a timely basis and at acceptable prices, the Company may not be able to deliver its products on a timely or cost-effective basis to its customers, which could cause customers to cancel their orders with the Company, reduce the Companys gross margins and seriously harm its business, results of operations and financial condition.

The Company has also experienced increased transportation costs in the past due to global supply chain challenges, including the cost of ocean freight from China, and could be subject to future increases in transportation costs. In addition, the Companys ability to meet customers demands depends, in part, on its ability to obtain the timely and adequate shipment of its products. Given that the Companys suppliers are based primarily in China, finding suppliers outside of China could result in additional risks, including additional compliance requirements with foreign laws and taxes, obtaining distribution and administrative support and training new personnel. During fiscal 2024, inbound freight costs have declined from the higher costs we experienced from the COVID-19 pandemic and related global supply chain disruptions and have begun to approach levels seen prior to the impact of such factors. However, recently the Company is experiencing increased inbound freight costs, albeit not to the levels experienced during the COVID-19 pandemic.

If the Company is unable to deliver products in the required amounts and in a timely fashion, the Company could experience delays or reductions in shipments to its customers, which could materially and adversely affect the Companys revenues and relationships with its customers.

The Companys ability to provide high quality customer service, process and fulfill orders, and manage inventory depends on the efficient and uninterrupted operation and timely and uninterrupted performance of its suppliers. The Company can provide no assurances that it will not experience operational difficulties with its suppliers, including reductions in the availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines, increases in manufacturing costs, increased lead times or production shutdowns or production slowdowns due to health pandemics or otherwise, which have in the past and could in the future result in increased costs and decreased efficiency. If the Company is unable to obtain products from these factories in the required quantities and quality and in a timely fashion, the Company could experience delays or reductions in product shipments to its customers, which could negatively affect the Companys ability to meet the requirements of its customers, as well as its relationships with its customers, which in turn could materially and adversely affect the Companys revenues and operating results. In addition, shipping rates and surcharges are volatile and subject to market fluctuations, and any increases in shipping costs may reduce the Companys margins and adversely affect its profitability.

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All the Companys suppliers are based in China and as a result the Company is subject to risks associated with international operations and global manufacturing and sourcing including, among others:

Furthermore, any material disruption, slowdown or shutdown of the operations of the Companys principal logistics providers and shippers, including without limitation as a result of labor disputes, public health threats, social unrest, inclement weather, natural disasters, possible acts of terrorism, availability of shipping containers and increased security restrictions, could cause delays in the Companys ability to receive, process and fulfill customer orders and may cause orders to be canceled, lost or delivered late, goods to be returned or receipt of goods to be refused. These and other factors described above have and could continue to cause increases in shipping and storage costs. As a result, the Companys relationships with its customers, revenues and operating results could be materially and adversely affected.

The Company relies on a third-party logistics provider for the storage and distribution of its products in the United States and, if such third party logistics provider incurs any damage to the facilities where the Companys products are stored or is unable to distribute its products as needed, it could have a material adverse effect on the Companys results of operations and business.

The Company relies on a third-party logistics provider for the storage and distribution of its products. The facilities where the Companys products are stored by such provider may also be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, power outages, communications failure or terrorism. Any material damage to the facilities where the Companys products are stored could adversely affect its inventory and the ability of such third-party logistics provider to meet the needs of its customers. In addition, an inability to maintain the Companys contracts with such third-party logistics provider or a delay, disruption or quality control problems in the operations of such third-party logistics provider, including as a result of damage to the facilities of such provider or a strike by such providers workers, could cause delays in the Companys ability to fulfill customer orders and may cause orders to be canceled, lost or delivered late, the Companys products to be returned or receipt of products to be refused, any of which could adversely affect the Companys business and results of operations. The Companys contract with its third-party logistics provider is terminable upon written notice by either party for convenience without cause. If the Company is unable to maintain its contract with its third-party logistics provider, the Company would be required to retain a new third party logistics provider and the Company may be unable to retain such third party at a cost that is acceptable to the Company. If the Companys shipping costs were to increase as a result of an increase in the fees charged by such third-party logistics provider or as a result of obtaining a new third-party logistics provider and if the Company is unable to pass on these higher costs to its customers, it could have a material adverse effect on the Companys results of operations and business.

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The Companys revenues and earnings could be materially and adversely affected if it cannot anticipate market trends, enhance existing products or achieve market acceptance of new products.

The Companys 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. In addition, to increase the Companys penetration of current markets and gain footholds in new markets for its products, the Company must maintain its existing products and integrate them with new products. The Company may not be successful in sourcing, marketing and releasing new products that respond to technological developments or changing customer needs and preferences and those efforts may not succeed and may divert management resources from existing operations and require the Company to commit significant financial resources, either of which could significantly impair our operating results. The Company may also experience difficulties that could delay or prevent the successful development, introduction and sale of these new products. These new products may not adequately meet the requirements of the marketplace and may not achieve any significant degree of market acceptance. If release dates of any future products or enhancements to the Companys products are delayed, or if these products or enhancements fail to achieve market acceptance when released, the Companys sales volume may decline and earnings could be materially and adversely affected. In addition, new products or enhancements by the Companys competitors may cause customers to defer or forgo purchases of the Companys products, which could also materially and adversely affect the Companys revenues and earnings.

Cash generated by operating activities represents the Companys principal source of funding and therefore the Company depends on its ability to successfully manage its operating cash flows to fund its operations.

The Company does not maintain any credit facilities (other than, from time to time, certain letters of credit) in connection with the operation of its business. The Company has relied on, and continues to rely on, its cash on hand and cash generated by operations to manage its business. Certain of the Companys major factory suppliers, including Itoma, extend credit lines to the Company in amounts based on various factors, including the amounts of the Companys purchases and their internal credit criteria, and in the past have reduced the maximum amount of open credit lines available to the Company. The loss of, or reduction in, credit lines from the Companys principal suppliers could reduce the Companys liquidity, increase its working capital needs or limit its ability to purchase products which in turn could adversely affect its financial condition or results of operations. If the Company is unable to generate sufficient cash from operations, the Company may need to secure alternative means of financing or reorganize its operations to continue to maintain its current business.

The Company is subject to intense competition in the industry in which it operates, which could cause material changes in the selling price of its products or losses of its market share.

The housewares and consumer electronics industry is highly competitive, especially with respect to pricing and the introduction of new products and features. The Companys products compete in the low to medium-priced sector of the housewares and consumer electronics market and compete primarily on the basis of reliability, brand recognition, quality, price, design, consumer acceptance of the Emerson trademark and quality service and support to retailers and their customers. The Company and many of its competitors are subject to factory cost increases, and the Company expects these pressures to continue. If these pressures are not mitigated by increases in selling price or cost reductions from the Companys suppliers or changes in product mix, or if the consumers of the Companys products change their buying habits as a result of the Companys actions, the Companys revenues and profits could be substantially reduced. In addition, the Company also sells through online marketplaces, including Amazon. The Company's ability to maintain or increase its sales depends on its ability to increase its visibility and continue to distribute its products through these online marketplaces. As compared to the Company, many of its competitors are larger in size and more broadly diversified with significantly greater managerial, financial, marketing, technical and other competitive resources and greater brand recognition. As a result, the Companys competitors may be able to (i) adapt more quickly to new or emerging technologies and changes in customer requirements; (ii) rapidly replicate new features and innovations that we may introduce into the market; (iii) devote greater resources to the promotion and sale of their products and services; (iv) aggressively discount their products and services in order to gain market share; and (v) respond more effectively to pricing pressures. Competition could increase if new companies enter the market, existing competitors expand their product mix or the Company expands into new markets. An increase in competition could result in material price reductions or loss of the Companys market share.

In addition, the industry in which the Company competes generally has low barriers to entry that allow the introduction of new products or new competitors at a fast pace. Some retailers have and may continue to introduce their own private label products, which could reduce the volume of products they buy from the Company, as well as decrease the shelf space they allocate to the Companys products. If the Company is unable to protect the Companys brand image and authenticity, the Company may be unable to effectively compete with these new market entrants or new products.

Changes in consumer shopping trends and changes in distribution channels could result in lost market share and decreased revenue and profitability.

Traditional brick-and-mortar retail channels have experienced low growth or declines in recent years, while the ecommerce channel has experienced significant growth. Consumer shopping preferences have shifted, and may continue to shift in the future, to distribution channels other than traditional brick-and-mortar retail channels. Success in the ecommerce channel requires providing products at the right price, products that earn strong ratings and reviews and meaningful engagement with online shoppers. The Company has invested in selling and marketing capabilities in the ecommerce channel, while maintaining its presence in traditional brick-and-mortar retail channels. However, if we are not successful in utilizing ecommerce channels that consumers may prefer, we may experience a loss in market share and decreased revenue and profitability.

The Company depends on the experience and expertise of its senior management team and key technical employees, and the loss of any key employee may impair its ability to operate effectively.

The Companys success depends upon the continued services of its senior management team and key technical employees. Each of the Companys executive officers, key technical personnel and other employees could terminate his or her relationship with the Company at any time. The loss of any member of the Companys senior management team might significantly delay or prevent the achievement of the Companys business objectives and could materially harm the Companys business and customer relationships. In addition, turnover, particularly on the senior management team, with insufficient development of leadership talent and succession plans, could diminish employee confidence and increase risks for retaining key employees.

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Changes in consumer spending and economic conditions may cause the Companys operating results to fluctuate and cause its stock price to decline.

The Companys net revenue and operating results may vary significantly from year-to-year and quarter-to-quarter as well as in comparison to the corresponding quarter of the preceding year. Factors that may cause these variations include:

As a result of any of these factors, the Companys operating results may fluctuate significantly, which may in turn cause its stock price to decline.

Legal, Regulatory and Tax Risks

The Company is subject to a variety of U.S. and foreign laws and regulations that are central to the Companys business; its failure to comply with these laws and regulations could harm the Companys business or operating results.

The Company is or may become subject to a variety of laws and regulations in the United States and abroad that involve matters central to its business, including laws and regulations regarding consumer protection, data privacy and security, advertising, electronic commerce, intellectual property, manufacturing, anti-bribery and anti-corruption, and economic or other trade prohibitions or sanctions. For example, certain governmental authorities regulate the development, manufacture, sale and distribution of certain of our products, and failure to comply with all applicable rules and regulations may adversely impact us. For certain products in our business, government regulations may require detailed inspection of, and controls over, research and development, clinical investigations, product approvals and manufacturing, marketing and promotion, sampling, distribution, record-keeping, storage and disposal practices. Failure to comply with any applicable laws or regulations could result in fines or revocation of our operating permits and licenses or, in rare circumstances, market withdrawal of the product. We may also be dependent on receiving governmental or third-party approvals prior to manufacturing, marketing and shipping certain new products in the future, which may be costly and time-consuming. We cannot be certain that any such products will receive necessary approvals. Also, receipt of approval in one country does not guarantee approval by any other foreign regulatory agency.

In addition, the increasingly global nature of the Companys business operations subjects the Company to domestic and foreign laws and regulations such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery and anti-corruption laws in other jurisdictions. The Companys products are also subject to U.S. export controls, including the United States Department of Commerces Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Departments Office of Foreign Assets Controls.

In the ordinary course of business, the Company collects and otherwise processes personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property and sensitive third-party data. Our data processing activities presently and may in the future subject us to a variety of stringent and evolving domestic and foreign laws and regulations regarding information security and privacy, such as the California Consumer Privacy Act and the European Union's General Data Protection Regulation. These and similar data protection laws impose significant requirements on the collection, transfer and other processing of personal data, as well as may permit regulators and other stakeholders to seek to impose monetary and non-monetary fines and other penalties for non-compliance. These laws may also limit the ability to transfer personal data across jurisdictional boundaries. We presently or may in the future also have contractual or other (such as through public-facing statements) obligations related to information security and privacy. Compliance with our privacy and information security obligations have and may in the future result in significant expenses (for example due to increased investment in technology and the development of operational processes). We may at times fail (or be perceived to have failed) in our efforts to comply with our information security or privacy obligations. If we or the third parties with whom we work fail or are perceived to have failed, to address or comply with applicable information security or privacy obligations, we could face significant consequences such as enforcement actions, fines, litigation, operational disruptions, loss of customers or sales and other similar adverse events. Any of these events could have a material adverse effect on our reputation, business, or financial condition.

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Foreign regulations and changes in trade policies and the political, social and economic conditions in the United States and the foreign countries in which the Company operates its business could affect the Companys revenues and earnings materially and adversely.

The Company has operations in China and derives a significant portion of its revenue from sales of products manufactured by third parties located in China. In addition, third parties located in China and other countries located in the same region produce and supply many of the components and raw materials used in the Companys products. Additionally, a significant portion of the shipping of the Companys finished goods to the United States occurs through Hong Kong. Conducting an international business inherently involves a number of difficulties and risks that could materially and adversely affect the Companys ability to generate revenues and could subject the Company to increased costs. The diplomatic tensions between the United States and China, including over Chinas enactment of the Hong Kong national security law, create uncertainties for doing business in China, and the risk of additional protectionist trade policies and tariffs or other escalating retaliatory policies, such as the passage of the Hong Kong Autonomy Act in July 2020 and the concurrent U.S. executive order that ended the special economic status afforded to Hong Kong under the United States-Hong Kong Policy Act of 1992, could increase the Companys cost of doing business and adversely affect the Companys business, financial condition and results of operations. Furthermore, it is unclear whether the current U.S. administration will further alter the existing trade agreements between China and the U.S. or otherwise modify or impose additional tariffs on imports from China. It is possible that further tariffs may be imposed on the categories of products the Company imports to the United States, or that the Companys business will be affected by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing the Company to raise prices or make changes to its operations, any of which could adversely affect demand for the Companys products or increase its costs.

Among the other factors that may adversely affect the Companys revenues and increase its costs are:

Any of the factors described above may materially and adversely affect the Companys revenues and/or increase its operating expenses.

Tariffs or other restrictions placed on the Companys products imported into the United States from China, or any related countermeasures taken by China, have had and could continue to have a material adverse effect on the Companys business, profitability and results of operations.

The Company has operations in China and all of the Companys products are currently manufactured by suppliers in China.  This concentration exposes the Company to risks associated with doing business globally, including changes in tariffs. Any tariffs or other trade restrictions affecting the import of these products to the United States from China or any retaliatory trade measures taken by China in response to existing or future tariffs could have a material adverse effect on the Companys results of operations going forward. The Companys dependency on its overseas suppliers could exacerbate these and other risks, and any tariffs on the categories of products the Company imports to the United States could negatively affect the demand for such products, increase the cost of components, delay production or affect the Companys ability to compete against competitors who do not manufacture in China or otherwise are not subject to such tariffs.

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Effective in September 2018, the United States imposed tariffs of 10% on approximately $200 billion worth ofcertain goods imported from China, including categories of products the Company imports from China. These tariffs were increased to 25% effective in May 2019 and were scheduled to further increase to 30% . Effective in OctoSeptember 2019, which increases were subsequently delayed indefinitely after an interim deal was reached  (and as amended by the certain Phase One Economic and Trade Agreement entered into between the United States and China. Effective in September in January 201920), the United States imposed additional tariffs of approximately 7.5% on essentially all remaining Chinese-origin imports, including approximately $300 billion worth of googoods imported from China (List 4 products). Tariffs of 15% were imposed on certain L. The new United States presidential administ 4ration has products effective in September 2019 (List 4A products),moted and implemented plans to further raise tariffs and pursue othe remainder were schedulr trade policies intended to be subjerestrict to imports from nearly all of these tariffs effective in December 2019 (List 4B products) United States' current trading partners and, in particular, China. In JanuarMay 2020, t5, following a series of tariffs imposed by the United States and on imports from China signed a Phase One Economic and Trade Aand reciprocal tariffs from China on imports from the United States, the countries agreement, pursuant to which the td on cumulative, bilateral reciprocal tariff increases ons of 10% to take effect on August 12, 2025, pending the List 4B products remained suspendoutcome of ongoing discussions between the countries. It has been reported andthat the rate ofse negotiations will result in an additional 20% tariffs on the List 4A products wasimports from China, reduced to 7.5%, while all otherpresenting an aggregate tariffs remain in place. T rate of 55%. The ultimate scope of the effects on the Company of these imposed and proposed tariffs areis uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. If the U.S. and China are able to negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated, but given the uncertainties, including as a result of the recent change in U.S. administrations and any other political changes, there can be no assurance of whether, or when, this will be accomplished. If the currentl currently imposed and proposed tariffs covering the categories of products that the Company imports continue or are increased, and the Company is unable to obtain an exception, it could have a material adverse effect on the Companys business.

Although the Company is continuing to monitoring the trade environment and working to mitigate the effects of tariffs through pricing and sourcing strategies, including through ongoing inventory management, the Company cannot be certain how its customers and competitors will react to the actions taken. If the Company determines to pass some or all of these new tariff burdens on to its customers as product price increases in the future, the result may be a degradation of the Companys competitive position and a loss of customers that would adversely affect the Companys operating performance. AThe imposition of these new or additional tariffs imposed bor other trade barriers by the United States,  should they be implemented and ansustained for an extended period of time, and any related countermeasures by China, including as a result of the heightened tensions between the United States and China over Hong Kong, could further increase the Companys cost of goods and reduce its gross margins. We cannot predict future trade policy, whet and regulations in the United States and other excountries, inclusions will be reinstatedding whether, and to what extent, there may be additional changes to international trade agreements, such as those with China, or whether, or the terms of anyo what extent, quotas, duties, additional tariffs, export controls or other renegotiastrictions will be changed or imposed by the United trade agreementsStates or by other countries, and their impacts on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to further adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. and world economy, which in turn could further adversely impact our business, financial condition and results of operations.

Our business involves the potential for product recalls, which could affect our revenue and profitability.

The products that we sell are subject to various mandatory and voluntary standards. As a marketer and distributor of consumer products, we are subject to the Consumer Product Safety Act and the Federal Hazardous Substances Act, which empower the Consumer Products Safety Commission (CPSC) PSC to seek to exclude from the market those products that are found to be unsafe or hazardous. In addition, the U.S. Food and Drug Administration (FDA) DA and other governmental authorities regulate the development, manufacture, sale and distribution of certain of our products. Under certain circumstances, the CPSC, the FDA or other government agencies could require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so. Any repurchases or recalls of our products could be costly to us and could damage our reputation or the value of our brands. If we are required to remove, or we voluntarily remove our products from the market, our reputation or brands could be tarnished, and we might have large quantities of finished products that could not be sold. Furthermore, failure to timely notify the CPSC, the FDA or other applicable government agencies of a potential safety hazard can result in fines being assessed against us. Additionally, laws regulating certain of our products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future. Our results of operations are also susceptible to adverse publicity regarding the quality and safety of our products. In particular, product recalls may result in a decline in sales for a particular product.

The Company could be exposed to product liability or other claims for which its product liability or other insurance may be inadequate.

A failure of any of the products marketed by the Company may subject it to the risk of product liability claims and litigation arising from injuries allegedly caused by the improper functioning or design of its products. Although the Company currently maintains product liability insurance in amounts which the Company considers adequate, the Company cannot assure that:

To the extent product liability or other litigation losses are beyond the limits or scope of the Companys insurance coverage, the Companys expenses could materially increase.

Failure to comply with public health, consumer protection and other regulations could affect our reputation, revenue and profitability.

Electrical appliances are subject to various mandatory and voluntary standards. Some jurisdictions require that products be listed by UL, nderwriters Laboratories, Inc. (UL), a not-for-profit organization that sets safety standards for products, or other similar recognized laboratories. We endeavor to design our products to meet the certification requirements of, and to be certified in, each of the jurisdictions in which they are sold. Failure to comply with such certification requirements could result in additional re-design expenses, fines, or product liability claims.

The Companys business could be materially and adversely affected if it cannot protect its intellectual property rights or if it infringes on the intellectual property rights of others.

The Companys ability to compete effectively depends on its ability to maintain and protect its proprietary rights. The Company owns the Emerson and other trademarks, which are materially important to its business, as well as other trademarks, licenses and proprietary rights that are used for certain of the products that it markets and sells. The Companys trademarks are registered throughout the world, including the United States and other countries. The laws of some foreign countries in which the Company operates may not protect the Companys proprietary rights to the same extent as do laws in the United States. The protections afforded by the laws of such countries may not be adequate to protect the Companys intellectual property rights.

Third parties may seek to challenge, invalidate, circumvent or render unenforceable any trademarks, patents or proprietary rights owned by or licensed to the Company. In addition, in the event third-party licensees fail to protect the integrity of the Companys trademarks, the value of these marks could be materially and adversely affected. The Companys inability to protect its proprietary rights could materially and adversely affect the license of its trade names, trademarks and other proprietary rights to third parties as well as its ability to sell its products. Litigation has been and may in the future be necessary to enforce the Companys intellectual property rights, protect the Companys trade secrets and determine the scope and validity of such intellectual property rights. Any such litigation, whether or not successful, could result in substantial costs and diversion of resources and managements attention from the operation of the Companys business.

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The Company may receive notices of claims of infringement of other parties proprietary rights. Such actions could result in litigation and the Company could incur significant costs and diversion of resources in defending such claims. The party making such claims could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief. Such relief could effectively block the Companys ability to make, use, sell, distribute or market its products and services in certain jurisdictions. The Company may also be required to seek licenses to such intellectual property. The Company cannot predict, however, whether such licenses would be available or, if available, that such licenses could be obtained on terms that are commercially reasonable and acceptable to the Company. The failure to obtain the necessary licenses or other rights could delay or preclude the sale, manufacture or distribution of its products and could result in increased costs to the Company.

An information systems interruption or breach in security, including as a result of cyber-attacks, could adversely affect the Companys business, results of operations and reputation.

In the ordinary course of business, the Company maintains sensitive data, including intellectual property, its proprietary business information and that of its customers and suppliers, and personal information related to various constituents. In addition, the Company sells its products through online marketplaces, including Amazon, which may rely upon third-party online payment platform service providers that maintain personal information collected from customers. The secure collection, maintenance, transmission and other processing of information is important to the Companys operations. An interruption or breach in security of the Companys information systems (or those of other parties with whom the Company works) could result in significant data compromise.

Because the techniques (such as viruses and worms, phishing attacks, distributed denial-of-service attacks and ransomware) used to obtain unauthorized access, disable or degrade service, or sabotage systems and other threats (such as software bugs, personnel error or misconduct) change frequently and may be difficult to detect for long periods of time, the Company may be unable to anticipate all techniques and threats or implement adequate preventive measures. In particular, ransomware attacks are becoming increasingly prevalent and severe and we may be unwilling or unable to pay extortion payments. In addition, hardware, software or other applications and systems the Company procures from third parties or uses may contain defects in design or manufacture or other problems (such as, supply chain attacks) that could compromise information security. Unauthorized parties may also attempt to gain access to the Companys systems or facilities through fraud, trickery or other forms of deceiving its employees. Accordingly, the Company may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, or if such measures are implemented, and even with appropriate training conducted in support of such measures, may still fail. Remote work has become more common which has increased risk to our information systems and data. The Company's information systems and data may also fail or be compromised for reasons other than a cyberattack such as server malfunctions, software or hardware failures, data loss, telecommunications failures, earthquakes, fire, flood and other similar events.

We take steps designed to detect, mitigate and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.

It is virtually impossible for the Company to entirely mitigate these risks. A party, whether internal or external, who is able to circumvent the Companys security measures or those of third parties with whom the Company works could misappropriate information. In addition, cyber insurance, if any, may not protect against all of the costs and liabilities arising from a cyber-attack.

Additionally, as cyber-attacks are increasing in frequency, level of sophistication, persistence and intensity, and are being conducted by sophisticated organized groups (such as national states and state-sponsored actors) and individuals with a wide range of motives and expertise, we are vulnerable in the event of cyber-attack. This includes threats to our key customers. If our key customers websites or systems are disrupted for a considerable amount of time, whether due to a cyber-attack or other disruption, we could experience lost sales to consumers and the key customers inability to submit new purchase orders, which could result in reduced revenue and profitability. Furthermore, past or future business transactions could expose the Company to information security risks. Any compromise or disruption to the Company's information systems (or those of third parties with whom the Company works) could lead to, significant reputational and financial losses and negatively impact the Companys results of operations, cash flows, financial condition, and liquidity. In addition, an information system breach, disruption or other compromise could result in other negative consequences, including disruption of internal operations, and may subject the Company to private litigation, government investigations, enforcement actions (including fines or penalties), and cause the Company to incur reputational harm, significant liability, damages, or remediation (including notification obligations) costs.

The Company operates its business in jurisdictions where intellectual property theft or compromise is common.

Currently, a majority of the Companys products are manufactured in China. Subject to contractual confidentiality obligations, the Company is required to share significant product design materials with third-parties necessary for the design and manufacture of our products. The Company cannot be sure that its data or intellectual property will not be compromised through cyber-intrusion, theft or other means, particularly when the data or intellectual property is held by partners in foreign jurisdictions. Should the Companys intellectual property be compromised, it may be difficult to enforce the Companys rights in China and other foreign jurisdictions in which the Company operates.

Fluctuations in the Companys tax obligations and effective tax rate and realization of deferred tax assets, including net operating loss carryforwards, may result in volatility of the Companys operating results.

The Company is subject to income taxes in various federal, state, local and certain foreign jurisdictions. The Company records tax expense based on its estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets, including net operating loss carryforwards. In addition, tax laws in certain jurisdictions may limit the ability to use net operating loss carryforwards upon a change in control. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. In addition, the Companys effective tax rate in a given financial statement period may be materially affected by a variety of factors including but not limited to changes in the mix and level of revenues, varying tax rates in the different jurisdictions in which the Company operates, fluctuations in the valuation allowance, timing of the utilization of net operating loss carryforwards, or by changes to existing accounting rules or regulations. Further, tax legislation or changes in tax rules and regulations or the interpretations thereof may be enacted in the future which could negatively affect the Companys current or future tax structure and effective tax rates. For example, the Organization for Economic Co-operation and Development has introduced a framework to implement a global minimum corporate income tax of 15%, referred to as Pillar Two. Certain countries in which we operate have enacted legislation to adopt Pillar Two and other countries are considering changes to their tax laws to implement this framework. The EU agreed to implement Pillar Two starting in 2024. Whether, and to what extent, Pillar Two is adopted or enacted by the other jurisdictions in which we operate is uncertain and could increase the cost and complexity on compliance and may adversely affect our global effective tax rate, financial condition and results of operations.

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Corporate Governance and Stock Ownership Risks

There is a limited trading market for the Companys common stock and the market price of the Companys common stock is subject to volatility.

The Companys common stock, which trades on the NYSE American, has experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of the Companys common stock. For example, the Company believes that recent volatility in the market price of the Companys common stock reflects market and trading dynamics unrelated to the Companys underlying business or macro or industry fundamentals. These fluctuations have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums. The Company may continue to incur rapid and substantial increases or decreases in its stock price that may not coincide in timing with the disclosure of news or developments by or affecting the Company. Accordingly, the market price of the Companys common stock may fluctuate dramatically, and may decline rapidly, regardless of any developments in the Companys business. The market price of the Companys common stock may also fluctuate significantly in response to various factors and events, including:

In addition, the securities markets may experience significant price and volume fluctuations that affect the market prices of equity securities of many companies due to, among other factors, the actions of market participants or other actions outside of the Companys control, including general market volatility caused by any surges in demand, high inflation, rising interest rates and bank failures. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Disruptions may re-emerge, and broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of the Companys common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. The Company may be the target of this type of litigation in the future, which could result in substantial costs and divert managements attention.

The Company is a controlled company within the meaning of the NYSE American rules and, as a result, qualifies for, and relies on, exemptions from certain corporate governance requirements. As a result, the Companys shareholders do not have the same protections afforded to shareholders of companies that are subject to such requirements.

Nimble Holdings Company Limited (Nimble), formerly known as The Grande Holdings Limited, through one of its indirect subsidiaries, is the beneficial owner of approximately 72.4% of the Companys outstanding common stock as of March 31, 20245. As a result, the Company is a controlled company within the meaning of the NYSE American Company Guide (the "Company Guide"). Under the NYSE American rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE American corporate governance requirements, including the requirements that:

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The Company has elected to use certain of these exemptions and the Company may continue to use all or some of these exemptions in the future for so long as the Company is a controlled company. The Board acts as the nominating committee and compensation committee and determines the compensation and benefits of the Companys executive officers, administers its employee stock and benefit plans, as may be in effect from time to time, and reviews policies relating to the compensation and benefits of its employees. Although all members of the Board have fiduciary obligations in connection with compensation matters, the Companys lack of an independent compensation committee presents the risk that any executive officers who are also directors may have influence over their personal compensation and benefits levels that may not be commensurate with the Companys financial performance. Accordingly, shareholders of the Company do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE American.

The controlling ownership of the Companys common stock by an indirect subsidiary of Nimble substantially reduces the influence of other stockholders, and the interests of Nimble may conflict with the interests of the Companys other stockholders.

Nimble, through one of its indirect subsidiaries, is the beneficial owner of approximately 72.4% of the Companys outstanding common stock as of March 31, 20245. As a result, Nimble will be able to exert significant influence over the Companys business and have the ability to control the approval process for actions by the Company that require stockholder approval, including: the election of the Companys directors and the approval of mergers, sales of assets or other significant corporate transactions or matters submitted for stockholder approval. Nimble may have interests that differ from your interests and may cause the shares in the Company beneficially owned by Nimble to be voted in a way with which you disagree and that may be adverse to your interests. In addition, several provisions of the Companys organizational documents and Delaware law may deter or prevent a takeover attempt, including a takeover attempt in which the potential purchaser offers to pay a per share price greater than the current market price of the Companys common stock. Under the terms of the Companys certificate of incorporation, the Board has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for the Companys common stock, including transactions that may be in your best interests.

The Companys bylaws designate the Court of Chancery of the State of Delaware or the federal district courts in Delaware as the exclusive forum for certain litigation that may be initiated by the Companys stockholders, which could limit stockholders ability to have certain claims heard in any other judicial forum.

Pursuant to the Companys corporate bylaws, as amended (the bylaws), unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the Company or any stockholder to the Company or the Companys stockholders; (iii) any action or proceeding asserting a claim against the Company or any current or former director, officer or other employee of the Company or any stockholder arising pursuant to any provision of the General Corporation Law of Delaware or the Companys certificate of incorporation or bylaws (as each may be amended from time to time); (iv) any action or proceeding to interpret, apply, enforce or determine the validity of the Companys certificate of incorporation or bylaws (including any right, obligation or remedy thereunder); (v) any action or proceeding as to which the General Corporation Law of Delaware confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against the Company or any director, officer or other employee of the Company or any stockholder, governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the courts having personal jurisdiction over the indispensable parties named as defendants. This forum selection clause in the Companys bylaws does not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts of the United States of America have exclusive jurisdiction. The bylaws further provide, that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. In addition, the bylaws provide that any person or entity holding, owning or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and to have consented to these provisions. The forum selection clause in the Companys bylaws may limit stockholders ability to have certain claims heard in any court other than in the Court of Chancery or the federal district courts in Delaware.

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