EMERSON RADIO CORP. The following discussion of the Company's operations and financial condition should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this Quarterly Report.
In the following discussions, most percentages and dollar amounts have been rounded to aid presentation. Accordingly, all amounts are approximations.
Forward-Looking Information
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements include statements with respect to the Company's beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond the Company's control, and which may cause the Company's actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.
All statements other than statements of historical fact are statements that could be forward-looking statements. The reader can identify these forward-looking statements through the Company's use of words such as "may," "will," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "project," "predict," "could," "intend," "target," "potential," and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:
• the ongoing effects of the coronavirus (COVID-19) pandemic-related
business disruption and economic uncertainty on both the Company's
projected customer demand and supply chain, as well as its operations and
financial performance;
• the Company's ability to generate sufficient revenue to achieve and
maintain profitability;
• the Company's ability to obtain new customers and retain key existing
customers, including the Company's ability to maintain purchase volumes of
the Company's products by its key customers;
• the Company's ability to obtain new licensees and distribution
relationships and maintain relationships with its existing licensees and
distributors;
• the Company's ability to resist price increases from its suppliers or pass
through such increases to its customers;
• changes in consumer spending for retail products, such as the Company's
products, and in consumer practices, including sales over the Internet;
• the Company's ability to maintain effective internal controls or
compliance by its personnel with such internal controls;
• the Company's ability to successfully manage its operating cash flows to
fund its operations;
• the Company's ability to anticipate market trends, enhance existing
products or achieve market acceptance of new products;
• the Company's ability to accurately forecast consumer demand and
adequately manage inventory;
• the Company's dependence on a limited number of suppliers for its
components and raw materials;
• the Company's dependence on third party manufacturers to manufacture and
deliver its products;
• increases in shipping costs for the Company's products or other service
issues with the Company's third-party shippers;
• the Company's dependence on a third party logistics provider for the
storage and distribution of its products in the United States ;
• the ability of third party sales representatives to adequately promote,
market and sell the Company's products;
• the Company's ability to maintain, protect and enhance its intellectual
property;
• the effects of competition;
• the Company's ability to distribute its products in a timely fashion,
including as a result of labor disputes and public health threats and
social unrest;
• evolving cybersecurity threats to the Company's information technology
systems or those of its customers or suppliers;
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• changes in foreign laws and regulations and changes in the political and
economic conditions in the foreign countries in which the Company
operates;
• changes in accounting policies, rules and practices;
• changes in tax rules and regulations or interpretations;
• changes in U.S. and foreign trade regulations and tariffs, including
potential increases of tariffs on goods imported into the U.S. , and
uncertainty regarding the same;
• limited access to financing or increased cost of financing;
• the effects of currency fluctuations between the U.S. dollar and Chinese
renminbi relative to the dollar and increases in costs of production in
China ; and
• the other factors listed under "Risk Factors" in the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended March 31, 2022
and other filings with the SEC .
Furthermore, the situation surrounding the COVID-19 pandemic remains fluid and
the potential for a material impact on the Company's results of operations and
financial condition increases the longer the COVID-19 pandemic affects activity
levels in
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The reader is cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. The Company has no obligation, and expressly disclaims any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. The Company has expressed its expectations, beliefs and projections in good faith and it believes it has a reasonable basis for them. However, the Company cannot assure the reader that its expectations, beliefs or projections will result or be achieved or accomplished.
Results of Operations
The following table summarizes certain financial information for the three month periods endedJune 30, 2022 (fiscal 2023) andJune 30, 2021 (fiscal 2022) (in thousands): Three Months Ended June 30, 2022 2021 Net product sales$ 1,004 $ 1,987 Licensing revenue 70 65 Net revenues 1,074 2,052 Cost of sales 879 1,609 Selling, general and administrative expenses 1,344 1,375 Operating loss (1,149 ) (932 ) Interest income, net 50 17 Income from governmental assistance programs 22 - Loss before income taxes (1,077 ) (915 ) Provision for income taxes - - Net loss$ (1,077 ) $ (915 )
Net product sales - Net product sales for the three month period ended
Net product sales are comprised primarily of the sales of houseware and audio
products which bear the Emerson® brand name. Net product sales may be
periodically impacted by adjustments made to the Company's sales allowance and
marketing support accrual to record unanticipated customer deductions from
accounts receivable or to reduce the accrual by any amounts which were accrued
in the past but not taken by customers through deductions from accounts
receivable within a certain time period. In the aggregate, these adjustments had
no effect on net product sales and operating income for either of the three
month periods ended
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i) Houseware products: Net sales decreased $0.3 million , or 43.5%, to $0.5
million for the three month period ended June 30, 2022 as compared to $0.8
million for the three month period ended June 30, 2021 , driven by a
decrease in year-over-year sales of microwave ovens.
ii) Audio products: Net sales decreased $0.6 million , or 53.4%, to $0.6
million for the three month period ended June 30, 2022 as compared to $1.2
million for the three month period ended June 30, 2021 , resulting from
decreased net sales of clock radios.
Business operations - The Company expects to continue to expand its existing
distribution channels and to develop and promote new products with retailers in
the
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
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
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
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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, please see the risk factors within Part I, Item 1A, "Risk
Factors" in the Company's Annual Report on Form 10-K, as amended, for the year
ended
Legal Proceedings - On
Licensing revenue - Licensing revenue for the three month period ended
Net revenues - Net revenues were
Cost of sales - In absolute terms, cost of sales decreased
The Company purchases the products it sells from a limited number of factory
suppliers. In each of the three month periods ended
Selling, general and administrative expenses ("S,G&A") - S,G&A, in absolute
terms, was
Interest income, net - Interest income, net, was
Income from governmental assistance programs - For the three month period ended
Provision (benefit) for income taxes - For the three month periods ended
Although the Company generated net losses during fiscal 2023 and fiscal 2022, it was unable to realize an income tax benefit due to valuation allowances recorded against its deferred tax assets.
Net (loss) - As a result of the foregoing factors, the Company realized a net
loss of
Liquidity and Capital Resources
As of
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equivalents of
Cash Flows
Net cash used by operating activities was approximately
Net cash provided by investing activities was nil for the three month period
ended
Net cash used by financing activities was nil for the three month period ended
Sources and Uses of Funds
The Company's principal existing sources of cash are generated from operations and its existing short-term investments. The Company believes that its existing cash balance and sources of cash will be sufficient to support existing operations over the next 12 months.
Off-Balance Sheet Arrangements
As of
Recently Adopted Accounting Pronouncements
Accounting Standards Update 2019-12 "Income Taxes (Topic 740) - Simplifying the
Accounting for Income Taxes" (Issued
In
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
In
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