Financial Analysis

Note 8 Acquisition On July 19, 2024 ( the Closing Date), NoJo acquired substantially all of the assets, and assumed certain specified liabilities, of Baby Boom Consumer Products, Inc. (Baby Boom)(the Acquisition), for a purchase price of $18.0 million in cash, subject to a working capital adjustment. The Acquisition was funded by the Company using the proceeds of an $8.0 million term loan from CIT and additional borrowings under the Companys revolving line of credit with CIT. The Acquisition has been accounted for in accordance with FASB ASC Topic 805, Business Combinations. The identifiable assets acquired were recorded at their estimated fair value, which has been determined based on available information and the use of multiple valuation approaches. The estimated useful lives of the identifiable intangible assets acquired were determined based upon the remaining time that these assets are expected to directly or indirectly contribute to the future cash flow of the Company. On December 23, 2025, the Company received $2.5 million in proceeds from certain claims filed by the Company under a representations and warranties insurance policy purchased in connection with the Acquisition (the Insurance Proceeds). The Insurance Proceeds are recorded within other income in the accompanying consolidated statements of operations for the year ended March 29, 2026. The Company considers the measurement period to have ended as of June 25, 2025 and further considers all measurement period …

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Note 14 Commitments and Contingencies Royalty expense amounted to $6.5 million and $6.7 million during fiscal years 2026 and 2025, respectively. The Companys commitment for the next five fiscal years for minimum guaranteed royalty payments under its license agreements as of March 29, 2026 is $9.2 million, consisting of $5.0 million, $3.6 million, $425 thousand, $59 thousand and $59 thousand due in fiscal years 2027, 2028, 2029, 2030 and 2031, respectively. The Company is, from time to time, involved in various legal proceedings relating to claims arising in the ordinary course of its business. Neither the Company nor any of its subsidiaries is a party to any such legal proceeding the outcome of which, individually or in the aggregate, is expected to have a material adverse effect on the Companys financial position, results of operations or cash flows. …

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Note 6 Financing Arrangements Factoring Agreements: To reduce its exposure to credit losses, the Company assigns the majority of its trade accounts receivable to CIT, a subsidiary of First Citizens Bank, pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT. As such, the Company does not take advances on the factoring agreements. CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the consolidated statements of operations, were $335 thousand and $386 thousand during the fiscal years ended March 29, 2026 and March 30, 2025, respectively. Credit Facility: The Companys credit facility includes a revolving line of credit and a term loan of $8.0 million under a financing agreement with CIT. The Company may …

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Note 10 Stock-based Compensation The Company has two incentive stock plans, the 2014 Omnibus Equity Compensation Plan (the 2014 Plan) and the 2021 Incentive Plan (the 2021 Plan). As a result of the approval of the 2021 Plan by the Companys stockholders at the Companys 2021 annual meeting of stockholders, grants may no longer be issued under the 2014 Plan. The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Companys overall goal of increasing stockholder value. Awards granted under the 2021 Plan may be in the form of incentive stock options, non-qualified stock options, shares of restricted or unrestricted stock, stock units, stock appreciation rights, or other stock-based awards. Awards may be granted subject to the achievement of performance goals or other conditions, and certain awards may be payable in stock or cash, or a combination of the two. The 2021 Plan is administered by the Compensation Committee of the Board, which selects eligible employees, non-employee directors and other individuals to participate in the 2021 Plan and determines the type, amount, duration (such duration not to exceed a term of ten (10) years for grants of stock options) and other terms of individual awards. At March 29, 2026, 125,504 shares of the Company …

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Note 7 Goodwill, Customer Relationships and Other Intangible Assets Goodwill: Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in business combinations. For the purpose of presenting and measuring for impairment of goodwill, the Company has two reporting units: one that produces and markets bedding and diaper bags and another that produces and markets bibs, toys and disposable products. The Company measures for impairment annually as of the first day of the Companys fiscal year. For the fiscal year ended March 30, 2025, the Company determined that a triggering event occurred in relation to the depressed market price of the Companys common stock and corresponding significant decline in the Companys market capitalization. As a result, the Company performed a quantitative goodwill impairment test. The fair value of goodwill in each impairment test was determined using a combination of an income approach, which estimates fair value based upon projections of future revenues, expenses, and cash flows discounted to their respective present values, and a market approach. The valuation methodology and underlying financial information included in the Companys determination of fair value required significant judgments by management. The principal assumptions used in the Companys discounted cash flow analysis consisted of (a) long-term projections of financial performance and (b) the weighted-average cost of capital of market pa …

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Note 12 Income Taxes As disclosed in Note 2, the Company adopted ASU No. 2023 - 09 effective for the fiscal year ended March 29, 2026. The ASU requires disaggregation of information contained in the disclosures related to the reconciliation of the U.S. federal statutory corporate income tax rate to the Companys effective tax rate, which is summarized below for the fiscal year ended March 29, 2026 ( amounts in thousands): Fiscal year ended March 29, 2026 Amount Tax Rate U.S. statutory rate applied to income before income taxes $ 554 21.0 % Differences arising from: State income taxes, net of federal income tax benefit (1) 161 6.1 % Foreign tax effects - Peoples Republic of China 24 0.9 % Tax credits - foreign tax credits (24 ) (0.9% ) Changes in unrecognized tax liabilities (88 ) (3.4% ) Nontaxable or nondeductible items (2) 157 6.0 % Other - net 11 0.4 % Income tax expense / effective tax rate $ 795 30.1 % ( 1 ) For the fiscal year ended March 29, 2026, the majority of the Company's state income taxes were incurred in California, Georgia, Michigan, Minnesota and Texas. ( 2 ) Primarily the effect of tax shortfalls arising from the expiration and forfeiture of stock options and performance share awards, as well as the vesting of non-vested stock during the year. In accordance with the guidance in effect prior to the adoption of ASU No. 2023 - 09, the Companys previously disclosed reconciliation of the U.S. federal statutory income tax rate to the Companys effective tax rate for …

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Note 9 Leases During the fiscal years ended March 29, 2026 and March 30, 2025, the Company capitalized operating lease obligations as right of use assets and recognized corresponding lease liabilities in the amount of $641 thousand and $999 thousand. The Company made cash payments related to its recognized operating leases of $4.7 million and $4.5 million during the fiscal years ended March 29, 2026 and March 30, 2025, respectively. Such payments reduced the operating lease liabilities and were included in the cash flows provided by operating activities in the accompanying consolidated statements of cash flows. The Company recognized noncash reductions to its operating right of use assets resulting from reductions to its lease liabilities in the amount of $876 thousand during the fiscal year ended March 30, 2025. As of March 29, 2026 and March 30, 2025, the Companys operating leases had weighted-average discount rates of 6.1% and 6.0%, respectively, and weighted-average remaining lease terms of 2.4 years and 3.2 years, respectively. During the fiscal years ended March 29, 2026 and March 30, 2025, the Company classified its operating lease costs within the accompanying consolidated statements of operations as follows (in thousands): Fiscal Years Ended 2026 2025 Cost of products sold $ 4,225 $ 4,202 Marketing and administrative expenses 417 386 Total operating lease costs $ 4,642 $ 4,588 The maturities of the Companys operating lease liabilities as of March 29, 2026 by fiscal y …

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Recently-Issued Accounting Standards: In December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes (Topic 740 ) Improvements to Income Tax Disclosures , the objective of which is to enhance the transparency and decision usefulness of income tax disclosures. The ASU requires disaggregated information about the Companys effective income tax rate reconciliation as well as on income taxes paid. The ASU was required to be adopted for fiscal years beginning after December 15, 2024 and early adoption was permitted. The Company adopted ASU No. 2023 - 09 effective for the fiscal year ended March 29, 2026 and the income tax disclosures in Note 12 reflect that adoption. In November 2024, the FASB issued ASU No. 2024 - 03, Income Statement Reporting Comprehensive Expense Disaggregation Disclosures (Subtopic 220 - 40 ) Disaggregation of Income Statement Expenses, the objective of which is to enhance the transparency and usefulness of financial statements by requiring public entities to provide more detailed disclosures about their expenses. The amendments in ASU No. 2024 - 03 are required to be adopted for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is evaluating the guidance of the ASU No. 2024 - 03 against its existing disclosures related to income statement expenses. The Company has determined that all other ASUs issued which had b …

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Note 13 Retirement Plan The Company sponsors a defined contribution retirement savings plan with a cash or deferred arrangement (the 401 (k) Plan), as provided by Section 401 (k) of the Internal Revenue Code (the Code). The 401 (k) Plan covers substantially all employees, who may elect to contribute a portion of their compensation to the 401 (k) Plan, subject to maximum amounts and percentages as prescribed in the Code. Each calendar year, the Board determines the portion, if any, of employee contributions that will be matched by the Company. For calendar years 2026, 2025, and 2024, the Board established the employer matching contributions at 100% of the first 2% of employee contributions and 50% of the next 3% of employee contributions to the 401 (k) Plan. If an employee separates from the Company prior to the full vesting of the funds in their account, then the unvested portion of the matching employer amount in their account is forfeited when the employee receives a distribution from their account. The Company utilizes such forfeitures as an offset to the aggregate matching contributions. The Companys matching contributions to the 401 (k) Plan, net of the utilization of forfeitures, were $392 thousand and $359 thousand for the fiscal years ended March 29, 2026 and March 30, 2025, respectively. …

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Note 3 Segment Reporting The Companys operations are managed and reported to its Chief Executive Officer, the Companys chief operating decision maker (CODM), on a consolidated basis. The Company operates in one principal segment, infant, toddler and juvenile products. These products consist of infant and toddler bedding, diaper bags, bibs, plush, dolls, disposables, toys and feeding products. The CODM assesses performance and allocates resources based on the Companys consolidated statements of operations, which requires the CODM to manage and evaluate the results of the Company in a consolidated manner to drive efficiencies and develop uniform strategies. Segment asset information is not used by the CODM to allocate resources. As a single reportable segment entity, the Companys segment performance measure is net income. The following table presents information about the Companys reportable segment (in thousands): 2026 2025 Net sales $ 82,266 $ 87,250 Less: Cost of products sold 62,188 65,985 Marketing and administrative expenses 18,979 18,690 Goodwill impairment charge - 13,766 Interest expense, net and other (1,539 ) 1,222 Income tax expense (benefit) 795 (3,057 ) Segment net income (loss) $ 1,843 $ (9,356 ) Included in the profit or loss measure above are the following for the fiscal year ended March 29, 2026, depreciation and amortization expenses were $752 thousand and $774 thousand, respectively, while for the fiscal year ended March 30, 2025, depreciation expense was $7 …

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Note 2 - Summary of Significant Accounting Policies Basis of Presentation: The accompanying consolidated financial statements include the accounts of the Company and have been prepared pursuant to accounting principles generally accepted in the U.S. (GAAP) as promulgated by the Financial Accounting Standards Board (FASB). Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated balance sheets and the reported amounts of revenues and expenses during the periods presented on the consolidated statements of operations and cash flows. Significant estimates are made in relation to allowances related to accounts receivable for expected credit losses and for customer deductions for returns, allowances and disputes; inventory reserves for discontinued finished goods; and a reserve for unrecognized tax liabilities in respect of the tax impact of state apportionment percentages. Actual results could differ materially from these estimates. Cash and Cash Equivalents: The Companys credit facility consists of a revolving line of credit under a financing agreement with The CIT Group/Commercial Services (CIT). The Company classifies a negative balance outstanding under this revolving line of credit as cash and cash equivalents, as these amounts are legally owed to the Com …

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Note 11 Shareholders Equity Dividends: The holders of shares of the Companys common stock are entitled to receive dividends when and as declared by the Board. Cash dividends of $ 0.32 per share were declared during each of the fiscal years ended March 29, 2026 and March 30, 2025, amounting to $3.4 million and $3.3 million, respectively. The Companys financing agreement with CIT permits the payment by the Company of cash dividends on its common stock without limitation, provided there is no default before or as a result of the payment of such dividends. Stock Repurchases: The Company acquired treasury shares by way of the surrender to the Company shares of common stock from several employees to satisfy the income tax withholding obligations relating to the vesting of non-vested stock. In this manner, the Company acquired 3,000 treasury shares during the fiscal year ended March 29, 2026 at a market value of $2.89 per share, and acquired 13,000 treasury shares during the fiscal year ended March 30, 2025 at a weighted-average market value of $4.44 per share. …

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