Financial Analysis

NOTE 6 COMMITMENTS AND CONTINGENCIES: The Companys ERP software provider is subscription based with annual commitments as follows (in thousands). Fiscal Years Amount 2027 $ 60 2028 40 Total $ 100 Rent expense resulting from leases with non-affiliated companies were approximately $67,000 and $64,000 for fiscal 2026 and fiscal 2025 , respectively. Letters of Credit: The Company utilizes the services of one of its banks to issue secured letters of credit on behalf of the Company, as needed, on a 100% cash collateralized basis. At March 31, 2026 and March 31, 2025 , the Company had no letters of credit outstanding. Capital Expenditure: As of March 31, 2026 and March 31, 2025 , there were no capital expenditures or other commitments other than the normal purchase orders used to secure product. Employee Benefit Plan: The Company currently sponsors a defined contribution 401 (k) retirement plan which is subject to the provisions of the Employee Retirement Income Security Act. The Company matches a percentage of the participants contributions up to a specified amount. These contributions to the plan for fiscal 2026 and 2025 were approximately $14,000 and $19,000, respectively, and were charged against earnings for the periods presented. …

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Disaggregation of revenue (in 000's) 2026 2025 Net revenues by type: Net product sales $ 5,924 $ 10,449 Licensing revenue 386 336 Total: 6,310 10,785 Net revenues by customers: (over 10%) Amazon.com $ 2,656 $ 4,156 Fred Meyer 839 Walmart 3,322 Total: $ 3,495 $ 7,478 …

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"NOTE 5 INCOME TAXES: The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740, ""Accounting for Income Taxes"" (""ASC 740"" ). When uncertain tax positions exist, the Company will recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of March 31, 2026 , the Company does not believe it has any uncertain tax positions. Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not some or all of the deferred tax assets will not be realized. As of March 31, 2026 , the Company had available net operating loss carryforwards to reduce federal and state inc …

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"NOTE 11 LEGAL PROCEEDINGS: On October 10, 2023, the US District Court for the District of Delaware granted final judgment in favor of the Company in its trademark infringement lawsuit against air conditioning and heating products provider Emerson Quiet Kool and wholesaler Home Easy (the defendants). Among other things, the court order issues an injunction and directs the US Patent and Tr ademark Office to cancel the d efendants existing and proposed "" E merson Q uiet K ool "" trademark s and prohibit s d efendants from register ing or applying to register, or using t he same mark or any other mark or name containing the word ""Emerson"" going forward . The total j udgment awarded to the Company has increased from approximately $6.5 million to approximately $10.4 million, inclusive of disgorgement of wrongful profits, attorney's fees and enhanced damages. The aggregate award to the Company also includes the $4.1 million of advanced deposits previously paid to the Company. The $4.1 million of advanced deposits was reduced by approximately $1 million of incurred legal fees. The remaining balance of $3.1 million was released by the Company to other income during the quarter ended September 30, 2023. Like any judgement, there is no guarantee that the Company will be able to collect the entire judgement or if it is able to collect, how soon it will be able to do so. The defendants have filed separate bankruptcy petitions in the US Bankruptcy Court for the District of New Jersey, …

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"Recently Adopted Accounting Pronouncements Accounting Standards Update 2025 - 05 Financial Instruments Credit Losses (Topic 326 ): Measurement of Credit Losses for Accounts Receivable and Contract Assets In July 2025, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""ASU"") 2025 - 05, which provides ( 1 ) all entities with a practical expedient and ( 2 ) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The practical expedient allows an entity to assume that, when estimating expected credit losses, current conditions as of the balance sheet date remain unchanged for the remaining life of the asset. The accounting policy election permits nonpublic entities that elect the practical expedient to also consider collection activity occurring after the balance sheet date when estimating expected credit losses. The standard is effective for fiscal years beginning after December 15, 2025, and for interim periods within those annual reporting periods. Early adoption is permitted. The Company has adopted ASU 2025 - 05 for the three and nine month periods ended December 31, 2025. The adoption did not have a material impact on its financial condition, results of operations or cash flows. Accounting Standards Update 2023 - 09 In …

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"NOTE 3 RELATED PARTY TRANSACTIONS: From time to time, Emerson engages in business transactions with its controlling shareholder, Nimble, formerly known as The Grande Holdings Limited, and one or more of Nimbles direct and indirect subsidiaries, or with entities related to the Companys Chairman of the Board. Set forth below is a summary of such transactions. Controlling Shareholder S&T International Distribution Limited (S&T), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd. (""N.A.K.S""), which is a wholly owned subsidiary of Nimble, collectively have, based on a Schedule 13D/A filed with the SEC on February 15, 2019, the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 72.4%, of the Companys outstanding common stock as of March 31, 2026 . Accordingly, the Company is a controlled company as defined in Section 801 (a) of the Company Guide. Related Party Transactions Charges of rental and utility fees on office space in Hong Kong D uring fiscal 2026 and fiscal 2025 , the Company was billed approximately $130,000 and $138,000, respectively, for rental and utility fees from Vigers Appraisal and Consulting Ltd (VACL), which is a company related to the Companys Chairman of the Board. The Company owed $802 to VACL related to rental charges as of March 31, 2026 and $819 as of March 31, 2025 . During fiscal 2026 and fiscal 2025 , the Company was billed nil and approximately $385, respectively, for its share of installation charg …

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"NOTE 16 SEGMENT INFORMATION The Company currently operates as one segment which includes two revenue types, product sales and licensing revenue. While the Company discloses product sales and licensing revenue separately, management does not consider these to be separate segments, as all Emerson branded product is sold though similar sales channels and to similar customers. Management's determination for the allocation of resources is not analyzed by revenue streams, but as a single business unit. The determination of a single business segment is consistent with the consolidated financial information provided to the Company's Chief Operating Decision Maker (""CODM""). The Company's CODMs are the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer who review and evaluate consolidated net income for purposes of assessing performance, allocating resources, making operating decisions and for its planning and forecasting processes. Segment expenses are provided to the CODM on the same basis as disclosed in the condensed Consolidated Statements of Operations. The CODM does not evaluate performance nor does it allocate resources based on segment assets and therefore such information is not presented in the notes to the financial statements."

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NOTE 7 SHAREHOLDERS EQUITY: Common Shares: Authorized common shares total 75,000,000 with a par value $0.01 per share, of which 21,042,652 were outstanding as of March 31, 2026 and March 31, 2025 . Shares held in treasury at March 31, 2026 and March 31, 2025 were 31,923,145. Series A Preferred Stock: The Company has issued and outstanding 3,677 shares of Series A Preferred Stock, $.01 par value (Preferred Stock), with a face value of $3,677,000, which had no determinable market value as of March 31, 2026 . The Preferred Stock is non-voting, has no dividend preferences and has not been convertible since March 31, 2002; however, it retains a liquidation preference. …

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NOTE 15 SUBSEQUENT EVENTS As of the date of this filing, there were no subsequent events to disclose. …

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