Emerson Radio (MSN) Risk Factors

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 Company's major factory suppliers, including Itoma, extend credit lines to the Company in amounts based on various factors, including the amounts of the Company's 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 Company's principal suppliers could reduce the Company's 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.

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: - its insurance will provide adequate coverage against potential liabilities;- adequate product liability insurance will continue to be available in the future; or - its insurance can be maintained on acceptable terms. To the extent product liability or other litigation losses are beyond the limits or scope of the Company's insurance coverage, the Company's expenses could materially increase.

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 Company's 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 Company's 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.

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") 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") 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's success depends upon the continued services of its senior management team and key technical employees. Each of the Company's 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 Company's senior management team might significantly delay or prevent the achievement of the Company's business objectives and could materially harm the Company's 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.

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 Company's operations. An interruption or breach in security of the Company's 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 Company's 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 Company's 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 Company's 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's 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: - unanticipated changes in market and economic conditions;- periods of uncertain economic conditions, such as inflation, rising interest rates, recessions or economic slowdowns;- the discretionary nature of consumers' demands and spending patterns;- variations in the sales of the Company's products to its significant customers;- variations in manufacturing and supplier relationships;- if the Company is unable to correctly anticipate and provide for inventory requirements, it may not have sufficient inventory to deliver its products to its customers in a timely fashion or the Company may have excess inventory that it is unable to sell;- new product developments or introductions;- product reviews and other media coverage;- competition, including competitive price pressures; and - political instability, war (including Russia's invasion of Ukraine and the Israel-Hamas war) or other hostilities, acts of terrorism, public health threats or other disasters. As a result of any of these factors, the Company's operating results may fluctuate significantly, which may in turn cause its stock price to decline.

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 Company's products. Additionally, a significant portion of the shipping of the Company's 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 Company's ability to generate revenues and could subject the Company to increased costs. The diplomatic tensions between the United States and China, including over China's 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 Company's cost of doing business and adversely affect the Company's business, financial condition and results of operations. Furthermore, it is unclear whether the current U.S. administration will 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 Company's 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 Company's products or increase its costs. Among the other factors that may adversely affect the Company's revenues and increase its costs are: - currency fluctuations which could cause an increase in the price of the components and raw materials used in the Company's products and a decrease in its profits;- Chinese labor laws;- labor shortages affecting the Company's facilities and its suppliers' manufacturing facilities located in China;- the elimination or reduction of value-added tax refunds to Chinese factories that manufacture products for export;- the rise of inflation and substantial economic growth in China;- more stringent export restrictions in the countries in which the Company operates which could adversely affect its ability to deliver its products to its customers;- tariffs and other trade barriers, such as import and export duties and quotas, which could make it more expensive for the Company to obtain and deliver its products to its customers;- increases in shipping costs for the Company's products or other service issues with the Company's third-party shippers, such as global availability of shipping containers and fuel costs;- political instability and economic downturns globally and in the countries in which the Company operates could adversely affect the Company's ability to obtain its products from its manufacturers or deliver its products to its customers in a timely fashion;- outbreaks of public health threats affecting the production capabilities of the Company's suppliers, including as a result of quarantines or closures;- new restrictions on the sale of electronic products containing certain hazardous substances; and - the laws of China are likely to govern many of the Company's supplier agreements. Any of the factors described above may materially and adversely affect the Company's revenues and/or increase its operating expenses.