Emerson Radio (MSN) Risk Analysis

The Company has operations in China and all of the Company's 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 Company's results of operations going forward. The Company's 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 Company's ability to compete against competitors who do not manufacture in China or otherwise are not subject to such tariffs. Effective in September 2018, the United States imposed tariffs of 10% on certain goods imported from China, including categories of products the Company imports from China. These tariffs were increased to 25% effective in May 2019. Effective in September 2019 (and as amended by the certain Phase One Economic and Trade Agreement entered into between the United States and China in January 2020), the United States imposed additional tariffs of approximately 7.5% on essentially all remaining goods imported from China. The new United States presidential administration has promoted and implemented plans to further raise tariffs and pursue other trade policies intended to restrict imports from nearly all of the United States' current trading partners and, in particular, China. In May 2025, following a series of tariffs imposed by the United States on imports from China and reciprocal tariffs from China on imports from the United States, the countries agreed on cumulative, bilateral reciprocal tariffs of 10% to take effect on August 12, 2025, pending the outcome of ongoing discussions between the countries. It has been reported that these negotiations will result in an additional 20% tariff on imports from China, representing an aggregate tariff rate of 55%. The ultimate scope of the effects on the Company of these imposed and proposed tariffs is uncertain because of the dynamic nature of governmental actions and responses, as well as possible exemptions for certain products. If the 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 Company's business. Although the Company is continuing to monitor 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 Company's competitive position and a loss of customers that would adversely affect the Company's operating performance. The imposition of these new or additional tariffs or other trade barriers by the United States, should they be implemented and sustained 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 Company's cost of goods and reduce its gross margins. We cannot predict future trade policy and regulations in the United States and other countries, including whether, and to what extent, there may be additional changes to international trade agreements, such as those with China, or whether, or to what extent, quotas, duties, additional tariffs, export controls or other restrictions will be changed or imposed by the United States 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.