Note 4 – Concentrations

Product Sourcing: Foreign and domestic contract manufacturers produce most of the Company’s products, with the largest concentration being in China. The Company makes sourcing decisions on the basis of quality, timeliness of delivery and price, including the impact of ocean freight and duties. Although the Company maintains relationships with a limited number of suppliers, the Company believes that its products  may be readily manufactured by several alternative sources in quantities sufficient to meet the Company’s requirements.

The Company maintains foreign a representative office located in Shanghai, China, which is responsible for the coordination of production, purchases and shipments, seeking out new vendors and overseeing inspections for social compliance and quality. The Company’s management and quality assurance personnel visit the third-party facilities regularly to monitor and audit product quality and to ensure compliance with labor requirements and social and environmental standards. In addition, the Company closely monitors the currency exchange rate. The impact of future fluctuations in the exchange rate or changes in safeguards cannot be predicted with certainty.

For the three-month period ended June 28, 2026, purchases from the Company’s three largest suppliers accounted for approximately 17%, 11% and 10% of purchases as compared to 15%, 13% and 11% for the three-month period ended June 29, 2025. To mitigate the risks associated with supplier concentration, the Company engages in ongoing efforts to identify alternative sources of supply, assess supplier reliability and performance, and negotiate favorable contractual terms where feasible. However, there is no assurance that the Company will be successful in reducing its dependence on any single supplier or mitigating the impact of supplier-related risks in the future.

The U.S. government has tariffs on imports from certain countries, including China. During 2025, the U.S. government increased tariffs which increased the cost of the products the Company sources from China and affected shipments from the Company’s Chinese-based suppliers. Some of these tariffs, the International Emergency Economic Powers Act ("IEEPA") tariffs, were recently deemed illegal by the U.S. Supreme Court ruling issued on February 20, 2026. The Company incurred approximately $5.3 million and $267 thousand of IEEPA tariffs during fiscal year 2026 and 2025, respectively. In April 2026, the U.S. Customs and Border Protection launched the Consolidated Administration and Processing of Entities ("CAPE"), a platform for importers of record to submit IEEPA tariff refund requests. The Company has evaluated its eligibility to submit IEEPA tariff refund requests, is complying with all applicable refund procedures and has submitted its eligible entries. As of June 28, 2026, $4.7 million of the refunds submitted were accepted by the CAPE system. These accepted claims for the recovery of IEEPA tariffs were deemed probable under the loss recovery model as of June 28, 2026. Of this amount, $0.2 million was received during the quarter and the remaining $4.5 million has been recorded as a receivable included within other current assets on the Condensed Consolidated Balance Sheets. The Company recognized a reduction in cost of sales of $3.7 million within the Condensed Consolidated Statements of Operations. Additionally, $0.9 million was recorded as a reduction to inventory for tariff costs that remain capitalized within inventory. As of August 5, 2026, the Company has received $4.6 million in IEEPA refunds.  The Company continues to evaluate the impact of the tariffs and its potential refunds on the additional $0.9 million of refund requests.  While significant refunds have been received, some uncertainty remains regarding the ultimate availability, timing, and amount of a full recovery of this amount. The Company will continue to monitor developments and will recognize any additional recovery when realization becomes probable.

Licensed Products: Certain products are manufactured and sold pursuant to licensing agreements for trademarks. Also, many of the designs used by the Company are copyrighted by other parties, including trademark licensors, and are available to the Company through copyright license agreements. The licensing agreements are generally for an initial term of one to three years and  may or  may not be subject to renewal or extension. Sales of licensed products represented 49% of the Company’s gross sales in both the three-month periods ended June 28, 2026 and June 29, 2025, which included 24% and 18% of gross sales in the three-month periods ended June 28, 2026 and June 29, 2026, respectively, under the Company’s license agreements with affiliated companies of The Walt Disney Company (“Disney”). The Company’s license agreement with Disney expires  December 31, 2027, and covers infant and toddler bedding, diaper bags, infant feeding and bath in the United States and Canada, and bibs and disposable products in the United States, Canada and Japan.

Customers: The Company’s customers consist principally of mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, internet accounts and wholesale clubs. The Company does not enter into long-term or other purchase agreements with its customers. The table below sets forth those customers that represented more than 10% of the Company’s gross sales: