##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-07731
 EMERSON RADIO CORP.
  DELAWARE
    
    22-3285224(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)9 Entin Road Parsippany, New Jersey
    
    07054(Address of principal executive offices)
    
    (Zip code)
 
 
 þ o
  o o þ
 o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19ITEM 3. Defaults Upon Senior Securities
    
    
    20ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    20ITEM 5. Other Information
    
    
    20ITEM 6. Exhibits
    
    
    20SIGNATURES
    
    
    21EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATIONSEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  2




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Item 1. Financial Statements.
 EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except earnings per share data)
 Three Months Ended
    
    Six Months EndedSeptember 30
    
    September 302007
    
    2006
    
    2007
    
    2006Net revenuesNet revenues
    
    $
    57,823
    
    
    $
    99,588
    
    
    $
    110,426
    
    
    $
    154,829Net revenues-related party
    
    
    39
    
    
    
    
    
    
    
    124
    
    
    
    57,862
    
    
    
    99,588
    
    
    
    110,550
    
    
    
    154,829Costs and expenses:Cost of sales
    
    
    51,393
    
    
    
    65,736
    
    
    
    96,641
    
    
    
    113,576Cost of sales-related party purchases
    
    
    
    
    
    
    20,942
    
    
    
    
    
    
    
    20,942Other operating costs and expenses
    
    
    1,548
    
    
    
    1,426
    
    
    
    3,344
    
    
    
    3,025Selling, general and administrative
expenses (exclusive of non-cash
compensation shown below)
    
    
    5,307
    
    
    
    5,620
    
    
    
    10,284
    
    
    
    10,806Acquisition costs incurred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Non-cash compensation (recovered)
    
    
    (266
    )
    
    
    (50
    )
    
    
    (187
    )
    
    
    5557,982
    
    
    
    93,674
    
    
    
    110,082
    
    
    
    148,425Operating income (loss)
    
    
    (120
    )
    
    
    5,914
    
    
    
    468
    
    
    
    6,404Gain on sale of building
    
    
    854
    
    
    
    
    
    
    
    854
    
    
    
    Interest income (expense), net
    
    
    (66
    )
    
    
    (212
    )
    
    
    4
    
    
    
    (107
    )Interest income-related party
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    Income before income taxes
    
    
    668
    
    
    
    5,702
    
    
    
    1,489
    
    
    
    6,297Provision for income taxes
    
    
    3,952
    
    
    
    1,898
    
    
    
    4,331
    
    
    
    1,912Net income (loss)
    
    $
    (3,284
    )
    
    $
    3,804
    
    
    $
    (2,842
    )
    
    $
    4,385Net income (loss) per share:Basic
    
    $
    (0.12
    )
    
    $
    0.14
    
    
    $
    (0.10
    )
    
    $
    0.16Diluted
    
    $
    (0.12
    )
    
    $
    0.14
    
    
    $
    (0.10
    )
    
    $
    0.16Weighted average shares outstanding:Basic
    
    
    27,130
    
    
    
    27,077
    
    
    
    27,122
    
    
    
    27,071Diluted
    
    
    27,130
    
    
    
    27,106
    
    
    
    27,122
    
    
    
    27,123
 
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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 September 30, 2007
    
    
    March 31, 2007(A)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,406
    
    
    $
    1,851Restricted cash
    
    
    3,000
    
    
    
    3,000Accounts receivable (less allowances of $3,407 and $3,573, respectively)
    
    
    31,199
    
    
    
    19,375Other receivables
    
    
    1,939
    
    
    
    1,536Due from affiliates
    
    
    1,219
    
    
    
    24,690Net inventory
    
    
    61,362
    
    
    
    32,463Prepaid expenses and other current assets
    
    
    3,602
    
    
    
    3,376Deferred tax assets
    
    
    4,716
    
    
    
    5,737Total current assets
    
    
    114,443
    
    
    
    92,028Property, plant and equipment, net
    
    
    1,553
    
    
    
    2,492Trademarks and other intangible assets, net
    
    
    291
    
    
    
    311Deferred tax assets
    
    
    4,718
    
    
    
    4,067Other assets
    
    
    655
    
    
    
    510Total assets
    
    $
    121,660
    
    
    $
    99,408LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    $
    5,606
    
    
    $
    3,111Current maturities of long-term borrowings
    
    
    75
    
    
    
    146Accounts payable and other current liabilities
    
    
    43,697
    
    
    
    20,044Accrued sales returns
    
    
    865
    
    
    
    1,191Income taxes payable
    
    
    433
    
    
    
    306Deferred tax liabilities
    
    
    
    
    
    
    47Total current liabilities
    
    
    50,676
    
    
    
    24,845Long-term borrowings
    
    
    154
    
    
    
    651Deferred tax liabilities
    
    
    42
    
    
    
    25Shareholders equity:Preferred shares  10,000,000 shares authorized; 3,677 shares
issued and outstanding; liquidation preference of $3,677
    
    
    3,310
    
    
    
    3,310Common shares  $.01 par value, 75,000,000 shares authorized;
52,965,797 and 52,945,797 shares issued, 27,129,832 and 27,109,832
shares outstanding, respectively
    
    
    529
    
    
    
    529Capital in excess of par value
    
    
    117,235
    
    
    
    117,371Accumulated other comprehensive losses
    
    
    (82
    )
    
    
    (82
    )Accumulated deficit
    
    
    (25,980
    )
    
    
    (23,017
    )Treasury stock, at cost, 25,835,965 shares
    
    
    (24,224
    )
    
    
    (24,224
    )Total shareholders equity
    
    
    70,788
    
    
    
    73,887Total liabilities and shareholders equity
    
    $
    121,660
    
    
    $
    99,408
 
 (A)
    
    Reference is made to the Companys Annual Report on Form 10-K for the fiscal year ended March
31, 2007 filed with the Securities and Exchange Commission in June 2007 and amended in July
2007.  4




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Six Months EndedSeptember 302007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    (2,842
    )
    
    $
    4,385Adjustments to reconcile net income to net cash provided (used) by operating activities:Depreciation and amortization
    
    
    415
    
    
    
    298Non cash compensation
    
    
    (187
    )
    
    
    55Deferred tax expenses
    
    
    340
    
    
    
    1,507Asset allowances, reserves and other
    
    
    (1,316
    )
    
    
    1,298Gain on sale of building
    
    
    (854
    )
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (12,365
    )
    
    
    (41,776
    )Other receivables
    
    
    (403
    )
    
    
    (330
    )Due from affiliates
    
    
    23,471
    
    
    
    Inventories
    
    
    (27,368
    )
    
    
    (18,173
    )Prepaid expenses and other current assets
    
    
    (226
    )
    
    
    (899
    )Deposits  Short Term
    
    
    
    
    
    
    (28,767
    )Other assets
    
    
    (187
    )
    
    
    595Accounts payable and other current liabilities
    
    
    23,653
    
    
    
    43,139Income taxes payable
    
    
    6
    
    
    
    367Net cash provided (used) by operating activities
    
    
    2,137
    
    
    
    (38,301
    )Cash flows from investing activities:Proceeds from sale of building
    
    
    2,000
    
    
    
    Additions to property and equipment
    
    
    (521
    )
    
    
    (88
    )Net cash provided (used) by investing activities
    
    
    1,479
    
    
    
    (88
    )Cash flows from financing activities:Short-term borrowings
    
    
    (71
    )
    
    
    24,086Net borrowings under foreign bank facilities
    
    
    2,495
    
    
    
    1,505Exercise of stock options
    
    
    51
    
    
    
    50Long-term borrowings
    
    
    85,203
    
    
    
    16,782Repayments of long-term borrowings
    
    
    (85,739
    )
    
    
    (16,709
    )Net cash provided by financing activities
    
    
    1,939
    
    
    
    25,714Net increase (decrease) in cash and cash equivalents
    
    
    5,555
    
    
    
    (12,675
    )Cash and cash equivalents at beginning of period
    
    
    1,851
    
    
    
    17,517Cash and cash equivalents at end of period
    
    $
    7,406
    
    
    $
    4,842
    Interest
    
    $
    229
    
    
    $
    339Income taxes
    
    $
    337
    
    
    $
    119
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EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
          Three months ended
    
    Six months endedSeptember 30
    
    September 302007
    
    2006
    
    2007
    
    2006(Unaudited)Net income (loss)
    
    $
    (3,284
    )
    
    $
    3,804
    
    
    $
    (2,842
    )
    
    $
    4,385Recognition of realized losses in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Change in unrealized loss on securities, net
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (10
    )Comprehensive income
    
    $
    (3,284
    )
    
    $
    3,797
    
    
    $
    (2,842
    )
    
    $
    4,378
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Three months ended
    
    Six months endedSeptember 30
    
    September 302007
    
    2006
    
    2007
    
    2006(Unaudited)Numerator:Net income (loss) for basic and diluted earnings per share
    
    $
    (3,284
    )
    
    $
    3,804
    
    
    $
    (2,842
    )
    
    $
    4,385Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    27,130
    
    
    
    27,077
    
    
    
    27,122
    
    
    
    27,071Effect of dilutive securities on denominator:Options and warrants
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    52Denominator for diluted earnings per share  weighted average
shares and assumed conversions
    
    
    27,130
    
    
    
    27,106
    
    
    
    27,122
    
    
    
    27,123Basic and diluted earnings (loss) per share
    
    $
    (0.12
    )
    
    $
    0.14
    
    
    $
    (0.10
    )
    
    $
    0.16
         September 30, 2007
    
    March 31, 2007(Unaudited)Finished goods
    
    $
    64,206
    
    
    $
    36,839Less inventory allowances
    
    
    (2,844
    )
    
    
    (4,376
    )Net inventory
    
    $
    61,362
    
    
    $
    32,463
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9




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Short-term Borrowings
  September 30, 2007
    
    
    March 31, 2007(In thousands)(Unaudited)Foreign bank loans
    
    $
    5,606
    
    
    $
    3,111Short term borrowings
    
    $
    5,606
    
    
    $
    3,111
 Long-term Borrowings
  September 30, 2007
    
    
    March 31, 2007(In thousands)(Unaudited)Mortgage payable
    
    $
    
    
    
    $
    567Capitalized lease obligations and other
    
    
    229
    
    
    
    230229
    
    
    
    797Less current maturities
    
    
    (75
    )
    
    
    (146
    )Long term debt and notes payable
    
    $
    154
    
    
    $
    651
 Credit Facility
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Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
   Forward-Looking Information
    11




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
    
    the loss of any of our key customers or reduction in the purchase of our products by any
such customers;
    
    Our inability to maintain effective internal controls or the failure by our personnel to
comply with such internal controls;
    
    the failure to maintain our relationships with our licensees and distributors or the
failure to obtain new licensees or distribution relationships on favorable terms;
    
    our inability to anticipate market trends, enhance existing products or achieve market
acceptance of new products;
    
    our dependence on a limited number of suppliers for our components and raw materials;
    
    our dependence on third party manufacturers to manufacture and deliver our products;
    
    the seasonality of our business, as well as changes in consumer spending and economic
conditions;
    
    the failure of third party sales representatives to adequately promote, market and sell
our products;
    
    our inability to protect our intellectual property;
    
    the effects of competition;
    
    changes in foreign laws and regulations and changes in the political and economic
conditions in the foreign countries in which we operate;
    
    conflicts of interest that exist based on our relationship with Grande;
    
    the outcome of the Audit Committees review of our related party transactions and
internal controls;
    
    changes in accounting policies, rules and practices; and
    
    the other factors listed under Risk Factors in our Form 10-K, as amended, for the
fiscal year ended March 31, 2007 and other filings with the Securities and Exchange
Commission (the SEC).
  Company Filings
  Results of Operations
   12




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##### Table of Contents



Three Months Ended
    
    Six Months EndedSeptember 30
    
    September 302007
    
    2006
    
    2007
    
    2006(Unaudited)Net revenues
    
    $
    57,862
    
    
    $
    99,588
    
    
    $
    110,550
    
    
    $
    154,829Cost of sales
    
    
    51,393
    
    
    
    86,678
    
    
    
    96,641
    
    
    
    134,518Other operating costs
    
    
    1,548
    
    
    
    1,426
    
    
    
    3,344
    
    
    
    3,025Selling, general and administrative costs
    
    
    5,307
    
    
    
    5,620
    
    
    
    10,284
    
    
    
    10,806Acquisition costs incurred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Non-cash compensation costs (recovered)
    
    
    (266
    )
    
    
    (50
    )
    
    
    (187
    )
    
    
    55Operating income (loss)
    
    
    (120
    )
    
    
    5,914
    
    
    
    468
    
    
    
    6,404Gain on sale of building
    
    
    854
    
    
    
    
    
    
    
    854
    
    
    
    Interest income (expense), net
    
    
    (66
    )
    
    
    (212
    )
    
    
    167
    
    
    
    (107
    )Income before income taxes
    
    
    668
    
    
    
    5,702
    
    
    
    1,489
    
    
    
    6,297Provision for income taxes
    
    
    3,952
    
    
    
    1,898
    
    
    
    4,331
    
    
    
    1,912Net Income (loss)
    
    $
    (3,284
    )
    
    $
    3,804
    
    
    $
    (2,842
    )
    
    $
    4,385
  i)
    
    Emerson(R) branded products sales of $53.6 million in the second quarter of fiscal 2008
as compared to $64.6 million in the second quarter of fiscal 2007, a decrease of $11.0
million, or 17.0%. Emerson(R) branded products sales were $102.2 million in the six month
period of fiscal 2008 as compared to $116.0 million in the six month period of fiscal 2007,
a decrease of $13.8 million, or 11.9%. The decrease for the three and six month periods
primarily resulted from decreased sales volumes in several audio product lines and the
Ipod(R) compatible product category, partially offset by an increase in the microwave ovens
and clock radios categories;ii)
    
    During the second quarter of fiscal 2007, Emerson had promotional item sales to ESI
International of $20.8 million, associated with a major holiday promotion with one of our
major customers. In addition to increasing net revenues, this promotional sale resulted in
an increase in accounts payable and other current liabilities and accounts receivable of
$20.6 million and $20.8 million, respectively, in the period ended September 30, 2006 as
well as an increase in short term deposits of $28.8 million in the same period due to parts
and inventory purchases related to this sale. In order to fund these purchases, short term
borrowings through our revolving line of credit increased by $24.0 million for the period
ended September 30, 2006. These short term borrowings were repaid in the three months ended
December 31, 2006;iii)
    
    Themed product sales of $2.6 million in the second quarter of fiscal 2008 compared to
$12.7 million in the second quarter of fiscal 2007, a decrease of $10.1 million, or 79.5%.
For the six month period of fiscal 2008, themed product sales were $4.8 million as compared
to $15.0 million for the six month period of fiscal 2007, a decrease of $10.2 million or
68.0%. The decrease for the three and six month periods was primarily a result of the
discontinuance of Nickelodeon(R) themed products, partially offset by sales of Mattel(R)
themed products which began in the fourth quarter of fiscal 2007;iv)
    
    Licensing revenues increased approximately $205,000, or 13.7%, to $1.7 million in the
second quarter of fiscal 2008 as compared to $1.5 million in the second quarter of fiscal
2007. For the six month period of fiscal 2008, licensing revenues increased $381,000, or
12.7%, to $3.4 million as compared to $3.0 million in the six months of fiscal 2007. The
increase in licensing revenue for the three and six month periods was primarily due to the
commencement of several new licensing agreements; andv)
    
    In the second quarter and six month period of fiscal 2008, Emerson charged agent fees of
$10,000 and $95,000, respectively, to Sansui Sales PTE, Ltd and Akai Sales PTE, Ltd, both of
which are related parties to Emerson, for assistance in procuring their product. In the
second quarter and six month period of fiscal 2008, Emerson charged commissions of $29,000
to Capetronic Displays, Ltd, which is a related party to Emerson, for importation
assistance. See Note 7 Related Party Transactions. No related party revenue was recorded
in the second quarter and six month period of fiscal 2007.
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Liquidity and Capital Resources
        
    
    two letter of credit facilities totaling $10.0 million which are used for inventory
purchases; and
    
    two back-to-back letter of credit facilities totaling $7.5 million.
  Short-Term Liquidity.
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Payment due by periodLess than
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    1 year
    
    1 - 3 years
    
    3 - 5 years
    
    yearsCapital lease obligations
    
    $
    229
    
    
    $
    75
    
    
    $
    135
    
    
    $
    19
    
    
    
    Lease-related party
    
    
    51
    
    
    
    51
    
    
    
    
    
    
    
    Leases- non-affiliate
    
    
    5,958
    
    
    
    1,805
    
    
    
    3,044
    
    
    
    1,109
    
    
    
    Total
    
    $
    6,238
    
    
    $
    1,931
    
    
    $
    3,179
    
    
    $
    1,128
    
    
    $
    
  Critical Accounting Policies
  Inflation, Foreign Currency, and Interest Rates
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    Disclosure controls and procedures.During fiscal 2007, our management, including the principal executive officer and principal
financial officer, evaluated our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) related to the recording,
processing, summarization and reporting of information in our reports that we file with the SEC.
These disclosure controls and procedures have been designed to ensure that material information
relating to us, including our subsidiaries, is made known to our management, including these
officers, by other of our employees, and that this information is recorded, processed,
summarized, evaluated and reported, as applicable, within the time periods specified in the SECs
rules and forms. Due to the inherent limitations of control systems, not all misstatements may be
detected. These inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. Our controls and procedures can only provide
reasonable, not absolute, assurance that the above objectives have been met.
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Based on their evaluation as of September 30, 2007, our principal executive officer and principal
financial officer have concluded that, for the reasons set forth below under Changes In Internal
Control Over Financial Reporting; our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective to
reasonably ensure that the information required to be disclosed by us in the reports that we file
or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms.(b)
    
    Changes in Internal Controls Over Financial ReportingEmerson has operated for many years under a system of internal controls governing the purchase
and sale of inventory and the use of its credit facilities to support its working capital needs.
This system was designed in order to insure participation by and coordination among employees
involved in each of the major functional areas of Emerson, namely sales, procurement and finance
both in the United States and in its Asian offices.The process begins with a monthly sales meeting in the United States chaired by the President of
Sales and attended by sales, treasury, sales planning and production scheduling personnel. At
this meeting, sales projections, pipeline and forecasts for all customers and for all models are
reviewed and the foundation for the Monthly Buy Package is established. Subsequent to the monthly
sales meeting, a Monthly Buy Package is developed, including a schedule of production needs by
month, model and quantity. This package is forwarded to the Director of Sales and the Director of
the Corporate Treasury and, when approved, forwarded to the Macao office.Experienced personnel in Macao then review and combine all buy packages received and schedule
letters of credit and on-account buys with manufacturers covering production for the month
necessary to fill outstanding orders and the likely needs of customers on a timely basis. The
report from Macao is then sent for final approval to the Director of the Corporate Treasury and
the Treasurer. This system of internal controls provides that no letter of credit may be
authorized for issuance and no open account production is permitted to begin until this final
approval is received.Once approved by Treasury, the package is sent back to the Macao office for execution of the buy
transactions. Orders are placed and letters of credit are issued as needed. The Macao office
produces and forwards to the Treasury and Finance Departments a Daily Activity Report which
includes, among other things, letter of credit number, dollar amount, model number, manufacturer
and quantity produced. All information on the Daily Activity Report should be able to be traced
back to and tie in with the original approved Buy Package. This information becomes the basis on
which Emersons cash and credit line are managed on a daily basis.Emersons primary domestic bank is notified of each letter of credit presented for payment and,
when paid, the applicable item is removed from the Daily Activity Report. In summary, this
system, which was developed over many years, was intended to ensure that every major function
within the firm participates at every stage of the purchase, sale and finance process and that
there centralized and continuing monitoring of the Companys liquidity position.In two transactions described in Note 7 (Related Party Transactions) our financial statements
included in this report on Form 10-Q, Emersons internal control process was bypassed. In the
transaction involving the 42 plasma televisions, purchase orders were issued, letters of credit
were authorized and funds were advanced as a deposit with Capetronic, an affiliate of Grande,
with only minimal involvement from the Treasury, Sales or Finance Departments under Emersons
system of internal control. In addition, the distributor to which Emerson sold the television
sets remitted approximately 25% of the monies due to Capetronic rather than to Emerson which then
received the funds at a later time. Documentation of the entire transaction was also deficient.The same infirmities (other than the payment by the distributor to Capetronic rather than
Emerson) are present in the transactions involving the H.H. Scott LCD sets. In addition, there is
virtually no documentation available to Emerson setting forth its participation in the
transactions beyond the detail information set forth in the issued Letters of Credit. However,
the available information shows that some of the Companys credit was utilized to fund
transactions for the benefit of Grande affiliates and in which Emerson then had no financial
interest whatsoever.
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As described under Note 7 to our financial statements, during the quarter ended December 31,
2006, we and affiliates of Grande entered into a number of related party transactions that
resulted in loans and letters of credit under our credit facility being issued for the benefit of
affiliates of Grande. These loans were (i) subject to a repayment schedule that commenced on
April 1, 2007 and ended on June 3, 2007 as set forth in the Note and (ii) guaranteed by Grande.
All obligations under the Note were satisfied by June 3, 2007. The Companys Audit Committee
conducted an initial review of these transactions and concluded that these financing transactions
(i) were not made on substantially the same terms, including interest rates and collateral and
return on investment, as those prevailing at the time for comparable transactions with unrelated
persons, and (ii) involved more than the normal risk of collectibility. In addition, the review
of the transactions revealed material weaknesses in the Companys internal controls. The
deficiencies that were uncovered related to (i) one or more senior managers failing to follow the
Companys existing internal controls over purchases and sales of inventory and utilization of the
Companys credit facilities and (ii) the lack of documentation related to such related party
transactions. These events have also raised concerns about the Companys overall control
environment. Although such events may not result in any adjustment to the Companys financial
statements, such events reflect material weaknesses with respect to the Company internal
controls.The Companys Audit Committee has received from an
independent investigator a report with respect to certain of the
related party transactions entered into by the Company, including its
subsidiaries, with affiliates of Grande Holdings from December 2005
to the present, and is continuing its independent review into such
transactions.As part of the Companys remedial actions, on February 20, 2007, the Board of Directors appointed
a committee of the Board of Directors comprised of Adrian Ma, the Companys Chief Executive
Officer, Greenfield Pitts, the Companys Chief Financial Officer, Michael A.B. Binney, the
Companys President  International Operations, and Eduard Will, the Companys President 
North American Operations, to internally review and approve all related party transactions in an
amount in excess of $500,000. Following review and approval by this newly formed committee, all
such related party transactions are required to be reviewed and approved by the Companys Audit
Committee.
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Share Repurchases:
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ITEM 3. Defaults Upon Senior Securities.
 (a)
    
    None(b)
    
    None
 
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  
 ITEM 5. Other Information.
  
 ITEM 6. Exhibits.
 31.1
    
    Certification of the Companys Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of the Companys Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*32
    
    Certification of the Companys Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    filed herewith 20




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EMERSON RADIO CORP.
         (Registrant)/s/ Adrian MaDate: November 14, 2007
    Adrian MaChief Executive Officer
(Principal Executive Officer)/s/ Greenfield PittsDate: November 14, 2007
    Greenfield PittsChief Financial Officer
(Principal Financial and Accounting Officer) 21