##### 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 June 30, 2008
 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)9 Entin Road Parsippany, New Jersey
    
    07054(Address of principal executive offices)
    
    (Zip code)
  
  
  þ o
  Large accelerated filer
o
    
    Accelerated filer o
    
    Non-accelerated filer  
o
(Do not check if a smaller reporting company)
    
    Smaller reporting company
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
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II  OTHER INFORMATION
    
    
    18Item 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18ITEM 3. Defaults Upon Senior Securities
    
    
    19ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    19ITEM 5. Other Information
    
    
    19ITEM 6. Exhibits
    
    
    19SIGNATURES
    
    
    20EX-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 EndedJune 302008
    
    2007Net revenuesNet revenues
    
    $
    43,095
    
    
    $
    52,603Net revenues-related party
    
    
    13
    
    
    
    8543,108
    
    
    
    52,688Costs and expenses:Cost of sales
    
    
    38,021
    
    
    
    45,248Other operating costs and expenses
    
    
    1,131
    
    
    
    1,796Selling, general and administrative expenses
(exclusive of non-cash compensation shown below)
    
    
    4,828
    
    
    
    4,977Non-cash compensation, net of recoveries
    
    
    18
    
    
    
    7943,998
    
    
    
    52,100Operating (loss) income
    
    
    (890
    )
    
    
    588Interest income, net
    
    
    132
    
    
    
    70Interest income-related party
    
    
    
    
    
    
    163Realized/unrealized holding gains on trading securities
    
    
    262
    
    
    
    (Loss) income before income taxes and minority interest
    
    
    (496
    )
    
    
    821Provision for income taxes
    
    
    527
    
    
    
    379Minority interest in loss of consolidated subsidiary
    
    
    94
    
    
    
    Net (loss) income
    
    $
    (929
    )
    
    $
    442Net (loss) income per share:Basic
    
    $
    (0.03
    )
    
    $
    0.02Diluted
    
    $
    (0.03
    )
    
    $
    0.02Weighted average shares outstanding:Basic
    
    
    27,130
    
    
    
    27,115Diluted
    
    
    27,130
    
    
    
    27,141
 
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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 June 30, 2008
    
    
    March 31, 2008(A)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,569
    
    
    $
    14,444Restricted cash
    
    
    2,000
    
    
    
    Foreign exchange forward contracts
    
    
    
    
    
    
    134Accounts receivable (less allowances of $3,327 and $4,148, respectively)
    
    
    21,562
    
    
    
    17,289Other receivables
    
    
    1,525
    
    
    
    2,131Due from affiliates
    
    
    179
    
    
    
    765Inventory, net
    
    
    26,593
    
    
    
    24,854Prepaid expenses and other current assets
    
    
    2,462
    
    
    
    2,246Deferred tax assets
    
    
    4,811
    
    
    
    5,412Total current assets
    
    
    75,701
    
    
    
    67,275Property, plant and equipment, net
    
    
    1,863
    
    
    
    1,902Trademarks and other intangible assets, net
    
    
    273
    
    
    
    279Investments in marketable securities
    
    
    10,510
    
    
    
    11,948Deferred tax assets
    
    
    6,029
    
    
    
    5,927Other assets
    
    
    612
    
    
    
    598Total assets
    
    $
    94,988
    
    
    $
    87,929LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of long-term borrowings
    
    $
    83
    
    
    $
    82Accounts payable and other current liabilities
    
    
    30,086
    
    
    
    21,737Due to affiliates
    
    
    11
    
    
    
    102Accrued sales returns
    
    
    706
    
    
    
    872Income taxes payable
    
    
    167
    
    
    
    185Total current liabilities
    
    
    31,053
    
    
    
    22,978Long-term borrowings
    
    
    123
    
    
    
    142Deferred tax liabilities
    
    
    65
    
    
    
    57Minority interest
    
    
    39
    
    
    
    133Shareholders 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 shares issued at June 30, 2008 and March 31, 2008;
27,129,832 shares outstanding at June 30, 2008 and March 31, 2008
    
    
    529
    
    
    
    529Capital in excess of par value
    
    
    117,263
    
    
    
    117,245Accumulated other comprehensive losses
    
    
    (82
    )
    
    
    (82
    )Accumulated deficit
    
    
    (33,088
    )
    
    
    (32,159
    )Treasury stock, at cost, 25,835,965 shares
    
    
    (24,224
    )
    
    
    (24,224
    )Total shareholders equity
    
    
    63,708
    
    
    
    64,619Total liabilities and shareholders equity
    
    $
    94,988
    
    
    $
    87,929
 
 (A)
    
    Reference is made to the Companys Annual Report on Form 10-K for the fiscal year ended March
31, 2008 filed with the Securities and Exchange Commission in July 2008 and amended in July
2008.  4




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Three Months EndedJune 302008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (929
    )
    
    $
    442Adjustments to reconcile net income to net cash provided by operating activities:Minority interest
    
    
    (94
    )
    
    
    Depreciation and amortization
    
    
    227
    
    
    
    202Non cash compensation
    
    
    18
    
    
    
    79Deferred tax expense (benefit)
    
    
    507
    
    
    
    152Asset allowances, reserves and other
    
    
    (1,843
    )
    
    
    (2,088
    )Unrealized holding gains on trading securities
    
    
    (262
    )
    
    
    Changes in assets and liabilities:Restricted cash
    
    
    (2,000
    )
    
    
    Foreign exchange foreign contracts
    
    
    134
    
    
    
    Accounts receivable
    
    
    (3,318
    )
    
    
    (7,961
    )Other receivables
    
    
    606
    
    
    
    (99
    )Due from affiliates
    
    
    586
    
    
    
    24,451Inventories
    
    
    (1,017
    )
    
    
    (11,285
    )Prepaid expenses and other current assets
    
    
    (216
    )
    
    
    (248
    )Other assets
    
    
    (35
    )
    
    
    87Accounts payable and other current liabilities
    
    
    8,349
    
    
    
    20,100Due to affiliates
    
    
    (91
    )
    
    
    Income taxes payable
    
    
    (18
    )
    
    
    91Net cash provided by operating activities
    
    
    604
    
    
    
    23,923Cash flows from investing activities:Proceeds from partial calls on securities
    
    
    1,700
    
    
    
    Additions to property and equipment
    
    
    (161
    )
    
    
    (126
    )Net cash provided (used) by investing activities
    
    
    1,539
    
    
    
    (126
    )Cash flows from financing activities:Short-term borrowings
    
    
    1
    
    
    
    4Net borrowings (repayments) under foreign bank facilities
    
    
    
    
    
    
    (2,495
    )Exercise of stock options
    
    
    
    
    
    
    51Long-term borrowings
    
    
    27,190
    
    
    
    51,158Repayments of long-term borrowings
    
    
    (27,209
    )
    
    
    (51,201
    )Net cash (used) by financing activities
    
    
    (18
    )
    
    
    (2,483
    )Net increase in cash and cash equivalents
    
    
    2,125
    
    
    
    21,314Cash and cash equivalents at beginning of period
    
    
    14,444
    
    
    
    1,851Cash and cash equivalents at end of period
    
    $
    16,569
    
    
    $
    23,165
    Interest
    
    $
    29
    
    
    $
    121Income taxes
    
    $
    20
    
    
    $
    115
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EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
          Three months endedJune 302008
    
    2007Net (loss) income
    
    $
    (929
    )
    
    $
    442Unrealized holding gains arising during period
    
    
    (31
    )
    
    
    Less: reclassification adjustment for gains included in net income
    
    
    31
    
    
    
    Comprehensive (loss) income
    
    $
    (929
    )
    
    $
    442
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Three months endedJune 302008
    
    2007Numerator:Net (loss) income for basic and diluted earnings per share
    
    $
    (929
    )
    
    $
    442Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    27,130
    
    
    
    27,115Effect of dilutive securities on denominator:Options and warrants
    
    
    
    
    
    
    26Denominator for diluted earnings per share  weighted average
shares and assumed conversions
    
    
    27,130
    
    
    
    27,141Basic and diluted (loss) earnings per share
    
    $
    (0.03
    )
    
    $
    0.02
       June 30, 2008
    
    March 31, 2008(Unaudited)Finished goods
    
    $
    29,747
    
    
    $
    28,730Less inventory allowances
    
    
    (3,154
    )
    
    
    (3,876
    )Net inventory
    
    $
    26,593
    
    
    $
    24,854
     7




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Jurisdiction
    
    Open tax yearsU.S. federal
    
    2004-2007States
    
    2004-2007
     Grandes Purchase of Controlling Interest in Emerson.
 License Agreement for Scott Brands.
 Unsecured Financial Assistance to Grande.
   8




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Product Sourcing Transactions.
 Sales of goods.
 Leases and Other Real Estate Transactions.
    Toy Musical Instruments.
 9




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Freight Forwarding Services.
 Other.
      Short-term Borrowings
  Long-term Borrowings
  June 30, 2008
    
    
    March 31, 2008(In thousands)(Unaudited)Capitalized lease obligations and other
    
    
    206
    
    
    
    224Less current maturities
    
    
    (83
    )
    
    
    (82
    )Long term debt and notes payable
    
    $
    123
    
    
    $
    142
 Credit Facility
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NOTE 9  LEGAL PROCEEDINGS
   NOTE 10  FINANCIAL INSTRUMENTS
    NOTE 11  MARKETABLE SECURITIES:
   11




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Fair Value Measurement at Reporting Date Using:
 Significant Unobservable Inputs (Level 3)
    
    June 30, 2008Investments in marketable securities (classified as trading securities)
    
    $
    10,510Investments in marketable securities
    
    $
    10,510
  Fair ValueMeasurement ofAsset using Level 3inputsTrading Securitiesnon-currentPrincipal amount invested
    
    $
    13,900Total gains (losses) (realized or unrealized):Unrealized  included in earnings at March 31, 2008
    
    
    (1,952
    )Balance at March 31, 2008
    
    
    11,948Total gains (losses) (realized or unrealized):Realized  included in earnings at June 30, 2008
    
    
    231Unrealized  included in earnings at June 30, 2008
    
    
    31Redemptions of principal
    
    
    (1,700
    )Balance at June 30, 2008
    
    $
    10,510
 
 Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
  12




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Forward-Looking Information
    
    
    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 parties 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, 2008 and other filings with the Securities and Exchange
Commission (the SEC).
  13




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Company Filings
 www.emersonradio.com
 Results of Operations
   Three Months EndedJune 302008
    
    2007Net revenues
    
    $
    43,108
    
    
    $
    52,688Cost of sales
    
    
    38,021
    
    
    
    45,248Other operating costs and expenses
    
    
    1,131
    
    
    
    1,796Selling, general and administrative costs
    
    
    4,828
    
    
    
    4,977Non-cash compensation costs
    
    
    18
    
    
    
    79Operating income (loss)
    
    
    (890
    )
    
    
    588Interest income, net
    
    
    132
    
    
    
    233Unrealized holding gains on trading securities
    
    
    262
    
    
    
    Income (loss) before income taxes
    
    
    (496
    )
    
    
    821Provision for income taxes
    
    
    527
    
    
    
    379Minority interest in loss of consolidated subsidiary
    
    
    94
    
    
    
    Net income (loss)
    
    $
    (929
    )
    
    $
    442
  i)
    
    Home appliances product sales increased $4.0 million, or 15.4%, to $30.0 million in
the first quarter of fiscal 2009 as compared to $26.0 million in the first quarter of fiscal 2008. Home appliance product sales
consist of microwave ovens, wine coolers, small refrigerators, and toaster ovens;ii)
    
    Emerson(R) branded products sales, excluding home appliances products, were $10.3 million
in the first quarter of fiscal 2009 as compared to $22.7 million in the first quarter of

fiscal 2008, a decrease of $12.4 million, or 54.6%, primarily resulting from decreased sales
volumes in several audio product lines and the Ipod(R) compatible product category;iii)
    
    Themed product sales were $600,000 in the first quarter of fiscal 2009 compared to $2.2
million in the first quarter of fiscal 2008, a decrease of $1.6 million, or 72.7%, primarily
resulting from the discontinuance of Nickelodeon(R) themed products and a shift in the sales
volume and product mix of Mattel(R) themed products;iv)
    
    Licensing revenues increased approximately $54,000, or 3.2%, to $1.8 million in the first
quarter of fiscal 2009 as compared to $1.7 million in the first quarter of fiscal 2008,
primarily due to our video licensing arrangements;v)
    
    Sales of a joint venture which was formed in the fourth quarter of fiscal 2008 for the
primary purpose of manufacturing, selling, distributing, and/or licensing audio and video
equipment for the home and/or office had sales of $421,000 in the first quarter of fiscal 2009; andvi)
    
    In the three month periods ended June 30, 2008 and June 30, 2007, we charged fees of
$13,000 and $85,000, respectively, to Sansui Sales PTE, Ltd and Akai Sales PTE, Ltd, both of
which are related parties to us, for assistance in procuring their product from third-party
suppliers. See Note 7 Related Party Transactions.
  14




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Liquidity and Capital Resources
        As a result of Emerson electing to cancel its foreign bank facilities in December 2007, our
foreign subsidiaries maintain no credit facilities as of December 31, 2007.
  Short-Term Liquidity.
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Payment due by period (1)Less than
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    1 year
    
    1 - 3 years
    
    3 - 5 years
    
    yearsCapital lease obligations
    
    $
    206
    
    
    $
    83
    
    
    $
    109
    
    
    $
    14
    
    
    $
    Operating lease obligations  related party
    
    
    183
    
    
    
    183
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations  non-affiliate
    
    
    4,494
    
    
    
    1,753
    
    
    
    2,437
    
    
    
    304
    
    
    
    Total
    
    $
    4,883
    
    
    $
    2,019
    
    
    $
    2,546
    
    
    $
    318
    
    
    $
    
 
 (1)
    
    Amounts in the above table do not include a reserve of approximately $149,000 related
to uncertain tax positions. The Company is not able to reasonably estimate when, if ever,
these reserves would result in actual cash payments.  Other Events and Circumstances Pertaining to Liquidity
    Critical Accounting Policies
  Inflation, Foreign Currency, and Interest Rates
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure controls and procedures
 17




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(b) Changes in Internal Controls Over Financial Reporting
  
 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:
  18




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ITEM 3. Defaults Upon Senior Securities.
   
 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 19




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EMERSON RADIO CORP.(Registrant)/s/ Adrian MaDate: August 14, 2008
    Adrian MaChief Executive Officer
(Principal Executive Officer)/s/ Greenfield PittsDate: August 14, 2008
    Greenfield PittsChief Financial Officer
(Principal Financial and Accounting Officer) 20