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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 December 31, 2010
 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.)85 Oxford Drive, Moonachie, New Jersey
    
    07074(Address of principal executive offices)
    
    (Zip code)
  
  
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    20ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20ITEM 3. Defaults Upon Senior Securities
    
    
    20ITEM 4. Removed and Reserved
    
    
    20ITEM 5. Other Information
    
    
    20ITEM 6. Exhibits
    
    
    20SIGNATURES
    
    
    21EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Item 1. Financial Statements.
 EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except earnings per share data)
 Three Months Ended
    
    
    Nine Months EndedDecember 31
    
    
    December 312010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    40,571
    
    
    $
    48,038
    
    
    $
    159,692
    
    
    $
    155,411Costs and expenses:Cost of sales
    
    
    33,077
    
    
    
    39,298
    
    
    
    136,492
    
    
    
    132,602Other operating costs and expenses
    
    
    567
    
    
    
    708
    
    
    
    1,578
    
    
    
    2,563Selling, general and administrative
    
    
    1,945
    
    
    
    3,397
    
    
    
    5,919
    
    
    
    10,82935,589
    
    
    
    43,403
    
    
    
    143,989
    
    
    
    145,994Operating income
    
    
    4,982
    
    
    
    4,635
    
    
    
    15,703
    
    
    
    9,417Interest income (expense), net
    
    
    10
    
    
    
    (1
    )
    
    
    24
    
    
    
    21Realized gains on trading securities
    
    
    966
    
    
    
    
    
    
    
    966
    
    
    
    Income from continuing operations before income taxes
    
    
    5,958
    
    
    
    4,634
    
    
    
    16,693
    
    
    
    9,438Provision for income taxes
    
    
    1,774
    
    
    
    1,221
    
    
    
    3,407
    
    
    
    1,643Income from continuing operations
    
    
    4,184
    
    
    
    3,413
    
    
    
    13,286
    
    
    
    7,795Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )Net income
    
    $
    4,184
    
    
    $
    3,413
    
    
    $
    13,286
    
    
    
    7,740Basic net income per share:Continuing operations
    
    $
    .15
    
    
    $
    .13
    
    
    $
    .49
    
    
    $
    .29Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .15
    
    
    $
    .13
    
    
    $
    .49
    
    
    $
    .29Diluted net income per share:Continuing operations
    
    $
    .15
    
    
    $
    .13
    
    
    $
    .49
    
    
    $
    .29Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .15
    
    
    $
    .13
    
    
    $
    .49
    
    
    $
    .29Weighted average shares outstanding:Basic
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130Diluted
    
    
    27,131
    
    
    
    27,133
    
    
    
    27,131
    
    
    
    27,131
 
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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 December 31, 2010
    
    
    March 31, 2010(A)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,727
    
    
    $
    9,969Restricted cash
    
    
    591
    
    
    
    5,083Accounts receivable, net
    
    
    8,197
    
    
    
    20,350Other receivables
    
    
    1,001
    
    
    
    1,037Due from affiliates
    
    
    70
    
    
    
    Inventory, net
    
    
    24,240
    
    
    
    10,952Prepaid expenses and other current assets
    
    
    457
    
    
    
    736Deferred tax assets
    
    
    3,300
    
    
    
    3,383Total current assets
    
    
    56,583
    
    
    
    51,510Property, plant and equipment, net
    
    
    2,857
    
    
    
    3,131Trademarks and other intangible assets, net
    
    
    1,545
    
    
    
    1,606Due from affiliates
    
    
    
    
    
    
    185Investments in marketable securities
    
    
    3,897
    
    
    
    6,031Deferred tax assets
    
    
    4,185
    
    
    
    6,588Other assets
    
    
    864
    
    
    
    205Total assets
    
    $
    69,931
    
    
    $
    69,256LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    $
    2,478
    
    
    $
    5,629Current maturities of long-term borrowings
    
    
    10
    
    
    
    30Accounts payable and other current liabilities
    
    
    11,315
    
    
    
    20,776Due to affiliates
    
    
    3
    
    
    
    28Accrued sales returns
    
    
    893
    
    
    
    957Income taxes payable
    
    
    393
    
    
    
    174Total current liabilities
    
    
    15,092
    
    
    
    27,594Long-term borrowings
    
    
    65
    
    
    
    201Deferred tax liabilities
    
    
    144
    
    
    
    119Total liabilities
    
    
    15,301
    
    
    
    27,914Shareholders equity:Preferred
shares - 10,000,000 shares
authorized; 3,677 shares issued and
outstanding; liquidation preference of $3,677,000
    
    
    3,310
    
    
    
    3,310Common
shares - $.01 par value, 75,000,000
shares authorized, 52,965,797 shares issued,
and 27,129,832 shares outstanding
    
    
    529
    
    
    
    529Capital in excess of par value
    
    
    98,785
    
    
    
    98,785Accumulated other comprehensive losses
    
    
    (82
    )
    
    
    (82
    )Accumulated deficit
    
    
    (23,688
    )
    
    
    (36,976
    )Treasury stock, at cost, 25,835,965 shares
    
    
    (24,224
    )
    
    
    (24,224
    )Total shareholders equity
    
    
    54,630
    
    
    
    41,342Total liabilities and shareholders equity
    
    $
    69,931
    
    
    $
    69,256
 
 (A)
    
    Reference is made to the Companys Annual Report on Form 10-K for the fiscal year ended March
31, 2010 filed with the Securities and Exchange Commission on July 14, 2010.  4




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine Months EndedDecember 312010
    
    
    2009Cash flows from operating activities:Income from continuing operations
    
    $
    13,286
    
    
    $
    7,795Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    405
    
    
    
    644Non cash compensation
    
    
    
    
    
    
    12Deferred tax expense
    
    
    2,511
    
    
    
    1,339Asset allowances, reserves and other
    
    
    (931
    )
    
    
    (2,687
    )Gain on sales of investments
    
    
    (966
    )
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    13,404
    
    
    
    1,699Other receivables
    
    
    36
    
    
    
    324Due from affiliates
    
    
    115
    
    
    
    (45
    )Inventories
    
    
    (13,670
    )
    
    
    6,249Prepaid expenses and other current assets
    
    
    279
    
    
    
    (548
    )Other assets
    
    
    (659
    )
    
    
    107Accounts payable and other current liabilities
    
    
    (9,461
    )
    
    
    2,970Due to affiliates
    
    
    (25
    )
    
    
    (41
    )Interest and income taxes payable
    
    
    219
    
    
    
    4Net cash provided by operating activities
    
    
    4,543
    
    
    
    17,822Cash flows from investing activities:Proceeds from sale of investments
    
    
    3,100
    
    
    
    Decrease in restricted cash
    
    
    4,492
    
    
    
    3,022Purchase of trademark
    
    
    
    
    
    
    (1,516
    )Additions to property and equipment
    
    
    (70
    )
    
    
    (2,872
    )Net cash (used) provided by investing activities
    
    
    7,522
    
    
    
    (1,366
    )Cash flows from financing activities:Repayments of short-term borrowings
    
    
    (3,171
    )
    
    
    (107
    )Borrowings under long-term credit facility
    
    
    88,162
    
    
    
    94,141Repayments of borrowings under long-term credit facility
    
    
    (88,298
    )
    
    
    (94,165
    )Net cash (used) by financing activities
    
    
    (3,307
    )
    
    
    (131
    )Net increase in cash and cash equivalents
    
    
    8,758
    
    
    
    16,325Cash and cash equivalents at beginning of period
    
    
    9,969
    
    
    
    22,518Cash and cash equivalents at end of period
    
    $
    18,727
    
    
    $
    38,843Cash paid during the period for:Interest
    
    $
    91
    
    
    $
    89Income taxes
    
    $
    553
    
    
    $
    17
  5




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EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
             6




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Three months ended
    
    
    Nine months endedDecember 31
    
    
    December 312010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Income from continuing operations for basic and diluted earnings per share
    
    $
    4,184
    
    
    $
    3,413
    
    
    $
    13,286
    
    
    $
    7,795Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130Effect of dilutive securities on denominator:Options (computed using the treasury stock method)
    
    
    1
    
    
    
    3
    
    
    
    1
    
    
    
    1Denominator for diluted earnings per share  weighted average shares and
assumed conversions
    
    
    27,131
    
    
    
    27,133
    
    
    
    27,131
    
    
    
    27,131Basic and diluted earnings from continuing operations per share
    
    $
    .15
    
    
    $
    .13
    
    
    $
    .49
    
    
    $
    .29
      December 31, 2010
    
    
    March 31, 2010(Unaudited)Finished goods
    
    $
    26,380
    
    
    $
    12,710Less inventory allowances
    
    
    (2,140
    )
    
    
    (1,758
    )Net inventory
    
    $
    24,240
    
    
    $
    10,952
     8




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Jurisdiction
    
    Open tax yearsU.S. federal
    
    
    2007-2009States
    
    
    2007-2009
    Majority Shareholder
 Grandes Ownership Interest in Emerson.
 Related Party Transactions
 Leases and Other Real Estate Transactions.
 Rented Space in Hong Kong
       Rented Space in the Peoples Republic of China
  9




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Other.
        Short-term Borrowings
  Long-term Borrowings
  10




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December 31, 2010
    
    
    March 31, 2010(Unaudited)Capitalized lease obligations and other
    
    
    75
    
    
    
    231Less current maturities
    
    
    (10
    )
    
    
    (30
    )Long term debt and notes payable
    
    $
    65
    
    
    $
    201
 Credit Facility
 Letters of Credit
 NOTE 9  LEGAL PROCEEDINGS
 In re: Emerson Radio Shareholder Derivative Litigation.
  11




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NOTE 10  MARKETABLE SECURITIES:
        Fair Value Measurement at Reporting Date Using:
 Significant Unobservable Inputs (Level 3)
    
    December 31, 2010Investments in marketable securities (classified as trading securities)
    
    $
    3,897Investments in marketable securities
    
    $
    3,897
  Fair Value Measurement of Asset usingLevel 3 inputsTrading Securities non-currentBalance at March 31, 2010
    
    
    6,031Total gains (losses) (realized or unrealized):Realized  included in earnings at December 31, 2010
    
    
    966Unrealized  included in earnings at December 31, 2010
    
    
    Redemptions of principal
    
    
    (3,100
    )Balance at December 31, 2010
    
    $
    3,897
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NOTE 11  DISCONTINUED OPERATIONS:
  
 Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
   Forward-Looking Information
    
    
    the loss of any of the Companys key customers or reduction in the purchase of its
products by any such customers;
    
    the failure by the Company to maintain its relationships with its licensees and
distributors or the failure to obtain new licensees or distribution relationships on
favorable terms;
    
    cash generated by operating activities represents the Companys principal source of
funding and therefore the Company depends on its ability to successfully manage its
operating cash flows to fund its operations;
    
    the Companys inability to anticipate market trends, enhance existing products or achieve
market acceptance of new products;
    
    the Companys dependence on a limited number of suppliers for its components and raw
materials;
    
    the Companys dependence on a limited number of third parties to manufacture and deliver
its products;
    
    changes in consumer spending and economic conditions;
    
    the failure of third party sales representatives to adequately promote, market and sell
the Companys products;
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
    
    the Companys inability to protect its 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 the Company operates;
    
    conflicts of interest that exist based on the Companys relationship with Grande;
    
    the Companys ability to maintain effective internal controls over financial reporting,
to prevent material weaknesses or to remediate any weaknesses that may arise;
    
    changes in accounting policies, rules and practices; and
    
    the other factors listed under Risk Factors in the Companys Form 10-K, as amended, for
the fiscal year ended March 31, 2010 and other filings with the Securities and Exchange
Commission (the SEC).
  14




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Results of Operations
  Three months ended
    
    
    Nine months endedDecember 31
    
    
    December 312010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    40,571
    
    
    $
    48,038
    
    
    $
    159,692
    
    
    $
    155,411Cost of sales
    
    
    33,077
    
    
    
    39,298
    
    
    
    136,492
    
    
    
    132,602Other operating costs and expenses
    
    
    567
    
    
    
    708
    
    
    
    1,578
    
    
    
    2,563Selling, general and administrative expenses
    
    
    1,945
    
    
    
    3,397
    
    
    
    5,919
    
    
    
    10,829Operating income
    
    
    4,982
    
    
    
    4,635
    
    
    
    15,703
    
    
    
    9,417Interest income (expense), net
    
    
    10
    
    
    
    (1
    )
    
    
    24
    
    
    
    21Realized gains on trading securities
    
    
    966
    
    
    
    
    
    
    
    966
    
    
    
    Income from continuing operations before income taxes
    
    
    5,958
    
    
    
    4,634
    
    
    
    16,693
    
    
    
    9,438Provision for income taxes
    
    
    1,774
    
    
    
    1,221
    
    
    
    3,407
    
    
    
    1,643Income from continuing operations
    
    $
    4,184
    
    
    $
    3,413
    
    
    $
    13,286
    
    
    $
    7,795
   i)
    
    Houseware products net sales decreased $4.0 million, or 11.0%, to $32.2 million in the
third quarter of fiscal 2011 as compared to $36.2 million in the third quarter of fiscal
2010, principally driven by decreases in microwave ovens, toaster ovens and coffee makers
partially offset by increases in compact refrigerators and wine coolers. For the nine month
period of fiscal 2011, houseware products net sales were $142.7 million, an increase of
$21.8 million or 18.0%, from $120.9 million in the nine month period of fiscal 2010, on
increases in compact refrigerators, microwave ovens and wine coolers, partially offset by
decreases in toaster ovens and coffee makers. Houseware products consists of microwave
ovens, compact refrigerators, wine coolers, toaster ovens and coffee makers;ii)
    
    Emerson(R) branded products net sales, excluding houseware products, were $5.9 million in
the third quarter of fiscal 2011 as compared to $8.6 million in the third quarter of fiscal
2010, a decrease of $2.7 million, or 31.3%. For the nine month period of fiscal 2011,
Emerson(R) branded products net sales, excluding houseware products, were $11.7 million, a
decrease of $14.6 million, or 55.6%, from $26.3 million in the nine month period of fiscal
2010, primarily resulting from decreased audio sales volumes;iii)
    
    Themed product net sales were $0 in the third quarter of fiscal 2011 compared to $1.2
million in the third quarter of fiscal 2010. For the nine month period of fiscal 2011,
themed product sales were $0 compared to $3.3 million in the nine month period of fiscal
2010. The decrease in both periods resulted from the expiration of the Companys licensing
arrangement with Mattel® to distribute themed products bearing the Barbie®, Hot Wheels® and
Funkey® brand names;iv)
    
    Licensing revenues in the third quarter of fiscal 2011 were $2.5 million compared to $2.0
million in the third quarter of fiscal 2010, an increase of $500,000 or 22.1%. Licensing
revenues for the nine month period of fiscal 2011 were $5.3 million as compared to $4.9
million for the nine month period of fiscal 2010, an increase of $400,000 or 8.2%.
 15




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Liquidity and Capital Resources
 General
     Credit Arrangements
 Credit
Facility
 Letters
of Credit
  Recently Issued Accounting Pronouncements
 In April 2010, the FASB issued Accounting Standard Update (ASU) 2010-17, Revenue
Recognition  Milestone Method
         17




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FASB Accounting Standards Update 2010-20, Receivables (Topic 310): Disclosure about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
          FASB Accounting Standards Update 2010-28, Intangibles  Goodwill and Other (Topic 350)
   FASB Accounting Standards Update 2010-29, Business Combinations (Topic 805)
  18




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Inflation, Foreign Currency, and Interest Rates
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure controls and procedures
   (b) Changes in Internal Controls Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1.  Legal Proceedings
 In re: Emerson Radio Shareholder Derivative Litigation.
 19




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Item 1A.  Risk Factors
  
 ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
  
 ITEM 3.  Defaults Upon Senior Securities.
   
 ITEM 4.  Removed and Reserved.
 
 ITEM 5.  Other Information.
 None
 
 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**
    
    furnished herewith 20




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SIGNATURES
  EMERSON RADIO CORP.
(Registrant)Date: February 14, 2011
    /s/ Adrian MaAdrian MaChief Executive Officer
(Principal Executive Officer)Date: February 14, 2011
    /s/ Andrew L. DavisAndrew L. DavisChief Financial Officer
(Principal Financial and Accounting Officer) 21