##### 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, 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 
incorporation or organization)
    
    (I.R.S. Employer
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
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 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
    
    
    18Item 4. Controls and Procedures
    
    
    18PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19ITEM 3. Defaults Upon Senior Securities
    
    
    19ITEM 4. Removed and Reserved
    
    
    19ITEM 5. Other Information
    
    
    19ITEM 6. Exhibits
    
    
    19SIGNATURES
    
    
    20EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  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
    
    
    Six Months EndedSeptember 30
    
    
    September 302010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    51,966
    
    
    $
    51,774
    
    
    $
    119,121
    
    
    $
    107,373Costs and expenses:Cost of sales
    
    
    45,892
    
    
    
    43,701
    
    
    
    103,415
    
    
    
    93,304Other operating costs and expenses
    
    
    712
    
    
    
    1,077
    
    
    
    1,011
    
    
    
    1,855Selling, general and administrative
    
    
    2,045
    
    
    
    3,643
    
    
    
    3,974
    
    
    
    7,43248,649
    
    
    
    48,421
    
    
    
    108,400
    
    
    
    102,591Operating income
    
    
    3,317
    
    
    
    3,353
    
    
    
    10,721
    
    
    
    4,782Interest income, net
    
    
    4
    
    
    
    12
    
    
    
    14
    
    
    
    22Income from continuing operations before income taxes
    
    
    3,321
    
    
    
    3,365
    
    
    
    10,735
    
    
    
    4,804Provision for income taxes
    
    
    98
    
    
    
    144
    
    
    
    1,633
    
    
    
    422Income from continuing operations
    
    
    3,223
    
    
    
    3,221
    
    
    
    9,102
    
    
    
    4,382Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55
    )Net income
    
    $
    3,223
    
    
    $
    3,221
    
    
    $
    9,102
    
    
    
    4,327Basic net income per share:Continuing operations
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .34
    
    
    $
    .16Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .34
    
    
    $
    .16Diluted net income per share:Continuing operations
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .34
    
    
    $
    .16Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .34
    
    
    $
    .16Weighted average shares outstanding:Basic
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130Diluted
    
    
    27,131
    
    
    
    27,130
    
    
    
    27,131
    
    
    
    27,130
 
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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
 September 30, 2010
    
    
    March 31, 2010(A)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,608
    
    
    $
    9,969Restricted cash
    
    
    2,197
    
    
    
    5,083Accounts receivable, net
    
    
    20,447
    
    
    
    20,350Other receivables
    
    
    1,339
    
    
    
    1,037Due from affiliates
    
    
    86
    
    
    
    Inventory, net
    
    
    34,991
    
    
    
    10,952Prepaid expenses and other current assets
    
    
    529
    
    
    
    736Deferred tax assets
    
    
    3,346
    
    
    
    3,383Total current assets
    
    
    65,543
    
    
    
    51,510Property, plant and equipment, net
    
    
    2,959
    
    
    
    3,131Trademarks and other intangible assets, net
    
    
    1,545
    
    
    
    1,606Due from affiliates
    
    
    144
    
    
    
    185Investments in marketable securities
    
    
    6,031
    
    
    
    6,031Deferred tax assets
    
    
    5,584
    
    
    
    6,588Other assets
    
    
    219
    
    
    
    205Total assets
    
    $
    82,025
    
    
    $
    69,256LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    $
    5,598
    
    
    $
    5,629Current maturities of long-term borrowings
    
    
    17
    
    
    
    30Accounts payable and other current liabilities
    
    
    24,143
    
    
    
    20,776Due to affiliates
    
    
    2
    
    
    
    28Accrued sales returns
    
    
    1,259
    
    
    
    957Income taxes payable
    
    
    328
    
    
    
    174Total current liabilities
    
    
    31,347
    
    
    
    27,594Long-term borrowings
    
    
    104
    
    
    
    201Deferred tax liabilities
    
    
    128
    
    
    
    119Shareholders 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
    
    
    (27,872
    )
    
    
    (36,976
    )Treasury stock, at cost, 25,835,965 shares
    
    
    (24,224
    )
    
    
    (24,224
    )Total shareholders equity
    
    
    50,446
    
    
    
    41,342Total liabilities and shareholders equity
    
    $
    82,025
    
    
    $
    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)
 Six Months EndedSeptember 302010
    
    
    2009Cash flows from operating activities:Income from continuing operations
    
    $
    9,102
    
    
    $
    4,382Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    299
    
    
    
    432Non cash compensation
    
    
    
    
    
    
    10Deferred tax expense
    
    
    1,050
    
    
    
    142Asset allowances, reserves and other
    
    
    94
    
    
    
    (442
    )Changes in assets and liabilities:Accounts receivable
    
    
    518
    
    
    
    (2,460
    )Other receivables
    
    
    (302
    )
    
    
    140Due from affiliates
    
    
    (45
    )
    
    
    (4
    )Inventories
    
    
    (24,444
    )
    
    
    (1,317
    )Prepaid expenses and other current assets
    
    
    207
    
    
    
    710Other assets
    
    
    (14
    )
    
    
    50Accounts payable and other current liabilities
    
    
    3,367
    
    
    
    3,612Due to affiliates
    
    
    (26
    )
    
    
    (25
    )Interest and income taxes payable
    
    
    154
    
    
    
    (7
    )Net cash (used) provided by operating activities
    
    
    (10,040
    )
    
    
    5,223Cash flows from investing activities:Decrease in restricted cash
    
    
    2,886
    
    
    
    3,023Purchase of trademark
    
    
    
    
    
    
    (1,469
    )Additions to property and equipment
    
    
    (66
    )
    
    
    (200
    )Net cash provided by investing activities
    
    
    2,820
    
    
    
    1,354Cash flows from financing activities:Repayments of short-term borrowings
    
    
    (44
    )
    
    
    (82
    )Borrowings under long-term credit facility
    
    
    56,820
    
    
    
    57,032Repayments of borrowings under long-term credit facility
    
    
    (56,917
    )
    
    
    (57,048
    )Net cash (used) by financing activities
    
    
    (141
    )
    
    
    (98
    )Net increase (decrease) in cash and cash equivalents
    
    
    (7,361
    )
    
    
    6,479Cash and cash equivalents at beginning of period
    
    
    9,969
    
    
    
    22,518Cash and cash equivalents at end of period
    
    $
    2,608
    
    
    $
    28,997Cash paid during the period for:Interest
    
    $
    63
    
    
    $
    58Income taxes
    
    $
    331
    
    
    $
    4
  5




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




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7




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Three months ended
    
    
    Six months endedSeptember 30
    
    
    September 302010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income from continuing operations for basic and diluted
earnings per share
    
    $
    3,223
    
    
    $
    3,221
    
    
    $
    9,102
    
    
    $
    4,382Denominator: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
    
    
    
    
    
    
    
    1
    
    
    
    Denominator for diluted earnings per share  weighted average
shares and assumed conversions
    
    
    27,131
    
    
    
    27,130
    
    
    
    27,131
    
    
    
    27,130Basic and diluted earnings from continuing operations per share
    
    $
    .12
    
    
    $
    .12
    
    
    $
    .34
    
    
    $
    .16
       September 30, 2010
    
    
    March 31, 2010(Unaudited)Finished goods
    
    $
    37,154
    
    
    $
    12,710Less inventory allowances
    
    
    (2,163
    )
    
    
    (1,758
    )Net inventory
    
    $
    34,991
    
    
    $
    10,952
   8




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Jurisdiction
    
    Open tax yearsU.S. federal
    
    
    2006-2009States
    
    
    2006-2009
    Majority Shareholder
 Grandes Ownership Interest in Emerson.
 Related Party Transactions
 Leases and Other Real Estate Transactions.
 Rented Space in Hong Kong
      9




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Rented Space in the Peoples Republic of China
    Other.
        Short-term Borrowings
  10




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Long-term Borrowings
  September 30, 2010
    
    
    March 31, 2010(Unaudited)Capitalized lease obligations and other
    
    
    121
    
    
    
    231Less current maturities
    
    
    (17
    )
    
    
    (30
    )Long term debt and notes payable
    
    $
    104
    
    
    $
    201
 Credit Facility
  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)
    
    September 30, 2010Investments in marketable securities (classified as trading securities)
    
    $
    6,031Investments in marketable securities
    
    $
    6,031
  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 September 30, 2010
    
    
    Unrealized  included in earnings at September 30, 2010
    
    
    Redemptions of principal
    
    
    Balance at September 30, 2010
    
    $
    6,031
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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;
 13




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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).
  Company Filings
 www.emersonradio.com
 14




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Results of Operations
  Three months ended
    
    
    Six months endedSeptember 30
    
    
    September 302010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues
    
    $
    51,966
    
    
    $
    51,774
    
    
    $
    119,121
    
    
    $
    107,373Cost of sales
    
    
    45,892
    
    
    
    43,701
    
    
    
    103,415
    
    
    
    93,304Other operating costs and expenses
    
    
    712
    
    
    
    1,077
    
    
    
    1,011
    
    
    
    1,855Selling, general and administrative expenses
    
    
    2,045
    
    
    
    3,643
    
    
    
    3,974
    
    
    
    7,432Operating income
    
    
    3,317
    
    
    
    3,353
    
    
    
    10,721
    
    
    
    4,782Interest income, net
    
    
    4
    
    
    
    12
    
    
    
    14
    
    
    
    22Income from continuing operations before income taxes
    
    
    3,321
    
    
    
    3,365
    
    
    
    10,735
    
    
    
    4,804Provision for income taxes
    
    
    98
    
    
    
    144
    
    
    
    1,633
    
    
    
    422Net income from continuing operations
    
    $
    3,223
    
    
    $
    3,221
    
    
    $
    9,102
    
    
    $
    4,382
   i)
    
    Houseware products net sales increased $9.0 million, or 23.3%, to $47.5 million in the
second quarter of fiscal 2011 as compared to $38.6 million in the second quarter of fiscal
2010, principally driven by growth in microwave ovens and compact refrigerators, partially
offset by decreases in toaster ovens and coffee makers. For the six month period of fiscal
2011, houseware products net sales were $110.5 million, an increase of $25.8 million or
30.4%, from $84.8 million in the six month period of fiscal 2010, on increases in microwave
ovens, compact refrigerators 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 $3.2 million in
the second quarter of fiscal 2011 as compared to $10.2 million in the second quarter of
fiscal 2010, a decrease of $7.0 million, or 69.3%. For the six month period of fiscal 2011,
Emerson(R) branded products net sales, excluding houseware products, were $5.8 million, a
decrease of $11.9 million, or 67.4%, from $17.7 million in the six month period of fiscal
2010, primarily resulting from decreased sales volumes in several audio product lines;iii)
    
    Themed product sales were $0 in the second quarter of fiscal 2011 compared to $1.5
million in the second quarter of fiscal 2010. For the six month period of fiscal 2011,
themed product sales were $0 compared to $2.0 million in the six 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 second quarter of fiscal 2011 were $1.3 million compared to
$1.5 million in the second quarter of fiscal 2010, a decrease of $200,000 or 11.3%.
Licensing revenues for the six month period of fiscal 2011 were $2.8 million as compared to
$2.9 million for the six month period of fiscal 2010, a decrease of $100,000 or 1.6%.
 15




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Liquidity and Capital Resources
 General
  16




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Wachovia
    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
          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.
   18




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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.
  
 ITEM 3.
    
    Defaults Upon Senior Securities.
   
 ITEM 4.
    
    Removed and Reserved.
 
 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**
    
    furnished herewith 19




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EMERSON RADIO CORP.
(Registrant)Date: November 15, 2010
    /s/ Adrian MaAdrian MaChief Executive Officer
(Principal Executive Officer)Date: November 15, 2010
    /s/ Andrew DavisAndrew DavisChief Financial Officer
(Principal Financial and Accounting Officer) 20