##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q (Mark One) [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2004 or [  ]
    
    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 0-25226 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)
 (973) 884-5800(Registrants telephone number, including area code)(Former name, former address, and former fiscal year, if changed since last report)
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [  ] No Indicate by check mark whether the registrant is an accelerated Filer (as
defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No Indicate the number of shares outstanding of common stock as of July 23,
2004: 27,037,608.




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTSItem 2. Managements Discussion and Analysis of Results of Operations and Financial ConditionItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 2. Changes in Securities and Use of ProceedsITEM 3. Default Upon Senior SecuritiesITEM 4. Submission of Matters to a Vote of Security HoldersITEM 5. Other InformationITEM 6. Exhibits and Reports on Form 8-KSIGNATURESAmendment to Revolving Credit and Term Loan AgreementCertification of the Chief Executive OfficerCertification of the Chief Financial OfficerCertification of the CEO and CFO    Table of Contents  
 PART I  FINANCIAL INFORMATION 
 Item 1. Financial Statements. 
 EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except earnings per share data) Three Months EndedJune 30, 2004
    
    June 30, 2003Net revenues
    
    $
    72,930
    
    
    $
    54,171Costs and expenses:Cost of sales
    
    
    57,034
    
    
    
    42,967Other operating costs and expenses
    
    
    1,553
    
    
    
    1,256Selling, general & administrative expenses
    
    
    10,763
    
    
    
    9,318Acquisition costs
    
    
    (71
    )
    
    
    643Stock based costs
    
    
    
    
    
    
    1869,279
    
    
    
    54,202Operating income (loss)
    
    
    3,651
    
    
    
    (31
    )Interest expense, net
    
    
    294
    
    
    
    422Minority interest in net income of
consolidated subsidiary
    
    
    (606
    )
    
    
    (54
    )Income (loss) before income taxes
and discontinued operations
    
    
    2,751
    
    
    
    (507
    )Provision (benefit) for income taxes
    
    
    946
    
    
    
    (67
    )Income (loss) from continuing operations
    
    
    1,805
    
    
    
    (440
    )Loss from discontinued operations,
net of tax
    
    
    
    
    
    
    (5
    )Net income (loss)
    
    $
    1,805
    
    
    $
    (445
    )Basic net income (loss) per share:Continuing operations
    
    $
    0.07
    
    
    $
    (0.02
    )Discontinued operations
    
    
    
    
    
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted net income (loss) per share:Continuing operations
    
    $
    0.07
    
    
    $
    (0.02
    )Discontinued operations
    
    
    
    
    
    
    $
    0.07
    
    
    $
    (0.02
    )Weighted average shares
outstanding:Basic
    
    
    26,630
    
    
    
    27,416Diluted
    
    
    27,261
    
    
    
    27,416
 The accompanying notes are an integral part of the interim
consolidated financial statements. 2




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands) June 30, 2004
    
    March 31, 2004(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    4,073
    
    
    $
    6,369Accounts receivable (less allowances of $3,747 and
$3,653, respectively)
    
    
    23,921
    
    
    
    19,948Other receivables
    
    
    3,860
    
    
    
    2,821Inventories
    
    
    54,905
    
    
    
    46,997Prepaid expenses and other current assets
    
    
    5,916
    
    
    
    5,344Deferred tax assets
    
    
    5,660
    
    
    
    5,887Total current assets
    
    
    98,335
    
    
    
    87,366Property and equipment  (net of accumulated
depreciation
and amortization of $7,892 and $7,442, respectively)
    
    
    7,512
    
    
    
    7,822Deferred catalog expenses
    
    
    1,078
    
    
    
    1,695Trademarks and other intangible assets (net of
accumulated
amortization of $3,961 and $3,845, respectively)
    
    
    5,052
    
    
    
    5,168Deferred tax assets
    
    
    14,732
    
    
    
    15,263Other assets
    
    
    1,225
    
    
    
    1,355Total Assets
    
    $
    127,934
    
    
    $
    118,669LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term borrowings
    
    $
    35
    
    
    $
    58Short-term borrowings
    
    
    3,431
    
    
    
    4,762Accounts payable and other current liabilities
    
    
    34,026
    
    
    
    32,787Accrued sales returns
    
    
    2,631
    
    
    
    2,521Income taxes payable
    
    
    671
    
    
    
    509Total current liabilities
    
    
    40,794
    
    
    
    40,637Long-term borrowings
    
    
    21,728
    
    
    
    15,027Minority interest
    
    
    16,399
    
    
    
    15,793Shareholders Equity:Preferred shares - 10,000,000 shares
authorized, 3,677
shares issued and outstanding
    
    
    3,310
    
    
    
    3,310Common shares  $.01 par value, 75,000,000 shares
authorized; 52,310,350 shares issued and
26,630,383 shares outstanding
    
    
    523
    
    
    
    523Capital in excess of par value
    
    
    116,304
    
    
    
    116,304Accumulated other comprehensive losses
    
    
    (87
    )
    
    
    (83
    )Accumulated deficit
    
    
    (47,205
    )
    
    
    (49,010
    )Treasury stock, at cost, 25,679,967 shares
    
    
    (23,832
    )
    
    
    (23,832
    )Total shareholders equity
    
    
    49,013
    
    
    
    47,212Total Liabilities and Shareholders Equity
    
    $
    127,934
    
    
    $
    118,669
 The accompanying notes are an integral part of the interim
consolidated financial statements. 3




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands) Three Months EndedJune 30, 2004
    
    June 30, 2003Cash Flows from Operating Activities:Income (loss) from continuing operations
    
    $
    1,805
    
    
    $
    (440
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activities:Minority interest
    
    
    606
    
    
    
    54Depreciation and amortization
    
    
    711
    
    
    
    775Deferred tax expenses (benefits)
    
    
    758
    
    
    
    32Asset allowances, reserves and other
    
    
    66
    
    
    
    499Changes in assets and liabilities:Accounts receivable
    
    
    (3,205
    )
    
    
    (7,709
    )Other receivables
    
    
    (1,185
    )
    
    
    (457
    )Inventories
    
    
    (7,781
    )
    
    
    (10,024
    )Prepaid expenses and other current assets
    
    
    (22
    )
    
    
    3,332Other assets
    
    
    12
    
    
    
    Accounts payable and other current liabilities
    
    
    568
    
    
    
    822Income taxes payable
    
    
    162
    
    
    
    (202
    )Net cash used by continuing operations
    
    
    (7,505
    )
    
    
    (13,318
    )Net cash provided by discontinued operations
    
    
    30
    
    
    
    2,525Net cash used by operating activities
    
    
    (7,475
    )
    
    
    (10,793
    )Cash Flows from Investing Activities:Additions to property and equipment (continuing
operations)
    
    
    (167
    )
    
    
    (77
    )Other investing activity of discontinued operations
    
    
    
    
    
    
    (3
    )Net cash used by investing activities
    
    
    (167
    )
    
    
    (80
    )Cash Flows from Financing Activities:Borrowings (repayments) of short-term borrowings
    
    
    (1,331
    )
    
    
    2,696Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    12Long-term borrowings
    
    
    34,450
    
    
    
    38,830Repayments of long-term borrowings
    
    
    (27,773
    )
    
    
    (38,380
    )Net cash provided by financing activities
    
    
    5,346
    
    
    
    3,158Net decrease in cash and cash equivalents
    
    
    (2,296
    )
    
    
    (7,715
    )Cash and cash equivalents at beginning of year
    
    
    6,369
    
    
    
    11,413Cash and cash equivalents at end of period
    
    $
    4,073
    
    
    $
    3,698
 The accompanying notes are an integral part of the interim
consolidated financial statements. 4




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EMERSON RADIO CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) NOTE 1  BACKGROUND AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of Emerson
Radio Corp. (Emerson, consolidated  the Company) and its majority-owned
subsidiaries, including Sport Supply Group, Inc. (SSG), which has been 53.2%
owned since February 2002. The Company operates in two business segments: consumer electronics and
sporting goods. The consumer electronics segment designs, sources, imports and
markets a variety of consumer electronic products and licenses the (EMERSON LOGO) trademark
for a variety of products domestically and internationally to certain
licensees. The sporting goods segment, which is operated through SSG,
manufactures and markets sports related equipment and leisure products to
institutional customers in the United States. From July 2003 through October 2003, certain of SSGs team dealer
locations were discontinued. In November 2003, SSG sold all of the issued and
outstanding capital stock of its wholly-owned subsidiary, Athletic Training
Equipment Company, Inc. (ATEC). Collectively, SSG refers to these operations
as Discontinued Operations and accordingly, the accompanying financial
statements reflect these as discontinued operations. (See Note 12) The unaudited interim consolidated financial statements reflect all normal
and recurring adjustments that are, in the opinion of management, necessary to
present a fair statement of our consolidated financial position as of June 30,
2004 and the results of operations for the quarters ended June 30, 2004 and
2003. The unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission and accordingly do not include all of the disclosures normally made
in our annual consolidated financial statements. It is suggested that these
unaudited interim consolidated financial statements be read in conjunction with
the consolidated financial statements and notes thereto for the fiscal year
ended March 31, 2004 (fiscal 2004), included in our annual report on Form
10-K for fiscal 2004. Certain reclassifications were made to conform the prior years financial
statements to the current presentation. The consolidated financial statements include our accounts and all of our
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The preparation of the
unaudited interim consolidated financial statements requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes; actual results could materially differ from
those estimates. 5




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Due to the seasonal nature of both segments, the results of operations for
the quarter ended June 30, 2004 are not necessarily indicative of the results
of operations that may be expected for any other interim period or for the full
year ending March 31, 2005 (fiscal 2005). Emerson and SSG have elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees: (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25, if
the exercise price of employee stock options equals or exceeds the market price
of the underlying stock on the date of grant, no compensation expense is
recognized. Emerson and SSG have adopted the disclosure-only provisions under
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123). For the purposes of SFAS 123 pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options vesting periods. Our pro forma information for the quarter
ended June 30, 2004 and 2003 is as follows: Three Months EndedJune 30, 2004
    
    June 30, 2003(Unaudited)Income (loss) from continuing
operations (in thousands):As reported
    
    $
    1,805
    
    
    $
    (440
    )Less: Employee stock-based
compensation expense
    
    
    (2
    )
    
    
    (7
    )Pro forma
    
    $
    1,803
    
    
    $
    (447
    )Income (loss) from continuing
operations per common share:Basic  as reported
    
    $
    0.07
    
    
    $
    (0.02
    )Basic  pro forma
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted  as reported
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted  pro forma
    
    $
    0.07
    
    
    $
    (0.02
    )
 Three Months EndedJune 30, 2004
    
    June 30, 2003(Unaudited)Net income (loss)(in thousands):As reported
    
    $
    1,805
    
    
    $
    (445
    )Less: Employee stock-based
compensation expense
    
    
    (2
    )
    
    
    (7
    )Pro forma
    
    $
    1,803
    
    
    $
    (452
    )Net income (loss) per common share:Basic  as reported
    
    $
    0.07
    
    
    $
    (0.02
    )Basic  pro forma
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted  as reported
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted  pro forma
    
    $
    0.07
    
    
    $
    (0.02
    )
 6




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NOTE 2  COMPREHENSIVE INCOME Our comprehensive income (loss) for the three months ended June 30, 2004
and 2003 is as follows (in thousands): Three Months EndedJune 30, 2004
    
    June 30, 2003(Unaudited)Net income (loss)
    
    $
    1,805
    
    
    $
    (445
    )Interest rate swap
    
    
    (4
    )
    
    
    (4
    )Unrealized loss on securities, net
    
    
    
    
    
    
    (4
    )Recognition of realized losses
related to investments included in net losses
    
    
    
    
    
    
    42Comprehensive income (loss)
    
    $
    1,801
    
    
    $
    (411
    )
 NOTE 3  NET EARNINGS (LOSS) PER SHARE The following table sets forth the computation of basic and diluted
earnings (loss) per share (in thousands, except per share amounts): Three Months EndedJune 30, 2004
    
    June 30, 2003(Unaudited)Numerator:Net earnings (loss) before discontinued operations for
basic and diluted earnings (loss) per share
    
    $
    1,805
    
    
    $
    (440
    )Denominator:Denominator for basic earnings(loss) per share -
weighted average shares
    
    
    26,630
    
    
    
    27,416Effect of dilutive securities:Options and warrants
    
    
    631
    
    
    
    Denominator for diluted earnings per share -
weighted average shares and assumed conversions
    
    
    27,261
    
    
    
    27,416Basic earnings (loss) per share:Continuing operations
    
    $
    0.07
    
    
    $
    (0.02
    )Discontinued operations
    
    
    
    
    
    
    Basic earnings (loss) per share
    
    $
    0.07
    
    
    $
    (0.02
    )Diluted earnings (loss) per share:Continuing operations
    
    $
    0.07
    
    
    $
    (0.02
    )Discontinued operations
    
    
    
    
    
    
    Diluted earnings (loss) per share
    
    $
    0.07
    
    
    $
    (0.02
    )
 NOTE 4 - CAPITAL STRUCTURE Our outstanding capital stock at June 30, 2004 consisted of common stock
and Series A convertible preferred stock in which the conversion feature
expired effective March 31, 2002. 7




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At June 30, 2004, Emerson had outstanding approximately 907,000 options
with exercise prices ranging from $1.00 to $1.50 and SSG had outstanding
approximately 208,000 options with exercise prices ranging from $0.95 to $9.44.
Subsequent to June 30, 2004, 675,000 of the Emerson options were exercised in
cashless exchanges resulting in 438,910 shares being issued. On August 1, 2002, in connection with a consulting agreement, Emerson
granted 200,000 warrants with an exercise price of $2.20, of which 100,000
warrants vested after six months and 100,000 warrants vested one year from date
of grant. The warrants were valued using the Black-Scholes option valuation
model and were charged to earnings over the related service period of the
consulting agreement with approximately $18,000 being charged to operations for
the three months ended June 30, 2003. In February 2003, 100,000 of these
warrants were exercised. In November 2003, the remaining 100,000 of these
warrants were exercised under a cashless exercise and 45,544 shares of common
stock were issued. On October 7, 2003, in conjunction with a consulting agreement, Emerson
granted 50,000 warrants with immediate vesting and an exercise price of $5.00
per share. These warrants were valued using the Black-Scholes option valuation
model, which resulted in $90,500 being charged to earnings during fiscal 2004.
For the three months ending June 30, 2004, no expense was charged to operations
for these warrants. As of June 30, 2004, these warrants had not been
exercised. NOTE 5  INVENTORY Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for the consumer electronics segment and
the average cost method is used for the sporting goods segment. As of June 30,
2004 and March 31, 2004, inventories consisted of the following (in thousands): June 30, 2004
    
    March 31, 2004(Unaudited)Raw materials
    
    $
    1,196
    
    
    $
    1,138Work-in-process
    
    
    81
    
    
    
    67Finished
    
    
    56,690
    
    
    
    48,87857,967
    
    
    
    50,083Less inventory allowances
    
    
    (3,062
    )
    
    
    (3,086
    )$
    54,905
    
    
    $
    46,997
 NOTE 6  INCOME TAXES We have tax net operating loss carry forwards included in net deferred
tax assets that are available to offset future taxable income and can be
carried forward for 15 to 20 years. Although realization is not assured, we
believe it is more likely than not that all of the net deferred tax assets
will be realized through tax planning strategies 8




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available in future periods and through future profitable operating results.
The amount of the deferred tax asset considered realizable, however, could be
reduced or eliminated if certain tax planning strategies are not successfully
executed or estimates of future taxable income during the carryforward period
are reduced. If we determine that we would not be able to realize all or part
of the net deferred tax asset in the future, an adjustment to the deferred tax
asset would be charged to income in the period such determination was made. At June 30, 2004, approximately $20.4 million of deferred tax assets were
reported on our balance sheet. NOTE 7  RELATED PARTY TRANSACTIONS Effective March 1997, Emerson entered into a Management Services
Agreement with SSG, under which each company provides various managerial and
administrative services to the other company for fees at terms which reflect
arms length transactions. These charges have been eliminated in
consolidation, but are reflected in the segment information presented in Note
10. NOTE 8  GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board issued Statement
No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 requires
that goodwill not be amortized but instead be tested for impairment at least
annually by reporting unit. As a result of adopting SFAS 142, we ceased
recording amortization of goodwill on April 1, 2002. As of June 30, 2004, estimated amortization expense of other intangible
assets for each of the next five years is as follows (in thousands): 2005
    
    $
    4452006
    
    
    4452007
    
    
    3742008
    
    
    2802009
    
    
    207Thereafter
    
    
    3,301$
    5,052
 NOTE 9  BORROWINGS As of June 30, 2004 and March 31, 2004, short-term borrowings consisted
of the following (in thousands): 9




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June 30, 2004
    
    March 31, 2004(Unaudited)Foreign bank loan
    
    $
    3,431
    
    
    $
    4,762
 As of June 30, 2004 and March 31, 2004, long-term borrowings consisted of
the following (in thousands): June 30, 2004
    
    March 31, 2004(Unaudited)Consumer Electronics Segment Revolver
(Revolver A)
    
    $
    17,500
    
    
    $
    8,000Sporting Goods Segment Revolving line of
credit (Revolver B)
    
    
    4,201
    
    
    
    6,972Equipment notes and other
    
    
    62
    
    
    
    11321,763
    
    
    
    15,085Less current maturities
    
    
    35
    
    
    
    58Long term debt and notes payable
    
    $
    21,728
    
    
    $
    15,027
 Revolver A- The Borrowing Base amount on Revolver A loan is established
by specified percentages of eligible accounts receivables and inventories and
bears interest ranging from Prime plus 0.50% to 1.25% or, at Emersons
election, LIBOR plus 2.00% to 2.75% depending on certain financial covenants.
This agreement provides for revolving loans which cannot exceed the lesser
of $25 million or a Borrowing Base amount based upon specified percentages
of eligible accounts receivables and inventories. Pursuant to the Loan
Agreement as amended, Emerson is restricted from, among other things, paying
certain cash dividends, repurchasing its common stock and entering into
certain transactions without the lenders prior consent and are subject to
certain net worth and leverage financial covenants. Amounts outstanding
under the Loan Agreement are secured by substantially all of Emersons
tangible assets. As of June 30, 2004 Emerson was in compliance with the
covenants contained in the Loan Agreement. Revolver B- During the quarter ending December 31, 2003, SSG amended
its Loan and Security Agreement to finance its working capital requirements
through October 31, 2007. Under this amendment, SSGs line of credit was
reduced from $25 million to $20 million; its LIBOR borrowing rates were
reduced from 2.5% to 2.25%; and its inventory and accounts receivable
borrowing advance rates were increased. This agreement provides for
revolving loans and letters of credit which, in the aggregate, cannot exceed
the lesser of $20 million or a Borrowing Base amount based upon specified
percentages of eligible accounts receivables and inventories. Amounts
outstanding under the senior credit facility are secured by substantially all
the assets of SSG and its subsidiaries. Pursuant to the loan documents
governing this line of credit, SSG is restricted from, among other things,
paying cash dividends 10




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and entering into certain transactions without the lenders prior
consent and is required to maintain certain net worth levels. As of June 30,
2004, SSG was in compliance with the covenants. As of June 30, 2004, the carrying value of these credit facilities
approximated fair value. NOTE 10  SEGMENT INFORMATION The following table presents certain operating segment information for
each of the three months ended June 30, 2004 and 2003 (in thousands): Three Months Ended
    
    Three Months EndedJune 30, 2004
    
    June 30, 2003Consumer
    
    
    
    
    
    ConsumerElectronics
    
    Sporting Goods
    
    Electronics
    
    Sporting Goods(Unaudited)
    
    (Unaudited)Net revenues from
external customers
    
    $
    47,826
    
    
    $
    25,104
    
    
    $
    31,650
    
    
    $
    22,521Income (loss) before
income taxes and
discontinued
operations
    
    $
    1,514
    
    
    $
    1,237
    
    
    $
    (637
    )
    
    $
    130Segment assets
    
    $
    85,359
    
    
    $
    42,575
    
    
    $
    84,346
    
    
    $
    53,368
 NOTE 11  LEGAL PROCEEDINGS Putative Class Actions Between September 4, 2003 and October 30, 2003, several putative class
action lawsuits were filed in the United States District Court for the District
of New Jersey against Emerson and Messrs. Geoffrey Jurick, Kenneth Corby and
John Raab (the Individual Defendants) on behalf of purchasers of our publicly
traded securities who bought shares between January 29, 2003 and August 12,
2003 (the Class Period.) On December 17, 2003, the Court entered a Joint
Stipulation and Order consolidating these putative class actions under the
caption In Re Emerson Radio Corp. Securities Litigation, 03cv4201 (JLL) (the
Consolidated Action.) Further to that Stipulation and Order, lead plaintiff
was appointed and co-lead counsel and co-liaison counsel were approved by the
Court in the Consolidated Action. Consistent with the Stipulation and Order,
the plaintiffs filed an Amended Consolidated Complaint (the Amended
Complaint) that, among other things, added Jerome Farnum, one of Emersons
directors, as a defendant in the litigation. Generally, the Amended Complaint alleges that Emerson and the Individual
Defendants violated Sections 10(b) and 20(a) of the Securities 11




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##### Table of Contents



Exchange Act of 1934, and Rule 10b-5 promulgated there under, by (i) issuing
certain positive statements during the Class Period regarding our ability to
replace lost revenues attributable to our Hello Kitty® license and (ii)
omitting to disclose that Emerson suffered allegedly soured relationships with
its largest retail customers. The Amended Complaint further alleges that
these statements were materially false and misleading when made because Emerson
allegedly misrepresented and omitted certain adverse facts which then existed
and disclosure of which was necessary to make the statements not false and
misleading. Emerson, and the Individual Defendants intend to defend the
lawsuit vigorously. Other Matters The Company is a party to various other litigation matters, in most cases
involving ordinary and routine claims incidental to its business. The Company
cannot estimate with certainty its ultimate legal and financial liability with
respect to such pending litigation matters. However, the Company believes,
based on its examination of such matters, that its ultimate liability will not
have a material adverse effect on its financial position, results of operations
or cash flows. NOTE 12  DISCONTINUED OPERATIONS From July 2003 through October 2003, certain of SSGs team dealer
locations were closed. In November 2003, SSG sold all of the issued and
outstanding capital stock of its wholly owned subsidiary, ATEC. These closures
and sale of stock, and related discontinued operations resulted in a loss of
approximately $5,000 for the three months ended June 30, 2003. The results of
these transactions are included in discontinued operations in the accompanying
Consolidated Statement of Operations for the three months ended June 30, 2004
and 2003. (See Note 1) The following table summarizes the results of these discontinued
operations, net of related income taxes, as applicable (in thousands). (See
Note 6) Three Months EndedJune 30, 2004
    
    June 30, 2003Net revenues-ATEC
    
    $
    
    
    
    $
    2,290Net revenues-Team Dealers
    
    
    
    
    
    
    1,393Net revenues-total
    
    
    
    
    
    
    3,683Income from operations  ATEC
    
    $
    
    
    
    $
    116Loss from operations  Team Dealers
    
    
    
    
    
    
    (121
    )Total discontinued operations, net of tax
    
    $
    
    
    
    $
    (5
    )
 12




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition Managements Discussion and Analysis of Results of Operation is presented
in three parts: consolidated operations, the consumer electronics segment and
the sporting goods segment. The following discussion of our operations and financial condition should
be read in conjunction the Financial Statements and notes thereto included
elsewhere in this Quarterly Report on Form 10-Q. Special Note: Certain statements set forth below constitute
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. See Item 1  Business
Forward-Looking Statements. In the following discussions, most percentages and dollar amounts have
been rounded to aid presentation, accordingly, all amounts are
approximations. Consolidated Operations: The following table sets forth, for the periods indicated, certain items
related to our consolidated statements of operations as a percentage of net
revenues for the three months ended June 30, 2004 and 2003. A detailed
discussion of the material changes in operating results is set forth under the
discussion of our two operating segments: consumer electronics and sporting
goods. Three Months EndedJune 302004
    
    2003(Unaudited)Net revenues (in thousands)
    
    $
    72,930
    
    
    $
    54,171100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    78.2
    %
    
    
    79.3
    %Other operating costs and expenses
    
    
    2.1
    %
    
    
    2.3
    %Selling, general and administrative expenses
    
    
    14.8
    %
    
    
    17.2
    %Acquisition costs
    
    
    (0.1
    %)
    
    
    1.2
    %Stock based costs
    
    
    
    
    
    
    0.1
    %Operating income (loss)
    
    
    5.0
    %
    
    
    (0.1
    %)Interest expense
    
    
    0.4
    %
    
    
    0.7
    %Minority interest in net income
of consolidated subsidiary
    
    
    (0.8
    %)
    
    
    (0.1
    %)Provision (benefit) for income taxes
    
    
    1.3
    %
    
    
    (0.1
    %)Loss from discontinued operations, net of tax
    
    
    
    
    
    
    Net income (loss)
    
    
    2.5
    %
    
    
    (0.8
    %)
 13




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##### Table of Contents



Net Revenues  Consolidated net revenues for the three months ended June 30,
2004 increased $18.8 million, or 34.6%, to $72.9 million from $54.1 million as
compared to the same period ended June 30, 2003. The increase is attributable
to a $16.2 million increase in net revenues for the consumer electronics
segment, and a $2.6 million increase in net revenues for the sporting goods
segment, due primarily to increases in units sold in both segments. Cost of Sales  Cost of sales, as a percentage of consolidated net revenues,
decreased to 78.2% for the three months ending June 30, 2004 from 79.3% for the
same period ending June 30, 2003. The decrease in cost of sales as a
percentage of net revenues for the three month period was primarily the result
of higher margins in both the consumer electronics and sporting goods segments.
In absolute terms, cost of sales increased to $57.0 million from $43.0 million
($14.0 million or 32.7%) for the three months of fiscal 2005 as compared to the
same period in fiscal 2004. The increase is due to a $12.8 million increase in
the consumer electronics segment and a $1.2 million increase in the sporting
goods segment, due to higher revenues in both segments. Other Operating Costs and Expenses  Other operating costs and expenses are
associated with the consumer electronics segment. As a percentage of
consolidated net revenues, other operating costs and expenses decreased to 2.1%
from 2.3% for the three months ended June 30, 2004 compared to the same period
in fiscal 2004. In absolute terms, other operating costs and expenses
increased to $1.6 million from $1.3 million ($297,000 or 23.7%) for the three
months of fiscal 2005 as compared to the same period in fiscal 2004. Selling, General and Administrative Expenses (S,G&A)   S,G&A, as a
percentage of consolidated net revenues, were 14.8% for the three months ended
June 30, 2004 as compared to 17.2% for the three months ended June 30, 2003,
since certain of these expenses are fixed and do not vary directly with sales
volume. In absolute terms, S,G&A increased to $10.8 million from $9.3 million
($1.5 million or 15.5%) for the three month period ended June 30, 2004 as
compared to the same period in fiscal 2004. The increase for the first quarter
of fiscal 2005 is due to a $1.2 million increase in the consumer electronics
segment, and a $.3 million increase in the sporting goods segment. Acquisition Costs  Acquisition costs are associated with the consumer
electronics segment. Adjustments to acquisitions costs incurred in the fourth
quarter of fiscal 2004 were made in the first quarter of fiscal 2005, resulting
in a reduction in such costs of $71,000, as compared to $643,000 of costs for
(1.2% of consolidated net revenues) the three months ended June 30, 2003, a
decrease of approximately $714,000. Stock Based Costs  Stock based costs are associated with the consumer
electronics segment and relate to the cost of warrants previously issued 14




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##### Table of Contents



in exchange for consulting services incurred during the three months ended June
30, 2004. Interest Expense, Net  Interest expense decreased $128,000 (30.3%) to $294,000
(0.4% of consolidated net revenues) for the three months ended June 30, 2004
from $422,000 (0.7% of consolidated net revenues) for the three months ended
June 30, 2003. The decrease in interest expense was a result of lower average
borrowings and lower borrowing costs in both segments. Minority Interest in Net Income of Consolidated Subsidiary  Minority interest
in net income of consolidated subsidiary represents that portion of the
sporting goods segment net income for the three months ended June 30, 2004 and
2003 that was not included in the consolidated statements of operations. (See
Note 1) Provision for Income Taxes  The provision for income taxes increased $1.0
million to $946,000 (1.3% of consolidated net revenues) for the three months
ended June 30, 2004 from a benefit of $67,000 (less than 0.1% of consolidated
net revenues) for the three months ended June 30, 2003. The increase in the
provision for income taxes was primarily due to an increase in pre-tax profit
in the consumer electronics segment. Loss from Discontinued Operations  From July through October, SSG ceased
operations of several of its Team Dealer locations. In November 2003, SSG sold
all of the issued and outstanding shares of capital stock of its wholly owned
subsidiary  ATEC. There were no amounts recorded for these operations (the
discontinued operations) for the three months ended June 30, 2004 as compared
to a loss of approximately $5,000 for the same period of fiscal 2004. Net Income (Loss)  As a result of the foregoing factors, we earned net income
of approximately $1.8 million (2.5% of consolidated net revenues) for the three
months ended June 30, 2004 as compared a net loss of approximately $445,000
(0.8% of consolidated net revenues) for the three months ended June 30, 2003. Consumer Electronics Segment: The following table summarizes certain financial information relating to the
consumer electronics segment for the three months ended June 30, 2004 and 2003
(in thousands): 15




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##### Table of Contents



Three Months EndedJune 302004
    
    2003(Unaudited)Net revenues
    
    $
    47,826
    
    
    $
    31,650Cost of sales
    
    
    39,409
    
    
    
    26,615Other operating costs and expenses
    
    
    1,553
    
    
    
    1,256Selling, general & administrative
    
    
    4,580
    
    
    
    3,423Acquisition costs
    
    
    (71
    )
    
    
    643Stock based costs
    
    
    
    
    
    
    18Operating income (loss)
    
    
    2,355
    
    
    
    (305
    )Interest expense, net
    
    
    235
    
    
    
    278Income (loss) before income taxes
    
    
    2,120
    
    
    
    (583
    )Provision (benefit) for income taxes
    
    
    946
    
    
    
    (136
    )Net income (loss)
    
    $
    1,174
    
    
    $
    (447
    )
 Net Revenues  Net revenues for the three months ended June 30, 2004 increased
$16.2 million, or 51.1%, to $47.8 million from $31.6 million for the three
months ended June 30, 2003. Consumer electronics net revenues are comprised of
Emerson branded product sales, themed product sales and licensing revenues.
Emerson branded product sales are earned from the sale of products bearing the
Emerson or HH Scott brand name; themed product sales represent products sold
bearing a certain theme or character; and licensing revenues are derived from
licensing the Emerson and HH Scott brand names to licensees for a fee. The
increase in net revenues for the three months ended June 30, 2004 was comprised
of:  i)
    
    An increase in revenues from the sale of Emerson branded product of
$15.1 million, or 53.4%, to $43.3 million in the first quarter of
fiscal 2005 from $28.2 million in the first quarter of fiscal 2004.
Increased orders from our primary customers associated with an overall
improving economy contributed to the increases in Emerson branded
product sales.ii)
    
    An increase in themed product sales of approximately $280,000, or
an 89.5% increase to $590,000 in the first quarter of fiscal 2005 as
compared to $310,000 for the first quarter of fiscal 2004. The
increase was due to the continued introduction of Nickelodeon themed
products.iii)
    
    Licensing revenues increased by approximately $900,000, or 26.9%,
for the first quarter of fiscal 2005 to $4.0 million compared to $3.1
million for the first quarter of fiscal 2004, primarily due to
increased sales volumes from our video licensing agreements. Cost of Sales  Cost of sales for the three months ended June 30, 2004
increased $12.8 million (48.1%) to $39.4 million from $26.6 million for 16




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##### Table of Contents



the three months ended June 30, 2003. In relative terms, cost of sales for the
three months ended June 30, 2004 decreased to 82.4% of consumer electronics net
revenue as compared to 84.1% for the same period in fiscal 2004. The decrease
in cost of sales in relative terms is primarily due to increased license
revenue. Gross profit margins continue to be subject to competitive pressures arising
from lower pricing of the product categories in the consumer electronics market
in which Emerson competes. Emersons branded products are generally placed in
the low-to-medium priced category of the market. Other Operating Costs and Expenses- Other operating costs and expenses, as a
percentage of consumer electronics net revenues, decreased to 3.3% in the June
quarter of fiscal 2005 as compared to 4.0% for the same period in fiscal 2004.
In absolute terms, other operating costs and expenses increased to $1.6 million
from $1.3 million ($297,000 or 23.7%) for the three months ended June 30, 2004
as compared to the same period in fiscal 2004. This increase in absolute terms
was primarily due to increased net revenues. Selling, General and Administrative Expenses (S,G&A)    S,G&A, increased
approximately $1.2 million, or 33.8%, to $4.6 million (9.6% of the consumer
electronics net revenues) from $3.4 million (10.8% of the consumer electronics
net revenues) for the three months ended June 30, 2004 as compared to the same
period ended June 30, 2003. The increase in absolute terms for the three
months ended June 30, 2004, resulted from increases in advertising expenses of
approximately $250,000; professional fees of approximately $400,000, freight
expenses of $142,000, travel related costs of $106,000 and increases in various
other S,G&A accounts. Acquisition Costs  Acquisition costs incurred in the fourth quarter of fiscal
2004 were adjusted in the first quarter of fiscal 2005, resulting in a
reduction of such costs of $71,000, as compared to $643,000 of costs incurred
for the three months ended June 30, 2003. These costs were associated with
acquisition transactions not completed in fiscal 2004. Stock Based Costs  Stock Based Costs, which relate to the cost of warrants
issued in exchange for consulting services, decreased by approximately $18,000
for the three months of fiscal 2005 as compared to the same period in fiscal
2004. Interest Expense, net  Interest expense decreased by approximately $43,000, or
15.5%, to $235,000 (0.5% of the consumer electronics net revenues) for the
three months ended June 30, 2004, from $278,000 (0.9% of the consumer
electronics net revenues) for the three months ended June 30, 2003. The
decrease in interest expense was the result of lower average borrowings. Provision for Income Taxes  The provision for income taxes was approximately
$946,000 (2.0% of the consumer electronics net revenue) compared to a benefit
of approximately $136,000 for the three months ended 17




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##### Table of Contents



June 30, 2003. The increase in the provision for income taxes for the three
months ended June 30, 2004 was the result of the pre-tax profit as compared to
a pre-tax loss during the same period in the prior fiscal year. Net Income (Loss)  As a result of the foregoing factors, the consumer
electronics segment earned net income of $1.2 million (2.5% of net consumer
revenues) for the three months ended June 30, 2004 as compared to a net loss of
$447,000 (1.4% of net consumer revenues) for the three months ended June 30,
2003. Sporting Goods Segment: The following table summarizes certain financial information relating to
the sporting goods segment as reported by SSG for the three months ended June
30, 2004 and 2003 (in thousands): Three Months Ended June 302004
    
    2003(Unaudited)Net revenues
    
    $
    25,104
    
    
    $
    22,521Cost of sales
    
    
    17,625
    
    
    
    16,352Selling, general & administrative
    
    
    6,183
    
    
    
    5,895Operating income
    
    
    1,296
    
    
    
    274Interest expense, net
    
    
    59
    
    
    
    144Income before income taxes &
discontinued operations
    
    
    1,237
    
    
    
    130Provision for income taxes
    
    
    
    
    
    
    69Loss from discontinued operations
    
    
    
    
    
    
    (5
    )Net income
    
    $
    1,237
    
    
    $
    56
 Net Revenues  Net revenues for the three month period ended June 30, 2004
increased $2.6 million, or 11.5%, to $25.1 million from $22.5 million for the
three month period ended June 30, 2003. The increase in net revenues was
primarily the result of previously implemented sales and marketing programs,
which increased unit volume, as well as having three additional shipping days
in the current quarter as compared to the same quarter in the previous year
due to a change in the fiscal year for the sporting goods segment. Cost of Sales  Cost of sales for the three month period ended June 30, 2004
increased $1.3 million, or 7.8%, to $17.6 million from $16.3 million for the
three month period ended June 30, 2003. As a percentage of net revenues, cost
of sales decreased to 70.2% for the three month period ended June 30, 2004, as
compared to 72.6% for the same period in fiscal 2004. The decrease in cost of
sales as a percentage of net revenues for 18




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##### Table of Contents



the three month period was primarily the result of efficiencies gained through
improved product procurement and product mix. Selling, General and Administrative Expenses (S,G&A)    S,G&A expenses for
the three month period ended June 30, 2004 increased approximately $288,000, or
4.9%, to $6.2 million from $5.9 million for the three month period ended June
30, 2003. As a percentage of net revenues, SG&A decreased to 24.6% for the
three month period ended June 30, 2004 from 26.2% for the same period in fiscal
2004. The increase in SG&A for the three month period was primarily a result
of an increase in payroll related expenses of approximately $174,000 and an
increase in selling and promotional expenses of approximately $130,000. Interest Expense, net  Interest expense decreased by approximately $85,000, or
59.0%, to $59,000 for the three month period ended June 30, 2004, as compared
to $144,000 for the same period in the prior year. Provision for Income Taxes  For the three month period ended June 30, 2004,
SSG recorded no income tax provision due to the existence of prior net
operating losses to offset current income, and no change in managements
estimate of the extent to which deferred tax assets are realizable. (See Note
6) Loss from Discontinued Operations  Discontinued operations reflect net
operating losses related to our discontinued and sold team dealer operations,
and the net income from and net gain on the sale of SSGs ATEC subsidiary for
the three month period ended June 30, 2003. (See Note 12) Net Income  As a result of the foregoing factors, the sporting goods segment
earned net income of approximately $1,237,000 for the three months ended June
30, 2004 as compared to approximately $56,000 for the three months ended June
30, 2003. Liquidity and Capital Resources As of June 30, 2004, we had cash and cash equivalents of approximately
$4.1 million compared to approximately $6.4 million at March 31, 2004. Working
capital increased to $57.5 million at June 30, 2004 as compared to $46.8
million at March 31, 2004. The decrease in cash and cash equivalents of
approximately $2.3 million was primarily due to operating activities, partially
offset by financing activities. Operating cash flow used in continuing operating activities was
approximately $7.5 million for the three months ended June 30, 2004. Cash was
primarily used for increases in inventory and accounts receivable. Net cash used by investing activities was approximately $167,000 for the
three months ended June 30, 2004, which consisted primarily of computer and
office equipment fixed asset acquisitions. 19




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##### Table of Contents



Net cash provided from financing activities was approximately $5.3 million
for the three months ended June 30, 2004, due primarily to the net increase in
long-term borrowings. Emerson and SSG maintain credit facilities as described in Note 9 to our
consolidated financial statements  Borrowings. At June 30, 2004, there were
approximately $21.7 million of borrowings outstanding under these facilities
and no letters of credit outstanding. Approximately $17.5 million of
borrowings were outstanding under the Emerson Loan Agreement and $4.2 million
of borrowings were outstanding under the SSG Loan Agreement. At June 30, 2004,
Emerson and SSG were in compliance with the covenants in each of the loan
agreements. Our foreign subsidiaries maintain various credit facilities, aggregating
$75.0 million, consisting of the following:  
    
    two letter of credit facilities totaling $15.0 million which is used
for inventory purchases; and
    
    three back-to-back letter of credit facilities totaling $60 million. At June 30, 2004, our Hong Kong subsidiary pledged approximately $3.6
million in certificates of deposit to this bank to assure the availability of
the $15.0 million credit facilities. At June 30, 2004, there were
approximately $12.6 million of letters of credit outstanding under these credit
facilities. These letter of credit facilities require the foreign subsidiary
to meet a net worth covenant which was complied with at June 30, 2004. At present, we believe that future cash flow from operations and our
existing institutional financing noted above will be sufficient to fund all of
our cash requirements for the next twelve months. The following summarizes our obligations at June 30, 2004 for the periods
shown (in thousands): Payment due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1 - 3 years
    
    3 - 5 years
    
    yearNotes Payable
    
    $
    21,701
    
    
    $
    
    
    
    $
    17,500
    
    
    $
    4,201
    
    
    $
    Capital lease
obligations
    
    
    62
    
    
    
    35
    
    
    
    27
    
    
    
    
    
    
    
    Leases
    
    
    7,584
    
    
    
    2,378
    
    
    
    3,714
    
    
    
    1,492
    
    
    
    Total
    
    $
    29,347
    
    
    $
    2,413
    
    
    $
    21,241
    
    
    $
    5,693
    
    
    $
    
 There were no material capital expenditure commitments and no substantial
commitments for purchase orders outside the normal purchase orders used to
secure product as of June 30, 2004. 20




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##### Table of Contents



Critical Accounting Policies For the three month period ended June 30, 2004, there were no significant
changes to our accounting policies from those reported in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2004. Inflation, Foreign Currency, and Interest Rates Neither inflation nor currency fluctuations had a significant effect on
our results of operations during the first quarter of fiscal 2005. Our exposure
to currency fluctuations has been minimized by the use of U.S. dollar
denominated purchase orders, and by sourcing production in more than one
country. The consumer electronics segment purchases virtually all of its
products from manufacturers located in various Asian countries. The interest on borrowings under our credit facilities is based on the
prime and LIBOR rate. We believe that given the present economic climate,
interest rates, while expected to rise, are not expected to increase
significantly during the coming year. Forward-Looking Information This report contains various forward-looking statements made pursuant to
the safe harbor provisions under the Private Securities Litigation Reform Act
of 1995 (the Reform Act) and information that is based on managements
beliefs as well as assumptions made by and information currently available to
management. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance that such
expectations will prove to be correct. When used in this report, the words
anticipate, believe, estimate, expect, predict, project, and
similar expressions are intended to identify forward-looking statements.
Readers are cautioned not to place undue reliance on forward-looking statements
which speak only as of the date hereof, and should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, including the statements under Risk
Factors set forth in our Form 10-K for the fiscal year ended March 31, 2004
and other filings with the Securities and Exchange Commission (the SEC).
We undertake no obligation to publicly release the results on any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. We make available through our internet website free of charge our annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, amendments to such reports and other filings made by us with the SEC, as
soon as practicable after we electronically file such reports and filings with
the SEC. Our website address is 21




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##### Table of Contents



www.emersonradio.com. The information contained in this website is not
incorporated by reference in this report. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes from items disclosed in Form
10-K for the fiscal year ended March 31, 2004. 
 Item 4. Controls and Procedures (a) Disclosure controls and procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, we
carried out an evaluation, with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures pursuant to Securities Exchange Act
Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in ensuring that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SECs rules and forms. (b) Changes in internal controls over financial reporting. There have been no changes in our internal control over financial reporting
that occurred during our last fiscal quarter to which this Quarterly Report on
Form 10-Q relates that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting. 
 PART II OTHER INFORMATION 
 ITEM 1. Legal Proceedings. Putative Class Actions Between September 4, 2003 and October 30, 2003, several putative class
action lawsuits were filed in the United States District Court for the District
of New Jersey against Emerson and Messrs. Geoffrey Jurick, Kenneth Corby and
John Raab (the Individual Defendants) on behalf of purchasers of our publicly
traded securities who bought shares between January 29, 2003 and August 12,
2003 (the Class Period.) On December 17, 2003, the Court entered a Joint
Stipulation and Order consolidating these putative class actions under the
caption In Re Emerson Radio Corp. Securities Litigation, 03cv4201 (JLL) (the
Consolidated Action.) Further to that Stipulation and Order, lead plaintiff
was 22




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##### Table of Contents



appointed and co-lead counsel and co-liaison counsel were approved by the
Court in the Consolidated Action. Consistent with the Stipulation and Order,
the plaintiffs filed an Amended Consolidated Complaint (the Amended
Complaint) that, among other things, added Jerome Farnum, one of Emersons
directors, as a defendant in the litigation. Generally, the Amended Complaint alleges that Emerson and the Individual
Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and Rule 10b-5 promulgated there under, by (i) issuing certain positive
statements during the Class Period regarding our ability to replace lost
revenues attributable to our Hello Kitty® license and (ii) omitting to disclose
that Emerson suffered allegedly soured relationships with its largest retail
customers. The Amended Complaint further alleges that these statements were
materially false and misleading when made because Emerson allegedly
misrepresented and omitted certain adverse facts which then existed and
disclosure of which was necessary to make the statements not false and
misleading. Emerson, and the Individual Defendants intend to defend the
lawsuit vigorously. For other information on litigation to which the Company is a party,
reference is made to Part 1 Item-3-Legal Proceedings in our most recent annual
report on Form 10-K. 
 ITEM 2. Changes in Securities and Use of Proceeds. None. Share Repurchases: For the quarter ending June 30, 2004, we did not repurchase any shares
under the Emerson Radio Corp.s common stock share repurchase program. The

share repurchase program was publicly announced in September 2003 to repurchase
up to 2,000,000 shares of Emersons outstanding common stock. Share
repurchases are made from time to time in open market transactions in such
amounts as determined in the discretion of Emersons management within the
guidelines set forth by Rule 10b  18 under the Securities Exchange Act. Prior
to the June 30, 2004 quarter, we repurchased 1,111,625 shares under this
program. As of June 30, 2004, the maximum number of shares that are available
to be repurchased under Emerson Radio Corps common share repurchase program
was 888,375. 
 ITEM 3. Default Upon Senior Securities.  (a)
    
    None(b)
    
    None 
 ITEM 4. Submission of Matters to a Vote of Security Holders. None 23




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##### Table of Contents



ITEM 5. Other Information. None 
 ITEM 6. Exhibits and Reports on Form 8-K. (a)
    
    Exhibits:10.27.3
    
    Amendment to Revolving Credit and Term Loan Agreement (Number Three)
and Waiver dated June 28, 2004, among Emerson Radio Corp., Majexco
Imports, Inc., Emerson Radio (Hong Kong) Ltd., and Emerson Radio
international Ltd. Jointly and Severally, and PNC Bank, National
Association.*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.*(b)
    
    Reports on Form 8-K:Current report on Form 8-K, dated June 29, 2004, furnishing the
press release announcing the Companys financial results for the
year ended March 31, 2004.
   *
    
    filed herewith 24




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. EMERSON RADIO CORP.(Registrant)Date: August 5, 2004
    
    /s/ Geoffrey P. JurickGeoffrey P. JurickChairman of the Board,Chief Executive Officer and
President(Principal Executive Officer)Date: August 5, 2004
    
    /s/ Kenneth A. CorbyKenneth A. CorbyExecutive Vice President andChief Financial Officer(Principal Finance andAccounting Officer)
 25