##### Table of Contents



VERSION C
 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, 2009
 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
  o Large accelerated filer
o Accelerated filer
o Non-accelerated filer(Do not check if a smaller reporting company)
þ Smaller reporting company
 o þ




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##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Results of Operations and Financial Condition
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II  OTHER INFORMATION
    
    
    19Item 1. Legal Proceedings
    
    
    19Item 1A. Risk Factors
    
    
    19Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21EX-31.1EX-31.2EX-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
    
    
    Nine Months EndedDecember 31
    
    
    December 312009
    
    
    2008
    
    
    2009
    
    
    2008Net revenuesNet revenues
    
    $
    48,038
    
    
    $
    60,068
    
    
    $
    155,411
    
    
    $
    157,424Net revenues-related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1548,038
    
    
    
    60,068
    
    
    
    155,411
    
    
    
    157,439Costs and expenses:Cost of sales
    
    
    39,298
    
    
    
    55,612
    
    
    
    132,602
    
    
    
    140,434Other operating costs and expenses
    
    
    708
    
    
    
    2,058
    
    
    
    2,563
    
    
    
    4,769Selling, general and administrative expenses
    
    
    3,397
    
    
    
    4,519
    
    
    
    10,829
    
    
    
    13,78143,403
    
    
    
    62,189
    
    
    
    145,994
    
    
    
    158,984Operating income (loss)
    
    
    4,635
    
    
    
    (2,121
    )
    
    
    9,417
    
    
    
    (1,545
    )Interest (expense) income, net
    
    
    (1
    )
    
    
    21
    
    
    
    21
    
    
    
    227Unrealized holding (losses) on trading securities
    
    
    
    
    
    
    (410
    )
    
    
    
    
    
    
    (431
    )Realized gains on trading securities
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    623Income (loss) from continuing operations before income taxes
    
    
    4,634
    
    
    
    (2,419
    )
    
    
    9,438
    
    
    
    (1,126
    )Provision (benefit) for income taxes
    
    
    1,221
    
    
    
    (506
    )
    
    
    1,643
    
    
    
    848Income (loss) from continuing operations
    
    
    3,413
    
    
    
    (1,913
    )
    
    
    7,795
    
    
    
    (1,974
    )Loss from discontinued operations, net of tax benefit
    
    
    
    
    
    
    176
    
    
    
    55
    
    
    
    357Net income (loss)
    
    $
    3,413
    
    
    $
    (2,089
    )
    
    $
    7,740
    
    
    $
    (2,331
    )Basic net income (loss) per share:Continuing operations
    
    $
    .13
    
    
    $
    (.07
    )
    
    $
    .29
    
    
    $
    (.07
    )Discontinued operations
    
    
    
    
    
    
    (.01
    )
    
    
    
    
    
    
    (.02
    )$
    .13
    
    
    $
    (.08
    )
    
    $
    .29
    
    
    $
    (.09
    )Diluted net income (loss) per share:Continuing operations
    
    $
    .13
    
    
    $
    (.07
    )
    
    $
    .29
    
    
    $
    (.07
    )Discontinued operations
    
    
    
    
    
    
    (.01
    )
    
    
    
    
    
    
    (.02
    )$
    .13
    
    
    $
    (.08
    )
    
    $
    .29
    
    
    $
    (.09
    )Weighted average shares outstanding:Basic
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130Diluted
    
    
    27,133
    
    
    
    27,130
    
    
    
    27,131
    
    
    
    27,130
 
 3




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##### Table of Contents



EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 December 31, 2009
    
    
    March 31, 2009 (A)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    38,843
    
    
    $
    22,518Restricted cash
    
    
    3
    
    
    
    3,025Accounts receivable, net
    
    
    14,838
    
    
    
    15,970Other receivables
    
    
    1,263
    
    
    
    1,587Due from affiliates
    
    
    52
    
    
    
    78Inventory, net
    
    
    16,748
    
    
    
    20,691Prepaid expenses and other current assets
    
    
    2,738
    
    
    
    2,190Deferred tax assets
    
    
    3,936
    
    
    
    4,872Total current assets
    
    
    78,421
    
    
    
    70,931Property, plant and equipment, net
    
    
    3,585
    
    
    
    1,139Trademarks and other intangible assets, net
    
    
    1,683
    
    
    
    255Due from affiliates
    
    
    185
    
    
    
    114Investments in marketable securities
    
    
    6,031
    
    
    
    6,031Deferred tax assets
    
    
    6,715
    
    
    
    7,102Other assets
    
    
    235
    
    
    
    472Total assets
    
    $
    96,855
    
    
    $
    86,044LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    $
    5,655
    
    
    
    5,733Current maturities of long-term borrowings
    
    
    56
    
    
    
    85Accounts payable and other current liabilities
    
    
    21,899
    
    
    
    18,929Due to affiliates
    
    
    25
    
    
    
    66Accrued sales returns
    
    
    1,313
    
    
    
    1,130Income taxes payable
    
    
    159
    
    
    
    155Total current liabilities
    
    
    29,107
    
    
    
    26,098Long-term borrowings
    
    
    35
    
    
    
    59Deferred tax liabilities
    
    
    103
    
    
    
    87Shareholders equity:Preferred shares 10,000,000 shares
authorized; 3,677 shares issued and
outstanding; liquidation preference of $3,677
    
    
    3,310
    
    
    
    3,310Common shares  $.01 par value, 75,000,000
shares authorized; 52,965,797 shares issued,
and 27,129,832 shares outstanding
    
    
    529
    
    
    
    529Capital in excess of par value
    
    
    117,255
    
    
    
    117,243Accumulated other comprehensive losses
    
    
    (82
    )
    
    
    (82
    )Accumulated deficit
    
    
    (29,178
    )
    
    
    (36,976
    )Treasury stock, at cost, 25,835,965 shares
    
    
    (24,224
    )
    
    
    (24,224
    )Total shareholders equity
    
    
    67,610
    
    
    
    59,800Total liabilities and shareholders equity
    
    $
    96,855
    
    
    $
    86,044
 
 (A)
    
    Reference is made to the Companys Annual Report on Form 10-K for the fiscal year
ended March 31, 2009 filed with the Securities and Exchange Commission in July 2009 and
amended in July 2009.  4




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EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Nine Months EndedDecember 312009
    
    
    2008Cash flows from operating activities:Income (loss) from continuing operations
    
    $
    7,795
    
    
    $
    (1,974
    )Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    644
    
    
    
    585Non cash compensation
    
    
    12
    
    
    
    (6
    )Deferred tax expense
    
    
    1,339
    
    
    
    573Asset allowances, reserves and other
    
    
    (2,687
    )
    
    
    (616
    )Gains on sales of investments
    
    
    
    
    
    
    (623
    )Unrealized holding gains on trading securities
    
    
    
    
    
    
    431Changes in assets and liabilities:Restricted cash
    
    
    3,022
    
    
    
    (96
    )Foreign exchange foreign contracts
    
    
    
    
    
    
    134Accounts receivable
    
    
    1,699
    
    
    
    350Other receivables
    
    
    324
    
    
    
    982Due from affiliates
    
    
    (45
    )
    
    
    610Inventories
    
    
    6,249
    
    
    
    (4,445
    )Prepaid expenses and other current assets
    
    
    (548
    )
    
    
    (523
    )Other assets
    
    
    107
    
    
    
    69Accounts payable and other current liabilities
    
    
    2,970
    
    
    
    (4,040
    )Due to affiliates
    
    
    (41
    )
    
    
    208Interest and income taxes payable
    
    
    4
    
    
    
    (18
    )Operating activities of continuing operations
    
    
    20,844
    
    
    
    (8,399
    )Operating activities of discontinued operations
    
    
    
    
    
    
    (555
    )Net cash provided (used) by operating activities
    
    
    20,844
    
    
    
    (8,954
    )Cash flows from investing activities:Proceeds from partial calls on securities
    
    
    
    
    
    
    5,050Purchase of trademark
    
    
    (1,516
    )
    
    
    Additions to property and equipment
    
    
    (2,872
    )
    
    
    (328
    )Investing activities of continuing operations
    
    
    (4,388
    )
    
    
    4,722Investing activities of discontinued operations
    
    
    
    
    
    
    92Net cash (used) provided by investing activities
    
    
    (4,388
    )
    
    
    4,814Cash flows from financing activities:Short-term borrowings
    
    
    
    
    
    
    5,589Repayments of short-term borrowings
    
    
    (107
    )
    
    
    Borrowings under long-term credit facility
    
    
    94,141
    
    
    
    112,636Repayments of borrowings under long-term credit facility
    
    
    (94,165
    )
    
    
    (112,697
    )Net cash (used) provided by financing activities
    
    
    (131
    )
    
    
    5,528Net increase in cash and cash equivalents
    
    
    16,325
    
    
    
    1,388Cash and cash equivalents at beginning of period
    
    
    22,518
    
    
    
    14,283Cash and cash equivalents at end of period
    
    $
    38,843
    
    
    $
    15,671Cash paid during the period for:Interest
    
    $
    89
    
    
    $
    115Income taxes
    
    $
    17
    
    
    $
    64
  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 312009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    3,413
    
    
    $
    (2,089
    )
    
    $
    7,740
    
    
    $
    (2,331
    )Unrealized holding losses arising during period
    
    
    
    
    
    
    410
    
    
    
    
    
    
    
    431Less: reclassification adjustment for losses
included in net income
    
    
    
    
    
    
    (410
    )
    
    
    
    
    
    
    (431
    )Comprehensive income (loss)
    
    $
    3,413
    
    
    $
    (2,089
    )
    
    $
    7,740
    
    
    $
    (2,331
    )
 7




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##### Table of Contents



Three months ended
    
    
    Nine months endedDecember 31
    
    
    December 312009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net income (loss) from continuing operations for basic and diluted
earnings per share
    
    $
    3,413
    
    
    $
    (1,913
    )
    
    $
    7,795
    
    
    $
    (1,974
    )Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130
    
    
    
    27,130Effect of dilutive securities on denominator:Options and warrants
    
    
    3
    
    
    
    
    
    
    
    1
    
    
    
    Denominator for diluted earnings per share  weighted average shares
and assumed conversions
    
    
    27,133
    
    
    
    27,130
    
    
    
    27,131
    
    
    
    27,130Basic and diluted earnings (loss) from continuing operations per share
    
    $
    0.13
    
    
    $
    (0.07
    )
    
    $
    0.29
    
    
    $
    (0.07
    )
       December 31, 2009
    
    March 31, 2009(Unaudited)Finished goods
    
    $
    17,957
    
    
    $
    24,205Less inventory allowances
    
    
    (1,209
    )
    
    
    (3,514
    )Net inventory
    
    $
    16,748
    
    
    $
    20,691
   December 31, 2009
    
    
    March 31, 2009(Unaudited)Computer equipment & software
    
    
    2,983
    
    
    
    2,930Furniture and fixtures
    
    
    1,871
    
    
    
    1,783Machinery and equipment
    
    
    903
    
    
    
    737Leasehold improvements
    
    
    417
    
    
    
    672Building
    
    
    1,929
    
    
    
    Land
    
    
    641
    
    
    
    8,744
    
    
    
    6,122Less accumulated depreciation and amortization
    
    
    (5,159
    )
    
    
    (4,983
    )$
    3,585
    
    
    $
    1,139
 8




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##### Table of Contents



Jurisdiction
    
    Open tax yearsU.S. federal
    
    
    2006-2009States
    
    
    2006-2009
    Majority Shareholder
 Grandes Ownership Interest in Emerson.
 Related Party Transactions
 Product Sourcing Transactions.
 Sales of goods.
 9




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##### Table of Contents



Leases and Other Real Estate Transactions.
   Toy Musical Instruments.
    Hong Kong Electronics Fairs (HKEF).
  10




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##### Table of Contents



Other.
       Short-term Borrowings
  Long-term Borrowings
  December 31,2009
    
    
    March 31, 2009(Unaudited)Capitalized lease obligations and other
    
    
    91
    
    
    
    144Less current maturities
    
    
    (56
    )
    
    
    (85
    )Long term debt and notes payable
    
    $
    35
    
    
    $
    59
 Credit Facility
   11




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##### Table of Contents



In re: Emerson Radio Shareholder Derivative Litigation.
          Fair Value Measurement at Reporting Date Using:
 Significant Unobservable Inputs (Level 3)
    
    December 31, 2009(in thousands)Investments in marketable securities (classified as trading securities)
    
    $
    6,031Investments in marketable securities
    
    $
    6,031
 12




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##### Table of Contents



Fair ValueMeasurementof Asset usingLevel 3 inputs(in thousands)TradingSecurities non-currentBalance at March 31, 2009
    
    
    6,031Total gains (losses) (realized or unrealized):Realized  included in earnings at December 31, 2009
    
    
    Unrealized  included in earnings at December 31, 2009
    
    
    Redemptions of principal
    
    
    Balance at December 31, 2009
    
    $
    6,031
    
 Item 2.
    
    Managements Discussion and Analysis of Results of Operations and Financial Condition
   Forward-Looking Information
   13




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##### Table of Contents




    
    the loss of any of the Companys key customers or reduction in the price or volume of its
products purchased by any such customers;
    
    the Companys inability to maintain effective internal controls or the failure by its
personnel to comply with such internal controls;
    
    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;
    
    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 third parties to manufacture and deliver its products;
    
    the seasonality of the Companys business, as well as changes in consumer spending and
economic conditions;
    
    the failure of third party sales representatives to adequately promote, market and sell
the Companys products;
    
    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;
    
    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, 2009 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
    
    Nine Months EndedDecember 31
    
    December 312009
    
    2008
    
    2009
    
    2008Net revenues
    
    $
    48,038
    
    
    $
    60,068
    
    
    $
    155,411
    
    
    $
    157,439Cost of sales
    
    
    39,298
    
    
    
    55,612
    
    
    
    132,602
    
    
    
    140,434Other operating costs and expenses
    
    
    708
    
    
    
    2,058
    
    
    
    2,563
    
    
    
    4,769Selling, general and administrative expenses
    
    
    3,397
    
    
    
    4,519
    
    
    
    10,829
    
    
    
    13,781Operating income (loss)
    
    
    4,635
    
    
    
    (2,121
    )
    
    
    9,417
    
    
    
    (1,545
    )Interest income (expense), net
    
    
    (1
    )
    
    
    21
    
    
    
    21
    
    
    
    227Unrealized holding (losses) on trading securities
    
    
    
    
    
    
    (410
    )
    
    
    
    
    
    
    (431
    )Realized gains on trading securities
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    623Income (loss) from continuing operations before income taxes
    
    
    4,634
    
    
    
    (2,419
    )
    
    
    9,438
    
    
    
    (1,126
    )Provision (benefit) for income taxes
    
    
    1,221
    
    
    
    (506
    )
    
    
    1,643
    
    
    
    848Net income (loss) from continuing operations
    
    $
    3,413
    
    
    $
    (1,913
    )
    
    $
    7,795
    
    
    $
    (1,974
    )
 Net Revenues
  i)
    
    Home appliances product sales decreased $3.9 million, or 9.3%, to $38.2 million in the
third quarter of fiscal 2010 as compared to $42.1 million in the third quarter of fiscal
2009 on decreases in microwave ovens, wine coolers and coffee makers, partially offset by
increases in small refrigerators and toaster ovens. For the nine month period of fiscal
2010, home appliances product sales were $127.0 million, an increase of $15.0 million, or
13.3%, from $112.1 million in the nine month period of fiscal 2009, on increases in all
product categories except for wine coolers. Home appliance product sales consist of
microwave ovens, small refrigerators, toaster ovens, wine coolers and coffee makers;ii)
    
    Emerson(R) branded products sales, excluding home appliances products, were $6.5 million
in the third quarter of fiscal 2010 as compared to $12.5 million in the third quarter of
fiscal 2009, a decrease of approximately $6.0 million, or 48.0%. For the nine month period
of fiscal 2010, Emerson® branded products sales, excluding home appliances products, were
$20.1 million, a decrease of $11.7 million, or 36.8% from $31.8 million in the nine month
period of fiscal 2009, primarily resulting from decreased sales volumes across the Companys
entire audio category;iii)
    
    Themed product sales were $1.3 million in the third quarter of fiscal 2010 compared to
$3.9 million in the third quarter of fiscal 2009, a decrease of $2.6 million, or 67.7%. For
the nine month period of fiscal 2010, themed product sales were $3.4 million, a decrease of
$5.0 million, or 59.7%, from $8.3 million in the nine month period of fiscal 2009. The
decrease in both periods results from the winding down of the Companys licensing
arrangement with Mattel® to distribute themed products bearing the Barbie®, Hot Wheels® and
Funkey® brand names. The licensing arrangement with Mattel terminated on December 31, 2009;iv)
    
    Licensing revenues increased approximately $0.4 million, or 27.6%, to $2.0 million in the
third quarter of fiscal 2010 as compared to $1.6 million in the third quarter of fiscal 2009
due primarily to higher sales volumes in the quarter of licensed video products. For the
nine month period of fiscal 2010, licensing revenues decreased approximately $0.3 million,
or 5.9%, to $4.9 million as compared to $5.2 million for the nine month period of fiscal
2009 due primarily to lower sales volumes in the nine month period of licensed video
products.
 15




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Cost of Sales
 Gross Profit Margins
 Other Operating Costs and Expenses
 Selling, General and Administrative Expenses (S,G&A)
 Interest Income (Expense), net
 Realized/Unrealized Holding Gains (Losses) on trading securities
 Provision (benefit) for Income Taxes
 Net Income (loss) from continuing operations
 16




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Liquidity and Capital Resources
 General
     Wachovia
   Short-Term Liquidity.
  Recently Issued Accounting Pronouncements
  17




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The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162
  Inflation, Foreign Currency, and Interest Rates
  18




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 (a)
    
    Disclosure controls and procedures.
   (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.
  19




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##### Table of Contents



ITEM 3. Defaults Upon Senior Securities.
   
 ITEM 4. Submission of Matters to a Vote of Security Holders.
   Nominee:
    
    Votes For:
    
    Votes Withheld:Christopher Ho
    
    
    21,242,676
    
    
    
    4,733,063Adrian Ma
    
    
    21,252,397
    
    
    
    4,723,342Greenfield Pitts
    
    
    21,619,723
    
    
    
    4,356,016Eduard Will
    
    
    21,259,058
    
    
    
    4,716,681Duncan Hon
    
    
    21,591,755
    
    
    
    4,383,984Mirzan Mahathir
    
    
    23,220,732
    
    
    
    2,755,007Kareem E. Sethi
    
    
    23,249,672
    
    
    
    2,726,067Terence A. Snellings
    
    
    23,262,403
    
    
    
    2,713,336
  No. of
    
    No. of Shares
    
    No. of
    
    No. of BrokerVoted For:
    
    Voted Against:
    
    Abstentions:
    
    Non-vote:23,468,316
    
    
    2,345,518
    
    
    
    161,904
    
    
    
    0
 
 ITEM 5. Other Information.
  
 ITEM 6. Exhibits.
 31.1
    
    Certification of the Companys Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of the Companys Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32
    
    Certification of the Companys Chief Executive Officer and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
 
 *
    
    filed herewith 20




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##### Table of Contents



EMERSON RADIO CORP.(Registrant)/s/ Adrian MaDate: February 11, 2010
    Adrian MaChief Executive Officer
(Principal Executive Officer)/s/ Greenfield PittsDate: February 11, 2010
    Greenfield PittsChief Financial Officer
(Principal Financial and Accounting Officer) 21