**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q/A**

 

**(Mark One)**

 

**x****     ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended****March 31,2010**

 

**or**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                     to                     **

** **

**CommissionFile Number****1-10346**

 

**EMRISECORPORATION**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                    | ** ** | **77-0226211**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

**611Industrial Way**

**Eatontown,New Jersey 07224**

(Address of principalexecutive offices) (Zip code)

 

**(732) 389-0355**

(Registrant’s telephone number, including area code)

 

**Not applicable**

(Former name, former address and former fiscal year, if changed sincelast report)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days. Yes x No o

 

Indicate by check markwhether the registrant submitted electronically and posted on its corporatewebsite, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (section 232.405 of thischapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes o No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.  (Check one):

 

| Large Accelerated Filer  o                  |   | Accelerated Filer o          |
|---------------------------------------------|--------|------------------------------|
|                                        |   |                         |
| Non-Accelerated  Filer o                    |   | Smaller  Reporting Company x |
| (do not check if Smaller Reporting Company) |   |                         |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o No x

 

The number of sharesoutstanding of the Registrant’s common stock, $0.0033 par value, as of May 12,2010 was 10,213,214.

 

 

 

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**EXPLANATORY NOTE**

 

The purpose of thisAmendment No. 1 to Form 10-Q (this “Amendment”) is to amend ouroriginal filing of a Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2010, filed with the U.S. Securities and ExchangeCommission (the “SEC”) on May 17, 2010 (the “Initial Filing”).

 

EMRISE Corporation (the“Company”) is amending the Initial Filing to modify the discussion that theCompany completed an evaluation of internal control over financial reporting asof March 31, 2010 in Item 4T (Controls and Procedures) of the InitialFiling.

 

Unless specified, thedisclosures provided in this document have not been updated for more currentinformation.  Therefore, this Amendmentshould be read in conjunction with our other filings made with the SECsubsequent to the date of the initial filing.

 

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**ITEM 4T.****                    ****CONTROLS AND PROCEDURES.**

 

***Evaluation of Disclosure Controls and Procedures***

*** ***

Management is responsible for establishing andmaintaining adequate internal control over financial reporting.  The Company maintains disclosure controls andprocedures that are designed to ensure that information required to bedisclosed in the Company’s reports pursuant to the Securities Exchange Act of1934, as amended, is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms, and that suchinformation is accumulated and communicated to the Company’s management,including its Chief Executive Officer and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, managementrecognized that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives, and management necessarily was required to apply itsjudgment in evaluating the cost-benefit relationship of possible controls andprocedures.

 

Based on an evaluation of our disclosure controls andprocedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15,as of March 31, 2010, our Principal Executive Officer and PrincipalFinancial Officer have concluded that our disclosure controls and procedureswere not effective, because of the material weaknesses set forth below thatwere identified as part of our evaluation of the effectiveness of our internalcontrols over financial reporting at December 31, 2009.

 

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***Summary of Material Weaknesses***

*** ***

Set forth below is a summaryof the various significant deficiencies which caused management to concludethat we had four material weaknesses.

 

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(1)           We did not effectivelyimplement comprehensive entity-level internal controls, as evidenced by thefollowing control deficiencies:

 

·                  EntityLevel Internal Control Evaluation.  Wedid not formally consider entity-wide controls that are pervasive across ourcompany when considering whether control activities are sufficient to addressidentified risks.

 

·                  FraudConsiderations.  We did not conductregular formalized assessments to consider risk factors that influence thelikelihood of someone committing a fraud and the impact of a fraud on ourfinancial reporting.

 

·                  ObjectiveEvaluation of Internal Controls.  We didnot use an internal audit function or other objective party to provide anobjective perspective on key elements of the internal control system.

 

·                  Assessmentof Information Technology.  We did notformally evaluate the extent of the needed information technology controls inrelation to our assessment of processes and systems supporting financialreporting.

 

·                  InformationTechnology.  We did not have sufficientinformation technology controls, where applicable, designed and implemented tosupport the achievement of financial reporting objectives.

 

·                  Ongoingand Separate Evaluations.  We did noteffectively create and maintain effective evaluations on the progress of ourremediation efforts nor the constant evaluations of the operating effectivenessof our internal controls over financial reporting.

 

·                  ReportingDeficiencies.  We did not perform timelyand sufficient internal or external reporting of our progress and evaluation ofprior year material weaknesses or the current fiscal year internal controldeficiencies.

 

(2)           We did not maintain effectivecontrols over changes to critical financial reporting applications and overaccess to these applications and related data, as evidenced by the fact thatcertain of our personnel had unrestricted access to various financialapplication programs and data beyond the requirements of their individual jobresponsibilities. This control deficiency could result in a materialmisstatement of significant accounts or disclosures, including those describedabove, that could result in a material misstatement of our interim or annualconsolidated financial statements that would not be prevented or detected.

 

(3)           We did not maintain a sufficientlevel of information technology personnel to execute general computing controlsover our information technology structure, which include the implementation andassessment of information technology policies and procedures. This controldeficiency did not result in an audit adjustment to our 2008 interim or annualconsolidated financial statements, but could result in a material misstatementof significant accounts or disclosures, which would not have been prevented ordetected.

 

(4) We are a relatively complex company with operations conducted in multiplecountries, multiple currencies and multiple languages.  We have divestedfour separate operations in the past 18 months, acquired a large subsidiaryduring the same time, and we are in the process of divesting additional assetsin order to repay our current obligations.  All of these transactions giverise to complex accounting and tax treatments. Most recently, we have beenconcentrating our efforts in securing amendments to our current credit facilityand ensuring adherence to milestones set forth in our most recent creditfacility amendment.  Our finance team isa relatively small but experienced staff. Although we believe the accounting staffare qualified to perform their functions, due to reasons above, the quantity ofstaff may be insufficient to deal with the work load and complexities created,which could result in material misstatements to our financial statements.

 

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***Remediation of Internal Control Deficiencies***

 

Through the efforts of management, externalconsultants and our Audit Committee, we are currently in the process ofexecuting specific action plans to remediate the material weaknesses identifiedabove.  If we are able to complete theseactions in a timely manner, we anticipate that all control deficiencies andmaterial weaknesses will be remediated in 2011.

 

We are developing specificaction plans for each of the above material weaknesses.  In addition, our audit committee hasauthorized the hiring of additional temporary staff and/or the use of financialand information technology consultants, as necessary, to ensure that we havethe depth and experience to remediate the above listed material weaknesses,including the implementation and monitoring of the appropriate level of controlprocedures related to all of our manufacturing locations and our corporateoffices.  The audit committee will alsowork directly with management and outside consultants, as necessary, to ensurethat board level deficiencies are addressed. We are uncertain at this time of the costs to remediate all of the abovelisted material weaknesses, however, we anticipate the cost to be in the rangeof $200,000 to $400,000 (including the cost of the consolidation softwaredescribed above), most of which costs we expect to incur during 2010.  We cannot guarantee that the actual costs toremediate these deficiencies will not exceed this amount.

 

Throughthese steps, we believe that we are addressing the deficiencies that affectedour internal control over financial reporting. Because the remedial actionsrequire hiring of additional personnel, upgrading certain of our informationtechnology systems, and relying extensively on manual review and approval, thesuccessful operation of these controls for at least several quarters may berequired before management may be able to conclude that the material weaknesseshave been remediated.  We intend tocontinue to evaluate and strengthen our internal control over financialreporting systems. These efforts require significant time and resources.  If we are unable to establish adequateinternal control over financial reporting systems, we may encounterdifficulties in the audit or review of our financial statements by ourindependent registered public accounting firm, which in turn may have amaterial adverse effect on our ability to prepare financial statements inaccordance with GAAP and to comply with our SEC reporting obligations.

 

***Changes in Internal Control over FinancialReporting***

 

There has been no change inour internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the most recently completedfiscal quarter that has materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.

 

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**PART II — OTHER INFORMATION**

 

**ITEM 6.****                                                 ****EXHIBITS.**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                     |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                |
| 31.1       |       | Certification of  Principal Executive Officer required by Rule 13a-14(a) of the  Securities Exchange Act of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002* |
|       |       |                                                                                                                                                                                                                |
| 31.2       |       | Certification of  Principal Financial Officer required by Rule 13a-14(a) of the  Securities Exchange Act of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002* |

 

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* Filed herewith.

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|                  | EMRISE CORPORATION |
|-----------------------|--------------------|
|                  |               |
| Dated:  July 27, 2010 | By:                | /S/  CARMINE T. OLIVA |
|                  |               | Carmine  T. Oliva, |
|                  |               | Chief  Executive Officer (Principal Executive Officer) |
|                  |               |   |
|                  |               |   |
| Dated:  July 27, 2010 | By:                | /S/  D. JOHN DONOVAN |
|                  |               | D.  John Donovan, Chief Financial Officer (Principal Financial and Accounting  Officer) |

 

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**INDEX TO EXHIBITS ATTACHED TOTHIS REPORT**

 
| **Number** | ** ** | **Description**                                                                                                                                                                                                    |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                               |
| 31.1       |       | Certification of  Principal Executive Officer required by Rule 13a-14(a) of the  Securities Exchange Act of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |
|       |       |                                                                                                                                                                                                               |
| 31.2       |       | Certification of  Principal Financial Officer required by Rule 13a-14(a) of the  Securities Exchange Act of 1934, as amended, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 |

 

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