**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC 20549**

** **

**FORM 10-K/A**

 

| **(Mark One)**                                                                                                                                                                                                                                                                                                                            |                                                                                                     |
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| **x**                                                                                                                                                                                                                                                                                                                                     | **ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**     |
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                     |
| **For the fiscal year 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:****1-10346**

** **

**EMRISECORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **77-0226211**                       |
|-----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation  or organization) | ** ** | (I.R.S. Employer Identification No.) |
|                                                            | ** ** | ** **                           |
| **611 Industrial Way, Eatontown, New Jersey**                   | ** ** | **07724**                            |
| (Address of principal executive offices)                        | ** ** | (Zip Code)                           |

 

Registrant’s telephone number, including area code: **(732) 389-0355**

 

Securities registered pursuant to Section 12(b) ofthe Act:

 
| **Title of Each Class**              | ** ** | **Name of Each Exchange on Which  Registered** | ** ** |
|--------------------------------------|------------|------------------------------------------------|------------|
| **Common Stock,  $0.0033 par value** | ** ** | **NYSE Arca**                                  | ** ** |

 

Securities registered pursuant to Section 12(g) ofthe Act:

 

**None**

(Title of class)

 

Indicate by check mark if theregistrant is a well-known seasoned issuer, as defined in Rule 405 of theSecurities Act.  Yes o  No x

 

Indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  Yes o  No x

 

Indicate by check mark whether theregistrant (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 mark whether theregistrant submitted electronically and posted on its corporate website, ifany, every interactive data file required to be submitted and posted pursuantto Rule 405 of Regulation S-T (section 232.405 of this chapter) during thepreceding 12 months (or for such shorter period that registrant was required tosubmit and post such files).  Yes o  No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether theregistrant 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(do not  check if Smaller Reporting Company) |   | Smaller Reporting Company x |

 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).  Yes o   No x

 

Theaggregate market value of the voting common equity held by nonaffiliates of theregistrant, computed by reference to the $1.27 closing sale price of such stockon June 30, 2009, the last business day of the registrant’s most recentlycompleted second fiscal quarter, was approximately $13,000,000.  The registrant has no non-voting commonequity.

 

Thenumber of shares outstanding of the Registrant’s common stock, $0.0033 parvalue, as of April 7, 2010 was 10,213,412.

 

 

 

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**EXPLANATORYNOTE**

 

The purpose of thisAmendment No. 1 to Form 10-K (this “Amendment”) is to amend ouroriginal filing of our Annual Report on Form 10-K for the fiscal yearended December 31, 2009, filed with the U.S. Securities and ExchangeCommission (the “SEC”) on April 15, 2010 (the “Initial Filing”).

 

EMRISE Corporation (the“Company”) is amending the Initial Filing to modify its discussion in Item9A(T) (Controls and Procedures) to (i) correct the references toRules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of1934, as amended (the “Exchange Act”), (ii) amend the definition ofdisclosure controls and procedures to conform to Exchange Act Rule 13a-15(f),(iii) include the disclosure describing the temporary rule regardingauditor attestation reports pursuant to Item 308T(a)(4) of Regulation S-K,and (iv) update a date reference.

 

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 9A(T).**                                  Controls and Procedures.

 

**Evaluationof Disclosure Controls and Procedures**

 

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in our Exchange Act reports is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including our Principal Executive Officer and Principal FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure.  In designing and evaluatingthe disclosure controls and procedures, management recognized that any controlsand procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, andmanagement necessarily was required to apply its judgment in evaluating thecost-benefit relationship of possible controls and procedures.

 

As of December 31,2009, the Company carried out an assessment, under the supervision of and withthe participation of the Company’s Chief Executive Officer and the ChiefFinancial Officer, of the effectivelness of our disclosure controls andprocedures (as defined in the Exchange Act Rules 13a-15(e) and15d-15(e)).  The Chief Executive Officerand the Chief Financial Officer concluded that the Company’s disclosure controlsand procedures were not effective as of December 31, 2009.

 

**Management’s Report on InternalControl Over Financial Reporting**

** **

Managementis responsible for establishing and maintaining adequate internal control overfinancial reporting, as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act. The Company’s internal control system over financial reporting isdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with GAAP.  The Company’sinternal control over financial reporting includes those policies andprocedures that:

 

(i)  pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the Company;

 

(ii)  providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with GAAP, and that receiptsand expenditures of the Company are being made only in accordance withauthorizations of management and directors of the Company; and

 

(iii)  providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of the Company’s assets that could have amaterial effect on the financial statements.

 

Because of inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements.  Therefore, eventhose systems determined to be effective can provide only reasonable assurancewith respect to financial statement preparation and presentation.  Also, projections of any evaluation ofeffectiveness to future periods are subject to risk that controls may becomeinadequate because of changes in condition, or that the degree of compliancewith the policies or procedures may deteriorate.

 

Under the supervision and with theparticipation of management, including the Company’s Principal ExecutiveOfficer and Principal Financial Officer, the Company conducted an evaluation ofthe effectiveness of its internal control over financial reporting based on theframework in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission. Thisevaluation included an 

 

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assessmentof the design of the Company’s internal control over financial reporting andtesting of the operational effectiveness of its internal control over financialreporting. Based on this evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded as of December 31, 2009 that our internal controls overfinancial reporting were not effective at the reasonable assurance level due tothe material weaknesses discussed below.

 

In light of the four material weaknesses described below,we performed additional analysis and other post-closing procedures to ensurethat our consolidated financial statements were prepared in accordance withgenerally accepted accounting principles. Accordingly, we believe that the consolidated financial statementsincluded in this report fairly present, in all material respects, our financialcondition, results of operations and cash flows for the periods presented.

 

Our ChiefExecutive Officer and Chief Financial Officer concluded that as of December 31,2009 the following four material weaknesses existed:

 

(1)                                We did not effectivelyimplement comprehensive entity-level internal controls.

 

(2)                                We did not maintaineffective controls over changes to critical financial reporting applicationsand over access to these applications and related data.

 

(3)                                We did not maintain asufficient level of information technology personnel to execute generalcomputing controls over our information technology structure.

 

(4)                                We did not maintain asufficient level of resources within our accounting department.

 

If not remediated, these material weaknesses could resultin one or more material misstatements in our reported financial statements in afuture annual or interim period.

 

This Annual Report doesnot include an attestation report of the Company’s registered public accountingfirm regarding internal control over financial reporting.  Management’s report was not subject toattestation by the Company’s registered public accounting firm pursuant totemporary rules of the SEC that permit the Company to provide onlymanagement’s report in this Annual Report.

 

**InherentLimitations on the Effectiveness of Controls**

** **

Managementdoes not expect that our disclosure controls and procedures or our internalcontrol over financial reporting will prevent or detect all errors and allfraud. A control system, no matter how well conceived and operated, can provideonly reasonable, not absolute, assurance that the objectives of the controlsystems are met. Further, the design of a control system must reflect the factthat there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in acost-effective control system, no evaluation of internal control over financialreporting can provide absolute assurance that misstatements due to error orfraud will not occur or that all control issues and instances of fraud, if any,have been or will be detected.

 

Theseinherent limitations include the realities that judgments in decision-makingcan be faulty and that breakdowns can occur because of a simple error ormistake. Controls can also be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management override of thecontrols. The design of any system of controls is based in part on certainassumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under allpotential future conditions. Projections of any evaluation of controlseffectiveness to future periods are subject to risks. Over time, controls maybecome inadequate because of changes in conditions or deterioration in thedegree of compliance with policies or procedures.

 

**MaterialWeaknesses and Related Remediation Initiatives**

** **

Set forthbelow is a summary of the various significant deficiencies which causedmanagement to conclude that we had the four material weaknesses identifiedabove.  Through the efforts of management,external consultants and our Audit Committee, we are currently in the processof executing specific action plans to remediate the material weaknessesidentified above and discussed more fully below.  We expect to complete these various actionplans during 2010.  If we are able tocomplete these actions in a timely manner, we anticipate that all controldeficiencies and material weaknesses will be remediated by June 30, 2011.

 

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

 

·                  Entity Level Internal Control Evaluation.  We did not formally consider entity-widecontrols that are pervasive across our company when considering whether controlactivities are sufficient to address identified risks.

 

·                  Fraud Considerations. We did not conduct regular formalized assessments to consider riskfactors that influence the likelihood of someone committing a fraud and theimpact of a fraud on our financial reporting.

 

·                  Objective Evaluation of Internal Controls.  We did not use an internal audit function orother objective party to provide an objective perspective on key elements ofthe internal control system.

 

·                  Assessment of Information Technology.  We did not formally evaluate the extent ofthe needed information technology controls in relation to our assessment ofprocesses and systems supporting financial reporting.

 

·                  Information Technology. We did not have sufficient information technology controls, whereapplicable, designed and implemented to support the achievement of financialreporting objectives.

 

·                  Ongoing and Separate Evaluations.  We did not effectively create and maintaineffective evaluations on the progress of our remediation efforts nor theconstant evaluations of the operating effectiveness of our internal controlsover financial reporting.

 

·                  Reporting Deficiencies. We did not perform timely and sufficient internal or external reportingof our progress and evaluation of prior year material weaknesses or the currentfiscal year internal control deficiencies.

 

(2)           We didnot maintain effective controls over changes to critical financial reportingapplications and over access to these applications and related data, asevidenced by the fact that certain of our personnel had unrestricted access tovarious financial application programs and data beyond the requirements oftheir individual job responsibilities. This control deficiency could result ina material misstatement of significant accounts or disclosures, including thosedescribed above, that could result in a material misstatement of our interim orannual consolidated financial statements that would not be prevented ordetected.

 

(3)           We didnot maintain a sufficient level of information technology personnel to executegeneral computing controls over our information technology structure, whichinclude the implementation and assessment of information technology policiesand procedures. This control deficiency did not result in an audit adjustmentto our 2009 interim or annual consolidated financial statements, but couldresult in a material misstatement of significant accounts or disclosures, whichwould not have been prevented or detected.

 

(4)  We are a relatively complex company withoperations conducted in multiple countries, multiple currencies and multiplelanguages.  We have divested four separate operations in the past 18months, acquired a large subsidiary during the same time, and we are in theprocess of divesting additional assets in order to repay our currentobligations.  All of these transactions give rise to complex accountingand tax treatments. Most recently, we have been concentrating our efforts insecuring amendments to our current credit facility and ensuring adherence tomilestones set forth in one of our most recent credit facility amendments.  Our finance team is a relatively small butexperienced staff. Although we believe the accounting staff are qualified toperform their functions, due to reasons above, the quantity of staff may beinsufficient to deal with the work load and complexities created, which couldresult in material misstatements to our financial statements.

 

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**Remediationof Internal Control Deficiencies and Expenditures**

** **

It isreasonably possible that, if not remediated, one or more of the materialweaknesses described above could result in a material misstatement in ourreported financial statements that might result in a material misstatement in afuture annual or interim period.

 

We aredeveloping specific action plans for each of the above materialweaknesses.  In addition, our auditcommittee has authorized the hiring of additional temporary staff and/or theuse of financial and information technology consultants, as necessary, toensure that we have the depth and experience to remediate the above listedmaterial weaknesses, including the implementation and monitoring of theappropriate level of control procedures related to all of our manufacturinglocations and our corporate offices.  Theaudit committee will also work directly with management and outsideconsultants, as necessary to ensure that board level deficiencies areaddressed.  We are uncertain at this timeof the costs to remediate all of the above listed material weaknesses, however,we anticipate the cost to be in the range of $200,000 to $400,000 (includingthe cost of the consolidation software described above), most of which costs weexpect to incur during 2010.  We cannotguarantee that the actual costs to remediate these deficiencies will not exceedthis amount.

 

Through these steps, we believe that we are addressing thedeficiencies that affected our internal control over financial reporting as of December 31,2009. Because the remedial actions require hiring of additional personnel,upgrading certain of our information technology systems, and relyingextensively on manual review and approval, the successful operation of thesecontrols for at least several quarters may be required before management may beable to conclude that the material weaknesses have been remediated.  We intend to continue to evaluate andstrengthen our internal control over financial reporting systems. These effortsrequire significant time and resources. If we are unable to establish adequate internal control over financialreporting systems, we may encounter difficulties in the audit or review of ourfinancial statements by our independent registered public accounting firm,which in turn may have a material adverse effect on our ability to preparefinancial statements in accordance with GAAP and to comply with our Commissionreporting obligations.

 

***Changes in Internal Control overFinancial Reporting***

 

There hasbeen no change in our 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 IV**

**Item 15.**                Exhibitsand Financial Statement Schedules.

 

(b) Exhibits.

 
| **Exhibit  No.** | ** ** | **Description** |
|------------------|------------|-----------------|
|             |       |            |   |
|             | 31.1       |            | Certification  of Principal Executive Officer Required by Rule 13a-14(a) or  15d-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) or  15d-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 Section 13or 15(d) the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized on this 27th day of July,2010.

 
|   | EMRISE CORPORATION |
|--------|--------------------|
|   |               |
|   | By:                | /S/  CARMINE T. OLIVA |
|   |               | Carmine  T. Oliva, |
|   |               | Chairman  of the Board and |
|   |               | Chief  Executive Officer (principal executive officer) |
|   |               |   |
|   |               |   |
|   | By:                | /S/  D. JOHN DONOVAN |
|   |               | D.  John Donovan, |
|   |               | Chief  Financial Officer (principal financial officer and principal accounting  officer) and Secretary |

 

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**EMRISE CORPORATION**

**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                      |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **          | ** ** | ** **                                                                                                                                                                                                                           |
| 31.1                |       | Certification  of Principal Executive Officer required by Rule 13a-14(a) or  15d-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) or  15d-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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