TheOur effective tax rate for the respective three and nine months ended December 31, 2007 differs from the federal statutory rate primarily as a result of the settlement made in relationdue to the California franchiseexpenses that are not deductible for federal income tax issue described in the second paragraph of this note. The effective tax rate for the respective threepurposes and nine months ended December 31, 2006 differs from the federal statutory rate primarily as a result of state income taxes.

     The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. A summary of the Company’s open tax years is as follows as of December 31, 2007:June 30, 2008:

     Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense.

     In May 2007, the FASB issued FASB Staff Position (“FSP”) FIN 48-1 Definition of a Settlement in FASB Interpretation No. 48 (FSP(“FSP FIN 48-1)48-1”). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to April 1, 2007. The implementation of this standard did not have a material impact on our consolidated balance sheets or statements of operations.

     From time to time, Emerson engages in business transactions with its controlling shareholder, The Grande Holdings Limited and its subsidiaries (“Grande”).  Set forth below is a summary of such transactions.  As of June 30, 2008, substantially all monies then currently due to Emerson from Grande have been paid in full.

Grande’s Purchase of Controlling Interest in Emerson.On December 5, 2005, The Grande Holdings Limited (“Grande”) purchased approximately 37% (10,000,000 shares) of the Company’s outstanding common stock (10,000,000 shares) from our former Chairman and Chief Executive Officer, Geoffrey P. Jurick. Since its initial purchase, Grande has increased its ownership of the Company’s common stock through open market and private purchases, including the purchase on September 21, 2007 from a former holder of more than five percent of Emerson’s common stock of 1,853,882 shares.  Grande beneficially owned approximately 57.6% of the Company’s common stock on December 31, 2007.June 30, 2008.

     License Agreement for Scott Brands.In October 2006,April 2008, Emerson entered into anterminated its agreement with a consumer electronics distributor, , APH (the “Licensee”), pursuant to which, among other things, Emerson had agreed to grant the Licensee a license to distribute and sell LCD televisions (“LCD sets”) in North America under Emerson’s “H.H. Scott” brand name. The licensee hasalso had a distributor relationship with Grande, a related party to Emerson. In the fiscal quarter ended December 31, 2006, the Licensee began selling 32” and 37” LCD sets to a major United States based retailer. Pursuant to the terms of the agreement with the licensee, Emerson was paid a royaltyroyalties of $110,000 in March 2007 as a result of such sales through March 31, 2007. No sales of LCD televisions pursuantbearing the H.H. Scott name.

     Interest on the unpaid principal balance of the Note accrued at a rate of 8.25% per annum, commencing on February 21, 2007, until all obligations under the Note were paid in full, subject to an automatic increase of 2% per annum in the event of default under the Note in accordance with the terms thereof. Payments of principal and interest under the Note were to be made in nine installments from April 1, 2007 through June 3, 2007 in such amounts and on such dates as set forth in the Note, with all amounts of interest due under the Note scheduled to be paid with the final installment.

     By June 3, 2007, all amounts due under the note were repaid. In February 2008, Emerson accepted a debit note from Capetronic for $4,604 resulting from a previous overpayment of the note.

     Product Sourcing Transactions.Since August 2006, Emerson has been providing to Sansui Sales PTE Ltd (“Sansui Sales”) and Akai Sales PTE Ltd (“Akai Sales”), both of which are subsidiaries of Grande, assistance with acquiring certain products for resale.sale. Emerson issues purchase orders to third-party suppliers who manufacture these products, and Emerson issues sales invoices to Sansui Sales’ and Akai Sales’ at gross amounts for these products. Financing is provided by Sansui Sales’ and Akai Sales’ customers in the form of transfer letters of credit to the suppliers, and goods are shipped directly from the suppliers to Sansui Sales’ and Akai Sales’ customers. Emerson recorded income totaling $100,000$13,000 and $85,000 for providing this service in the ninethree months ended DecemberJune 30, 2008 and June 30, 2007, respectively. On June 30, 2008 Akai Sales and Sansui Sales collectively paid Emerson the outstanding receivable of $134,000 as of March 31, 2007.2008 as well as $8,000 on current activity. Sansui Sales and Akai Sales collectively owe Emerson $126,000$5,000 at December 31, 2007 as a resultJune 30, 2008 related to current activity.

     Leases and Other Real Estate Transactions.Effective January 1, 2006, we entered into a lease for office space in Hong Kong with Grande and an agreement for services in connection with this office space rental from Grande, which was extended through December 31, 2008, and which will expire at that date unless terminated earlier by either party upon three months prior written notice of termination by either party. We incurred rent expense with Grande of approximately $105,000 and $45,000 forUnder a new agreement commencing March 1, 2008, the three month periods ended December 31, 2007 and December 31, 2006, respectively.office space rented was increased from 7,810 square feet to 18,476 square feet. Rent expense with Grande was $185,000$119,000 and $158,000$35,000 for the nine month periodsthree months ended December 31,June 30, 2008 and June 30, 2007, and December 31, 2006, respectively. The amount of expense incurred with Grande for all other services in connection with this office space rental was approximately $58,000$20,000 and $61,000$7,000 for the fiscal 2009 and fiscal 2008, respectively. Emerson owed Grande $11,000 related to this activity at June 30, 2008.

     Emerson utilizes the services of Grande employees for certain administrative and executive functions. Grande pays Emerson’s quality assurance personnel in RMB in China on Emerson’s behalf for which Emerson subsequently pays a reimbursement to Grande. Payroll and travel expenses, including utilization of Grande employees as well as payroll and travel expenses paid on Emerson’s behalf and reimbursed to Grande, were $91,000 for each of the three month periodsmonths ended December 31,June 30, 2008 and June 30, 2007, respectively. Emerson has a balance paid in advance to Grande of $7,000 related to this activity as of June 30, 2008.

     From May to October 2007, Emerson occupied office space in Shenzhen, China under a lease agreement with Akai AV Multimedia (Zhongshan) Co Ltd, an affiliate of Grande. Rent expense was $28,000 and December 31, 2006, respectively. The amount of expense incurred with Grande for all other servicesexpenses in connection with this office space rentalagreement were $15,000 in the three months ended June 30, 2007. The agreement was approximately $172,000 and $182,000 for the nine month periods ended December 31, 2007 and December 31, 2006, respectively.not renewed.

     In May 2007 Emerson paid an initiala $10,000 commission to Vigers Hong Kong Ltd, (“Vigers”), a property agent and a subsidiary

20, 2007, Capetronic advised us that it was unable to manufacture the musical instruments for us because it did not have the requisite governmental licenses to do so. As of December 31, 2007,In June 2008, Capetronic repaid the $546,000 advance it received from Emerson in July 2007. Capetronic currently physically possesses theour musical instrument molds, owned by Emerson and owes to Emerson $546,000 for the upfront advances madewhich we wrote off in anticipation of Capetronic’s manufacture of the instruments. As a result of the above, Emerson has written the cost of the molds down to $0 at December 31, 2007.fiscal 2008.

Freight Forwarding Services.In June 2007, Emerson and Capetronic signed an agreement for Emerson to provide freight forwarding services to Capetronic, whereuponCapetronic. Under this agreement, Emerson will pay the costs of importation of Capetronic’s inventory on Capetronic’s behalf. Under the agreement, Emerson is alsobehalf, and to arrange for the inventory to be received at a port of entry, cleared through the United States Customs Service using Emerson’s regularly engaged broker, and transfer the inventory to a common carrier as arranged by Capetronic’s customer. If Capetronic’s customer has not madefailed to make such arrangements with a common carrier, Emerson isagreed to transfer the inventory to Emerson’s warehouse for storage or make other arrangements with a public warehouse. Following the transfer of Capetronic’s inventory, Emerson is required to provide Next Day delivery of all importation documents and bills of lading to Capetronic’s customer. Capetronic agreesagreed to reimburse Emerson for all costs incurred by Emerson in connection with the activity just described within thirty days of demand by Emerson, after which interest will accrue.accrues. As compensation, Capetronic agreesagreed to pay Emerson a service fee of 12% of the importation costs. Emerson billed Capetronic for the reimbursement of importation costs totaling $246,000 and a commission of $29,000. Capetronic paid Emerson $275,000 on November 14, 2007.

Other.Between August and December 2007, Emerson paid invoices and incurred charges for goods and services relating to the Hong Kong Electronics Fair of $153,069.00.$153,069. Portions of these charges totaling $87,353.18,$87,353, have been allocated and invoiced to affiliates of Grande in proportion to their respective share of space occupied and services rendered during the Electronics Fair as follows;follows: Nakamichi Corporation Ltd. $17,143.08,$17,143, Akai Sales PtePTE Ltd $44,495.48$44,495 and Sansui Sales PtePTE Ltd $25,714.62. All$25,715. Akai Sales and Sansui Sales collectively owed Emerson $70,210 in connection with the Hong Kong Electronics Fair as of March 31, 2008, for which they collectively paid $63,774 to Emerson on June 30, 2008. Akai Sales owes Emerson $6,436 for this activity as of June 30, 2008.

     In June 2007 Emerson paid a one-time sales commission in the amount of $14,000 to an Executive Director of Grande Holdings, who is also a Director of Emerson. The commission was 50% of the respective amounts have been classified as Duenet margin on a sale by Emerson to an unaffiliated customer.

     In June 2008, Emerson paid Capetronic $160,000 for reimbursement of payroll and travel expenses paid on behalf of Emerson from Affiliates.October 2007 through May 2008. Also included in the payment was a reimbursement for expenses Capetronic paid on behalf of Emerson for a trade show.

     During the third quarter of fiscalAt June 30, 2008 Emerson elected to cancel it’s foreign bank facilities. As a result, the $3.0 million in certificates of deposit at these banks to assure the availability of the credit facilities was returned.

     As of December 31, 2007June 30, 2008 and March 31, 2007,2008, borrowings under long-term facilities consisted of the following:

$233,547 have been recorded     Financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as non-operating incomefollows:

             In accordance with the fair value hierarchy described above, the following table shows the fair value of our securities available for sale that are required to be measured at December 31, 2006.fair value as of June 30, 2008:

     The following discussion of our operations and financial condition should be read in conjunction with the Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

     In the following discussions, most percentages and dollar amounts have been rounded to aid presentation. Accordingly, all amounts are approximations.

     This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

     Forward-looking statements include statements with respect to Emerson’s beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond Emerson’s control, and which may cause Emerson’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.

     All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through Emerson’s use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “project,” “predict,” “could,” “intend,” “target,” “potential,” and other similar words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including, without limitation:

     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 iswww.emersonradio.com. The information contained in this website is not incorporated by reference in this report.

     Results of Operations

     We operate in one segment, the consumer electronics segment, as presented in the following Management’s Discussion and Analysis.

     The following table summarizes certain financial information for the three and nine month periods ended December 31,June 30, 2008 (fiscal 2009) and June 30, 2007 (fiscal 2008) and the three and nine month periods ended December 31, 2006 (fiscal 2007) (in thousands):

Net Revenues — Net revenues for the thirdfirst quarter of fiscal 2009 were $43.1 million as compared to $52.7 million for the first quarter of fiscal 2008, were $75.8 million as compared to $89.3 million for the third quarter of fiscal 2007, a decrease of $13.5$9.6 million or 15.1%. For the nine month period of fiscal 2008, net revenues were $186.3 million as compared to $244.2 million for the nine month period of fiscal 2007, a decrease of $57.9 million or 23.7%18.2%. Net revenues are comprised of Emerson(R) branded product sales, themed product sales and licensing revenues. Emerson(R) branded product sales are earned from the sale of products bearing the Emerson(R) or HH Scott(R) brand name; themed product sales represent products sold bearing a certain theme or character; and licensing revenues are derived from licensing the Emerson(R) and HH Scott(R) brand names to licensees for a fee. The major elements which contributed to the overall decrease in net revenues was comprised of:were as follows:

compared to $76.5$45.2 million in the thirdfirst quarter of fiscal 2007. In absolute terms, cost of sales was $165.1 million in the nine month period of fiscal 2008 as compared to $211.0 million in the nine months of fiscal 2007.2008. Cost of sales, as a percentage of net revenues, was 90.3%88.2% and 85.6%85.9% in the thirdfirst quarters of fiscal 20082009 and fiscal 2007, respectively, and 88.6% and 86.4% in the nine month periods of fiscal 2008, and fiscal 2007, respectively. Cost of sales as a percentage of sales revenues less license revenues increased to 92.2%92.0% in the thirdfirst quarter of fiscal 20082009 from 87.3%88.8% in the thirdfirst quarter of fiscal 2007. Cost of sales as a percentage of sales revenues less license revenues increased to 91.0% in the nine month period of fiscal 2008 from 88.1% in the nine month period of fiscal 2007. As a percentage of net revenues for the third quarter and nine month period of fiscal 2008, cost of sales associated with sales to Akai Sales PTE, Ltd and Sansui Sales PTE, Ltd, related parties, were 0.3% and 0.1% of total Emerson net revenues. As a percentage of net revenues for the third quarter and nine month period of fiscal 2007, cost of sales associated with purchases from Capetronic Displays Ltd, a related party, was 13.6% of total Emerson net revenues.2008. The decrease in cost of sales in absolute terms for the thirdfirst quarter and nine month period of fiscal 20082009 as compared to the same periodsfirst quarter of fiscal 20072008 was primarily related to the decrease in sales volume, an increase in reserves for sales returns, a decrease in inventory reserves,warehousing costs, and a decrease in royalty expense offset by an increase in writedownscosts of personnel in Asia involved in quality assurance in production of our product, inventory warehousing costs,overhead, and inventory overhead.reserves. The increase in cost of sales as a percentage of net revenues for the thirdfirst quarter of fiscal 20082009 as compared to fiscal 20072008 resulted from lower margins in several audiothemed product categories as well as an increase in warehousingquality assurance costs. The increase in cost of sales as a percentage of net revenues for the nine months of fiscal 2008 as compared to fiscal 2007 resulted from lower margins in several audio categories offset byIn addition, a decrease in inventory costs due to a decreasereserves in inventory reserves. The decrease in inventory reservesthe first quarter of fiscal 2008 resulted primarily from the reduction of inventory levels of a discontinued themed-product line and returned, substandard goods which are not sold to retailers, which werehad been fully reserved in our previous quarter; however, there was an offsetting impact on margins for the reduction in themed-product line goods as a consequence.preceding quarter.

Gross profit margins continue to be subject to competitive pressures arising from pricing strategies associated with the categories of the consumer electronics market in which we compete. Our products are generally placed in the low-to-medium priced category of the market, which ishas a tendency to be highly competitive.

Other Operating Costs and Expenses — As a percentage of net revenues, other operating costs and expenses were 1.9%2.6% in the third

During fiscal 2007,the first three months of Fiscal 2008, our management, including the principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934, as amended (the “Exchange Act”)) related to the recording, processing, summarization and reporting of information in our reports that we file with the SEC.Securities and Exchange Commission. These disclosure controls and procedures have been designed to ensure that material information relating to us, including our

     (a) None

     (b) None

     The Annual Meeting of the Stockholders of the Company (the “Annual Meeting”) was held on December 13, 2007, at which time the stockholders of the Company elected the following individuals to serve as directors of the Company until the next annual meeting of stockholders of the Company and until their successors are duly elected and qualified: Michael A.B. Binney, W. Michael Driscoll, Christopher Ho, Adrian Ma, Mirzan Mahathir, David R. Peterson, Greenfield Pitts, Kareem E. Sethi, Eduard Will and Norbert R. Wirsching. There were 27,129,832 shares of capital stock of the Company outstanding and entitled to vote at the record date for the Annual Meeting. There were present at the Annual Meeting, in person or by proxy, stockholders holding 26,047,528 shares of common stock of the Company, which represented approximately 96% of the total capital stock outstanding and entitled to vote.

     None