SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q~~10-Q/A

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31,~~June 30, 2008


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.

(Exact name of registrant as specified in its charter)


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.þ Yeso No

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


oLarge accelerated filero	Accelerated filer o ~~Accelerated~~	Non-accelerated filer	o ~~Non-accelerated filer~~	þ ~~Smaller reporting company~~
	(Do not check if a smaller reporting company)			Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o Yesþ No

Indicate the number of shares outstanding of common stock as of ~~February 13, 2009:~~August 14, 2008: 27,129,832.

EXPLANATORY NOTE

Unless the context otherwise requires, the term “the Company” and “Emerson,” refers to Emerson Radio Corp. and its subsidiaries.

This Amendment No. 1 on Form 10-Q/A (the “Form 10-Q/A”) to the Quarterly Report on Form 10-Q (the “Quarterly Report”) of the Company for the three months ended June 30, 2008, filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2008, is filed to restate certain financial information contained therein.

As previously disclosed, based upon an extensive review and analysis of its sales allowance reserve and i-pod(R) marketing fund (the “Review”) initiated as a result of the receipt of a comment letter from the Staff of the SEC, management of the Company concluded that its previously issued financial statements for the three month period ended June 30, 2008 need to be restated. The Review revealed that, in certain instances, credits offered to or taken by customers were charged against the incorrect sales allowance reserve account which had no material impact on the Company’s publicly disclosed financial results until the quarter ended June 30, 2008, when the Company, believing it was then under reserved in its sales allowance accounts, expensed an extra amount of approximately $1.1 million in order to maintain these reserves at an appropriate level.

The effects of the adjustments on the three months ended June 30, 2008 as identified during the restatement process are reflected in the following table:

(In thousands, except earnings per share data)


	As originally
	reported:			As restated:			Variance:
Statement of Operations Data
Net revenues	$	43,108		$	44,209		$	1,101
Operating (loss) income	$	(890	)	$	211		$	1,101
Net loss	$	(929	)	$	(268	)	$	661
Earnings per share — basic and diluted	$	(.03	)	$	(.01	)	$	.02
Balance Sheet Data:
Current assets	$	75,701		$	75,259		$	(442	)
Total assets	$	94,988		$	94,548		$	(440	)
Current liabilities	$	31,053		$	29,952		$	(1,101	)
Total shareholders’ equity	$	63,708		$	64,369		$	661

Except as described above, no other amendments are being made to the Quarterly Report. Except as set forth above, this Form 10-Q/A does not reflect events occurring after the filing of the Quarterly Report on August 14, 2008 or modify or update the disclosure contained in the Quarterly Report in any way.

TABLE OF CONTENTS


PART I –— FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19	18
Item 4. Controls and Procedures	20	18
PART II — OTHER INFORMATION		18
Item 1. Legal Proceedings	20	18
Item 1A. Risk Factors	20	19
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	21	19
ITEM 3. Defaults Upon Senior Securities	22	19
ITEM 4. Submission of Matters to a Vote of Security Holders	22	19
ITEM 5. Other Information	22	19
ITEM 6. Exhibits	22	19
SIGNATURES	23	20
~~Ex-31.1 CERTIFICATION~~EX-31.1
EX-31.2 ~~CERTIFICATION~~
EX-32 ~~CERTIFICATION~~

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 Ended						Nine Months Ended						Three Months Ended
	December 31						December 31						June 30
	2008			2007			2008			2007			2008
													RESTATED			2007
Net revenues
Net revenues	$	60,247		$	75,543		$	158,434		$	185,969		$	44,196		$	52,603
Net revenues-related party		—			246			15			370			13			85

		60,247			75,789			158,449			186,339			44,209			52,688

Costs and expenses:
Cost of sales		55,724			68,191			141,106			164,832			38,021			45,248
Cost of sales-related party		—			232			—			232
Other operating costs and expenses		2,063			1,434			4,787			4,778			1,131			1,796
Selling, general and administrative expenses (exclusive of reimbursement claim-related party)		4,851			7,651			14,475			17,748
Reimbursement claim-related party		—			—			313			—
Selling, general and administrative expenses (exclusive of non-cash compensation shown below)														4,828			4,977
Non-cash compensation, net of recoveries														18			79

		62,638			77,508			160,681			187,590			43,998			52,100

Operating (loss)		(2,391	)		(1,719	)		(2,232	)		(1,251	)
Gain on sale of building		—			—			—			854
Gains on foreign exchange forward contracts		—			515			—			515
Interest income (expense), net		5			(76	)		186			(72	)
Operating (loss) income														211			588
Interest income, net														132			70
Interest income-related party		—			—			—			163			—			163
Unrealized holding (losses) on trading securities		(410	)		—			(431	)		—
Realized gains on trading securities		91			—			623			—
Realized/unrealized holding gains on trading securities														262			—

(Loss) income before income taxes and minority interest		(2,705	)		(1,280	)		(1,854	)		209			605			821
(Benefit) provision for income taxes		(616	)		(2,394	)		610			1,937
Provision for income taxes														967			379
Minority interest in loss of consolidated subsidiary		—			—			(133	)		—			94			—

Net (loss) income	$	(2,089	)	$	1,114		$	(2,331	)	$	(1,728	)	$	(268	)	$	442


Net (loss) income per share:
Basic	$	(0.08	)	$	0.04		$	(0.09	)	$	(0.06	)	$	(0.01	)	$	0.02
Diluted	$	(0.08	)	$	0.04		$	(0.09	)	$	(0.06	)	$	(0.01	)	$	0.02
Weighted average shares outstanding:
Basic		27,130			27,130			27,130			27,125			27,130			27,115
Diluted		27,130			27,136			27,130			27,125			27,130			27,141

EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)


							June 30, 2008			March 31, 2008(A)
	December 31, 2008			March 31, 2008(A)			RESTATED
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,681		$	14,444		$	16,569		$	14,444
Restricted cash		96			—			2,000			—
Foreign exchange forward contracts		—			134			—			134
Accounts receivable (less allowances of $4,325 and $4,148, respectively)		17,031			17,289
Accounts receivable (less allowances of $3,327 and $4,148, respectively)								21,562			17,289
Other receivables		1,149			2,131			1,525			2,131
Due from affiliates		78			765			179			765
Inventory, net		30,363			24,854			26,593			24,854
Prepaid expenses and other current assets		2,833			2,246			2,462			2,246
Deferred tax assets		4,654			5,412			4,369			5,412

Total current assets		71,885			67,275			75,259			67,275
Property, plant and equipment, net		1,633			1,902			1,863			1,902
Trademarks and other intangible assets, net		261			279			273			279
Due from affiliates		77			—
Investments in marketable securities		7,090			11,948			10,510			11,948
Deferred tax assets		6,143			5,927			6,031			5,927
Other assets		467			598			612			598

Total assets	$	87,556		$	87,929		$	94,548		$	87,929

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Loans payable	$	5,588		$	—
Current maturities of long-term borrowings		83			82		$	83		$	82
Accounts payable and other current liabilities		18,006			21,737			28,985			21,737
Due to affiliates		310			102			11			102
Accrued sales returns		958			872			706			872
Income taxes payable		167			185			167			185

Total current liabilities		25,112			22,978			29,952			22,978
Long-term borrowings		81			142			123			142
Deferred tax liabilities		81			57			65			57
Minority interest		—			133			39			133
Shareholders’ equity:
Preferred shares —10,000,000 shares authorized; 3,677 shares issued and outstanding; liquidation preference of $3,677		3,310			3,310
Common shares — $.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at December 31, 2008 and March 31, 2008; 27,129,832 shares outstanding at December 31, 2008 and March 31, 2008		529			529
Preferred shares — 10,000,000 shares authorized; 3,677 shares issued and outstanding; liquidation preference of $3,677								3,310			3,310
Common shares — $.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at June 30, 2008 and March 31, 2008; 27,129,832 shares outstanding at June 30, 2008 and March 31, 2008								529			529
Capital in excess of par value		117,239			117,245			117,263			117,245
Accumulated other comprehensive losses		(82	)		(82	)		(82	)		(82	)
Accumulated deficit		(34,490	)		(32,159	)		(32,427	)		(32,159	)
Treasury stock, at cost, 25,835,965 shares		(24,224	)		(24,224	)		(24,224	)		(24,224	)

Total shareholders’ equity		62,282			64,619			64,369			64,619

Total liabilities and shareholders’ equity	$	87,556		$	87,929		$	94,548		$	87,929

EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Nine Months Ended
December 31
2008 2007
Net (loss) $ (2,331 ) $ (1,728 )
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Minority interest (133 ) —
Depreciation and amortization 674 620
Non cash compensation (6 ) (159 )
Deferred tax expense 566 (1,076 )
Asset allowances, reserves and other (483 ) 2,510
Gain on insurance reimbursement (54 ) —
Gains on sales of investments (623 ) —
Gain on sale of building — (854 )
Asset write-offs — 120
Gains on foreign exchange forward contracts not settled — (279 )
Unrealized holding losses on trading securities 431 —
Changes in assets and liabilities:
Restricted cash (96 ) 3,000
Foreign exchange foreign contracts 134 —
Accounts receivable 224 (11,986 )
Other receivables 982 (137 )
Due from affiliates 610 23,893
Inventories (4,906 ) 1,467
Prepaid expenses and other current assets (533 ) 420
Other assets 69 (181 )
Accounts payable and other current liabilities (3,731 ) 5,277
Due to affiliates 208 —
Interest and income taxes payable 33 65

Net cash (used) provided by operating activities (8,965 ) 20,972

Cash flows from investing activities:
Proceeds from sale of building — 2,000
Proceeds from partial calls on securities 5,050 —
Additions to property and equipment (325 ) (741 )

Net cash provided by investing activities 4,725 1,259

Cash flows from financing activities:
Short-term borrowings 8,272 (73 )
Repayments of short-term borrowings (2,734 ) —
Net borrowings under foreign bank facilities — (3,111 )
Exercise of stock options — 51
Long-term borrowings 112,696 143,671
Repayments of long-term borrowings (112,757 ) (144,225 )

Net cash provided (used) by financing activities 5,477 (3,687 )

Net increase in cash and cash equivalents 1,237 18,544
Cash and cash equivalents at beginning of period 14,444 1,851

Cash and cash equivalents at end of period $ 15,681 $ 20,395

Supplemental disclosures of non-cash investing and financing activities:
Cash paid during the period for:

Interest $ 115 $ 410
Income taxes $ 64 $ 5,200

The Company has entered into certain capital lease agreements. For the nine month periods ended December 31, 2008 and December 31, 2007, the Company entered into agreements related to approximately $0 and $39 of equipment, respectively, which are excluded from the statement of cash flows as the transactions were non-cash in nature.


	Three Months Ended
	June 30
	2008
	RESTATED			2007
Cash flows from operating activities:
Net (loss) income	$	(268	)	$	442
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest		(94	)		—
Depreciation and amortization		227			202
Non cash compensation		18			79
Deferred tax expense (benefit)		947			152
Asset allowances, reserves and other		(1,843	)		(2,088	)
Unrealized holding gains on trading securities		(262	)		—
Changes in assets and liabilities:
Restricted cash		(2,000	)		—
Foreign exchange foreign contracts		134			—
Accounts receivable		(3,318	)		(7,961	)
Other receivables		606			(99	)
Due from affiliates		586			24,451
Inventories		(1,017	)		(11,285	)
Prepaid expenses and other current assets		(216	)		(248	)
Other assets		(35	)		87
Accounts payable and other current liabilities		7,248			20,100
Due to affiliates		(91	)		—
Income taxes payable		(18	)		91

Net cash provided by operating activities		604			23,923

Cash flows from investing activities:
Proceeds from partial calls on securities		1,700			—
Additions to property and equipment		(161	)		(126	)

Net cash provided (used) by investing activities		1,539			(126	)

Cash flows from financing activities:
Short-term borrowings		1			4
Net borrowings (repayments) under foreign bank facilities		—			(2,495	)
Exercise of stock options		—			51
Long-term borrowings		27,190			51,158
Repayments of long-term borrowings		(27,209	)		(51,201	)

Net cash (used) by financing activities		(18	)		(2,483	)

Net increase in cash and cash equivalents		2,125			21,314
Cash and cash equivalents at beginning of period		14,444			1,851

Cash and cash equivalents at end of period	$	16,569		$	23,165


Supplemental disclosures of non-cash investing and financing activities:

The Company has entered into certain capital lease agreements. For the three month periods ended June 30, 2008 and June 30, 2007, the Company entered into agreements related to approximately $0 and $39 of equipment, respectively, which are excluded from the statement of cash flows as the transactions were non-cash in nature.

Cash paid during the period for:

Interest	$	29		$	121
Income taxes	$	20		$	115

The accompanying notes are an integral part of the interim consolidated financial statements.

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”), which operates in the consumer electronics business. The consumer electronics business includes the design, sourcing, importing and marketing of a variety of consumer electronic products and the licensing of the “(EMERSON LOGO)” and H.H. Scott(R) trademarks for a variety of products domestically and internationally to certain licensees.

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 ~~the Company’s~~our consolidated financial position as of ~~December 31,~~June 30, 2008 and the results of operations for the three ~~and nine~~ month periods ended ~~December 31,~~June 30, 2008 and ~~December 31,~~June 30, 2007. 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. 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. Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended March 31, 2008 (“fiscal 2008”), included in ~~the Company’s~~our annual report on Form 10-K, as amended, for fiscal 2008.

Emerson maintains a controlling interest in Advanced Sound and Image, LLC (“ASI”), a designer and marketer of audio and video equipment, and consolidates the results of operations of ASI with a minority interest to represent the share of equity that Emerson does not own. Assets of the joint venture have been recorded in the consolidation at fair value. All significant intercompany transactions and balances have been eliminated.

Due to the seasonal nature of Emerson’s business, the results of operations for the three ~~and nine~~ month ~~periods~~period ended ~~December 31,~~June 30, 2008 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, 2009 (“fiscal 2009”).

Certain reclassifications were made to conform the prior year’s financial statements to the current presentation.

~~NOTE 2 – STOCK-BASED COMPENSATION~~Stock- Based Compensation

The Company accounts for all share based payments in accordance with Statement of Financial Accounting Standard (“FAS”) No. 123R, “Share-Based Payment” (“FAS 123R”). As a result, the Company has applied FAS 123R to new awards and to awards modified, repurchased, or cancelled. Compensation cost for the portion of awards for which the requisite service ~~has~~had not been rendered isare being recognized as the requisite service is rendered (generally over the remaining option vesting period). The compensation cost for that portion of awards has been based on the grant-date fair value of those awards as calculated for pro forma disclosures under previously issued accounting standards. As a result of applying the provisions of FAS 123R, the Company has recorded ~~a recovery of~~ compensation costs of ~~$42,000~~$18,000 and ~~$6,000~~$79,000 for the three months ended June 30, 2008 and ~~nine~~June 30, 2007, respectively.

NOTE 2 — COMPREHENSIVE INCOME

Comprehensive income for the three month periods ended ~~December 31,~~June 30, 2008 ~~respectively. For the three month period of December 31, 2007, the Company recorded compensation costs of $28,000;~~ and ~~for the nine month period ended December 31, 2007, the Company recorded a recovery of compensation costs of $159,000.~~June 30,2007 is as follows (in thousands):


	Three months ended
	June 30
	2008
	RESTATED			2007
Net (loss) income	$	(268	)	$	442
Unrealized holding gains arising during period		(31	)		—
Less: reclassification adjustment for gains included in net income		31			—

Comprehensive (loss) income	$	(268	)	$	442

recognized in the balance sheet.

For fiscal 2009, the Company’s effective tax rate differs from the federal statutory rate due to the mix of income and loss between high and low statutory tax rate jurisdictions anticipated for the year and state income tax. For fiscal 2008, the Company’sOur effective tax rate differs from the federal statutory rate primarily ~~as a result of the settlement made in relation~~due to ~~the California franchise~~expenses that are not deductible for federal income tax ~~issue described in the second paragraph of this note.~~purposes and state income taxes.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. ~~With few exceptions,~~A summary of the ~~Company~~Company’s open tax years is ~~no longer subject to U.S. federal and state income tax examinations by tax authorities for years ending before March 31, 2004.~~as follows as of June 30, 2008:


Jurisdiction		Open tax years
U.S. federal		2004-2007
States		2004-2007

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 FIN 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.

NOTE 7 –— RELATED PARTY TRANSACTIONS

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 ~~balances and~~ transactions.

~~Majority Shareholder~~ As of June 30, 2008, substantially all monies then currently due to Emerson from Grande have been paid in full.

Grande’s ~~Ownership~~Purchase of Controlling Interest in Emerson.On December 5, 2005, Grande purchased approximately 37% 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 aopen market and private purchases, including the purchase ~~of 1,853,882 shares~~ on September 21, 2007 from a former holder of more than five percent of Emerson’s common ~~stock.~~stock of 1,853,882 shares. Grande beneficially owned approximately 57.6% of the Company’s common stock on ~~December 31, 2008 and March 31,~~June 30, 2008.

~~Related Party Balances~~

~~Balances Due from Affiliates~~License Agreement for Scott Brands.In April 2008, Emerson terminated 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 also had a distributor relationship with Grande, a related party to Emerson. Emerson was paid royalties of $110,000 in March 2007 as a result of ~~December 31, 2008 and March 31, 2008.~~Assales of ~~December 31 and March 31, 2008, Grande was indebted to~~LCD televisions bearing the Company in the amounts of $155,000 and $765,000, respectively. The December balance represents a security deposit on Emerson’s Hong Kong office location, Hong Kong Electronics Fair reimbursements paid for by Emerson on Grande’s behalf, product sourcing transactions, product sales and related charges, and a refund for certain warehouse charges. The March balance represented amounts due to Emerson from advances paid in fiscal 2008 for the Toy Musical Instruments transaction, product sourcing transactions, product sales and related charges, and Hong Kong Electronics Fair reimbursements paid for by Emerson on Grande’s behalf.H.H. Scott name.

~~Balances Due to Affiliates as of December 31, 2008 and March 31, 2008.~~As of December 31 and March 31, 2008, Emerson was indebted to Grande in the amounts of $310,000 and $102,000, respectively. The December balance represents amounts owed for office, lab space, and equipment rental and charges ancillary to office rental from Grande; and the March balance represents amounts incurred by Grande on Emerson’s behalf, the 2006 Hong Kong Electronics Fair, and a chargeback by Capetronic for excess interest billed by Emerson in the note of February 2007.

~~Related Party Transactions~~

~~Repayment of Note relating to~~ Unsecured Financial Assistance to Grande.During the third quarter ~~ended June 30,~~of fiscal 2007, ~~Grande repaid in full the $23,501,514 promissory note due~~ Emerson ~~as a consequence of previously disclosed~~provided unsecured financial assistance ~~provided~~ to Capetronic Display Limited (“Capetronic”), Nakamichi Corporation (“Nakamichi”), Akai Electric (China) Co. Ltd. (“Akai”), and Sansui Electric (China) Co. (“Sansui”), each of which is a wholly-owned subsidiary of Grande, the manufacturer of the LCD sets, in the ~~fiscal year ended March~~form of letters of credit and loans which aggregated approximately $22.0 million at December 31, ~~2007.~~2006. In reviewing the documentation for certain of the letters of credit referred to above, Emerson determined that some of the parts for which letters of credit were opened were to be used for the manufacture of 27” and 42” television sets to be sold to the Licensee by Akai. Emerson had no direct or indirect interest in such sales, and Capetronic paid Emerson $57,000 as a fee for facilitating these transactions.

As a result of the transactions described in the preceding paragraph, Emerson may have been deemed to be in breach of certain covenants contained in Emerson’s credit facility. The lender under the credit facility agreed to waive such breaches and Emerson and the lender negotiated an amendment to the credit facility. Emerson was required to pay $125,000 to the lender in connection with the amendment. Emerson charged this amount to Capetronic and $125,000 was paid to one of Emerson’s foreign subsidiaries on August 14, 2007 by Capetronic.

On February 21, 2007, Capetronic, Nakamichi, Akai, and Sansui (collectively, the “Borrowers”), each of which is a wholly-owned subsidiary of Grande, jointly and severally, issued a promissory note (the “Note”) in favor of the Company in the principal amount of $23,501,514. The principal amount of the Note represented the outstanding amount owed to the Company as of February 21, 2007, as a result of certain related party transactions entered into between the Company and the Borrowers described above, including interest that had accrued from the date of such related party transactions until the date of the Note. Simultaneously with the execution of the Note, Grande executed a guaranty (the “Guaranty”) in favor of the Company pursuant to which Grande guaranteed payment of all of the obligations of the Borrowers under the Note in accordance with the terms thereof.

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 ~~Grande~~Capetronic for $4,604 resulting from a previous overpayment of the ~~Note.~~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 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 $0$13,000 and ~~$8,000~~$85,000 for providing this service in the three months ended ~~December~~June 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, 2008 ~~and December 31, 2007, respectively, and $15,000 and $100,000 in the nine months ended December 31, 2008 and December 31, 2007, respectively. As of December 31, 2008 and March 31, 2008,~~as well as $8,000 on current activity. Sansui Sales and Akai Sales collectively ~~owed~~owe Emerson ~~$7,600 and $134,000, respectively, relating~~$5,000 at June 30, 2008 related to ~~this~~current activity.

Sales of goods.In addition to the product sourcing transactions described in the preceding paragraph, Emerson has also ~~has~~ purchased products on behalf of Sansui Sales and Akai Sales from third-party suppliers and sold these goods to Sansui Sales and Akai Sales. These transactions ~~the latest of which occurred in February 2008, were~~are similar to the transactions described in the preceding paragraph; however, instead of utilizing transfer letters of credit provided by Sansui Sales’ and Akai Sales’ customers, Emerson ~~utilized~~utilizes its own cash to pay Sansui Sales’ and Akai Sales’ suppliers. Emerson invoices Sansui Sales and Akai Sales an amount that is marked up between two and three percent from the cost of the product. As a result of this arrangement, Emerson recorded sales to Sansui Sales and Akai Sales of $0 and $241,000 in the nine months ended December 31, 2008 and December 31, 2007, respectively. At December 31, 2008 and March 31, 2008, Sansui Sales and Akai Sales owed Emerson $1,500 and $5,000 relating to these activities, respectively. Akai Sales deducted ~~$9,600~~$9,000 for storage charges from its June 30, 2008 settlement payment to Emerson, ~~for this activity,~~ which was deemed to be in error by Emerson, which resulted in an outstanding balance owed to Emerson of ~~$9,600~~$9,000 at ~~December 31,~~June 30, 2008. ~~At December 31, 2008 and March 31, 2008,~~ Emerson ~~had~~has outstanding liabilities towith suppliers of product invoiced to Sansui Sales and Akai Sales totaling $3,000 ~~and $3,000, respectively.~~at June 30, 2008.

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. Under a new agreement commencing March 1, 2008, ~~Emerson entered into an amended lease agreement with Grande pursuant to which~~ the office space rented ~~from Grande~~ was increased from 7,810 square feet to 18,476 square feet. ~~This amended agreement by its terms expired on December 31, 2008. Emerson is in the process of negotiating a renewal of this agreement and currently occupies the space on a month-to-month basis.~~ Rent expense ~~and related service charges~~ with Grande ~~totaled $109,000~~was $119,000 and ~~$150,000~~$35,000 for the three months ended ~~December 31,~~June 30, 2008 and ~~December 31,~~June 30, 2007, ~~respectively~~respectively. The amount of expense incurred with Grande for all other services in connection with this office space rental was approximately $20,000 and ~~$353,000 and $242,000~~$7,000 for the ~~nine months ended December 31,~~fiscal 2009 and fiscal 2008, ~~and December 31, 2007,~~ respectively. ~~Rent and related service charges described in this activity are included in the Consolidated Statements of Operations as a component of selling, general, and administrative expenses.~~ Emerson owed Grande ~~$69,100 and $0~~$11,000 related to this activity at ~~December 31, 2008 and March 31, 2008, respectively. A security deposit of $77,315 on the leased property is held by Grande as of December 31,~~June 30, 2008. ~~Emerson is also due a $11,500 refund from Grande for previously paid warehouse charges.~~

Emerson utilizes the services of Grande employees for certain administrative and executive functions. Grande pays Emerson’s quality assurance personnel in ~~Renminbi~~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 ~~$8,000 and $13,000~~$91,000 for each of the three months ended ~~December 31,~~June 30, 2008 and ~~December 31, 2007, respectively, and $127,000 and $114,000 for the nine months ended December 31, 2008 and December 31,~~June 30, 2007, respectively. Emerson ~~owed~~has a balance paid in advance to Grande ~~$0 at December 31, 2008 and $70,000~~of $7,000 related to this activity ~~at March 31, 2008.~~

~~In December 2008, Emerson signed a lease agreement with Akai Electric (China) Ltd concerning the rental~~as of ~~office space, office equipment, and lab equipment for Emerson’s quality assurance personnel in Zhou Shang Shi, China. The lease term began in July 2007 and ends~~ June 2009, and the agreement renews automatically at the end of the term. Emerson owed Grande $233,000 related to the agreement at December 31, 2008, which represents rent expense for the period July 2007 to December30, 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 ~~related charges totaled $12,000 for~~other expenses in connection with this agreement were $15,000 in the three months ended ~~December 31, 2007 and $108,000 for the nine months ended December 31,~~June 30, 2007. The agreement was not ~~renewed after its termination in October 2007.~~renewed.

In May 2007 Emerson paid a $10,000 commission to Vigers Hong Kong Ltd, a property agent and a subsidiary of Grande, related to the sale of a building owned by Emerson to an unaffiliated buyer. Also, Emerson received a deposit of approximately $300,000 from the buyer on this date. The sale was concluded on September 27, 2007, on which date Emerson received the balance of the purchase price of approximately $1,700,000 and paid an additional $10,000 commission to Vigers.

Toy Musical Instruments.In May 2007, Emerson entered into an agreement with Goldmen Electronic Co. Ltd. (“Goldmen”), pursuant to which ~~the Company~~we agreed to pay $1,682,220 in exchange for Goldmen’s manufacture and delivery to ~~Emerson~~us of musical instruments in order for itus to meet ~~its~~our delivery requirements of these instruments in the first week of September 2007.

In July 2007, ~~the Company~~we learned that Goldmen had filed for bankruptcy and was unable to manufacture the ~~ordered~~ musical ~~instruments.~~instruments we had ordered. Promptly ~~thereafter,~~after we learned of Goldmen’s bankruptcy, Capetronic ~~Displays Limited (“Capetronic”), a subsidiary of Grande,~~ agreed to manufacture the musical instruments ~~at the same price and~~ on substantially the same terms and ~~conditions.~~conditions, including the price, as Goldmen had agreed to manufacture them. Accordingly, on July 12, 2007, ~~Emerson~~we paid Tomei Shoji Limited, an affiliate of Grande, $125,000 to acquire from Goldmen and deliver to Capetronic the molds and equipment necessary for Capetronic to manufacture the musical instruments. In July, 2007, Emerson made two upfront payments to Capetronic totaling $546,000. On July 20, 2007, Capetronic advised ~~Emerson~~us that it was unable to manufacture the musical instruments for us because it did not have the requisite governmental licenses to do so.

In June 2008, Capetronic repaid the $546,000 advance it received from Emerson in July 2007.

~~In August 2008,~~ Capetronic ~~requested that Emerson reimburse it for the costs it had incurred to purchase the production materials required to produce the~~currently physically possesses our musical instruments. After a review of the facts, the material purchase orders, the physical material at the Capetronic premises, and deducting an agreed upon scrap value of the material, Emerson decided to honor the request and paid $313,000 to Capetronic on September 30, 2008. These materials are the property of Capetronic.

~~Capetronic is currently in physical possession of Emerson’s~~instrument molds, ~~originally required to produce the musical instruments,~~ which ~~Emerson~~we wrote off in fiscal 2008.

Freight Forwarding Services.In June 2007, Emerson and Capetronic signed an agreement for Emerson to provide freight forwarding services to Capetronic. Under this agreement, ~~which contains no specified termination date,~~ Emerson will pay the costs of importation ~~into the United States~~ of Capetronic’s inventory on Capetronic’s behalf, 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 failed to make such arrangements with a common carrier, Emerson agreed 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 agreed 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 accrues. As compensation, Capetronic agreed 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 for the nine month period of December 31, 2007.~~$29,000. Capetronic paid Emerson ~~the full amount due of~~ $275,000 on November 14, 2007.

~~Hong Kong Electronics Fairs (“HKEF”).~~Other.Emerson incurred costs totaling $152,633 for its participation in the 2008 HKEF. The total includes $5,138 billed by Grande to Emerson for services rendered in connection with the event, and, as of December 31, 2008, Emerson owes Lafe Technology (Hong Kong) Ltd $4,396 for storage and delivery charges. In addition, Emerson has billed $33,823 to its affiliates for expenses incurred on their behalf for the 2008 HKEF; and as of December 31, 2008, $19,657 from Nakamichi Corporation Ltd, $8,222 from Akai Sales PTE Ltd, and $5,944 from Sansui Sales PTE Ltd is due to Emerson.

Between August and December 2007, Emerson paid invoices and incurred charges for goods and services relating to the ~~2007 HKEF~~Hong Kong Electronics Fair of $153,069. Portions of these charges totaling $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 ~~2007 HKEF~~Electronics Fair as follows: Nakamichi Corporation Ltd. $17,143, Akai Sales PTE Ltd $44,495 and Sansui Sales PTE Ltd $25,715. Akai Sales and Sansui Sales collectively owed Emerson ~~$6,437 and~~ $70,210 in connection with the ~~2007 HKEF~~Hong Kong Electronics Fair as of ~~December 31, 2008 and~~ March 31, 2008, ~~respectively.~~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.

Also related to the ~~2006 and 2007~~ annual Hong Kong Electronics Fairs, Capetronic incurred charges and paid invoices on behalf of Emerson in the amount of $76,000 for which Emerson reimbursed Capetronic $48,000 ~~for the 2007 Hong Kong Electronics Fair~~ in March 2008. Emerson paid Capetronic the remaining balance ~~due~~ of $28,000 for ~~the 2006 Hong Kong Electronics Fair~~these trade shows on ~~September~~June 30, 2008.

~~Other.~~In June 2007 Emerson paid a one-time sales commission in anthe amount of $14,000 to aan Executive Director of Grande Holdings, who ~~at the time, was~~is also a Director of Emerson. The commission was 50% of the net margin on a sale by Emerson to an unaffiliated customer.

In January 2008, Grande transferred computer, office equipment, and ~~February 2008,~~furniture to Emerson ~~invoiced The GEL Engineering Corp. Ltd (“GEL”), an affiliate~~for which Emerson paid $12,000, which represented the carrying amount of the assets on the books of Grande ~~for a portion~~at the time of $7,900 travel expenses paid by Emerson, of which 70% pertained to travel for the benefit of GEL and 30% pertained to travel for Emerson. As of December 31, 2008 and March 31, 2008, GEL owed Emerson $5,500 as a result of this activity.sale.

In June 2008, Emerson paid Capetronic $160,000 for reimbursement of payroll and travel expenses ~~that Capetronic~~ paid on behalf of Emerson from October 2007 through May ~~2008~~2008. Also included in the payment was a reimbursement for expenses ~~related to Emerson employees located in mainland China.~~

~~In September 2008, Akai Sales invoiced~~Capetronic paid on behalf of Emerson for ~~travel expenses and courier fees which Akai Sales paid on Emerson’s behalf. As of December 31, 2008 Emerson owed Akai Sales $2,700 as~~ a ~~result of this invoice.~~trade show.

NOTE 8 — BORROWINGS

Short-term Borrowings

~~In September~~At June 30, 2008 ~~the Emerson Board of Directors resolved that, effective as of April 1, 2008, the annual base salary of the Chief Executive Officer of the Company shall be $350,000,~~ and that because all members of the Board are to receive board fees according to a schedule approved by the Board, and because no such fees had been paid to the Chairman of the Board from July 2006 through March 31, 2008 the Chairman of the Board shall be paid compensation in full for his services for that period of time, to be calculated using the standard annual fee structure in place for board members then currently in effect. As a result of these resolutions, in September 2008 the Company began paying the Chief Executive Officer the stated annual salary, made a onetime retroactive salary payment to the Chief Executive Officer of $145,833 covering the period April 1, 2008 through August 31, 2008, and made a onetime cash payment of $75,625 to the Chairman of the Board covering the period July 2006 through March 31, 2008.there were no short-term borrowings outstanding.

In October 2008, the Emerson Board of Directors resolved that those remaining directors currently serving on the Board who, from the date of joining the Board, had received no compensation as either a Board member or as an employee of the Company, receive a cash payment covering such periods of time, to be calculated using the standard annual fee structure in place for board members then currently in effect. As a result of this resolution, in October 2008 the Company made onetime cash payments of $90,000 and $37,500 to two members of the Board of Directors.

In November 2008, Emerson determined that it needed to temporarily maintain access to a material amount of Renminbi to ensure an uninterrupted supply of factory product in mainland China, due to the tightening of the local credit and exchange markets. Emerson does not have independent access to Renminbi because it does not maintain a physical presence in Mainland China. Emerson advanced to Zhongshan Tomei Audio & Video Products Company Ltd. (Zhongshan Tomei) an amount of HK$20,705,300 – approximately US$2,655,000 – for which Zhongshan Tomei was prepared to disburse, as may be needed, an equivalent amount of Renminbi to Emerson’s factory suppliers upon Emerson’s direction. Once the need to transact in Renminbi passed,US$2,670,922 was repaid to Emerson by Soshin Onkyo International Ltd in December 2008, resulting in a foreign exchange gain to Emerson of $16,000 in December 2008.

~~NOTE 8 – BORROWINGS~~

~~Short-term Borrowings~~

~~As of December 31, 2008 and March 31, 2008, short-term borrowings consisted of the following:~~

December 31, 2008 March 31, 2008
(In thousands)
(Unaudited)
Revolving loan agreement $ 5,588 $ —

Short-term borrowings $ 5,588 $ —

~~Revolving loan agreement~~– On August 7, 2008, Emerson entered into a revolving loan agreement with Citigroup Global Markets Inc. The limit of the credit facility was determined as a percentage of the outstanding principal value of the Company’s Auction Rate Securities (“ARS”) as of the date of the agreement. The loan is secured by the sum of all cash and other securities maintained by us in the Company’s accounts with Citigroup Global Markets Inc. The agreement compels Emerson to keep the aforementioned cash and securities free of security interests, liens, or other impediments to transfer which do not favor Citigroup Global Markets, and Emerson may not pledge the collateral to a different third-party. All payments received in respect of securities in the Company’s accounts, including interest received and redemptions of principal, may be applied against the Company’s outstanding loan balance and accrued interest thereon at the sole discretion of Citigroup Global Markets Inc. There is no specific term for the credit facility, and full or partial payment of the loan principal and accrued interest may be demanded at any time by Citigroup Global Markets Inc. Interest on the outstanding loan balance is calculated at the Federal Open Market Rate plus 1.1% to 1.5%.

Long-term Borrowings

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


	December 31, 2008			March 31, 2008			June 30, 2008			March 31, 2008
	(In thousands)						(In thousands)
	(Unaudited)						(Unaudited)
Capitalized lease obligations and other	$	164		$	224			206			224
Less current maturities		(83	)		(82	)		(83	)		(82	)

Long term debt and notes payable	$	81		$	142		$	123		$	142

NOTE 9 — LEGAL PROCEEDINGS

In late July 2008, the ~~plaintiffs in~~Court of Chancery of the State of Delaware (the “Court”) entered an Order (the “Order”) consolidating for all purposes two previously disclosed derivative actions (the “Berkowitz” and “Pinchuk” lawsuits) filed ~~a consolidated amended complaint naming as defendants two~~on our behalf against certain of our current and ~~one~~ former ~~director~~directors. The complaints in each of ~~the Company and alleging~~such actions alleged that the named defendants violated their fiduciary duties to ~~Emerson~~us in connection with a number of previously disclosed related party transactions with affiliates of Grande Holdings, ~~Emerson’s~~our controlling shareholder. ~~In January 2009,~~The Order also organizes counsel for the ~~individual~~plaintiffs in the consolidated action, relieves the defendants ~~filed an~~of their obligation to answer ~~denying~~ the ~~material allegations~~“Berkowitz” and “Pinchuk” complaints and contemplates the filing of ~~the complaint.~~a consolidated complaint as soon as practicable. The recovery, if any, in ~~this~~the consolidated action, will inure to ~~Emerson’s~~our benefit.

Except for the litigation matters described above, ~~Emerson is~~we are not currently a party to any legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to ~~the Company’s~~our business. ~~The Company’s management~~We cannot estimate with certainty ~~the Company’s~~our ultimate legal and financial liability with respect to such pending litigation matters. However, ~~management believes,~~we believe, based on our examination of such matters, that ~~the Company’s~~our ultimate liability will not have a material adverse effect on ~~its~~our financial position, results of operations or cash flows.

NOTE 10 — FINANCIAL INSTRUMENTS

In March 2007, the Company entered into fixed period foreign exchange forward contracts (between the US and Hong Kong dollar), based on economic and market conditions and solely for the purpose of speculative trading, not for the purpose of hedging other business opportunities. The contract terms ~~were~~are for fixed periods and at March 31, 2008, the Company’s foreign exchange forward contracts had expiration dates that ranged from one to two months, with notional amounts of $10 million.

At each balance sheet date the Company accounts for its foreign exchange forward contracts as a current asset with corresponding realized or unrealized gains and losses included in the income statement. Realized gains of $132,647 have been recorded as non-operating income in the ~~nine~~three months ended ~~December 31,~~June 30, 2008. Realized gains of ~~$281,308 and unrealized gains of $233,547~~$13,835 were recorded in the ~~nine~~three months ended ~~December 31,~~June 30, 2007.

~~As of~~At June 30, 2008, all foreign exchange forward contracts have expired and the Company has not entered into any new contracts.

NOTE 11 –— MARKETABLE SECURITIES:

As of ~~December 31,~~June 30, 2008, the Company has ~~$8.8~~$12.2 million invested in trading securities, consisting entirely of ~~ARS.~~auction rate securities (“ARS”). These securities have long-term nominal maturities for which interest rates are reset through a Dutch auction process at pre-determined calendar intervals; a process which had historically provided a liquid market for these securities. Interest continues to be paid by the issuers of these securities even through the continued liquidity issues experienced in the global credit and capital markets despite these ARS having multiple failed auctions. Based on an independent valuation and its internal analysis, the Company concluded that these securities had experienced an other-than-temporary decline in fair value and recorded an impairment charge of $1.95 million in fiscal 2008. These ARS have AAA/Aaa credit ratings as of ~~December 31,~~June 30, 2008, and have been classified as long-term investments in the Company’s Consolidated Balance Sheets as a consequence of their uncertain liquidity.

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Accounting for Fair Value Measurements” (“SFAS 157”), on April 1, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

Financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 inputs are unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing the asset or liability. The Company would develop these inputs based on the best information available, including its own data.

In accordance with the fair value hierarchy described above, the following table shows the fair value of ~~Emerson’s~~our securities available for sale that are required to be measured at fair value as of ~~December 31, 2008 (in thousands):~~June 30, 2008:

Fair Value Measurement at Reporting Date Using:

~~Significant Unobservable Inputs (Level 3)~~


Significant Unobservable Inputs (Level 3)	June 30, 2008
Investments in marketable securities (classified as trading securities)	$	10,510

Investments in marketable securities	$	10,510

December 31,
2008
Investments in marketable securities (classified as trading securities) $ 7,090

Investments in marketable securities $ 7,090

The following table summarizes the changes in fair value for our Level 3 assets:


	Fair Value
	Measurement of			Fair Value
	Asset using Level 3			Measurement of
	inputs			Asset using Level 3
	Trading Securities			inputs
	non-current			Trading Securities
	(in thousands)			non-current
Principal amount invested	$	13,900		$	13,900
Total gains (losses) (realized or unrealized):
Unrealized — included in earnings at March 31, 2008		(1,952	)		(1,952	)
Balance at March 31, 2008		11,948			11,948
Total gains (losses) (realized or unrealized):
Realized — included in earnings at December 31, 2008		623
Unrealized — included in earnings at December 31, 2008		(431	)
Realized — included in earnings at June 30, 2008					231
Unrealized — included in earnings at June 30, 2008					31
Redemptions of principal		(5,050	)		(1,700	)

Balance at December 31, 2008	$	7,090
Balance at June 30, 2008				$	10,510

Forward-Looking Information

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:

	•		the loss of any of ~~the Company’s~~our key customers or reduction in the purchase of ~~its~~our products by any such customers;

	•		~~the Company’s~~our inability to maintain effective internal controls or the failure by our personnel to comply with such internal controls;

	•		the failure to maintain our relationships with ~~the Company’s~~our licensees and distributors or the failure to obtain new licensees or distribution relationships on favorable terms;

	•		~~the Company’s~~our inability to anticipate market trends, enhance existing products or achieve market acceptance of new products;

	•		~~the Company’s~~our dependence on a limited number of suppliers for our components and raw materials;

	•		~~the Company’s~~our dependence on third parties to manufacture and deliver ~~its~~our products;

	•		the seasonality of ~~the Company’s~~our 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~~our products;

	•		~~the Company’s~~our inability to protect ~~its~~our 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;~~we operate;

	•		conflicts of interest that exist based on ~~the Company’s~~our relationship with Grande;

	•		the outcome of the Audit Committee’s review of ~~the Company’s~~our related party transactions and internal controls;

	•		changes in accounting policies, rules and practices; and

	•		the other factors listed under “Risk Factors” in ~~the Company’s~~our Form 10-K, as amended, for the fiscal year ended March 31, 2008 and other filings with the Securities and Exchange Commission (the “SEC”).

practicable after ~~the Company~~we electronically ~~files~~file such reports and filings with the SEC. ~~Emerson’s~~Our website address iswww.emersonradio.com. The information contained in this website is not incorporated by reference in this report.

Results of Operations

~~Emerson operates~~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 ~~December 31,~~June 30, 2007 (fiscal 2008) (in thousands):

Three Months Ended Nine Months Ended
December 31 December 31
2008 2007 2008 2007
Net revenues $ 60,247 $ 75,789 $ 158,449 $ 186,339

Cost of sales 55,724 68,423 141,106 165,064
Other operating costs and expenses 2,063 1,434 4,787 4,778
Selling, general and administrative expenses 4,851 7,651 14,788 17,748

Operating (loss) (2,391 ) (1,719 ) (2,232 ) (1,251 )
Interest income (expense), net 5 (76 ) 186 91
Gain on sale of building — — — 854
Gain on foreign exchange forward contracts — 515 — 515
Unrealized holding (losses) on trading securities (410 ) — (431 ) —
Realized gains on trading securities 91 — 623 —

(Loss) income before income taxes and minority interest (2,705 ) (1,280 ) (1,854 ) 209
(Benefit) provision for income taxes (616 ) (2,394 ) 610 1,937
Minority interest in loss of consolidated subsidiary — — (133 ) —

Net (loss) income $ (2,089 ) $ 1,114 $ (2,331 ) $ (1,728 )


	Three Months Ended
	June 30
	2008			2007
Net revenues	$	44,209		$	52,688
Cost of sales		38,021			45,248
Other operating costs and expenses		1,131			1,796
Selling, general and administrative costs		4,828			4,977
Non-cash compensation costs		18			79

Operating income (loss)		211			588
Interest income, net		132			233
Unrealized holding gains on trading securities		262			—

Income (loss) before income taxes		605			821
Provision for income taxes		967			379
Minority interest in loss of consolidated subsidiary		94			—

Net income (loss)	$	(268	)	$	442

Net Revenues — Net revenues for the ~~third~~first quarter of fiscal 2009 were ~~$60.3~~$44.2 million as compared to ~~$75.8~~$52.7 million for the ~~third~~first quarter of fiscal 2008, a decrease of ~~$15.5~~$8.5 million or ~~20.4%. For the nine month period of fiscal 2009, net revenues were $158.4 million as compared to $186.3 million for the nine month period of fiscal 2008, a decrease of $27.9 million or 15.0%~~16.1%. 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. Furthermore,~~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 were as follows:

	i)		Home appliances product sales ~~were $39.9~~increased $4.0 million, or 15.4%, to $30.0 million in the ~~third~~first quarter of fiscal 2009 as compared to ~~$41.6~~$26.0 million in the third quarter of fiscal 2008, a decrease of $1.7 million, or 4.1%. Home appliances products sales increased $3.3 million, or 3.2%, to $107.0 million in the nine month period of fiscal 2009 as compared to $103.7 million in the nine month period of fiscal 2008, due in large to sales of small refrigerator products which began in the thirdfirst quarter of fiscal 2008. Home appliance product sales consist of microwave ovens, wine coolers, small refrigerators, ~~coffee makers,~~ and toaster ovens;

	ii)		Emerson(R) branded products sales, excluding home appliances products, were ~~$14.7~~$11.4 million in the ~~third~~first quarter of fiscal 2009 as compared to ~~$25.6~~$22.7 million in the ~~third~~first quarter of fiscal 2008, a decrease of ~~$10.9~~$11.3 million, or ~~42.6%~~49.8%, primarily resulting from decreased sales volumes in several audio product lines and the Ipod(R) compatible product category. For the nine month period of fiscal 2009, sales of Emerson(R) branded products sales, excluding home appliances products, were $36.1 million as compared to $65.7 million for the nine month period of fiscal 2008, a decrease of $29.6 million or 45.1%;category;

	iii)		Themed product sales were ~~$3.9 million~~$600,000 in the ~~third~~first quarter of fiscal 2009 compared to ~~$6.8~~$2.2 million in the ~~third~~first quarter of fiscal 2008, a decrease of ~~$2.9~~$1.6 million, or ~~42.6%~~72.7%, primarily resulting from ~~lower sales volume of a line of Mattel(R) themed products that had also been sold in fiscal 2008 offset by~~ the recently introduced sales of a new line also associated with Mattel(R) themed products. A change in product mix, which, in fiscal 2008, included several products which sell at higher price points, compounded the effect of the decreased sales volume. For the nine month period of fiscal 2009, themed product sales were $8.0 million as compared to $11.6 million, a decrease of $3.6 million or 31.0%. In addition to Mattel(R) themed products, the nine month period of fiscal 2008 included salesdiscontinuance of Nickelodeon(R) themed products ~~which were discontinued after~~and a shift in the ~~first quarter~~sales volume and product mix of ~~fiscal 2008;~~Mattel(R) themed products;

1514

	iv)		Licensing revenues ~~were relatively unchanged at $1.6~~increased approximately $54,000, or 3.2%, to $1.8 million in the ~~third~~first quarter of fiscal 2009 as compared to $1.7 million in the ~~third~~first quarter of fiscal ~~2008. For the nine month period of fiscal 2009, licensing revenues were $5.2 million as compared~~2008, primarily due to ~~$5.0 million for the nine month period of fiscal 2008, an increase of $210,000 or 4.2%, largely as a result of~~ our video licensing arrangements;

	v)		For the nine month period of fiscal 2009, a reversal of the marketing fund accrual for iPod(R) compatible products resulted in an increase in net revenues in the amount of $1.1 million. The accrual was an accumulation of anticipated buydowns and other vendor concessions on product sold between 2006 and 2008, associated with the marketing of a second generation of these products which never materialized.

	~~vi)~~		Sales of a joint venture which was formed in the fourth quarter of fiscal 2008 for the primary purpose of manufacturing, selling, distributing, and/or licensing audio and video equipment for the home and/or office ~~with~~had sales of ~~$179,000~~$421,000 in the ~~third~~first quarter ~~of fiscal 2009 and $1.0 million for the nine months~~ of fiscal 2009; and

	~~vii)~~vi)		~~Emerson~~In the three month periods ended June 30, 2008 and June 30, 2007, we charged fees of ~~$8,000 in the third quarter of fiscal 2008~~$13,000 and $85,000, respectively, to Sansui Sales PTE, Ltd ~~(“Sansui Sales”)~~ and Akai Sales PTE, Ltd, ~~(“Akai Sales”),~~ both of which are related parties to ~~Emerson,~~us, for assistance in procuring their product from third-party suppliers. For the nine month period of fiscal 2009, Emerson charged fees of $15,000 for providing this service as compared to $100,000 in the nine month period of fiscal 2008. In the nine months of fiscal 2008, Emerson charged commissions of $29,000 to Capetronic Displays Ltd, which is a related party to Emerson, for importation assistance. In the three and nine month periods of fiscal 2008, Emerson sold to Sansui Sales and Akai Sales $238,000 and $241,000, respectively, of Sansui- and Akai- branded product which Emerson sourced on their behalf from third-party suppliers. See Note 7 “Related Party Transactions”.

Cost of Sales — In absolute terms, cost of sales decreased ~~$12.7~~$7.2 million, or ~~18.6%~~15.9%, to ~~$55.7~~$38.0 million in the ~~third~~first quarter of fiscal 2009 as compared to ~~$68.4~~$45.2 million in the ~~third~~first quarter ~~of fiscal 2008. In absolute terms, cost of sales was $141.1 million in the nine month period of fiscal 2009 as compared to $165.1 million in the nine month period~~ of fiscal 2008. Cost of sales, as a percentage of net revenues, was ~~92.5%~~86.0% and ~~90.3%~~85.9% in the ~~third~~first quarters ~~of fiscal 2009 and fiscal 2008, respectively, and 89.1% and 88.6% in the nine month periods~~ of fiscal 2009 and fiscal 2008, respectively. Cost of sales as a percentage of sales revenues less license revenues ~~was 95.0%~~increased to 89.7% in the ~~third~~first quarter of fiscal 2009 ~~as compared to 92.2%~~from 88.8% in the ~~third~~first quarter ~~of fiscal 2008. Cost of sales as a percentage of sales revenues less license revenues was 92.1% in the nine month period of fiscal 2009 as compared to 91.0% in the nine month period~~ of fiscal 2008. The decrease in cost of sales in absolute terms for the ~~third~~first quarter of fiscal 2009 as compared to the ~~third~~first quarter of fiscal 2008 was primarily related to the decrease in sales volume, ~~a decrease in reserves for sales returns,~~warehousing costs, and royalty expense ~~and warehousing costs~~ offset by an increase in ~~inventory reserves,~~ costs of personnel in Asia involved in quality assurance in production of ~~Emerson’s~~our product, ~~writedowns of~~ inventory and costs in fiscal 2009 associated with independent quality assurance consultants. The increase in cost of sales as a percentage of net revenues for the third quarter of fiscal 2009 as compared to the third quarter of fiscal 2008 was primarily related to by lower margins on microwave ovens and in several audio categories, an increase in quality assurance costs, and an increase in inventory reserves. The decrease in cost of sales in absolute terms for the nine month period of fiscal 2009 as compared to the nine month period of fiscal 2008 resulted from the decrease in sales volume, royalty expense, and warehousing costs offset by an increase in quality assurance costsoverhead, and inventory reserves. The increase in cost of sales as a percentage of net revenues for the ~~nine months~~first quarter of fiscal 2009 as compared to ~~the nine months of~~ fiscal 2008 resulted from lower margins ~~on microwave ovens and~~ in ~~several audio~~themed product categories ~~increased inventory reserves, and~~as well as an increase in quality assurance ~~costs offset by lower warehousing~~ costs. ~~The~~In addition, a decrease in inventory reserves in the ~~nine month period~~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 had been fully reserved ~~at the end of~~in the preceding ~~fiscal year.~~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 has a tendency to be highly competitive.

Other Operating Costs and Expenses — As a percentage of net revenues, other operating costs and expenses were ~~3.4%~~2.6% in the ~~third~~first quarter of fiscal 2009 and ~~1.9%~~3.4% in the ~~third~~first quarter of fiscal 2008. ~~For the nine month periods of fiscal 2009 and fiscal 2008, other operating costs, as a percentage of net revenues, were 3.0% and 2.6%, respectively.~~ In absolute terms, other operating costs and expenses ~~increased $628,000,~~decreased $665,000, or ~~43.8%~~37.0%, to ~~$2.1~~$1.1 million for the ~~third~~first quarter of fiscal 2009 as compared to ~~$1.4~~$1.8 million in the ~~third~~first quarter of fiscal 2008 as a result of ~~increased~~decreased service costs. ~~Also in absolute terms, other operating costs and expenses were relatively unchanged at $4.8 million for the nine month period of fiscal 2009 as compared to the nine month period of fiscal 2008.~~

Selling, General and Administrative Expenses (“S,G&A”) — S,G&A, as a percentage of net revenues, were ~~8.1%~~11.2% in the ~~third~~first quarter of fiscal 2009 as compared to ~~10.1%~~9.4% in the ~~third~~first quarter of fiscal 2008. S,G&A, in absolute terms, decreased ~~$2.8 million,~~$150,000, or ~~36.4%~~3.0%, to ~~$4.9~~$4.8 million for the ~~third~~first quarter of fiscal 2009 as compared to ~~$7.7~~$5.0 million for the ~~third~~first quarter of fiscal 2008. The decrease in S,G&A in absolute terms between the ~~third~~first quarter of fiscal 2009 and ~~third~~first quarter of ~~fiscal 2008 was primarily due to a decrease in~~

variable selling expenses of $1.2 million, legal fees of $870,000, and employment agency fees of $127,000 offset by an increase in rent expense of $216,000. As a percentage of net revenues, S,G&A were 9.3% in the nine month period of fiscal 2009 as compared to 9.6% in the nine month period of fiscal 2008. In absolute terms, S,G&A decreased $2.9 million, or 16.4%, to $14.8 million for the nine month period of fiscal 2009 as compared to $17.7 million for the nine month period of fiscal 2008. The decrease in S,G&A in absolute terms between the nine month periods of fiscal 2009 and fiscal 2008 was primarily due to a decrease in variable selling expenses of ~~$1.9 million~~$320,000 and ~~legal fees~~advertising expenses of ~~$1.2 million~~$228,000 offset by an increase in rent expense of ~~$487,000.~~$165,000, legal fees of $132,000, employment agency fees of $67,000, and consulting fees related to the Company’s Sarbanes-Oxley section 404 implementation of $52,000.

~~Gain on sale~~Non Cash Compensation — Non cash compensation relates to stock options expense associated with the adoption of ~~building — Emerson sold its office location in Macao to an unaffiliated buyer for approximately $2.0 million in~~FAS 123(R) “Share-Based Payment.” For the ~~nine month period~~first quarter of fiscal ~~2008. The gain on the sale~~2009, non-cash compensation costs of ~~this property was $854,000.~~

~~Gains on foreign exchange forward contracts — Realized gains of $281,000 and unrealized gains of $234,000~~$18,000 were recorded, as ~~non-operating income~~compared to $79,000 in non-cash compensation costs recorded for the ~~nine months~~first quarter of fiscal 2008.

Interest Income, ~~(Expense),~~ net — Interest income, net, was ~~$5,000~~$132,000 (0.3% of net revenues) in the ~~third~~first quarter of fiscal 2009 as compared to ~~interest expense, net, of $76,000 in the third quarter of fiscal 2008. For the nine month period of fiscal 2009, interest income, net, was $186,000 (0.1%~~$233,000 (0.4% of net revenues)~~. For the nine month period of fiscal 2008, interest income, net, was $91,000~~, including interest income on a note receivable from a related party of ~~$163,000.~~$163,000, in the first quarter of fiscal 2008. See Note 7 —- - “Related Party Transactions.” Interest income ~~net,~~ for the ~~third~~first quarter of fiscal 2009 was primarily comprised of interest earned on the auction rate ~~securities net of interest expense on an outstanding balance on a line of credit.~~securities. Interest ~~expense, net,~~income for the ~~third~~first quarter of 2008 was ~~related to letter of credit purchases offset by interest~~ earned on money market accounts.

Realized/Unrealized holding ~~losses and realized~~ gains on trading securities — InDuring the ~~third~~fourth quarter of fiscal ~~2009, the Company~~2008, we recorded ~~realized gains of $91,000 on redemptions and~~ unrealized holding losses of ~~$410,000 after evaluating the Company’s investments in~~$1.95 million on our auction rate securities. ~~For the nine months of fiscal 2009, the Company recorded realized gains of $623,000 and unrealized holding losses of $431,000. The Company’s~~Our valuation was estimated by comparing current value based on projected cash flows discounted to the present and taking into account yields of similar illiquid instruments and assumptions about the extent of the failure of the auction process and the amount of discounts ~~exhibited~~demanded in ~~limited~~ sales of comparable securities. In the first quarter of fiscal 2009, we recorded realized holding gains of $231,000 on redemptions and unrealized holding gains of $31,000 after evaluating our investments in these securities. See note 11 — Marketable Securities.

Provision for Income Taxes — The Company estimates its annual effective tax rate and makes the necessary changes to adjust the rate on a quarterly basis. The estimated annual tax rate may fluctuate due to changes in the jurisdictional mix of anticipated annual income and changes to the valuation allowance for net deferred tax assets. The Company’s benefitOur provision for income taxes, which primarily represents the deferred tax charges associated with our profits in the United States, was ~~$616,000~~$967,000 for the ~~third~~first quarter of fiscal 2009, or 2.2% of net revenues, as compared to a ~~benefit~~provision of ~~$2.4 million~~$379,000 for the ~~third quarter of fiscal 2008. In the second~~first quarter of fiscal 2008, Emerson increased its estimated liability for California franchise taxes for tax years 1979-1990 in the amount of $3.7 million. In the third quarter of fiscal 2008, Emerson reduced its estimated liability by $1.0 million as a result of having resolved the matter. California franchise taxes are effectively tax on income and are recorded as such. See Note 6 — “Income Taxes”. Separate from the increase in the liability associated with California franchise taxes, the Company had a benefit of $1.4 million for the third quarter of fiscal 2008. For the nine months of fiscal 2009, Emerson’s provision for income taxes was $610,000 due to losses in foreign jurisdictions for which we recognize no tax benefit. Separate from the increase of $2.7 million in the liability associated with California franchise taxes, the Company had a benefit for income taxes for the nine month period of fiscal 2008 of $719,000.

~~Minority interest in net loss of a consolidated subsidiary — Minority interest of $133,000 for the nine month period of fiscal 2009 represents the share~~or 0.7% of net loss of the Company’s joint venture formed in February 2008, Advanced Sound and Image, LLC (“ASI”), that is attributable to the equity of ASI that Emerson does not own. Because the minority share of accumulated losses has exceeded the minority shareholder’s total equity in ASI, the Company has charged the excess losses of $143,000 and $227,000 to its interest in ASI for the third quarter and nine months of fiscal 2009, respectively. Transactions between Emerson and ASI are eliminated in the consolidated financial statements.revenues.

Net Income (Loss) — As a result of the foregoing factors, ~~Emerson’s~~our net (loss) was ~~$2.1 million~~$268,000 for the ~~third~~first quarter of fiscal 2009 as compared to net income of ~~$1.1 million, or 1.5%~~$442,000 (0.8% of net ~~revenues,~~revenues) in the ~~third~~first quarter ~~of fiscal 2008. For the nine month period of fiscal 2009, Emerson’s net (loss) was $2.3 million as compared to net (loss) of $1.7 million for the nine month period~~ of fiscal 2008.

Liquidity and Capital Resources

As of ~~December 31,~~June 30, 2008, ~~Emerson~~we had cash and cash equivalents of approximately ~~$15.7~~$16.6 million, compared to approximately ~~$20.4~~$23.2 million at ~~December 31,~~June 30, 2007. Working capital decreased to ~~$46.8~~$45.3 million at ~~December 31,~~June 30, 2008 as compared to ~~$63.9~~$67.1 million at ~~December 31,~~June 30, 2007. The decrease in cash and cash equivalents of approximately ~~$4.7~~$6.6 million was primarily due to investments in securities which have been classified as long-term and property and equipment additions, partially offset by ana change in the amount ~~received from a new revolving loan agreement~~of restricted cash which has been pledged to assure the availability of credit facilities as described in the following paragraphs.

Operating cash flow ~~used~~provided by operating activities was approximately ~~$9.0 million~~$604,000 for the ~~nine~~three months ended ~~December 31,~~June 30, 2008,

resulting from ~~purchases~~increases in amounts payable for purchasing our products, which are settled primarily through the use of ~~inventory and the reduction~~letters of ~~unsettled supplier payables~~credit but also on open account, primarily offset by growth in accounts receivable on our direct import sales, which represent sales under letter of credit ~~arrangements.~~arrangements, and the amount of restricted cash for balances pledged to assure the availability of credit facilities.

Net cash provided by investing activities was ~~$4.7~~$1.5 million for the ~~nine~~three months ended ~~December 31,~~June 30, 2008 and resulted primarily from partial calls on ~~the~~our auction rate securities offset by purchases of showroom furniture and computer equipment for ~~the Company’s~~our US operations as well as tooling by a foreign subsidiary related to sourcing of product.

Net cash ~~provided~~used by financing activities was ~~$5.5 million~~$18,000 for the ~~nine~~three months ended ~~December 31,~~June 30, 2008, resulting from ~~the borrowings under a new revolving loan agreement net~~repayments of ~~repayments. See Note 8 — “Borrowings”.~~long-term borrowings.

On December 23, 2005, we entered into a $45.0 million Revolving Credit Agreement with Wachovia Bank. This credit facility provides for revolving loans subject to individual maximums which, in the aggregate, are not to exceed the lesser of $45.0 million or a “Borrowing Base” as defined in the loan agreement. The Borrowing Base amount is established by specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.00% to 0.50% or, at our election, ~~LIBOR~~the London Interbank Offered Rate (“LIBOR”) plus 1.25% to 2.25% depending on excess availability. Pursuant to the loan agreement, ~~the Company is~~we are restricted from, among other things, paying certain cash dividends, and entering into certain transactions without the lender’s prior consent and are subject to certain leverage financial covenants. Borrowings under the loan agreement are secured by substantially all of ~~the Company’s~~our tangible assets.

At ~~December 31,~~June 30, 2008, there were approximately ~~$9.8~~$20.4 million of letters of credit outstanding under this facility. There were no borrowings outstanding at ~~December 31,~~June 30, 2008 under this facility. At ~~December 31,~~June 30, 2008, ~~the Company was~~we were in compliance with the covenants on ~~its~~our credit facilities.

~~On August 7,~~At June 30, 2008 Emerson entered into a revolving loan agreement with Citigroup Global Markets Inc. The limit of the credit facility was determined as a percentage of the outstanding principal value of the Company’s auction rate securities as of the date of the agreement. The loan is secured by the sum of all cash and other securities maintained by us in the Company’s accounts with Citigroup Global Markets Inc. The agreement compels Emerson to keep the aforementioned cash and securities free of security interests, liens, or other impediments to transfer which do not favor Citigroup Global Markets, and Emerson may not pledge the collateral to a different third-party. ~~As of December 31, 2008, a cash balance of $96,000 on deposit with Citigroup Global Markets has been classified on the balance sheet as restricted cash.~~ All payments received in respect of securities in the Company’s accounts, including interest received and redemptions of principal, may be applied against the Company’s outstanding loan balance and accrued interest thereon at the sole discretion of Citigroup Global Markets Inc. There is no specific term for the credit facility, and full or partial payment of the loan principal and accrued interest may be demanded at any time by Citigroup Global Markets Inc. Interest on the outstanding loan balance is calculated at the Federal Open Market Rate plus 1.1% to 1.5%.

~~At December 31, 2008 were approximately $5.6 million of borrowings outstanding under this facility.~~

~~As of December 31, 2008, $3.0 million on deposit with Wachovia Bank, which~~ the Company ~~had classified on the balance sheet as restricted cash, has been returned. The Company had maintained the deposit~~deposited $2.0 million with Wachovia, to secure on a dollar for dollar basis, additional letter of credit availability. As such, this amount has been classified on the balance sheet as restricted cash.

As a result of Emerson electing to cancel its foreign bank facilities in December 2007, our foreign subsidiaries maintain no credit facilities as of December 31, 2007.

At December 31, 2007, as a result of Emerson electing to cancel its foreign bank facilities, the requirement to maintain pledged deposits with foreign banks for our foreign subsidiaries was eliminated. As such, $3.0 million in certificates of deposit held at these banks have been returned.

Short-Term Liquidity.Liquidity is impacted by seasonality in that Emerson generally records the majority of its annual sales in the quarters ending September and December. This requires Emerson to maintain higher inventory levels during the quarters ending June and September, therefore increasing the working capital needs during these periods. Additionally, Emerson receives the largest percentage of product returns in the quarter ending March. The higher level of returns during this period adversely impacts collection activity, and therefore liquidity. In the ~~nine~~three months ended ~~December 31,~~June 30, 2008, products representing approximately ~~31.8%~~36.5% of net revenues were imported directly to Emerson’s customers. This contributes significantly to Emerson’s liquidity in that this inventory does not need to be financed.

Emerson’s principal existing sources of cash are generated from operations and borrowings available under its revolving credit facilities. As of ~~December 31,~~June 30, 2008, Emerson had ~~$31.5~~$24.6 million of borrowing capacity available under its $45.0 million revolving credit facilities, ~~with Wachovia Bank. There~~as there were ~~$9.8~~$20.4 million of letters of credit outstanding, and no outstanding loans. ~~In addition, Emerson had $137,000 of borrowing capacity available under its revolving loan agreement with Citigroup Global Markets.~~ Emerson believes that its existing sources of cash, including cash flows generated from operations, will be sufficient to support existing operations over the next 12 months; however, management may decide to raise additional financing, which may include the issuance of equity securities, or the incurrence of additional debt, in connection with existing operations or if ~~Emerson elects~~we elect to pursue acquisitions.

The following summarizes obligations at ~~December 31,~~June 30, 2008 for the periods shown (in thousands):

value of these investments no longer approximates par value. In the nine months ended December 31, 2008, the Company redeemed for cash $5.1 million of the face value of the securities, and recognized within its non-operating expenses and income, $431,000 of unrealized loss and $623,000 of realized gains. As of December 31, 2008, the total cash redemptions on the face value of the securities was $6.2 million and the full decline recognized from the par value of these investments was $1.8 million. The Company continues to monitor the market for these investments. Continued decline of the market or downgrade of the ratings for these investments may necessitate additional impairments, which could detrimentally impact the Company’s results of operations and cash flows. The Company does not expect it will be necessary to sell the auction rate securities to continue its operations, and the Company has obtained financing, secured by these investments, to mitigate their effect on funding of operations — see “Note 8. Borrowings”.

Item 4. Controls and Procedures

(a)Disclosure controls and procedures.

~~The Company has established~~During 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, as amended (the “Exchange Act”)) related to the recording, processing, summarization and reporting of information in our reports that we file with the Securities and Exchange Commission. These disclosure controls and procedures have been designed to ensure that material information relating to ~~the Company,~~us, including ~~its~~our subsidiaries, is made known to our management, including these officers, by other of ~~the Company’s~~our employees, and that this information is recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur ~~due to~~because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. ~~The Company’s~~Our controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

Based on their evaluation as of ~~December 31,~~June 30, 2008, ~~the Company’s~~our principal executive officer and principal financial officer have concluded that ~~the Company’s~~our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to reasonably ensure that the information required to be disclosed by ~~the Company~~us in the reports that ~~are filed~~we file or ~~submitted~~submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that information required to be disclosed by ~~the Company~~us in the reports ~~filed~~we file or ~~submitted~~submit under the Exchange Act is accumulated and communicated to our management, including ~~the Company’s~~our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.

(b) Changes in Internal Controls Over Financial Reporting

There have been no changes in ~~the Company’s~~our internal control over financial reporting that occurred during ~~the last~~our fiscal quarter ~~to which this Quarterly Report on Form 10-Q relates~~ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Except for the litigation matters described above, ~~Emerson is~~we are not currently a party to any legal proceedings other than litigation matters, in most cases involving ordinary and routine claims incidental to ~~the Company’s~~our business. ~~The Company’s management~~We cannot estimate with certainty ~~the Company’s~~our ultimate legal and financial liability with respect to such pending litigation matters. However, ~~management believes,~~we believe, based on our examination of such matters, that ~~the Company’s~~our ultimate liability will not have a material adverse effect on our financial position, results of operations or cash flows.

The global economic environment continues to be distressed by difficulties in the financial markets, which have led to curtailment of credit and increases in the degree of bankruptcies. Financial institution failures may impede the Company’s ability to obtain financing for its operations. The economic downturn may preclude the Company from realizing its business plan. The Company’s customers are primarily retailers. Some customers may have difficulty paying us, be slower to pay, or file for bankruptcy as a result of negative economic conditions. Prospects for new business and licensees could be hindered if economic conditions remain the same or worsen. The Company has implemented plans to lower expenses and reduce headcount, and a prolonged recession may cause the Company to take additional steps to reduce expenses.

The Company’s investments in auction rate securities potentially may not be redeemable until maturity if the market for them does not recover. The Company may be required to sell these investments at a substantial discount from par if immediate operating requirements demand it. The Company’s revolving loan agreement with Citigroup Global Markets Inc., secured by these investments, is due on demand, and if the loan were called, the Company’s cash flows and liquidity could be affected.

The Company has not hedged its interest rate exposure, and the Company’s indebtedness bears interest at variable rates, most notably Prime, the London interbank offered rate, and the Federal Open Market Rate. As a result, interest rate variations may result in increased interest expense, which could negatively affect funding available for the Company’s other requirements.2008.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share Repurchases:

For the quarter ended ~~December 31,~~June 30, 2008, the Company did not repurchase any shares under 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 ~~December 31,~~June 30, 2008 quarter, the Company repurchased 1,267,623 shares under this program. As of ~~December 31,~~June 30, 2008, the maximum number of shares that are available to be repurchased under Emerson Radio Corp.’s common share repurchase program was 732,377. No shares have been repurchased under the program since June 14, 2005.


	December 31, 2008			March 31, 2008			June 30, 2008			March 31, 2008
	(Unaudited)						(Unaudited)
Finished goods	$	33,636		$	28,730		$	29,747		$	28,730
Less inventory allowances		(3,273	)		(3,876	)		(3,154	)		(3,876	)

Net inventory	$	30,363		$	24,854		$	26,593		$	24,854


	Payment due by period (1)
			Less than						More than 5		Payment due by period (1)
	Total		1 year		1 - 3 years		3 - 5 years		years				Less than						More than 5
											Total		1 year		1 - 3 years		3 - 5 years		years
Capital lease obligations	$	164	$	83	$	76	$	5	$	—	$	206	$	83	$	109	$	14	$	—
Operating lease obligations — related party		64		64		—		—		—		183		183		—		—		—
Operating lease obligations — non-affiliate		3,606		1,702		1,741		163		—		4,494		1,753		2,437		304		—

Total	$	3,834	$	1,849	$	1,817	$	168	$	—	$	4,883	$	2,019	$	2,546	$	318	$	—


	EMERSON RADIO ~~CORP~~CORP.. (Registrant)
Date: ~~February 13,~~August 19, 2009	/s/ Adrian Ma
	Adrian Ma
	Chief Executive Officer (Principal Executive Officer)


Date: ~~February 13,~~August 19, 2009	/s/ Greenfield Pitts
	Greenfield Pitts
	Chief Financial Officer (Principal Financial and Accounting Officer)


(A)		Reference is made to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008 filed with the Securities and Exchange Commission in July ~~2008. We filed a 10-K/A~~2008 and amended in July 2008.


	December 31,
	2008
Investments in marketable securities (classified as trading securities)	$	7,090

Investments in marketable securities	$	7,090


(1)		Amounts in the above table do not include a reserve of approximately $149,000 related to uncertain tax positions. The Company is not able to reasonably estimate when, if ever, these reserves would result in actual cash payments.

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