Emerson Radio (MSN) 10-Q 9 Nov 16 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Sep. 30, 2016	Nov. 09, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Trading Symbol	MSN
Entity Registrant Name	EMERSON RADIO CORP
Entity Central Index Key	32,621
Current Fiscal Year End Date	--03-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		27,129,832

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net Revenues:
Net product sales	$ 4,844	$ 7,780	$ 10,315	$ 26,067
Licensing revenue	1,185	1,163	2,348	2,388
Net revenues	6,029	8,943	12,663	28,455
Costs and expenses:
Cost of sales	4,462	7,546	9,560	24,551
Other operating costs and expenses	44	167	177	241
Selling, general and administrative expenses	1,196	2,081	2,683	4,401
Total costs and expenses	5,702	9,794	12,420	29,193
Operating income (loss)	327	(851)	243	(738)
Other income:
Interest income, net	57	39	108	78
Income (loss) before income taxes	384	(812)	351	(660)
Provision (benefit) for income taxes	219	(102)	240	(71)
Net income (loss)	$ 165	$ (710)	$ 111	$ (589)
Net income (loss) per share:
Basic	$ 0.01	$ (0.03)	$ 0	$ (0.02)
Diluted	$ 0.01	$ (0.03)	$ 0	$ (0.02)
Weighted average shares outstanding:
Basic	27,130	27,130	27,130	27,130
Diluted	27,130	27,130	27,130	27,130

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2016	Mar. 31, 2016
Current Assets:
Cash and cash equivalents	$ 39,025	$ 30,096
Restricted cash		500
Short term investments	13,064	20,155
Trade accounts receivable, net	870	2,800
Royalty receivable	248	1,292
Inventory	3,888	2,056
Prepaid purchases	516	871
Prepaid expenses and other current assets	800	556
Total Current Assets	58,411	58,326
Property, plant, and equipment, net	25	29
Deferred tax assets	1,319	1,401
Other assets	132	132
Total Non-current Assets	1,476	1,562
Total Assets	59,887	59,888
Current Liabilities:
Accounts payable and other current liabilities	1,118	1,691
Deferred revenue	938
Due to affiliates		512
Income tax payable	490	455
Total Current Liabilities	2,546	2,658
Total Liabilities	2,546	2,658
Shareholders’ Equity:
Series A Preferred shares — 10,000,000 shares authorized; 3,677 shares issued and outstanding at September 30, 2016 and March 31, 2016 respectively; liquidation preference of $3,677,000 at September 30, 2016 and March 31, 2016, respectively	3,310	3,310
Common shares — $0.01 par value, 75,000,000 shares authorized; 52,965,797 shares issued at September 30, 2016 and March 31, 2016, respectively; 27,129,832 shares outstanding at September 30, 2016 and March 31, 2016, respectively	529	529
Additional paid-in capital	79,792	79,792
Accumulated deficit	(2,066)	(2,177)
Treasury stock, at cost (25,835,965 shares)	(24,224)	(24,224)
Total Shareholders’ Equity	57,341	57,230
Total Liabilities and Shareholders’ Equity	$ 59,887	$ 59,888

CONSOLIDATED BALANCE SHEETS (U4

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2016	Mar. 31, 2016
Statement Of Financial Position [Abstract]
Preferred shares, shares authorized	10,000,000	10,000,000
Preferred shares, shares issued	3,677	3,677
Preferred shares, shares outstanding	3,677	3,677
Preferred shares, liquidation preference	$ 3,677,000	$ 3,677,000
Common shares, par value	$ 0.01	$ 0.01
Common shares, shares authorized	75,000,000	75,000,000
Common shares, shares issued	52,965,797	52,965,797
Common shares, shares outstanding	27,129,832	27,129,832
Treasury stock, shares	25,835,965	25,835,965

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash Flows from Operating Activities:
Net income (loss)	$ 111	$ (589)
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization	7	33
Changes in assets and liabilities:
Trade accounts receivable	2,020	1,315
Royalty receivable	1,044	2,216
Due to affiliates	(512)
Inventory	(1,832)	(67)
Prepaid purchases	355	1,625
Prepaid expenses and other current assets	(244)	74
Deferred tax assets and liabilities	82	(162)
Other assets		(25)
Accounts payable and other current liabilities	(573)	495
Long term liabilities		84
Asset allowances, reserves and other	(90)	(242)
Deferred revenue	938
Income taxes payable	35	160
Net cash provided by operating activities	1,341	4,917
Cash Flows from Investing Activities:
Short term investment	7,091	(10,086)
Restricted cash	500
Additions to property, plant and equipment	(3)
Net cash provided (used) by investing activities	7,588	(10,086)
Cash Flows from Financing Activities:
Net increase (decrease) in cash and cash equivalents	8,929	(5,169)
Cash and cash equivalents at beginning of period	30,096	43,485
Cash and cash equivalents at end of period	39,025	38,316
Cash paid during the period for:
Interest	2	0
Income taxes	$ 8	$ 4

Background and Basis of Present

Background and Basis of Presentation	6 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Background and Basis of Presentation	NOTE 1 — BACKGROUND AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of Emerson Radio Corp. (“Emerson”, consolidated — the “Company”), and its subsidiaries. The Company designs, sources, imports and markets certain houseware and consumer electronic products, and licenses the Company’s trademarks for a variety of products domestically and internationally. 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 consolidated financial position as of September 30, 2016 and the results of operations for the three and six month periods ended September 30, 2016 and September 30, 2015. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. 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 the Company’s 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, 2016 (“fiscal 2016”), included in the Company’s annual report on Form 10-K, as amended, for fiscal 2016. The results of operations for the three and six month periods ended September 30, 2016 are not necessarily indicative of the results of operations that may be expected for any other interim periods or for the full year ended March 31, 2017 (“fiscal 2017”). Whenever necessary, reclassifications are made to conform the prior year’s financial statements to the current year’s presentation. Unless otherwise disclosed in the notes to these financial statements, the estimated fair value of the financial assets and liabilities approximates the carrying value. Sales Allowance and Marketing Support Expenses Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic 605, “Revenue Recognition”, subtopic 50 “Customer Payments and Incentives” and Securities and Exchange Commission Staff Accounting Bulletins 101 “Revenue Recognition in Financial Statements,” and 104 “Revenue Recognition, corrected copy” (“SAB’s 101 and 104”). At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 605, “Revenue Recognition”, subtopic 15 “Products”, (i) sales incentives offered to customers that meet the criteria for accrual under ASC topic 605, subtopic 50 and (ii) under SAB’s 101 and 104, an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers which it does not expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items because that percentage of shipped revenue fails to meet the collectability criteria within SAB 104’s and 101’s four revenue recognition criteria, all of which are required to be met in order to recognize revenue. If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves may be required and are accrued for when such support is offered.

Net Earnings Per Share

Net Earnings Per Share	6 Months Ended
	Sep. 30, 2016
Earnings Per Share [Abstract]
Net Earnings Per Share	NOTE 2 — NET EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, Six Months Ended September 30, 2016 2015 2016 2015 Numerator: Net income (loss) $ 165 $ (710 ) $ 111 $ (589 ) Denominator: Denominator for basic and diluted earnings per share — weighted average shares 27,130 27,130 27,130 27,130 Basic and diluted income (loss) per share $ 0.01 $ (0.03 ) $ 0.00 $ (0.02 )

Shareholders' Equity

Shareholders' Equity	6 Months Ended
	Sep. 30, 2016
Equity [Abstract]
Shareholders' Equity	NOTE 3 — SHAREHOLDERS’ EQUITY Outstanding capital stock at September 30, 2016 consisted of common stock and Series A preferred stock. The Series A preferred stock is non-voting, has no dividend preferences and has not been convertible since March 31, 2002; however, it retains a liquidation preference. At September 30, 2016, the Company had no options, warrants or other potentially dilutive securities outstanding.

Inventory

Inventory	6 Months Ended
	Sep. 30, 2016
Inventory Disclosure [Abstract]
Inventory	NOTE 4 — INVENTORY Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. As of September 30, 2016 and March 31, 2016, inventories consisted of the following (in thousands): September March Finished goods $ 3,888 $ 2,056

Income Taxes

Income Taxes	6 Months Ended
	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Income Taxes	NOTE 5 — INCOME TAXES At September 30, 2016, the Company had no U.S. federal net operating loss carry forwards and approximately $0.3 million of U.S. state net operating loss carry forwards included in net deferred tax assets that are available to offset future taxable income and can be carried forward for 20 years. Although realization is not assured, management believes it is more likely than not that all of the net deferred tax assets will be realized through tax planning strategies available in future periods and through future profitable operating results. The amount of the deferred tax asset considered realizable could be reduced or eliminated if certain tax planning strategies are not successfully executed or estimates of future taxable income during the carry forward period are reduced. If management determines that the Company would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. The Company’s effective tax rate differs from the federal statutory rate primarily due to income and losses incurred in foreign jurisdictions and taxed at locally applicable tax rates, subpart F income included in the Company’s tax expense, expenses that are not deductible for federal income tax purposes, and state income taxes. The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of September 30, 2016, the Company’s open tax years for examination for U.S. federal tax are 2011-2016 and for U.S. states tax are 2011-2016. 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.

Related Party Transactions

Related Party Transactions	6 Months Ended
	Sep. 30, 2016
Related Party Transactions [Abstract]
Related Party Transactions	NOTE 6 — RELATED PARTY TRANSACTIONS From time to time, Emerson engages in business transactions with its controlling shareholder, The Grande Holdings Limited (“Grande”), one or more of Grande’s direct and indirect subsidiaries, and companies related to the Company’s Chairman of the Board. Set forth below is a summary of such transactions. Controlling Shareholder S&T International Distribution Limited (“S&T”), which is a wholly owned subsidiary of Grande N.A.K.S. Ltd., which is a wholly owned subsidiary of Grande, collectively have the shared power to vote and direct the disposition of 15,243,283 shares, or approximately 56.2%, of the Company’s outstanding common stock. Accordingly, the Company is a “controlled company” as defined in Section 801(a) of the NYSE MKT Company Guide. Related Party Transactions Return of Pledged Collateral to S&T In April 2016, the Company, upon a request made by S&T, considered and agreed to return to S&T the $500,000 of collateral which S&T had paid to the Company in September 2014 as a part of the indemnification agreement between S&T, Grande and the Company pertaining to an Internal Revenue Service challenge of the Company’s March 31, 2010 earnings and profits calculations underlying the taxability of a dividend paid during March 2010 to all of its stockholders, net of the $79,000 in expenses incurred by the Company in defending the IRS challenge. Thusly, on April 29, 2016, the Company paid $421,000 to S&T to effectuate the release of the collateral net of the aforementioned expenses incurred by the Company. From September 30, 2014 through March 31, 2016, this pledged collateral had been recorded by the Company as restricted cash on its balance sheet. Consulting Services Provided to Emerson by one of its Former Directors who is a Current Director of Grande Until such agreement was cancelled by the Company effective November 7, 2013, Mr. Eduard Will, a former director of Emerson and a current director of Grande, was paid consulting fees by the Company for work performed by Mr. Will related to a lawsuit that the Company settled in December 2013 and merger and acquisition research. Mr. Will was not re-elected to serve as a director of the Company at the Company’s 2013 Annual Meeting of Stockholders held on November 7, 2013. Accordingly, Mr. Will was no longer a director of the Company or a related party to the Company from November 7, 2013 until his appointment as a director of Grande on February 19, 2016, at which time Mr. Will is once again a related party to the Company. During March 2016, Emerson accrued $12,000 in consulting fees and expense reimbursements for consulting work invoiced to the Company and expenses incurred by Mr. Will as a director of the Company during the period September 2013 through November 2013, and which the Company paid to Mr. Will in April 2016. Ancillary Expenses Pertaining to Rented Office Space in Hong Kong During the three and six months ended September 30, 2016, the Company was billed approximately $1,000 and $5,000, respectively, for utility and service charges from The Grande Properties Management Limited (“GPML”) and Lafe Strategic Services Limited (“LSSL”), both related parties to the Company’s Chairman of the Board, in connection with the Company’s rented office space in Hong Kong. The Company owed nil to both GPML and LSSL related to these charges at September 30, 2016.

Short Term Investments

Short Term Investments	6 Months Ended
	Sep. 30, 2016
Short Term Investments [Abstract]
Short Term Investments	NOTE 7 — SHORT TERM INVESTMENTS At September 30, 2016 and March 31, 2016, the Company held short term investments totaling $13.1 million and $20.2 million, respectively. These investments were comprised of bank certificates of deposit which will mature in November 2016.

Background and Basis of Prese13

Background and Basis of Presentation (Policies)	6 Months Ended
	Sep. 30, 2016
Accounting Policies [Abstract]
Preparation of Financial Statements	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 consolidated financial position as of September 30, 2016 and the results of operations for the three and six month periods ended September 30, 2016 and September 30, 2015. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary in order to make the financial statements not misleading have been included. 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 the Company’s 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, 2016 (“fiscal 2016”), included in the Company’s annual report on Form 10-K, as amended, for fiscal 2016.
Sales Allowance and Marketing Support Expenses	Sales Allowance and Marketing Support Expenses Sales allowances, marketing support programs, promotions and other volume-based incentives which are provided to retailers and distributors are accounted for on an accrual basis as a reduction to net revenues in the period in which the related sales are recognized in accordance with ASC topic 605, “Revenue Recognition”, subtopic 50 “Customer Payments and Incentives” and Securities and Exchange Commission Staff Accounting Bulletins 101 “Revenue Recognition in Financial Statements,” and 104 “Revenue Recognition, corrected copy” (“SAB’s 101 and 104”). At the time of sale, the Company reduces recognized gross revenue by allowances to cover, in addition to estimated sales returns as required by ASC topic 605, “Revenue Recognition”, subtopic 15 “Products”, (i) sales incentives offered to customers that meet the criteria for accrual under ASC topic 605, subtopic 50 and (ii) under SAB’s 101 and 104, an estimated amount to recognize additional non-offered deductions it anticipates and can reasonably estimate will be taken by customers which it does not expect to recover. Accruals for the estimated amount of future non-offered deductions are required to be made as contra-revenue items because that percentage of shipped revenue fails to meet the collectability criteria within SAB 104’s and 101’s four revenue recognition criteria, all of which are required to be met in order to recognize revenue. If additional marketing support programs, promotions and other volume-based incentives are required to promote the Company’s products subsequent to the initial sale, then additional reserves may be required and are accrued for when such support is offered.

Net Earnings Per Share (Tables)

Net Earnings Per Share (Tables)	6 Months Ended
	Sep. 30, 2016
Earnings Per Share [Abstract]
Computation of Basic and Diluted Earnings per Share	The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended September 30, Six Months Ended September 30, 2016 2015 2016 2015 Numerator: Net income (loss) $ 165 $ (710 ) $ 111 $ (589 ) Denominator: Denominator for basic and diluted earnings per share — weighted average shares 27,130 27,130 27,130 27,130 Basic and diluted income (loss) per share $ 0.01 $ (0.03 ) $ 0.00 $ (0.02 )

Inventory (Tables)

Inventory (Tables)	6 Months Ended
	Sep. 30, 2016
Inventory Disclosure [Abstract]
Inventory	As of September 30, 2016 and March 31, 2016, inventories consisted of the following (in thousands): September March Finished goods $ 3,888 $ 2,056

Computation of Basic and Dilute

Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Numerator:
Net income (loss)	$ 165	$ (710)	$ 111	$ (589)
Denominator:
Denominator for basic and diluted earnings per share — weighted average shares	27,130	27,130	27,130	27,130
Basic and diluted income (loss) per share	$ 0.01	$ (0.03)	$ 0	$ (0.02)

Shareholders' Equity - Addition

Shareholders' Equity - Additional Information (Detail)	Sep. 30, 2016shares
Stockholders Equity Note [Abstract]
Options outstanding	0
Warrants outstanding	0
Other potentially dilutive securities outstanding	0

Inventory (Detail)

Inventory (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Mar. 31, 2016
Inventory Disclosure [Abstract]
Finished goods	$ 3,888	$ 2,056

Income Taxes - Additional Infor

Income Taxes - Additional Information (Detail)	6 Months Ended
	Sep. 30, 2016USD ($)
Schedule Of Income Taxes [Line Items]
Tax net operating loss can be carried forward	20 years
U.S. federal
Schedule Of Income Taxes [Line Items]
Net operating loss carry forwards, amount	$ 0
U.S. federal | Earliest Tax Year
Schedule Of Income Taxes [Line Items]
Open tax years	2,011
U.S. federal | Latest Tax Year
Schedule Of Income Taxes [Line Items]
Open tax years	2,016
States
Schedule Of Income Taxes [Line Items]
Net operating loss carry forwards, amount	$ 300,000
States | Earliest Tax Year
Schedule Of Income Taxes [Line Items]
Open tax years	2,011
States | Latest Tax Year
Schedule Of Income Taxes [Line Items]
Open tax years	2,016

Related Party Transactions - Ad

Related Party Transactions - Additional Information (Detail) - USD ($)	1 Months Ended		3 Months Ended	6 Months Ended
	Apr. 30, 2016	Mar. 31, 2016	Sep. 30, 2016	Sep. 30, 2016	Apr. 29, 2016
Related Party Transaction [Line Items]
Accrued consulting fees and reimbursable expenses		$ 12,000
Mr. Will
Related Party Transaction [Line Items]
Consulting fee paid	$ 12,000
S&T
Related Party Transaction [Line Items]
Repayment of pledged collateral amount	500,000
Release of collateral, net of expenses incurred					$ 421,000
S&T | IRS
Related Party Transaction [Line Items]
Expenses incurred in defending IRS challenge	$ 79,000
GPML and LSSL | Chairman of Board
Related Party Transaction [Line Items]
Utility and service charges			$ 1,000	$ 5,000
GPML | Chairman of Board
Related Party Transaction [Line Items]
Due to related parties for utility and service charges			0	0
LSSL | Chairman of Board
Related Party Transaction [Line Items]
Due to related parties for utility and service charges			$ 0	$ 0
The Grande Holdings Limited (“Grande”)
Related Party Transaction [Line Items]
Grande's Ownership Interest in Emerson number of shares			15,243,283	15,243,283
Grande's Ownership Interest Percentage			56.20%	56.20%

Short Term Investments - Additi

Short Term Investments - Additional Information (Detail) - USD ($) $ in Thousands	6 Months Ended
	Sep. 30, 2016	Mar. 31, 2016
Investments Schedule [Abstract]
Short term investments	$ 13,064	$ 20,155
Certificates of deposit maturity period	2016-11