SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1998
or
[ ] 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 0-25226
EMERSON RADIO CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3285224
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of common stock as of July 27, 1998:
50,772,615.
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Quarterly Report on Form 10-Q pursuant to the Securities and
Exchange Act of 1934, as amended, for the quarterly period
ended July 3, 1998, as set forth in the pages attached hereto:
Part I, Item 1 and Part II, Item 6, as they pertain to earnings per
share data.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except earnings per share data)
<CAPTION>
Three Months Ended
July 3, June 30,
1998 1997
<S> <C> <C>
NET REVENUES $59,126 $30,443
Costs and expenses:
Cost of sales 51,888 28,399
Other operating costs and expenses 1,266 866
Selling, general & administrative
expenses 5,083 3,627
58,237 32,892
OPERATING INCOME (LOSS) 889 (2,449)
Equity in earnings of Affiliate 443 509
Interest expense, net (569) (741)
INCOME (LOSS) BEFORE INCOME TAXES 763 (2,681)
Provision (benefit) for income taxes (1) 41
NET INCOME (LOSS) $ 764 $(2,722)
NET INCOME (LOSS) PER COMMON SHARE
Basic $ .01 $ (.07)
Diluted $ .01 $ (.07)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 51,220 40,592
Diluted 64,253 40,592
</TABLE>
The accompanying notes are an integral part of the interim
consolidated financial statements.
<TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<CAPTION>
July 3, April 3,
1998 1998
ASSETS (Unaudited)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 5,619 $ 2,608
Accounts receivable (net allowances of
$5,822 and $4,884, respectively) 3,000 5,247
Other receivables 6,452 6,474
Inventories 11,148 11,375
Prepaid expenses and other current assets 1,852 2,503
TOTAL CURRENT ASSETS 28,071 28,207
Property and equipment - (net of
accumulated depreciation and amortization
of $3,310 and $3,152, respectively) 1,240 1,381
Investment in Affiliate and Joint Venture 18,009 17,522
Other assets 4,644 4,810
TOTAL ASSETS $ 51,964 $ 51,920
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 683 $ --
Current maturities of long-term debt 62 85
Accounts payable and other current
liabilities 10,527 12,256
Accrued sales returns 5,086 4,511
Income taxes payable 168 191
TOTAL CURRENT LIABILITIES 16,526 17,043
Long-term debt, net of current maturities 20,750 20,750
Other non-current liabilities 175 179
Shareholders' Equity:
Preferred shares - 10,000,000
shares authorized, 5,137 and 5,237
shares issued and outstanding,
respectively 4,623 4,713
Common shares - $.01 par value, 75,000,000
shares authorized, 51,331,615 and
51,044,730 shares issued; 51,065,115
and 51,044,730 shares outstanding,
respectively 513 510
Treasury stock, at cost, 266,500 shares
and 0 shares respectively. (145) --
Capital in excess of par value 113,293 113,201
Accumulated deficit (103,963) (104,673)
Cumulative translation adjustment 192 197
TOTAL SHAREHOLDERS' EQUITY 14,513 13,948
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 51,964 $ 51,920
</TABLE>
The accompanying notes are an integral part of the interim consolidated
financial statements.
<TABLE>
EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands of dollars)
<CAPTION>
Three Months Ended
July 3, June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net cash provided by operating
activities $ 2,521 $ 373
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided (used) by investing
activities. (44) 13
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line of
credit facility 683 (1,113)
Other (149) (157)
Net cash used by financing
activities 534 (1,270)
Net increase (decrease) in cash and cash
equivalents 3,011 (884)
Cash and cash equivalents at beginning
of year 2,608 2,640
Cash and cash equivalents at end of
period(a) $ 5,619 $ 1,756
Supplemental disclosure of cash flow
information:
Interest paid $ 569 $ 741
Income taxes paid $ 32 $ 31
</TABLE>
(a) Includes $1.0 million of cash and cash equivalents, pledged to
assure the availability of certain letter of credit facilities.
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)
(In thousands, except earnings per share data)
NOTE 1 - BUSINESS
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
Emerson Radio Corp.'s (the "Company" or "Emerson") consolidated
financial position as of July 3, 1998 and the results of operations
for the quarters ended July 3, 1998 and June 30, 1997 and 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. It is suggested that these
unaudited interim consolidated financial statements be read in
conjunction with the consolidated financial statements and notes
thereto for the fiscal year ended April 3, 1998 ("Fiscal 1998"),
included in the Company's annual report on Form 10-K.
The consolidated financial statements include the accounts of
the Company and all of its majority owned subsidiaries. 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.
Due to the seasonal nature of the Company's consumer
electronics business, the results of operations for the quarter
ended July 3, 1998 are not necessarily indicative of the results of
operations that may be expected for the full year ending April 2,
1999 ("Fiscal 1999").
Beginning in Fiscal 1998, the Company changed its financial
reporting year to a 52/53 week year ending on the Friday closest to
March 31. Accordingly, the current fiscal year will end on April
2, 1999. Such change in the Company's
financial reporting year will not have a material effect on the
Company's results of operations.
NOTE 2 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts):
<TABLE>
For the Three
Months Ended
July 3, June 30,
1998 1997
NUMERATOR:
<S> <C> <C>
Net income (loss) $ 764 $ (2,722)
Less: preferred stock dividends 54 132
Numerator for basic earnings per
share - income available to
common stockholders 710 (2,854)
Add back to effect assumed conversions:
Preferred stock dividends 54 --
Numerator for diluted earnings
(loss) per share $ 764 $ (2,854)
DENOMINATOR:
Denominator for basic earnings
per share - weighted average
shares 51,220 40,592
Effect of dilutive securities:
Preferred shares 13,033 --
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 64,253 40,592
Basic earnings (loss) per share $ .01 $ (.07)
Diluted earnings (loss) per share $ .01 $ (.07)
</TABLE>
NOTE 3- CAPITAL STRUCTURE
The outstanding capital stock of the Company at July 3, 1998
consisted of common stock and Series A convertible preferred stock.
The preferred shares are convertible to common shares until March
31, 2002.
During the quarters ended July 3, 1998 and June 30, 1997,
100 and 550 shares of Series A Preferred Stock were converted
into 286,885 and 766,054 shares of common stock, respectively.
If all existing outstanding preferred shares were converted at
July 3, 1998, an estimated 13 million additional common shares
would be issuable. Dividends for the preferred stock accrued and
were payable quarterly at a 7% annual rate until March 31, 1997;
dividend rates decline by 1.4% each succeeding year until March
31, 2001 when no further dividends are payable. The dividend
rates at July 3, 1998 and June 30, 1997 were 4.2% and 5.6%, with
$801,000 and $618,000 of dividends in arrears respectively.
At July 3, 1998, the Company had outstanding approximately
1.2 million options with exercise prices ranging from $1.00 to
$1.10. Outstanding warrants with a common stock equivalent total
approximately 670,000 shares and have conversion prices ranging
from $1.20 to $4.00.
The Company also has outstanding $20.8 million of Senior
Subordinated Convertible Debentures due in 2002. See "Note 7 -
Long Term Debt.".
NOTE 4 - INCOME TAXES
Income tax provisions and benefits for the quarterly periods
ended July 3, 1998 and June 30, 1997 consist of taxes related to
international operations. The Company did not recognize tax
benefits for losses incurred by its domestic operations during
the quarters ended July 3, 1998 and June 30, 1997.
NOTE 5 - INVENTORY
Inventories are comprised primarily of finished goods. Spare parts
inventories, net of reserves, aggregating $247,000 and $384,000 at
July 3, 1998 and April 3, 1998, respectively, are included in
"Prepaid expenses and other current assets."
NOTE 6 - INVESTMENT IN SPORT SUPPLY GROUP, INC.
The Company owns 2,200,000 (28% of the outstanding) shares of
common stock of Sport Supply Group, Inc. ("SSG") which it
purchased in 1996 at an aggregate cost of $15,728,000 or $ 6.92 per
share. In addition, the Company owns warrants also
purchased by it in 1996 for $500,000 to purchase an additional 1
million shares of SSG at $7.50 per share ("SSG Warrants"). If the Company
exercises all of the SSG Warrants, it will beneficially own
approximately 36% of the SSG common shares.
The investment in and results of operations of SSG are
accounted for by the equity method. In January 1997, SSG changed
its financial reporting year end from October 31 to
September 30. This change in accounting period resulted in
the Company now recording its share of SSG earnings on a
concurrent basis. Previously, the Company recorded its share of
SSG's earnings on a two month delay. The Company's investment
in SSG includes goodwill of $3,973,000 which is being amortized on
a straight line basis over 40 years. At July 3, 1998, the
aggregate market value quoted on the New York Stock Exchange of
Emerson's shares of SSG common shares was approximately $18
million. Summarized financial information derived from SSG's
financial reports to the Securities and Exchange Commission was as
follows (in thousands):
<TABLE>
(Unaudited)
July 3, 1998 April 3, 1998
<S> <C> <C>
Current assets $ 30,966 $ 37,282
Property, plant and
equipment and other assets 20,974 19,878
Current liabilities 6,741 8,395
Long-term debt 2,446 7,498
</TABLE>
<TABLE>
(Unaudited)
For the 3 Months For the 3 Months
Ended Ended
July 3, 1998 May 2, 1997
<S> <C> <C>
Net sales $ 25,340 $ 28,312
Gross profit 9,840 10,717
Net income 1,739 1,974
</TABLE>
In July 1997, the Company entered into a Management Services
Agreement with SSG, under which SSG provides various managerial and
administrative services to the Company.
NOTE 7 -LONG TERM DEBT
As of July 3, 1998 and April 3, 1998 long-term debt consisted of
the following
in (thousands of dollars):
<TABLE>
July 3, April 3,
1998 1998
<S> <C> <C>
8-1/2% Senior Subordinated Convertible
Debentures Due 2002 $20,750 $20,750
Equipment notes and other 62 85
20,812 20,835
Less current obligations
Long term debt 62 85
$20,750 $20,750
</TABLE>
The Senior Subordinated Convertible Debentures Due 2002
("Debentures") were issued in August 1995, bear interest at the
rate of 8-1/2% per annum, payable quarterly, and mature on August
15, 2002. The Debentures are convertible into shares of the
Company's common stock at any time prior to redemption or maturity
at a conversion price of $3.9875 per share, subject to adjustment
under certain circumstances. Beginning August 15, 1998 at the
option of the Company, the Debentures are redeemable in whole or
in part at an initial redemption price of 104% of principal,
decreasing by 1% per year until maturity. The Debentures are
subordinated to all existing and future senior indebtedness (as
defined in the Indenture governing the Debentures). The
Debentures restrict, among other things, the amount of senior
indebtedness and other indebtedness that the Company, and, in
certain instances, its subsidiaries, may incur. Each Debenture
holder has the right to cause the Company to redeem the Debentures
if certain designated events (as defined) should occur.
Note 8 --LEGAL PROCEEDINGS
The Company is involved in a number of legal proceedings and
claims of various types, the most significant of which are
described in "Part I - Item 3. Legal Proceedings" of the Company's
Form 10-K for the fiscal year ended April 3, 1998 and "Part II -
- - Other Information Item 1. Legal Proceedings" of this Quarterly
Report on Form 10-Q. While any such litigation contains an element
of uncertainty, management presently believes that the outcome of
such proceedings and claims will not have a material adverse effect
on the Company's consolidated financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company's operating results and liquidity are
impacted by the seasonality of its business. The Company records
the majority of its annual sales in the fiscal quarters ending in
September and December and receives the largest amount of
customer returns in the fiscal quarters ending in March and June.
Therefore, the results of operations discussed below are not
necessarily indicative of the Company's prospective annual results.
The Company expects its United States sales for the fiscal quarter ended
September 1998 to be lower than the second fiscal quarter of Fiscal
1998 due to reduced product sales.
RESULTS OF OPERATIONS
NET REVENUES Consolidated net revenues for the three month
period ended July 3, 1998 increased $28.6 million (94%) as compared
to the same period ended June 30, 1997. The increase in net
revenues resulted primarily from increased unit sales of audio
products and microwave ovens, partially offset by reductions
in other product categories. Additionally, a significant reduction
in returned product was recorded in the current period as compared
to the same period in the prior year. The significant
reduction in returned product is attributable to higher returns in
the June, 1997 quarter due to the opening of a return processing
center in early 1997 that resulted in delays in processing returns
that flowed into the June 1997 quarter; and an overall more
restrictive return policy by the Company's customers. While the
Company expects the latter to continue, the effect of the
processing center was a one time event. Revenues
earned from the licensing of the Emerson and G Clef trademark were
$613,000 and $1,000,000 in the three month period ended July
3,1998 and June 30,1997, respectively.
The Company reports royalty and commission revenues
earned from its licensing arrangements, covering various products
and territories, in lieu of reporting the full dollar value of
such sales and associated costs.
COST OF SALES Cost of Sales, as a percentage of
consolidated net revenues, was 88% for the three month period ended
July 3, 1998 as compared to 93% for the same period in Fiscal 1998.
Margins in the current quarter were significantly improved as a percent of
sales primarily as a result of: (i) a change in the product
mix to higher margin products; (ii) a reduction of inventory
overhead costs due to the Company's successful efforts to shift to
a higher portion of its sales to a direct import basis; and (iii)
a significant reduction in returned products and resulting loss
on such product. For the three month period ended July 3, 1998,
products representing approximately 87% of net revenues were
directly imported from manufacturers to the Company's customers
as compared to 78% for the same period last year.
The Company's gross profit margins continue to be subject to
competitive pressures arising from pricing strategies associated
with the category of the consumer electronics market in which
the Company competes. The Company's products compete generally
in the low-to-medium priced category of the market which tend to
be the most competitive and generate the lowest profit margins.
The Company believes that its marketing agreements, licensing
agreements in the United States and various foreign countries and
its distribution agreements in Canada, Europe and parts of Asia
all will have a favorable impact on the Company's gross
profit. The Company continues to promote its direct import
programs to reduce its inventory levels and working capital
risks thereby reducing its inventory overhead costs. In
addition, the Company continues to focus on its higher margin
products and continually reviews new products which can generate
higher margins than its current business, either through license
arrangements, acquisitions, joint ventures or on its own.
OTHER OPERATING COSTS AND EXPENSES Other operating costs
and expenses increased $400,000 for the three months ended July
3,1998 as compared to the same period in Fiscal 1998, primarily
as a result of the Company's return-tovendor program. Under the
return-to-vendor program, the Company, by paying a fee, is able
to return defective product to its suppliers and, to receive in
exchange, a replacement unit.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A")
S,G&A, as a percentage of net revenues, were 9% of net
revenues for the three month period ended July 3,1998
as compared to 12% in the same period a year ago. In absolute terms,
S,G&A increased by $1.5 million in the period ended
July 3,1998 as compared to the same
period last year. The decrease in S,G&A as a percentage of net
revenues was attributable primarily to a higher revenue base. The
increase in S,G&A in absolute terms was caused primarily by
(i) an increase in promotional programs and (ii) a decrease in
the charges incurred in the prior year for relocation costs of
the Company's back office operations from New Jersey to Texas.
OPERATING INCOME (LOSS) The Company reported operating income
of $889,000 for the three month period ended July 3,1998, as
compared to an operating loss of $2.4 million for the same period
a year ago. The operating income in the current year is
attributable to a higher revenue base and improved gross profit
margins and a reduction in S,G&A expenses as a percent of revenues.
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE The Company's
28% share in the earnings of SSG amounted to $443,000 for the three
month period ended July 3,1998 as compared to $509,000 for the same
period last year.
INTEREST EXPENSE Interest expense decreased by $172,000 in
the three months ended July 3,1998 as compared to the same period a
year ago. The decrease was attributable to a significant reduction
in short term average borrowings.
The decrease in short term borrowings was due to a reduction in
working capital requirements.
NET INCOME As a result of the foregoing factors, the
Company generated net income of $764,000 for the three months
ended July 3,1998, as compared to a net loss of $2.7 million for
the three months ended June 30,1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $2,521,000
for the three months ended July 3,1998. Cash was provided
primarily by a reduction in accounts receivable along with the
profitability of the Company for the period, partially offset by a
decrease in accounts payable. The decrease in accounts receivable
resulted primarily from an increase in the percentage of the
Company's sales which were on a direct shipment basis.
In the three months ended July 3,1998, the Company's
financing activities provided $534,000 of cash as the Company
increased its borrowings under its $10 million U.S. line of
credit facility from $0 at April 3, 1998 to $683,000 at July 3,
1998. The Company maintains 2 credit facilities with a Hong Kong
based bank: a $3.5 million letter of credit facility and a
$25 million back-to-back letter of credit facility.
At July 3, 1998, there was $1,565,000 and $9,647,000,
respectively, of letters of credit outstanding.
At present, management believes that future cash flow from
operations and its existing institutional financing noted above
will be sufficient to fund all of the Company's cash requirements
for the next twelve months. However, the adequacy of future
cash flow from operations is dependent upon the Company achieving
its operating plan. During the three month period ended July
3,1998, the Company reduced accounts receivable by 48%. The Company
intends to maintain the reduced accounts receivable levels and to
continue the sale of its products on a direct import
basis. For the three month period ended July 3, 1998,
products representing approximately 87% of net revenues were
directly imported from manufacturers to the Company's customers as
compared to 78% for the same period last year. The direct
import program implemented by the Company is critical in
providing sufficient working capital to meet its liquidity
objectives.
As of July 3, 1998 the Company had no material commitments
for capital expenditures.
INFLATION AND FOREIGN CURRENCY
Neither inflation nor currency fluctuations had a significant
effect on the Company's results of operations during the first
quarter of Fiscal 1999. The Company's exposure to currency
fluctuations has been minimized by the use of U.S. dollar
denominated purchase orders, and by sourcing production in more than
one country. The Company purchases virtually all of its
products from manufacturers located in various Asian countries.
The economic crises in these countries and its related
impact on their financial markets has not impacted
the Company's ability to purchase product.
Should these crises continue, they could have a material adverse
effect on the Company by inhibiting the Company's relationship
with its suppliers and its ability to acquire products for resale.
YEAR 2000
The Company has developed and is in the process of
implementing a plan to modify its management information system to
be year 2000 compliant. The Company currently expects to be
substantially complete with this conversion by mid-1999. The
incremental cost of conversion is estimated to be less than
$300,000. The Company does not expect the conversion to have
a significant effect on operations or the Company's financial
results. In addition, the year 2000 problem may impact other
entities with which the Company transacts business, and the Company
cannot predict the effect of the year 2000 problem on such entities.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
Recent pronouncements of the Financial Accounting Standards
Board ("FASB") which are not required to be adopted and the Company
has not adopted them as of July 3, 1998, include the following
Statements of Financial Accounting Standards ("SFAS"):
SFAS No. 130, "Reporting Comprehensive Income,"
establishes standards for reporting and display
of comprehensive income (all changes in
equity during a period except those resulting from investments
by and distributions to owners) and its components in the financial
statements. This new standard, which will be effective for Fiscal
1999, is not currently anticipated to have a significant impact on
the Company's financial statements based on the current financial
structure and operations of the Company.
SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information," which will be effective for the
Company for Fiscal 1999, establishes standards for reporting
information about operating segments in the annual financial
statements, selected information about operating segments in
interim financial reports and disclosures about products and
services, geographic areas and major customers. This new standard
requires the Company to report financial information on the basis
that is used internally for evaluating segment performance and
deciding how to allocate resources to segments, which may result
in more detailed information in the notes to the Company's financial
statements than is currently required and provided. The Company
has not yet determined the effects, if any, of implementing SFAS
No. 131 on its reporting of financial information.
FORWARD-LOOKING INFORMATION
This report contains various forward looking statements under
the Private Securities Litigation Reform Act of 1995 (the "Reform
Act") and information that is based on Management's beliefs as well
as assumptions made by and information currently available to
Management. When used in this report, the words "anticipate",
"estimate", "expect", "predict", "project", and similar
expressions are intended to identify forward looking statements.
Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated,
expected or projected. Among the key factors that could cause
actual results to differ materially are as follows: (i) the
ability of the Company to continue selling products to its largest
customers whose net revenues represented 58% and 16% of Fiscal
1998 net revenues; (ii) competitive factors such as competitive
pricing strategies utilized by retailers in the domestic
marketplace which negatively impacts product gross margins; (iii)
the ability of the Company to maintain its suppliers, primarily
all of whom are located in the Far East; (iv) the Company's
ability to replace the licensing income from the Supplier with
commission revenues from Daewoo; (v) the outcome of
litigation; (vi) the availability of sufficient capital to
finance the Company's operating plans; (vii) the ability of the
Company to comply with the restrictions imposed upon it by its
outstanding indebtedness; and (viii) general economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
EMERSON RADIO CORP. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During July 1998, further hearings were
held on the Creditors' motion to terminate the
Settlement Agreement in the Stelling litigation.
It is expected that all testimony in that matter
will be concluded in the next month.
In August 1998, the Company voluntarily dismissed
with prejudice its lawsuit against Grace Brothers,
Ltd.
For further information on the Stelling litigation
and other litigation to which the Company is a
party, reference is made to Part 1 Item-3-Legal
Proceedings in the Company's most recent annual
report on Form 10-K.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During the three months ended July 3, 1998,
the Company issued a total of 286,885 shares of
the common stock, upon conversion of 100 shares
of Series A Preferred Stock. No consideration
was received by the Company for the issuance of the
shares of common stock. The shares of common stock
were issued by the Company to certain of its
existing holders of Series A Preferred Stock
where no commission or other remuneration was paid
or given directly or indirectly for soliciting
such exchange. The shares of common stock were
issued pursuant to Section 3(a)(9) of the
Securities Act of 1933, as amended.
In August 1998, the Company repurchased 1,423
shares of its outstanding Series A Preferred Stock.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
(a) None
(b) None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
(a) None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
(27) Financial Data Schedule for quarter ended July 3, 1998.*
(b) REPORTS ON FORM 8-K - During the three month period
ended July 3, 1998, no Form 8-K was filed.
____________________________
*Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
EMERSON RADIO CORP.
(Registrant)
Date: February 23, 1999 /s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chairman, Chief Executive Officer
andPresident
Date: February 23, 1999 /s/ John P. Walker
John P. Walker
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
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<NAME> EMERSON RADIO CORP.
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0
4,623
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