SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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 2, 1999
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
Indicate the number of shares outstanding of common stock as of
August 5, 1999: 47,828,215.
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 2, July 3,
1999 1998
<S> <C> <C>
Net revenues $ 43,447 $59,126
Costs and expenses:
Cost of sales 38,271 51,888
Other operating costs and
expenses 773 1,266
Selling, general &
administrative expenses 3,864 4,898
42,908 58,052
Operating income 539 1,074
Equity in earnings of Affiliate 459 443
Write-down of investment -- (185)
Interest expense, net (574) (569)
Income before income taxes 424 763
Provision (benefit) for income
taxes 9 (1)
Net income $ 415 $ 764
Net income per common share
Basic $ .01 $ .01
Diluted $ .01 $ .01
Weighted average shares
outstanding
Basic 47,828 51,220
Diluted 55,197 64,253
</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)
<CAPTION>
July 2, April 2,
1999 1999
(Unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,469 $ 3,100
Available for sale securities (net of
fair value adjustment of $1,545
and $1,298, respectively) 490 738
Accounts receivable (less allowances
of $4,109 and $3,907, respectively) 4,797 5,143
Other receivables 6,644 6,782
Inventories 13,863 11,608
Prepaid expenses and other current
assets 1,929 2,839
Total current assets 29,192 30,210
Property and equipment - (net of
accumulated depreciation and
amortization of $2,913 and
$2,777, respectively) 1,212 1,211
Investment in Affiliates and Joint
Venture 19,974 19,525
Other assets 2,970 3,449
Total Assets $ 53,348 $ 54,395
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes payable $ 2,825 $ 2,216
Current maturities of long-term debt 47 50
Accounts payable and other current
Liabilities 15,156 16,759
Accrued sales returns 4,004 3,926
Income taxes payable 152 400
Total current liabilities 22,184 23,351
Long-term debt, less current maturities 20,750 20,750
Other non-current liabilities 76 97
Shareholders' Equity:
Preferred shares - 10,000,000
shares authorized, 3,714
shares issued and outstanding 3,343 3,343
Common shares - $.01 par value,
75,000,000 shares authorized,
51,331,615 shares issued;
47,828,215 shares outstanding 513 513
Capital in excess of par value 113,288 113,288
Cumulative translation adjustment (78) (78)
Unrealized loss on marketable
securities (248) --
Accumulated deficit (104,573) (104,962)
Treasury stock, at cost 3,503,400
shares (1,907) (1,907)
Total shareholders' equity 10,338 10,197
Total Liabilities and
Shareholders'Equity $ 53,348 $ 54,395
</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)
<CAPTION>
Three Months Ended
July 2, July 3,
1999 1998
Cash Flows from Operating Activities:
<S> <C> <C>
Net cash (used) provided by operating
activities $(1,805) $2,521
Cash Flows from Investing Activities:
Net cash used by investing
activities (385) (44)
Cash Flows from Financing Activities:
Net cash provided by financing
activities 559 534
Net increase (decrease) in cash and
cash equivalents (1,631) 3,011
Cash and cash equivalents at beginning
of year 3,100 1,608
Cash and cash equivalents at end of
period $1,469 $4,619
Supplemental disclosure of cash flow
information:
Interest paid $ 530 $532
Income taxes paid $ 11 $ 32
</TABLE>
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 - 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 2, 1999 and the results of operations
for the quarters ended July 2, 1999 and July 3, 1998. 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. 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 2, 1999 ("Fiscal 1999"),
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 2, 1999 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, 2000 ("Fiscal 2000").
The management of the Company considers the Company to have
one reportable segment, consumer electronics, and assesses
performance on a single segment basis.
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 March
31, 2000. Such change in the Company's financial reporting year
will not have a material effect on the Company's results of
operations.
Certain amounts in the prior period's consolidated financial
statements have been reclassified to conform to the current period's
presentation.
NOTE 2 - COMPREHENSIVE INCOME
The Company's total comprehensive income for the three months
ended July 2, 1999 and July 3, 1998 are as follows (in thousands):
<TABLE>
Three Months Ended
July 2 July 3,
1999 1998
<S> <C> <C>
Net Income $ 415 $ 764
Unrealized losses on securities,
net (248) ---
Comprehensive Income $ 167 $ 764
</TABLE>
NOTE 3 - EARNINGS 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 2, July 3,
1999 1998
Numerator:
<S> <C> <C>
Net income $ 415 $ 764
Less: preferred stock dividends 26 54
Numerator for basic earnings per
share - income available to
common stockholders 389 710
Add back to effect assumed conversions:
Preferred stock dividends 26 54
Numerator for diluted earnings
per share $ 415 $ 764
Denominator:
Denominator for basic earnings
per share - weighted average
shares 47,828 51,220
Effect of dilutive securities:
Preferred shares 7,369 13,033
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed
conversions 55,197 64,253
Basic earnings per share $ .01 $ .01
Diluted earnings per share $ .01 $ .01
</TABLE>
NOTE 4- CAPITAL STRUCTURE
The outstanding capital stock of the Company at July 2, 1999
consisted of common stock and Series A convertible preferred stock.
The preferred shares are convertible to common shares until March
31, 2002.
During the quarter ended July 3, 1998, 100 shares of Series
A Preferred Stock were converted into 286,885 shares of
common stock. There were no conversions of Series A Preferred
Stock for the quarter ended July 2, 1999. If all existing outstanding
preferred shares were converted at July 2, 1999, an estimated
7.7 million additional common shares would be issuable. The
dividend rates on the Series A Preferred Stock at July 2, 1999 and
July 3, 1998 were 2.8% and 4.2%, with $879,000 and
$801,000 of dividends in arrears, respectively. The dividend rate
declines by 1.4% each succeeding year until March 31, 2001 when no
further dividends are payable.
At July 2, 1999, the Company had outstanding approximately
1.2 million options with exercise prices ranging from $1.00 to
$1.10. Approximately 986,000 outstanding warrants are convertible
into approximately 986,000 shares of common stock at conversion
prices ranging between $1.20 to $4.00.
The Company also has outstanding approximately $20.8 million
of Senior Subordinated Convertible Debentures due in 2002. See
"Note 9 - Long Term Debt" and "Note 11 - Subsequent Event".
NOTE 5 - INCOME TAXES
Income tax provisions and benefits for the quarterly periods
ended July 2, 1999 and July 3, 1998 consist of taxes related to
international operations. The Company does not recognize tax
benefits for losses incurred by its domestic operations.
NOTE 6 - INVENTORY
Inventories are comprised primarily of finished goods which
are stated at the lower of cost (first-in, first-out) or market.
NOTE 7 - AVAILABLE-FOR-SALE SECURITIES
Available-for-sale securities are stated at fair value, with
the unrealized gains and losses reported in a separate
component of shareholders' equity. Realized gains and
losses, and declines in value judged to be other-than-temporary
are included in earnings.
The following is a summary of available-for-sale equity
securities at July 2, 1999 (in thousands):
<TABLE>
Gross Gross Estimate
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Equity Securities $2,036 $-- $1,546 $490
</TABLE>
As of July 3, 1998 there were no securities held as available-for-sale.
NOTE 8 - INVESTMENT IN SPORT SUPPLY GROUP, INC.
The Company owns 2,269,500 (31% 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. 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 40%
of the SSG common shares. Effective March 1997, the Company entered into a
Management Services Agreement with SSG, under which SSG
provides various managerial and administrative services to the
Company.
The investment in and results of operations of SSG are
accounted for by the equity method. The Company's investment in SSG
includes goodwill of $6,530,000 which is being amortized on
a straight line basis over 40 years. At July 2, 1999,
the aggregate market value quoted on the New York Stock
Exchange of SSG common shares equivalent in number to those
owned by Emerson was approximately $23 million.
Summarized financial information derived from SSG's financial
reports to the Securities and Exchange Commission was as follows (in
thousands):
<TABLE>
(Unaudited)
July 2, 1999 April 2, 1999
<S> <C> <C>
Current assets $ 41,808 $ 44,322
Property, plant and equipment
and other assets 30,832 30,252
Current liabilities 14,068 14,965
Long-term debt 16,063 19,045
Stockholders' Equity 42,510 40,563
</TABLE>
<TABLE>
(Unaudited)
For the 3 Months For the 3 Months
Ended Ended
July 2, 1999 July 3, 1998
<S> <C> <C>
Net sales $ 26,310 $ 25,340
Gross profit 10,717 9,840
Net income 1,759 1,739
</TABLE>
See "Note 11 - Subsequent Event".
NOTE 9 - LONG-TERM DEBT
As of July 2, 1999 and April 2, 1999 long-term debt
consisted of the following in (thousands of dollars):
<TABLE>
July 2 April 2
1999 1999
<S> <C> <C>
8-1/2% Senior Subordinated Convertible
Debentures Due 2002 $20,750 $20,750
Equipment notes and other 47 50
20,797 20,835
Less current obligations 47 50
Long term debt $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. See "Note
11 - Subsequent Event".
NOTE 10 - 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 2, 1999 and "Part
II -- Other Information Item 1. Legal Proceedings" of this
Quarterly Report on Form 10-Q, and Form 8-K dated August 6, 1999.
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.
Note 11 - SUBSEQUENT EVENT
On August 3, 1999, the Company and Geoffrey P. Jurick,
the Company's Chairman of the Board, Chief Executive Officer and
President, entered into a letter of intent with Oaktree Capital
Management Corp. and certain of its affiliated entities
("Oaktree"). The letter of intent sets forth a proposed series
of transactions which, if consummated, would result in the
following:
. The Company would sell its entire ownership in SSG to Oaktree.
Under the terms of the letter of intent, Oaktree would purchase from
Emerson 2,269,500 shares of SSG common stock and warrants to
purchase one million shares for a purchase price consisting of
$15 million in cash, the surrender of approximately $13.9 million
face amount of Emerson's convertible debentures presently owned by
Oaktree and an exit consent amending certain provisions of the
indenture governing the Company's convertible debentures.
. The Company would purchase up to $23 million of its
outstanding common stock through a self-tender offer at a price of
not less than $1.00 per share. The $15 million cash proceeds from
the sale of the SSG securities would be utilized by Emerson
to fund, in part, a partial tender offer. The remainder of the
$23 million would come from additional borrowings.
. The resolution of litigation between Mr. Jurick, Emerson's
Chairman and largest shareholder, and certain of his creditors.
Pursuant to the terms of the letter of intent and an option
agreement, Oaktree would acquire all claims held by certain
creditors of Mr. Jurick for $20 million. The claims to be
acquired by Oaktree have been the subject of litigation in
the U.S. District Court for the District of New Jersey. Under
the terms of the transactions, Mr. Jurick would use amounts
received by him pursuant to Emerson's selftender, together with
certain other funds, to acquire those claims from Oaktree,
thereby eliminating the need for him to sell his Emerson shares.
Subject to approval by SSG's Board, Mr. Jurick also intends to
assign options to acquire 300,000 shares of SSG's common stock
to Oaktree.
Completion of the transaction described is contingent upon a
number of conditions being satisfied.
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 results for any subsequent
periods or for the year ending March 31, 2000. The Company
expects its United States sales for the quarter ended October
1, 1999 to increase as compared to the quarter ended October 2,
1998 due to increased product sales.
RESULTS OF OPERATIONS
NET REVENUES Consolidated net revenues for the three month
period ended July 2, 1999 decreased $15.7 million (26.5%) as
compared to the same period ended July 3, 1998. The decrease
in net revenues resulted primarily from decreased unit sales of
audio products and microwave ovens, partially offset by the
introduction of the Digital Video Disc (DVD) product line. The
decline in audio products was primarily attributable to a one-time
sale of an audio unit in the quarter ended July 2, 1998. Revenues
earned from the licensing of the Emerson and G-Clef trademark
were $704,000 and $613,000 in the three month period ended July
2,1999 and July 3,1998, 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 for both periods was 88%.
OTHER OPERATING COSTS AND EXPENSES Other operating costs
and expenses decreased $493,000 for the three months ended July 2,
1999 as compared to the same period in Fiscal 1999, primarily as
a result of reduced handling charges on returns.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("S,G&A") S,G&A
decreased by $1.0 million in the period ended July 2, 1999 as
compared to the same period last year. The decrease was
primarily attributable to a reduction in charges related to bad
debts, partially offset by an increase in salaries and
professional fees.
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE The
Company's 31% share in the earnings of SSG amounted to $459,000
for the three month period ended July 2, 1999 as compared to
$443,000 for the same period in the prior year.
WRITE-DOWN OF INVESTMENT Write-down for the three months
ended July 3, 1998 consisted of a charge of $185,000 for the
write-down of a foreign investment.
INTEREST EXPENSE Interest expense was substantially
unchanged for the three months ended July 2, 1999 as compared
to the same period in the prior year.
NET INCOME As a result of the foregoing factors, the
Company recorded net income of $415,000 for the three months
ended July 2, 1999, as compared to $764,000 for the three months
ended July 3, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities was $1.8 million for
the three months ended July 2, 1999. Cash was utilized primarily
to increase inventory. This was done in anticipation of a possible
longshoremen strike that could have materially and adversely affected
the Company's ability to import product. A tentative contract was
approved in July with the longshoremen's union ending the possibility of a
strike.
In the three months ended July 2, 1999, the Company's
financing activities provided $559,000 of cash. The Company
increased its borrowings under its $10 million U.S. line of credit
facility from $2.2 million at April 2, 1999 to $2.8 million at
July 2, 1999. The Company maintains two 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 2,
1999, there was $3.2 million and $17.0 million, respectively, of
letters of credit outstanding under these facilities.
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. The Company's proposed sale of its
ownership interest in SSG would initially reduce its existing
long-term debt by approximately $13.9 million. However, the Company would
need an additional facility of approximately $8 million to fund the $23
million partial self-tender for its own shares of stock, resulting
in a net reduction of approximately $5.9 million of indebtedness.
See "Note 11 - Subsequent Event".
As of July 2, 1999 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 2000. 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.
These countries are emerging from an economic and financial market crisis
that, to date, has not adversely affected the Company's ability to
purchase product. If the economic recovery currently in progress
should reverse its trend, it could adversely affect the Company's
relationship with its suppliers and its ability to acquire
products. Additional financial turmoil in the South American
economies may have an adverse impact on the Company's South American
licensee.
YEAR 2000
The Year 2000 issue is primarily the result of computer
programs or databases using a two-digit format, as opposed to four
digits, to represent a calendar year. Some computer systems
will be unable to correctly interpret dates beyond the year 1999,
which could cause a system failure or other computer errors,
leading to a disruption in the operation or accuracy of such
systems. The Company has undertaken a company-wide study and
testing program to locate and cure any Year 2000 issues in the
products or systems on which it relies and in the products it
offers for sale. The Company has completed the Year 2000 project
and is Year 2000 compliant. The specific costs of achieving Year
2000 compliance was approximately $500,000. The Company has been
working jointly with strategic vendors and business partners to
identify any Year 2000 issues that may impact the Company.
The Company anticipates that evaluation and corrective actions,
if any, will be ongoing throughout 1999. To date, the
Company has not identified any such problems requiring corrective
action that will result in a material adverse impact on the
Company. However, there can be no assurance that the companies
with which the Company does business will achieve Year 2000
compliance in a timely fashion, or that such failure to comply by
another company will not have a material adverse effect on the
Company. The Company believes the products it currently offers for
sale or license are all Year 2000 compliant, and that the cost to
remediate any previously sold product that is not Year 2000
compliant will not be material. The Company has incurred and will
incur internal but not incremental staff costs related to the
above initiative.
Based on the assessment effort to date, the Company does not
believe that the Year 2000 issue will have a material adverse
effect on its financial condition, results of operations, or
cash flows. This represents a forward looking statement under
the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from the Company's belief
and expectations, which are based on certain assumptions and
expectations that ultimately may prove to be inaccurate.
Potential sources of risk include (a) the inability of principal
suppliers to be Year 2000 ready, which could result in delays in
product deliveries from such suppliers; (b) disruption of the
distribution channel, including transportation vendors; (c)
customer problems that could affect revenue demand; and (d)
undiscovered issues related to Year 2000 compatibility which could
have a material adverse impact. The Company's Year 2000 assessment
is ongoing and the consideration of contingency plans will
continue to be evaluated as new information becomes available.
At this stage, however, the Company has not developed a
comprehensive contingency plan to address situations
that may result if any of the third parties upon which the Company
is dependent is unable to achieve Year 2000 compliance. The need
for such a contingency plan will be evaluated throughout 1999.
RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD
SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which will be effective for the
Company for Fiscal 2001, establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. The Company has not yet determined the effects, if any,
of implementing SFAS No. 133 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 52%
and 24% of Fiscal 1999 net revenues; (ii) competitive factors such
as competitive pricing strategies utilized by retailers in the
domestic marketplace that 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 outcome of litigation; (v) the ability of the Company to
comply with the restrictions imposed upon it by its outstanding
indebtedness; (vi) the Year 2000 Issue (as described above); (vii)
general economic conditions; and (viii) the ability of the Company
to execute its proposed plan involving the sale of its ownership
interest in SSG and the partial self-tender for the Company's
shares of common stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not material.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings.
In June 1999, the Hong Kong Inland Revenue Department (the
"IRD") accepted the Company's proposed compromise offer
in which the Company and the IRD settled, without
prejudice, an assessment of $858,000 for the amount of
$256,000. This assessment related to the Fiscal 1993
to Fiscal 1998 tax years and asserted that certain
revenues reported as non-taxable by Emerson Radio
(Hong Kong) Ltd. were subject to a profits tax.
For further information on 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, and on Form 8-K dated August 6, 1999.
ITEM 2. Changes in Securities and Use of Proceeds.
None.
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 2, 1999.*
(b) Reports on Form 8-K - Current report on Form 8-K
dated August 6, 1999, reporting a letter of intent to
resolve certain litigation and ownership issues.
*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: August 11, 1999 /s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chairman, Chief Executive Officer and
President
Date: August 11, 1999 /s/ John P. Walker
John P. Walker
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUL-02-1999
<CASH> 1,469
<SECURITIES> 490
<RECEIVABLES> 8,906
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0
3,343
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<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
