10-Q

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 June 30, 2004

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 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. [X] Yes [  ] No

     Indicate by check mark whether the registrant is an accelerated Filer (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

     Indicate the number of shares outstanding of common stock as of July 23, 2004: 27,037,608.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED STATEMENTS OF OPERATIONS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II OTHER INFORMATION
	ITEM 1. Legal Proceedings
	ITEM 2. Changes in Securities and Use of Proceeds
	ITEM 3. Default Upon Senior Securities
	ITEM 4. Submission of Matters to a Vote of Security Holders
	ITEM 5. Other Information
	ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
Amendment to Revolving Credit and Term Loan Agreement
Certification of the Chief Executive Officer
Certification of the Chief Financial Officer
Certification of the CEO and CFO

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
	June 30, 2004			June 30, 2003
Net revenues	$	72,930		$	54,171
Costs and expenses:
Cost of sales		57,034			42,967
Other operating costs and expenses		1,553			1,256
Selling, general & administrative expenses		10,763			9,318
Acquisition costs		(71	)		643
Stock based costs		—			18
		69,279			54,202
Operating income (loss)		3,651			(31	)
Interest expense, net		294			422
Minority interest in net income of consolidated subsidiary		(606	)		(54	)
Income (loss) before income taxes and discontinued operations		2,751			(507	)
Provision (benefit) for income taxes		946			(67	)
Income (loss) from continuing operations		1,805			(440	)
Loss from discontinued operations, net of tax		—			(5	)
Net income (loss)	$	1,805		$	(445	)
Basic net income (loss) per share:
Continuing operations	$	0.07		$	(0.02	)
Discontinued operations		—			—
	$	0.07		$	(0.02	)
Diluted net income (loss) per share:
Continuing operations	$	0.07		$	(0.02	)
Discontinued operations		—			—
	$	0.07		$	(0.02	)
Weighted average shares outstanding:
Basic		26,630			27,416
Diluted		27,261			27,416

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

2

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

	June 30, 2004			March 31, 2004
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	4,073		$	6,369
Accounts receivable (less allowances of $3,747 and $3,653, respectively)		23,921			19,948
Other receivables		3,860			2,821
Inventories		54,905			46,997
Prepaid expenses and other current assets		5,916			5,344
Deferred tax assets		5,660			5,887
Total current assets		98,335			87,366
Property and equipment — (net of accumulated depreciation and amortization of $7,892 and $7,442, respectively)		7,512			7,822
Deferred catalog expenses		1,078			1,695
Trademarks and other intangible assets (net of accumulated amortization of $3,961 and $3,845, respectively)		5,052			5,168
Deferred tax assets		14,732			15,263
Other assets		1,225			1,355
Total Assets	$	127,934		$	118,669
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term borrowings	$	35		$	58
Short-term borrowings		3,431			4,762
Accounts payable and other current liabilities		34,026			32,787
Accrued sales returns		2,631			2,521
Income taxes payable		671			509
Total current liabilities		40,794			40,637
Long-term borrowings		21,728			15,027
Minority interest		16,399			15,793
Shareholders’ Equity:
Preferred shares - 10,000,000 shares authorized, 3,677 shares issued and outstanding		3,310			3,310
Common shares — $.01 par value, 75,000,000 shares authorized; 52,310,350 shares issued and 26,630,383 shares outstanding		523			523
Capital in excess of par value		116,304			116,304
Accumulated other comprehensive losses		(87	)		(83	)
Accumulated deficit		(47,205	)		(49,010	)
Treasury stock, at cost, 25,679,967 shares		(23,832	)		(23,832	)
Total shareholders’ equity		49,013			47,212
Total Liabilities and Shareholders’ Equity	$	127,934		$	118,669

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

3

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

	Three Months Ended
	June 30, 2004			June 30, 2003
Cash Flows from Operating Activities:
Income (loss) from continuing operations	$	1,805		$	(440	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Minority interest		606			54
Depreciation and amortization		711			775
Deferred tax expenses (benefits)		758			32
Asset allowances, reserves and other		66			499
Changes in assets and liabilities:
Accounts receivable		(3,205	)		(7,709	)
Other receivables		(1,185	)		(457	)
Inventories		(7,781	)		(10,024	)
Prepaid expenses and other current assets		(22	)		3,332
Other assets		12			—
Accounts payable and other current liabilities		568			822
Income taxes payable		162			(202	)
Net cash used by continuing operations		(7,505	)		(13,318	)
Net cash provided by discontinued operations		30			2,525
Net cash used by operating activities		(7,475	)		(10,793	)
Cash Flows from Investing Activities:
Additions to property and equipment (continuing operations)		(167	)		(77	)
Other investing activity of discontinued operations		—			(3	)
Net cash used by investing activities		(167	)		(80	)
Cash Flows from Financing Activities:
Borrowings (repayments) of short-term borrowings		(1,331	)		2,696
Proceeds from exercise of stock options and warrants		—			12
Long-term borrowings		34,450			38,830
Repayments of long-term borrowings		(27,773	)		(38,380	)
Net cash provided by financing activities		5,346			3,158
Net decrease in cash and cash equivalents		(2,296	)		(7,715	)
Cash and cash equivalents at beginning of year		6,369			11,413
Cash and cash equivalents at end of period	$	4,073		$	3,698

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

4

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”) and its majority-owned subsidiaries, including Sport Supply Group, Inc. (“SSG”), which has been 53.2% owned since February 2002.

     The Company operates in two business segments: consumer electronics and sporting goods. The consumer electronics segment designs, sources, imports and markets a variety of consumer electronic products and licenses the “” trademark for a variety of products domestically and internationally to certain licensees. The sporting goods segment, which is operated through SSG, manufactures and markets sports related equipment and leisure products to institutional customers in the United States.

     From July 2003 through October 2003, certain of SSG’s team dealer locations were discontinued. In November 2003, SSG sold all of the issued and outstanding capital stock of its wholly-owned subsidiary, Athletic Training Equipment Company, Inc. (“ATEC”). Collectively, SSG refers to these operations as “Discontinued Operations” and accordingly, the accompanying financial statements reflect these as discontinued operations. (See Note 12)

     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 our consolidated financial position as of June 30, 2004 and the results of operations for the quarters ended June 30, 2004 and 2003. 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. 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 March 31, 2004 (“fiscal 2004”), included in our annual report on Form 10-K for fiscal 2004.

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

     The consolidated financial statements include our accounts and all of our 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.

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     Due to the seasonal nature of both segments, the results of operations for the quarter ended June 30, 2004 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, 2005 (“fiscal 2005”).

     Emerson and SSG have elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees: (“APB 25”) and related Interpretations in accounting for its employee stock options. Under APB 25, if the exercise price of employee stock options equals or exceeds the market price of the underlying stock on the date of grant, no compensation expense is recognized. Emerson and SSG have adopted the disclosure-only provisions under Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). For the purposes of SFAS 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting periods. Our pro forma information for the quarter ended June 30, 2004 and 2003 is as follows:

	Three Months Ended
	June 30, 2004			June 30, 2003
	(Unaudited)
Income (loss) from continuing operations (in thousands):
As reported	$	1,805		$	(440	)
Less: Employee stock-based compensation expense		(2	)		(7	)
Pro forma	$	1,803		$	(447	)
Income (loss) from continuing operations per common share:
Basic — as reported	$	0.07		$	(0.02	)
Basic — pro forma	$	0.07		$	(0.02	)
Diluted — as reported	$	0.07		$	(0.02	)
Diluted — pro forma	$	0.07		$	(0.02	)

	Three Months Ended
	June 30, 2004			June 30, 2003
	(Unaudited)
Net income (loss)(in thousands):
As reported	$	1,805		$	(445	)
Less: Employee stock-based compensation expense		(2	)		(7	)
Pro forma	$	1,803		$	(452	)
Net income (loss) per common share:
Basic — as reported	$	0.07		$	(0.02	)
Basic — pro forma	$	0.07		$	(0.02	)
Diluted — as reported	$	0.07		$	(0.02	)
Diluted — pro forma	$	0.07		$	(0.02	)

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NOTE 2 — COMPREHENSIVE INCOME

     Our comprehensive income (loss) for the three months ended June 30, 2004 and 2003 is as follows (in thousands):

	Three Months Ended
	June 30, 2004			June 30, 2003
	(Unaudited)
Net income (loss)	$	1,805		$	(445	)
Interest rate swap		(4	)		(4	)
Unrealized loss on securities, net		—			(4	)
Recognition of realized losses related to investments included in net losses		—			42
Comprehensive income (loss)	$	1,801		$	(411	)

NOTE 3 — NET EARNINGS (LOSS) PER SHARE

     The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

	Three Months Ended
	June 30, 2004		June 30, 2003
	(Unaudited)
Numerator:
Net earnings (loss) before discontinued operations for basic and diluted earnings (loss) per share	$	1,805	$	(440	)
Denominator:
Denominator for basic earnings(loss) per share - weighted average shares		26,630		27,416
Effect of dilutive securities:
Options and warrants		631		—
Denominator for diluted earnings per share - weighted average shares and assumed conversions		27,261		27,416
Basic earnings (loss) per share:
Continuing operations	$	0.07	$	(0.02	)
Discontinued operations		—		—
Basic earnings (loss) per share	$	0.07	$	(0.02	)
Diluted earnings (loss) per share:
Continuing operations	$	0.07	$	(0.02	)
Discontinued operations		—		—
Diluted earnings (loss) per share	$	0.07	$	(0.02	)

NOTE 4 - CAPITAL STRUCTURE

     Our outstanding capital stock at June 30, 2004 consisted of common stock and Series A convertible preferred stock in which the conversion feature expired effective March 31, 2002.

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     At June 30, 2004, Emerson had outstanding approximately 907,000 options with exercise prices ranging from $1.00 to $1.50 and SSG had outstanding approximately 208,000 options with exercise prices ranging from $0.95 to $9.44. Subsequent to June 30, 2004, 675,000 of the Emerson options were exercised in cashless exchanges resulting in 438,910 shares being issued.

     On August 1, 2002, in connection with a consulting agreement, Emerson granted 200,000 warrants with an exercise price of $2.20, of which 100,000 warrants vested after six months and 100,000 warrants vested one year from date of grant. The warrants were valued using the Black-Scholes option valuation model and were charged to earnings over the related service period of the consulting agreement with approximately $18,000 being charged to operations for the three months ended June 30, 2003. In February 2003, 100,000 of these warrants were exercised. In November 2003, the remaining 100,000 of these warrants were exercised under a cashless exercise and 45,544 shares of common stock were issued.

     On October 7, 2003, in conjunction with a consulting agreement, Emerson granted 50,000 warrants with immediate vesting and an exercise price of $5.00 per share. These warrants were valued using the Black-Scholes option valuation model, which resulted in $90,500 being charged to earnings during fiscal 2004. For the three months ending June 30, 2004, no expense was charged to operations for these warrants. As of June 30, 2004, these warrants had not been exercised.

NOTE 5 — INVENTORY

     Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method for the consumer electronics segment and the average cost method is used for the sporting goods segment. As of June 30, 2004 and March 31, 2004, inventories consisted of the following (in thousands):

	June 30, 2004			March 31, 2004
	(Unaudited)
Raw materials	$	1,196		$	1,138
Work-in-process		81			67
Finished		56,690			48,878
		57,967			50,083
Less inventory allowances		(3,062	)		(3,086	)
	$	54,905		$	46,997

NOTE 6 — INCOME TAXES

     We have tax 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 15 to 20 years. Although realization is not assured, we believe it is more likely than not that all of the net deferred tax assets will be realized through tax planning strategies

8

available in future periods and through future profitable operating results. The amount of the deferred tax asset considered realizable, however, could be reduced or eliminated if certain tax planning strategies are not successfully executed or estimates of future taxable income during the carryforward period are reduced. If we determine that we 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.

     At June 30, 2004, approximately $20.4 million of deferred tax assets were reported on our balance sheet.

NOTE 7 — RELATED PARTY TRANSACTIONS

     Effective March 1997, Emerson entered into a Management Services Agreement with SSG, under which each company provides various managerial and administrative services to the other company for fees at terms which reflect arms length transactions. These charges have been eliminated in consolidation, but are reflected in the segment information presented in Note 10.

NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS

     In June 2001, the Financial Accounting Standards Board issued Statement No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 142 requires that goodwill not be amortized but instead be tested for impairment at least annually by reporting unit. As a result of adopting SFAS 142, we ceased recording amortization of goodwill on April 1, 2002.

     As of June 30, 2004, estimated amortization expense of other intangible assets for each of the next five years is as follows (in thousands):

2005	$	445
2006		445
2007		374
2008		280
2009		207
Thereafter		3,301
	$	5,052

NOTE 9 — BORROWINGS

     As of June 30, 2004 and March 31, 2004, short-term borrowings consisted of the following (in thousands):

9

	June 30, 2004		March 31, 2004
	(Unaudited)
Foreign bank loan	$	3,431	$	4,762

     As of June 30, 2004 and March 31, 2004, long-term borrowings consisted of the following (in thousands):

	June 30, 2004		March 31, 2004
	(Unaudited)
Consumer Electronics Segment Revolver (Revolver A)	$	17,500	$	8,000
Sporting Goods Segment Revolving line of credit (Revolver B)		4,201		6,972
Equipment notes and other		62		113
		21,763		15,085
Less current maturities		35		58
Long term debt and notes payable	$	21,728	$	15,027

     Revolver A - The Borrowing Base amount on Revolver A loan is established by specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.50% to 1.25% or, at Emerson’s election, LIBOR plus 2.00% to 2.75% depending on certain financial covenants. This agreement provides for revolving loans which cannot exceed the lesser of $25 million or a “Borrowing Base” amount based upon specified percentages of eligible accounts receivables and inventories. Pursuant to the Loan Agreement as amended, Emerson is restricted from, among other things, paying certain cash dividends, repurchasing its common stock and entering into certain transactions without the lender’s prior consent and are subject to certain net worth and leverage financial covenants. Amounts outstanding under the Loan Agreement are secured by substantially all of Emerson’s tangible assets. As of June 30, 2004 Emerson was in compliance with the covenants contained in the Loan Agreement.

     Revolver B - During the quarter ending December 31, 2003, SSG amended its Loan and Security Agreement to finance its working capital requirements through October 31, 2007. Under this amendment, SSG’s line of credit was reduced from $25 million to $20 million; its LIBOR borrowing rates were reduced from 2.5% to 2.25%; and its inventory and accounts receivable borrowing advance rates were increased. This agreement provides for revolving loans and letters of credit which, in the aggregate, cannot exceed the lesser of $20 million or a “Borrowing Base” amount based upon specified percentages of eligible accounts receivables and inventories. Amounts outstanding under the senior credit facility are secured by substantially all the assets of SSG and its subsidiaries. Pursuant to the loan documents governing this line of credit, SSG is restricted from, among other things, paying cash dividends

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and entering into certain transactions without the lender’s prior consent and is required to maintain certain net worth levels. As of June 30, 2004, SSG was in compliance with the covenants.

     As of June 30, 2004, the carrying value of these credit facilities approximated fair value.

NOTE 10 — SEGMENT INFORMATION

     The following table presents certain operating segment information for each of the three months ended June 30, 2004 and 2003 (in thousands):

	Three Months Ended				Three Months Ended
	June 30, 2004				June 30, 2003
	Consumer				Consumer
	Electronics		Sporting Goods		Electronics			Sporting Goods
	(Unaudited)				(Unaudited)
Net revenues from external customers	$	47,826	$	25,104	$	31,650		$	22,521
Income (loss) before income taxes and discontinued operations	$	1,514	$	1,237	$	(637	)	$	130
Segment assets	$	85,359	$	42,575	$	84,346		$	53,368

NOTE 11 — LEGAL PROCEEDINGS

Putative Class Actions

     Between September 4, 2003 and October 30, 2003, several putative class action lawsuits were filed in the United States District Court for the District of New Jersey against Emerson and Messrs. Geoffrey Jurick, Kenneth Corby and John Raab (the “Individual Defendants”) on behalf of purchasers of our publicly traded securities who bought shares between January 29, 2003 and August 12, 2003 (the “Class Period.”) On December 17, 2003, the Court entered a Joint Stipulation and Order consolidating these putative class actions under the caption In Re Emerson Radio Corp. Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation and Order, lead plaintiff was appointed and co-lead counsel and co-liaison counsel were approved by the Court in the Consolidated Action. Consistent with the Stipulation and Order, the plaintiffs filed an Amended Consolidated Complaint (the “Amended Complaint”) that, among other things, added Jerome Farnum, one of Emerson’s directors, as a defendant in the litigation.

     Generally, the Amended Complaint alleges that Emerson and the Individual Defendants violated Sections 10(b) and 20(a) of the Securities

11

Exchange Act of 1934, and Rule 10b-5 promulgated there under, by (i) issuing certain positive statements during the Class Period regarding our ability to replace lost revenues attributable to our Hello Kitty^® license and (ii) omitting to disclose that Emerson suffered allegedly soured relationships with its largest retail customers. The Amended Complaint further alleges that these statements were materially false and misleading when made because Emerson allegedly misrepresented and omitted certain adverse facts which then existed and disclosure of which was necessary to make the statements not false and misleading. Emerson, and the Individual Defendants intend to defend the lawsuit vigorously.

Other Matters

     The Company is a party to various other litigation matters, in most cases involving ordinary and routine claims incidental to its business. The Company cannot estimate with certainty its ultimate legal and financial liability with respect to such pending litigation matters. However, the Company believes, based on its examination of such matters, that its ultimate liability will not have a material adverse effect on its financial position, results of operations or cash flows.

NOTE 12 — DISCONTINUED OPERATIONS

     From July 2003 through October 2003, certain of SSG’s team dealer locations were closed. In November 2003, SSG sold all of the issued and outstanding capital stock of its wholly owned subsidiary, ATEC. These closures and sale of stock, and related discontinued operations resulted in a loss of approximately $5,000 for the three months ended June 30, 2003. The results of these transactions are included in discontinued operations in the accompanying Consolidated Statement of Operations for the three months ended June 30, 2004 and 2003. (See Note 1)

     The following table summarizes the results of these discontinued operations, net of related income taxes, as applicable (in thousands). (See Note 6)

	Three Months Ended
	June 30, 2004		June 30, 2003
Net revenues-ATEC	$	—	$	2,290
Net revenues-Team Dealers		—		1,393
Net revenues-total		—		3,683
Income from operations — ATEC	$	—	$	116
Loss from operations — Team Dealers		—		(121	)
Total discontinued operations, net of tax	$	—	$	(5	)

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Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

     Management’s Discussion and Analysis of Results of Operation is presented in three parts: consolidated operations, the consumer electronics segment and the sporting goods segment.

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

     Special Note: Certain statements set forth below constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. See Item 1 — “Business Forward-Looking Statements.”

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

Consolidated Operations:

     The following table sets forth, for the periods indicated, certain items related to our consolidated statements of operations as a percentage of net revenues for the three months ended June 30, 2004 and 2003. A detailed discussion of the material changes in operating results is set forth under the discussion of our two operating segments: consumer electronics and sporting goods.

	Three Months Ended
	June 30
	2004			2003
	(Unaudited)
Net revenues (in thousands)	$	72,930		$	54,171
		100.0	%		100.0	%
Cost of sales		78.2	%		79.3	%
Other operating costs and expenses		2.1	%		2.3	%
Selling, general and administrative expenses		14.8	%		17.2	%
Acquisition costs		(0.1	%)		1.2	%
Stock based costs		—			0.1	%
Operating income (loss)		5.0	%		(0.1	%)
Interest expense		0.4	%		0.7	%
Minority interest in net income of consolidated subsidiary		(0.8	%)		(0.1	%)
Provision (benefit) for income taxes		1.3	%		(0.1	%)
Loss from discontinued operations, net of tax		—			—
Net income (loss)		2.5	%		(0.8	%)

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Net Revenues — Consolidated net revenues for the three months ended June 30, 2004 increased $18.8 million, or 34.6%, to $72.9 million from $54.1 million as compared to the same period ended June 30, 2003. The increase is attributable to a $16.2 million increase in net revenues for the consumer electronics segment, and a $2.6 million increase in net revenues for the sporting goods segment, due primarily to increases in units sold in both segments.

Cost of Sales — Cost of sales, as a percentage of consolidated net revenues, decreased to 78.2% for the three months ending June 30, 2004 from 79.3% for the same period ending June 30, 2003. The decrease in cost of sales as a percentage of net revenues for the three month period was primarily the result of higher margins in both the consumer electronics and sporting goods segments. In absolute terms, cost of sales increased to $57.0 million from $43.0 million ($14.0 million or 32.7%) for the three months of fiscal 2005 as compared to the same period in fiscal 2004. The increase is due to a $12.8 million increase in the consumer electronics segment and a $1.2 million increase in the sporting goods segment, due to higher revenues in both segments.

Other Operating Costs and Expenses — Other operating costs and expenses are associated with the consumer electronics segment. As a percentage of consolidated net revenues, other operating costs and expenses decreased to 2.1% from 2.3% for the three months ended June 30, 2004 compared to the same period in fiscal 2004. In absolute terms, other operating costs and expenses increased to $1.6 million from $1.3 million ($297,000 or 23.7%) for the three months of fiscal 2005 as compared to the same period in fiscal 2004.

Selling, General and Administrative Expenses (“S,G&A”) — S,G&A, as a percentage of consolidated net revenues, were 14.8% for the three months ended June 30, 2004 as compared to 17.2% for the three months ended June 30, 2003, since certain of these expenses are fixed and do not vary directly with sales volume. In absolute terms, S,G&A increased to $10.8 million from $9.3 million ($1.5 million or 15.5%) for the three month period ended June 30, 2004 as compared to the same period in fiscal 2004. The increase for the first quarter of fiscal 2005 is due to a $1.2 million increase in the consumer electronics segment, and a $.3 million increase in the sporting goods segment.

Acquisition Costs — Acquisition costs are associated with the consumer electronics segment. Adjustments to acquisitions costs incurred in the fourth quarter of fiscal 2004 were made in the first quarter of fiscal 2005, resulting in a reduction in such costs of $71,000, as compared to $643,000 of costs for (1.2% of consolidated net revenues) the three months ended June 30, 2003, a decrease of approximately $714,000.

Stock Based Costs — Stock based costs are associated with the consumer electronics segment and relate to the cost of warrants previously issued

14

in exchange for consulting services incurred during the three months ended June 30, 2004.

Interest Expense, Net — Interest expense decreased $128,000 (30.3%) to $294,000 (0.4% of consolidated net revenues) for the three months ended June 30, 2004 from $422,000 (0.7% of consolidated net revenues) for the three months ended June 30, 2003. The decrease in interest expense was a result of lower average borrowings and lower borrowing costs in both segments.

Minority Interest in Net Income of Consolidated Subsidiary — Minority interest in net income of consolidated subsidiary represents that portion of the sporting goods segment net income for the three months ended June 30, 2004 and 2003 that was not included in the consolidated statements of operations. (See Note 1)

Provision for Income Taxes — The provision for income taxes increased $1.0 million to $946,000 (1.3% of consolidated net revenues) for the three months ended June 30, 2004 from a benefit of $67,000 (less than 0.1% of consolidated net revenues) for the three months ended June 30, 2003. The increase in the provision for income taxes was primarily due to an increase in pre-tax profit in the consumer electronics segment.

Loss from Discontinued Operations — From July through October, SSG ceased operations of several of its Team Dealer locations. In November 2003, SSG sold all of the issued and outstanding shares of capital stock of its wholly owned subsidiary — ATEC. There were no amounts recorded for these operations (the “discontinued operations”) for the three months ended June 30, 2004 as compared to a loss of approximately $5,000 for the same period of fiscal 2004.

Net Income (Loss) — As a result of the foregoing factors, we earned net income of approximately $1.8 million (2.5% of consolidated net revenues) for the three months ended June 30, 2004 as compared a net loss of approximately $445,000 (0.8% of consolidated net revenues) for the three months ended June 30, 2003.

Consumer Electronics Segment:

The following table summarizes certain financial information relating to the consumer electronics segment for the three months ended June 30, 2004 and 2003 (in thousands):

15

	Three Months Ended
	June 30
	2004			2003
	(Unaudited)
Net revenues	$	47,826		$	31,650
Cost of sales		39,409			26,615
Other operating costs and expenses		1,553			1,256
Selling, general & administrative		4,580			3,423
Acquisition costs		(71	)		643
Stock based costs		—			18
Operating income (loss)		2,355			(305	)
Interest expense, net		235			278
Income (loss) before income taxes		2,120			(583	)
Provision (benefit) for income taxes		946			(136	)
Net income (loss)	$	1,174		$	(447	)

Net Revenues — Net revenues for the three months ended June 30, 2004 increased $16.2 million, or 51.1%, to $47.8 million from $31.6 million for the three months ended June 30, 2003. Consumer electronics net revenues are comprised of Emerson branded product sales, themed product sales and licensing revenues. Emerson branded product sales are earned from the sale of products bearing the Emerson or HH Scott brand name; themed product sales represent products sold bearing a certain theme or character; and licensing revenues are derived from licensing the Emerson and HH Scott brand names to licensees for a fee. The increase in net revenues for the three months ended June 30, 2004 was comprised of:

i)	An increase in revenues from the sale of Emerson branded product of $15.1 million, or 53.4%, to $43.3 million in the first quarter of fiscal 2005 from $28.2 million in the first quarter of fiscal 2004. Increased orders from our primary customers associated with an overall improving economy contributed to the increases in Emerson branded product sales.
ii)	An increase in themed product sales of approximately $280,000, or an 89.5% increase to $590,000 in the first quarter of fiscal 2005 as compared to $310,000 for the first quarter of fiscal 2004. The increase was due to the continued introduction of Nickelodeon themed products.
iii)	Licensing revenues increased by approximately $900,000, or 26.9%, for the first quarter of fiscal 2005 to $4.0 million compared to $3.1 million for the first quarter of fiscal 2004, primarily due to increased sales volumes from our video licensing agreements.

Cost of Sales — Cost of sales for the three months ended June 30, 2004 increased $12.8 million (48.1%) to $39.4 million from $26.6 million for

16

the three months ended June 30, 2003. In relative terms, cost of sales for the three months ended June 30, 2004 decreased to 82.4% of consumer electronics net revenue as compared to 84.1% for the same period in fiscal 2004. The decrease in cost of sales in relative terms is primarily due to increased license revenue.

Gross profit margins continue to be subject to competitive pressures arising from lower pricing of the product categories in the consumer electronics market in which Emerson competes. Emerson’s branded products are generally placed in the low-to-medium priced category of the market.

Other Operating Costs and Expenses- Other operating costs and expenses, as a percentage of consumer electronics net revenues, decreased to 3.3% in the June quarter of fiscal 2005 as compared to 4.0% for the same period in fiscal 2004. In absolute terms, other operating costs and expenses increased to $1.6 million from $1.3 million ($297,000 or 23.7%) for the three months ended June 30, 2004 as compared to the same period in fiscal 2004. This increase in absolute terms was primarily due to increased net revenues.

Selling, General and Administrative Expenses (“S,G&A”) — S,G&A, increased approximately $1.2 million, or 33.8%, to $4.6 million (9.6% of the consumer electronics net revenues) from $3.4 million (10.8% of the consumer electronics net revenues) for the three months ended June 30, 2004 as compared to the same period ended June 30, 2003. The increase in absolute terms for the three months ended June 30, 2004, resulted from increases in advertising expenses of approximately $250,000; professional fees of approximately $400,000, freight expenses of $142,000, travel related costs of $106,000 and increases in various other S,G&A accounts.

Acquisition Costs — Acquisition costs incurred in the fourth quarter of fiscal 2004 were adjusted in the first quarter of fiscal 2005, resulting in a reduction of such costs of $71,000, as compared to $643,000 of costs incurred for the three months ended June 30, 2003. These costs were associated with acquisition transactions not completed in fiscal 2004.

Stock Based Costs — Stock Based Costs, which relate to the cost of warrants issued in exchange for consulting services, decreased by approximately $18,000 for the three months of fiscal 2005 as compared to the same period in fiscal 2004.

Interest Expense, net — Interest expense decreased by approximately $43,000, or 15.5%, to $235,000 (0.5% of the consumer electronics net revenues) for the three months ended June 30, 2004, from $278,000 (0.9% of the consumer electronics net revenues) for the three months ended June 30, 2003. The decrease in interest expense was the result of lower average borrowings.

Provision for Income Taxes — The provision for income taxes was approximately $946,000 (2.0% of the consumer electronics net revenue) compared to a benefit of approximately $136,000 for the three months ended

17

June 30, 2003. The increase in the provision for income taxes for the three months ended June 30, 2004 was the result of the pre-tax profit as compared to a pre-tax loss during the same period in the prior fiscal year.

Net Income (Loss) — As a result of the foregoing factors, the consumer electronics segment earned net income of $1.2 million (2.5% of net consumer revenues) for the three months ended June 30, 2004 as compared to a net loss of $447,000 (1.4% of net consumer revenues) for the three months ended June 30, 2003.

Sporting Goods Segment:

     The following table summarizes certain financial information relating to the sporting goods segment as reported by SSG for the three months ended June 30, 2004 and 2003 (in thousands):

	Three Months Ended June 30
	2004		2003
	(Unaudited)
Net revenues	$	25,104	$	22,521
Cost of sales		17,625		16,352
Selling, general & administrative		6,183		5,895
Operating income		1,296		274
Interest expense, net		59		144
Income before income taxes & discontinued operations		1,237		130
Provision for income taxes		—		69
Loss from discontinued operations		—		(5	)
Net income	$	1,237	$	56

Net Revenues — Net revenues for the three month period ended June 30, 2004 increased $2.6 million, or 11.5%, to $25.1 million from $22.5 million for the three month period ended June 30, 2003. The increase in net revenues was primarily the result of previously implemented sales and marketing programs, which increased unit volume, as well as having three additional shipping days in the current quarter as compared to the same quarter in the previous year due to a change in the fiscal year for the sporting goods segment.

Cost of Sales — Cost of sales for the three month period ended June 30, 2004 increased $1.3 million, or 7.8%, to $17.6 million from $16.3 million for the three month period ended June 30, 2003. As a percentage of net revenues, cost of sales decreased to 70.2% for the three month period ended June 30, 2004, as compared to 72.6% for the same period in fiscal 2004. The decrease in cost of sales as a percentage of net revenues for

18

the three month period was primarily the result of efficiencies gained through improved product procurement and product mix.

Selling, General and Administrative Expenses (“S,G&A”) — S,G&A expenses for the three month period ended June 30, 2004 increased approximately $288,000, or 4.9%, to $6.2 million from $5.9 million for the three month period ended June 30, 2003. As a percentage of net revenues, SG&A decreased to 24.6% for the three month period ended June 30, 2004 from 26.2% for the same period in fiscal 2004. The increase in SG&A for the three month period was primarily a result of an increase in payroll related expenses of approximately $174,000 and an increase in selling and promotional expenses of approximately $130,000.

Interest Expense, net — Interest expense decreased by approximately $85,000, or 59.0%, to $59,000 for the three month period ended June 30, 2004, as compared to $144,000 for the same period in the prior year.

Provision for Income Taxes — For the three month period ended June 30, 2004, SSG recorded no income tax provision due to the existence of prior net operating losses to offset current income, and no change in managements’ estimate of the extent to which deferred tax assets are realizable. (See Note 6)

Loss from Discontinued Operations — Discontinued operations reflect net operating losses related to our discontinued and sold team dealer operations, and the net income from and net gain on the sale of SSG’s ATEC subsidiary for the three month period ended June 30, 2003. (See Note 12)

Net Income — As a result of the foregoing factors, the sporting goods segment earned net income of approximately $1,237,000 for the three months ended June 30, 2004 as compared to approximately $56,000 for the three months ended June 30, 2003.

Liquidity and Capital Resources

     As of June 30, 2004, we had cash and cash equivalents of approximately $4.1 million compared to approximately $6.4 million at March 31, 2004. Working capital increased to $57.5 million at June 30, 2004 as compared to $46.8 million at March 31, 2004. The decrease in cash and cash equivalents of approximately $2.3 million was primarily due to operating activities, partially offset by financing activities.

     Operating cash flow used in continuing operating activities was approximately $7.5 million for the three months ended June 30, 2004. Cash was primarily used for increases in inventory and accounts receivable.

     Net cash used by investing activities was approximately $167,000 for the three months ended June 30, 2004, which consisted primarily of computer and office equipment fixed asset acquisitions.

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     Net cash provided from financing activities was approximately $5.3 million for the three months ended June 30, 2004, due primarily to the net increase in long-term borrowings.

     Emerson and SSG maintain credit facilities as described in Note 9 to our consolidated financial statements — Borrowings. At June 30, 2004, there were approximately $21.7 million of borrowings outstanding under these facilities and no letters of credit outstanding. Approximately $17.5 million of borrowings were outstanding under the Emerson Loan Agreement and $4.2 million of borrowings were outstanding under the SSG Loan Agreement. At June 30, 2004, Emerson and SSG were in compliance with the covenants in each of the loan agreements.

     Our foreign subsidiaries maintain various credit facilities, aggregating $75.0 million, consisting of the following:

• two letter of credit facilities totaling $15.0 million which is used for inventory purchases; and

• three back-to-back letter of credit facilities totaling $60 million.

     At June 30, 2004, our Hong Kong subsidiary pledged approximately $3.6 million in certificates of deposit to this bank to assure the availability of the $15.0 million credit facilities. At June 30, 2004, there were approximately $12.6 million of letters of credit outstanding under these credit facilities. These letter of credit facilities require the foreign subsidiary to meet a net worth covenant which was complied with at June 30, 2004.

     At present, we believe that future cash flow from operations and our existing institutional financing noted above will be sufficient to fund all of our cash requirements for the next twelve months.

     The following summarizes our obligations at June 30, 2004 for the periods shown (in thousands):

	Payment due by period
			Less than 1						More than 5
	Total		year		1 - 3 years		3 - 5 years		year
Notes Payable	$	21,701	$	—	$	17,500	$	4,201	$	—
Capital lease obligations		62		35		27		—		—
Leases		7,584		2,378		3,714		1,492		—
Total	$	29,347	$	2,413	$	21,241	$	5,693	$	—

     There were no material capital expenditure commitments and no substantial commitments for purchase orders outside the normal purchase orders used to secure product as of June 30, 2004.

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Critical Accounting Policies

     For the three month period ended June 30, 2004, there were no significant changes to our accounting policies from those reported in our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

Inflation, Foreign Currency, and Interest Rates

     Neither inflation nor currency fluctuations had a significant effect on our results of operations during the first quarter of fiscal 2005. Our 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 consumer electronics segment purchases virtually all of its products from manufacturers located in various Asian countries.

     The interest on borrowings under our credit facilities is based on the prime and LIBOR rate. We believe that given the present economic climate, interest rates, while expected to rise, are not expected to increase significantly during the coming year.

Forward-Looking Information

     This report contains various forward-looking statements made pursuant to the safe harbor provisions 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. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect”, “predict”, “project”, and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date hereof, and should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including the statements under “Risk Factors” set forth in our Form 10-K for the fiscal year ended March 31, 2004 and other filings with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly release the results on any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

     We make available through our internet website free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to such reports and other filings made by us with the SEC, as soon as practicable after we electronically file such reports and filings with the SEC. Our website address is

21

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     There have been no significant changes from items disclosed in Form 10-K for the fiscal year ended March 31, 2004.

Item 4. Controls and Procedures

(a) Disclosure controls and procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

(b) Changes in internal controls over financial reporting.

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

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings.

Putative Class Actions

     Between September 4, 2003 and October 30, 2003, several putative class action lawsuits were filed in the United States District Court for the District of New Jersey against Emerson and Messrs. Geoffrey Jurick, Kenneth Corby and John Raab (the “Individual Defendants”) on behalf of purchasers of our publicly traded securities who bought shares between January 29, 2003 and August 12, 2003 (the “Class Period.”) On December 17, 2003, the Court entered a Joint Stipulation and Order consolidating these putative class actions under the caption In Re Emerson Radio Corp. Securities Litigation, 03cv4201 (JLL) (the “Consolidated Action.”) Further to that Stipulation and Order, lead plaintiff was

22

appointed and co-lead counsel and co-liaison counsel were approved by the Court in the Consolidated Action. Consistent with the Stipulation and Order, the plaintiffs filed an Amended Consolidated Complaint (the “Amended Complaint”) that, among other things, added Jerome Farnum, one of Emerson’s directors, as a defendant in the litigation.

     Generally, the Amended Complaint alleges that Emerson and the Individual Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated there under, by (i) issuing certain positive statements during the Class Period regarding our ability to replace lost revenues attributable to our Hello Kitty^® license and (ii) omitting to disclose that Emerson suffered allegedly soured relationships with its largest retail customers. The Amended Complaint further alleges that these statements were materially false and misleading when made because Emerson allegedly misrepresented and omitted certain adverse facts which then existed and disclosure of which was necessary to make the statements not false and misleading. Emerson, and the Individual Defendants intend to defend the lawsuit vigorously.

     For other information on litigation to which the Company is a party, reference is made to Part 1 Item-3-Legal Proceedings in our most recent annual report on Form 10-K.

ITEM 2. Changes in Securities and Use of Proceeds.

     None.

Share Repurchases:

     For the quarter ending June 30, 2004, we did not repurchase any shares under the 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 June 30, 2004 quarter, we repurchased 1,111,625 shares under this program. As of June 30, 2004, the maximum number of shares that are available to be repurchased under Emerson Radio Corp’s common share repurchase program was 888,375.

ITEM 3. Default Upon Senior Securities.

(a)	None
(b)	None

ITEM 4. Submission of Matters to a Vote of Security Holders.

         None

23

ITEM 5. Other Information.

        None

ITEM 6. Exhibits and Reports on Form 8-K.

(a)	Exhibits:
10.27.3	Amendment to Revolving Credit and Term Loan Agreement (Number Three) and Waiver dated June 28, 2004, among Emerson Radio Corp., Majexco Imports, Inc., Emerson Radio (Hong Kong) Ltd., and Emerson Radio international Ltd. Jointly and Severally, and PNC Bank, National Association.*
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.*
(b)	Reports on Form 8-K:
	Current report on Form 8-K, dated June 29, 2004, furnishing the press release announcing the Company’s financial results for the year ended March 31, 2004.

* filed herewith

24

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 5, 2004	/s/ Geoffrey P. Jurick
	Geoffrey P. Jurick
	Chairman of the Board,
	Chief Executive Officer and President
	(Principal Executive Officer)
Date: August 5, 2004	/s/ Kenneth A. Corby
	Kenneth A. Corby Executive Vice President and
	Chief Financial Officer
	(Principal Finance and
	Accounting Officer)

25

EX-10.27.3

                                                                 Exhibit 10.27.3

                          AMENDMENT TO REVOLVING CREDIT
                     AND TERM LOAN AGREEMENT (NUMBER THREE)
                                   AND WAIVER

      This AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (NUMBER THREE)
AND WAIVER dated as of June 28, 2004 (the "Amendment"), amends that certain
Revolving Credit and Term Loan Agreement dated as of June 28, 2002, as amended
by that certain Amendment to Revolving Credit and Term Loan Agreement (Number
One) dated as of November 7, 2003 ("Amendment Number One"), and as further
amended by that certain Amendment to Revolving Credit and Term Loan Agreement
(Number Two) dated as of December 31, 2003 ("Amendment Number Two") (said loan
agreement, as so amended, the "Loan Agreement") by and among EMERSON RADIO CORP.
("ERC US"), a Delaware corporation, MAJEXCO IMPORTS, INC. ("MI"), a California
corporation, EMERSON RADIO (HONG KONG) LIMITED ("ER HONG KONG") a Hong Kong
corporation, and EMERSON RADIO INTERNATIONAL LTD. ("ER BVI"), a British Virgin
Islands company, jointly and severally as co-borrowers and co-obligors, except
as expressly set forth herein in Section 10.8 hereof (individually and
collectively, the "Borrower"), PNC BANK, NATIONAL ASSOCIATION and each other
lender signatory hereto or which becomes a Lender pursuant to Section 9.1 (each
a "Lender" and, collectively, the "Lenders") and PNC BANK, NATIONAL ASSOCIATION
as agent for the Lenders (in such capacity, the "Agent").

                              W I T N E S S E T H:

      A.    Pursuant to the Loan Agreement, the Lenders provided the Borrower a
revolving credit facility and a term loan as described in the Loan Agreement.

      B.    The Borrower has informed the Agent and the Lenders that is has
failed to comply with the Fixed Charge Coverage Ratio set forth in Section 6.12
of the Loan Agreement for the four consecutive fiscal quarters ending March 31,
2004, and as a result of which an Event of Default has occurred under the Loan
Agreement (the "Specified Default").

      C.    The Borrower has requested that the Agent and the Lenders waive
Specified Default and amend the Fixed Charge Coverage Ratio set forth in said
Section 6.12.

      D.    The Agent and the Lenders are willing to so waive and amend, subject
to, and in accordance with, the terms and conditions set forth herein.

      E.    The Borrower has further requested certain modifications to the
Borrowing Base and certain of the other financial covenants set forth in the
Loan Agreement (in each case as more fully described below) and the Agent and
the Lenders are willing to so modify the Loan Agreement subject to, and in
accordance with, the terms and conditions set forth herein.

      NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth herein, and for value received by each party, the parties
hereto agree as follows:

      1. Definitions. Unless otherwise defined or modified herein, capitalized
terms used herein shall have the meanings set forth in the Loan Agreement.



      2. Amendments to Loan Agreement. Subject to the satisfaction of the
conditions to effectiveness set forth in Section 7 below, the Loan Agreement
shall be amended as follows:

            (a) The defined term "Borrowing Base" and "Consolidated EBITDA" set
forth in Section 1.1 of the Loan Agreement are hereby amended and restated in
their entirety to read as follows:

            "Borrowing Base" means an amount equal to (A) the sum of (x) 80% of
      the value of Eligible Receivables of ERC US for the most recently ended
      Calculation Period (excluding therefrom in all cases the Special
      Receivables) plus (y) 55% of the value of the Special Receivables of ERC
      US for the most recently ended Calculation Period plus (z) the lesser of
      (i) 55% (or such greater percentage as the Required Lenders may approve
      with respect to any Calculation Period) of the aggregate value of unsold
      Eligible Inventory of ERC US and MI for the most recently ended
      Calculation Period, (ii) 85% (or such greater percentage as the Required
      Lenders may approve with respect to any Calculation Period) of the Net
      Recovery Value and (iii) $15,000,000, during the period from and including
      January 1 to and including March 31 in each calendar year and $18,000,000,
      during the period from and including April 1 to and including December 31
      in each calendar year, less (B) (x) the Rental Reserve until the Agent
      shall have received landlord/warehousemen waivers as required by Section
      5.13 in form and substance satisfactory to the Agent from all Persons
      providing warehouse and leasehold premises to ERC US, (y) the amount of
      the California unitary tax assessed against ERC US (and all penalties,
      interest and other amounts payable with respect thereto) in the event a
      Lien is filed with respect to such tax by any Governmental Authority so
      long as such tax is not paid (provided if ERC US enters into an agreement
      with the relevant Governmental Authority assessing such tax in form and
      substance satisfactory to the Required Lenders with respect to a schedule
      for payment of such assessed tax (and any penalties, interest or other
      amounts payable with respect thereto), the amount reserved with respect to
      such assessed tax shall be limited to all payments under such agreement
      due prior to the second anniversary of any date of determination so long
      as ERC US is not in breach of such agreement and no proceedings have been
      initiated to enforce or foreclose upon the Lien with respect thereto), (z)
      at any time during the period from and including January 1st to and
      including March 31st in each year, an amount equal to 10% of the net
      accounts receivable reflected on the then most recent Borrowing Base
      Certificate delivered with respect to such period, and (aa) such
      additional reserves as Agent shall deem appropriate in its reasonable
      business judgment in the event the inventory of any Person constituting
      the Borrower is underinsured (in Agent's reasonable business judgment) by
      the insurance in force pursuant to Section 5.5. If the Required Lenders
      shall have approved a change in any percentage used in determining the
      Borrowing Base for any Calculation Period, they shall have no further or
      future obligation to do so with respect to any other Calculation Period."

            "Consolidated EBITDA" means, for any fiscal period, (a) Consolidated
      Net Income (Loss) for such period less upward adjustments to deferred tax
      assets which increase earnings as reflected on the profit and loss
      statement of ERC US plus, (b) the sum of (i) downward adjustments to
      deferred tax assets which decrease earnings as reflected on ERC US' profit
      and loss statement, (ii) other non-cash charges related to changes in
      GAAP, (iii) Consolidated Interest Expense, (iv) depreciation, (v)
      amortization

                                       2


      of intangible assets, (vi) federal, state, local and foreign income taxes
      and (vii) the non-recurring expenses related to the unconsummated
      acquisitions referred to as the "Recoton" and "Altec Lansing" transactions
      in an amount not to exceed $1,420,000 for the fiscal quarter ending June
      30, 2004, $1,425,000 for the fiscal quarter ending September 30, 2004,
      $957,000 for the fiscal year quarter ending December 31, 2004, and -$0-
      (zero dollars) for all fiscal periods ending thereafter; all as computed
      and calculated in accordance with GAAP."

            (b) There shall be added to Section 1.1 of the Loan Agreement a new
defined term "Special Receivables", in its appropriate alphabetical order, that
shall read as follows:

            "Special Receivables" all account receivables of ERC US so
      designated by the Agent in its reasonable discretion due to the level of
      dilution with respect to payments due thereunder (as is currently the case
      with accounts receivable due from "Walmart" and "Target"), but are
      otherwise Eligible Receivables. In addition to the accounts receivables in
      which "Walmart" and "Target" are the account debtors, the Agent reserves
      the right to designate otherwise Eligible Receivables to be Special
      Receivables from time to time in its reasonable discretion.

            (c) Section 6.12 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

            "Section 6.12. Fixed Charge Coverage Ratio. Permit the Fixed Charge
      Coverage Ratio for the period of four consecutive fiscal quarters
      preceding any date of determination to be less than 1.25 to 1 for all such
      fiscal periods ending prior to June 30, 2004, and 2.00 to 1.00 for all
      such fiscal periods ending on and after June 30, 2004; provided, however,
      that all principal payments on the Term Loans during the period commencing
      April 1, 2003 and ending March 31, 2004 (whether regularly scheduled
      pursuant to Section 2.6(b) of the Loan Agreement or as a mandatory
      prepayment pursuant to Section 2.9(e) of the Loan Agreement) shall be
      excluded from calculation of the Fixed Charge Coverage Ratio."

            (d) Section 6.13 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

            "Section 6.13. Senior Funded Debt to EBITDA. (a) Permit the ratio of
      Senior Funded Debt of ERC US and its consolidated Subsidiaries to
      Consolidated EBITDA for the period of four consecutive fiscal quarters
      preceding any date of determination to be greater than: 2.50 to 1.0;
      except in the case of said fiscal period ending September 30, 2004, in
      which case said ratio shall not be greater than 3.50 to 1.00.

            (b) Permit the ratio of Adjusted Funded Debt of ERC US and its
      consolidated Subsidiaries to Adjusted EBITDA for the period of four
      consecutive fiscal quarters preceding any date of determination to be
      greater than: 2.50 to 1.0, except in the case of said fiscal period ending
      September 30, 2004, in which case said ratio shall not be greater than
      3.50 to 1.00."

                                       3


      3. Waiver of Event of Default. The Borrower acknowledges that it has
violated Section 6.12 of the Loan Agreement by failing to maintain a Fixed
Charge Coverage Ratio of at least 1.10 to 1.00 for the four consecutive fiscal
quarters ending March 31, 2004. Subject to the satisfaction of the conditions
set forth in Section 7 below, the Lenders agree that such violation is waived
for the period ending March 31, 2004. The parties hereto agree that such waiver
shall be limited to the specific period and instance herein given, and shall not
prejudice any right or rights which any Lender now has or may have in the future
under the Loan Agreement or the other Loan Documents in the event of any other
breach or violation of any term, condition or covenant set forth in the Loan
Agreement or the other Loan Documents. Furthermore, the parties hereto agree
that such waiver shall in no event be construed as the establishment of a custom
or course of dealing among the Borrower, the Agent or the Lenders with respect
to any current or future issues of the Borrower's non-compliance with any term,
condition or covenant set forth in this Loan Agreement or the other Loan
Documents.

      4. Effects of Clarification. The Borrower acknowledges and agrees that the
amendments made pursuant to clauses (c) and (d) of Section 2 above have been
made to clarify existing certain financial covenants for the fiscal periods
therein specified and in no event shall be construed as the establishment of a
custom or course of dealing among the Borrower, the Agent or the Lenders with
respect to any current or future issue of the Borrower's non-compliance with any
term, condition or covenant set forth in this Loan Agreement or the other Loan
Documents. Furthermore, notwithstanding the amendment and restatement of Section
6.12 of the Loan Agreement pursuant to clause (c) of Section 2 above, the
adjustments to the Fixed Charge Coverage Ratio set forth in Amendment Number One
and Amendment Number Two for the test periods ending March 31, 2004 and December
31, 2003 shall survive the execution and delivery of this Amendment.

      5. References to Loan Agreement. This Amendment is an amendment to the
Loan Agreement. Unless the context of this Amendment otherwise requires, the
Loan Agreement and this Amendment shall be read together and shall have effect
as if the provisions of the Loan Agreement and this Amendment were contained in
one agreement.

      6. Full Force and Effect. Except as expressly modified by this Amendment,
all of the terms and conditions of the Loan Agreement and the other Loan
Documents shall continue in full force and effect, and all parties hereto shall
be entitled to the benefits thereof. This Amendment is limited as written and
shall not be deemed (a) to be an amendment of or a consent under or waiver of
any other term or condition of the Loan Agreement, or (b) to prejudice any right
or rights which the Lender now has or may have in the future under or in
connection with the Loan Agreement or the other Loan Documents.

      7. Conditions. This Amendment shall not be effective until the following
conditions precedent have been fulfilled to the satisfaction of the Agent and
the Lenders: (i) the Agent shall have received counterparts of this Amendment
duly executed by each of the parties hereto, and (ii) the Borrower shall have
paid the Agent (for ratable distribution to the Lenders) a modification fee of
$10,000 in consideration of the modification to the Loan Agreement set forth
herein. In addition, the Borrower agrees to pay upon execution of this
Amendment, all reasonable costs and expenses of the Agent and each Lender,
including, without limitation, the

                                       4


legal fees incurred by the Agent's counsel in connection with the preparation,
negotiation, execution and delivery and review of this Amendment. In the event
Borrower does not remit such payment together with this executed Amendment, the
Borrower hereby authorizes the Agent, without notice to the Borrower, to charge
any account of the Borrower maintained by the Agent or its Affiliates in payment
of the amounts due under this Section 7.

      8. Estoppel; Representations and Warranties. In order to induce the
Lenders to enter into this Amendment, the Borrower makes the following
representations and warranties, which representations and warranties shall
survive the execution and delivery hereof:

      (a) each of the Loan Agreement, the Notes, the Security Documents and the
other Loan Documents are in full force and effect;

      (b) as amended hereby, each of the Loan Agreement, the Notes, the Security
Documents, the other Loan Documents and this Amendment have been duly
authorized, executed and delivered by the Borrower and constitute legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms;

      (c) the Borrower has no offset, defense or counterclaim with respect to
any of their obligations under the Loan Agreement, the Notes, the Security
Documents and the other Loan Documents (any such offset, defense or counterclaim
as may now exist being hereby irrevocably waived by the Borrower);

      (d) no material adverse change in the financial condition of the Borrower
has occurred since the date of its most recent financial statements delivered to
the Lender;

      (e) other than the Specified Default, no Event of Default has occurred and
is continuing under the Loan Agreement or the other Loan Documents, and no event
has occurred which, with notice, lapse of time or both, would constitute such an
Event of Default;

      (f) except as discussed on SCHEDULE "A", all of the representations made
by or on behalf of the Borrower in the Loan Agreement and the other Loan
Documents are true and correct on and as of the date hereof;

      (g) neither the execution and delivery of this Amendment by the Borrower,
nor consummation by the Borrower of the transactions contemplated herein, nor
compliance by the Borrower with the terms, conditions and provisions hereof will
conflict with or result in a breach of any of the terms, conditions or
provisions of (i) any Borrower's Certificate of Incorporation and By-Laws or
other organizational or governing document, (ii) any agreement or instrument to
which any Borrower is a party or by which the property of the Borrower is or may
be bound, (iii) any judgment or order, writ, injunction or decree of any court,
or (iv) any applicable law or governmental regulation; and

      (h) no action of, or filing with, any governmental or public body or
authority is required to authorize, or is otherwise required in connection with
the execution, delivery and performance of this Amendment by the Borrower.

      9. Security Interests. The Borrower confirms the validity and
effectiveness of the Security Documents made by the Borrower in favor of the
Agent (for the benefit of the Lenders) and confirms that the Security Documents
secures payment of the Obligations (as defined in the Security Documents).

                                       5


      10. Governing Law. This Amendment, including the validity thereof and the
rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by, the laws of the State of New Jersey without
regard to any conflicts of laws principles.

      11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all which when taken together shall constitute one and the same agreement.

      IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.

                                       BORROWERS:

                                       EMERSON RADIO CORP

                                       By: /s/ KENNETH A. CORBY
                                          ----------------------------
                                       Name: Kenneth A. Corby
                                       Title: E.V.P., CFO

                                       MAJEXCO IMPORTS, INC.

                                       By: /s/ KENNETH A. CORBY
                                          ----------------------------
                                       Name: Kenneth A. Corby
                                       Title: E.V.P., CFO

                                       EMERSON RADIO (HONG KONG) LIMITED

                                       By: /s/ GEOFFREY P. JURICK
                                          ----------------------------
                                       Name: Geoffrey P. Jurick
                                       Title: Chairman, CEO

                                       EMERSON RADIO INTERNATIONAL LTD.

                                       By: /s/ KENNETH A. CORBY
                                          ----------------------------
                                       Name: Kenneth A. Corby
                                       Title: Director

                                       6


                                       AGENT:

                                       PNC BANK, NATIONAL ASSOCIATION,
                                       as Agent

                                       By: /s/ JEFFREY A. BLAKEMORE
                                          ----------------------------
                                       Name: Jeffrey A. Blakemore
                                       Title: Senior Vice President

                                       LENDERS:

                                       PNC BANK, NATIONAL ASSOCIATION,
                                       as a Lender

                                       By: /s/ JEFFREY A. BLAKEMORE
                                          ----------------------------
                                       Name: Jeffrey A. Blakemore
                                       Title: Senior Vice President

                                       SOVEREIGN BANK,
                                       as a Lender

                                       By: /s/ CHRIS WOLFSLAYER
                                          ----------------------------
                                       Name: Chris Wolfslayer
                                       Title: Vice President

                                       7


                                  SCHEDULE "A"

      The following class action complaints have been filed in the US District
Court for the District of New Jersey and now consolidated as In re: Emerson
Radio Corp. Securities Litigation Civil Action Number 03-cv-4201 (JLL).

1.) Kaplan v. Emerson Radio Corp., et al., 03-cv-4202 (JLL)

2.) Pelone v. Emerson Radio Corp., et al., 03-cv-4201 (JLL)

3.) Howard v. Jurick, et al., 03-cv-4330 (WGB)

4.) Glascoff v. Emerson Radio Corp., et al., 03-cv-4506 (JLL)

5.) Stromer v. Emerson Radio Corp., et al., 03-cv-4647 (JLL)

6.) Kaplan v. Emerson Radio Corp., et al., 03-cv-4856

7.) Freitag v. Emerson Radio Corp., et al., 03-cv-5140

      The complaints allege violations of federal securities laws including 1)
against all defendants: Section 10(b) of the Exchange Act Against and Rule
10-b-5 promulgated thereunder, and 2) against all individual defendants: Section
20(a) of the Exchange Act.

                                      S-2

EX-31.1

Exhibit 31.1

Certification

Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002

I, Geoffrey P. Jurick, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Emerson Radio Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2004

/s/ Geoffrey P. Jurick

Chairman of the Board,

Chief Executive Officer and President

A signed original of this written statement required by Section 302 has been provided to Emerson Radio Corp. and will be retained by Emerson Radio Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

Certification

Pursuant to Section 302 of the Sarbanes — Oxley Act of 2002

I, Kenneth A. Corby, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Emerson Radio Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 5, 2004

/s/ Kenneth A. Corby

Executive Vice President and Chief

Financial Officer

A signed original of this written statement required by Section 302 has been provided to Emerson Radio Corp. and will be retained by Emerson Radio Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Emerson Radio Corp., (the “Company”) on Form 10-Q for the period ended June 30, 2004, filed with the Securities and Exchange Commission, Geoffrey P. Jurick, Chief Executive Officer, and Kenneth A. Corby, Chief Financial Officer, of the Company each hereby certifies pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

Dated: August 5, 2004

By:	/s/ Geoffrey P. Jurick
Geoffrey P. Jurick
Chief Executive Officer
By:	/s/ Kenneth A. Corby
Executive Vice President and
Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Emerson Radio Corp. and will be retained by Emerson Radio Corp. and furnished to the Securities and Exchange Commission or its staff upon request.