SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004______ _____________

For the transition period from_____________________ to____________________

Commission file number                       0-25226

EMERSON RADIO CORP.

(973) 884-5800

     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 November 4, 2004: 27,103,164.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

EMERSON RADIO CORP. AND SUBSIDIARIES

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

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

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EMERSON RADIO CORP. AND SUBSIDIARIES

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. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of the unaudited interim consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes; actual results could materially differ from those estimates.

     The 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 “Emerson_®” 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 11)

     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 September 30, 2004 and the results of operations for the three and six month periods ending September 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.

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     Due to the seasonal nature of both segments, the results of operations for the three and six month periods ending September 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 three and six months ended September 30, 2004 and 2003 is as follows:

NOTE 2 – COMPREHENSIVE INCOME

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

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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):

NOTE 4- SHAREHOLDERS’ EQUITY

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

     At September 30, 2004, Emerson had outstanding approximately 307,000 options with exercise prices ranging from $1.00 to $3.00 and SSG

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had outstanding approximately 571,000 options with exercise prices ranging from $0.95 to $9.44. Subsequent to September 30, 2004, 425,000 options with exercise prices ranging from $2.97 to $3.26 were granted pursuant to the 2004 Emerson Employee Stock Incentive Plan.

     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. 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. The warrants were valued using the Black-Scholes valuation model and were charged to earnings over the related service period of the consulting agreement with approximately $6,000 and $24,000 being charged to operations for the three and six months ended September 30, 2003, respectively. Since the warrants were fully exercised in fiscal 2004, no expense was charged for these warrants in the current year.

     In September 2003, the Company publicly announced the Emerson Radio Corp. common stock repurchase program. The program provides for share repurchase of up to 2,000,000 shares of Emerson’s outstanding common stock. As of September 30, 2004, the Company had repurchased 1,111,625 shares under this program, including no repurchases in the six month period ending September 30, 2004. During the quarter ended September 30, 2004, there were no shares repurchased under this program. Repurchase of the Company’s shares are subject to certain conditions under Emerson’s banking facility.

     On October 7, 2003, in connection with a consulting agreement, Emerson granted 50,000 warrants with immediate vesting and an exercise price of $5.00 per share with an expiration date of October 2008. These warrants were valued using the Black-Scholes valuation model, which resulted in $90,500 being charged to earnings during the quarter ended December 31, 2003. For the three and six months ended September 30, 2004, no expense was charged to operations for these warrants. As of September 30, 2004, these warrants had not been exercised.

     On August 1, 2004, in connection with a consulting agreement, Emerson granted 50,000 warrants with immediate vesting and an exercise price of $3.00 per share. These warrants were valued using the Black-Scholes valuation model, which resulted in $88,500 being charged to earnings during the quarter ended September 30, 2004. As of September 30, 2004, these warrants had not been exercised.

     During the quarter ended September 30, 2004, 725,000 of Emerson’s stock options were exercised in a cashless manner, resulting in 472,781 shares of Emerson’s common stock being issued. Such exercises were accounted for in accordance with Emerging Issues Task Force Issue 84-18: Stock Option Pyramiding (EITF 84-18), which resulted in a non-cash, pre-tax charge of approximately $1.5 million in the quarter ended September 30, 2004.

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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 September 30, 2004 and March 31, 2004, inventories consisted of the following (in thousands):

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 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.

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 included in the determination of net income in the segment information presented in Note 10.

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NOTE 8 – BORROWINGS

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

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

     Emerson Credit Facility – On June 28, 2002, Emerson entered into a $40 million Revolving Credit and Term Loan Agreement (the “Emerson Loan Agreement”) with several U.S. financial institutions. The Emerson Loan Agreement provides for a $25 million revolving line of credit (the “Emerson Revolver”). The Emerson Loan Agreement also provided for a $15 million term loan, which was repaid in full in fiscal 2004. The $25 million revolving line of credit replaced Emerson’s $15 million senior secured facility and provides for revolving loans, subject to individual maximums which, in the aggregate, are not to exceed the lesser of $25 million or a “Borrowing Base” as defined in the Emerson Loan Agreement. The Borrowing Base amount is established by specified percentages of eligible accounts receivables and inventories and bears interest ranging from Prime plus 0.50% to 1.25% or, at Emerson’s election, LIBOR plus 2.00% to 2.75% depending on certain financial covenants. The interest rate charged on the Term Loan ranged from prime plus 1.00% to 1.75% or, at Emerson’s election, LIBOR plus 2.5% and 3.25% depending on certain financial covenants and amortized over a three-year period. Pursuant to the Emerson Loan Agreement, Emerson is restricted from, among other things, paying certain cash dividends, repurchasing Emerson’s common stock and entering into certain transactions without the lender’s prior consent and is subject to certain net worth and leverage financial

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covenants. Amounts outstanding under the Emerson Loan Agreement are secured by substantially all of Emerson’s tangible assets.

     As of September 30, 2004, there was approximately $18.7 million outstanding under the Emerson Revolver and Emerson was in compliance with the covenants contained in the Emerson Loan Agreement. The Emerson Revolver expires in June 2005, and accordingly, all amounts outstanding under this facility have been presented as a current liability. Prior to expiration Emerson intends to renew its banking facility or enter into a new banking facility with similar or more favorable terms than those presently existing.

     Sport Supply Credit Facility – During the quarter ending December 31, 2003, SSG amended its Loan and Security Agreement (the “SSG Loan 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 borrowing rates were reduced from LIBOR plus 2.5% to LIBOR plus 2.25%; and its inventory and accounts receivable borrowing bases were increased. The SSG Loan 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 receivable and inventories. Amounts outstanding under the SSG Loan Agreement are secured by substantially all of the assets of SSG and its subsidiaries. Pursuant to the SSG Loan Agreement, SSG is restricted from, among other things, paying cash dividends and entering into certain transactions without the lender’s prior consent and it is required to maintain certain net worth levels.

     The SSG Loan Agreement allows its lender, under certain circumstances, to accelerate payment upon the occurrence of an event that has a material adverse affect upon the business, operations, properties, assets, goodwill, or condition (financial or otherwise) of SSG on a consolidated basis. Effective February 2004, SSG’s lender amended the SSG Loan Agreement to make this clause effective only in the event that net availability under the facility falls below a certain level. Additionally, the SSG Loan Agreement requires SSG to maintain a depository account in favor of SSG’s lender. As of September 30, 2004, there was approximately $4.5 million outstanding under the SSG Loan Agreement and SSG was in compliance with the covenants in the SSG Loan Agreement.

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

NOTE 9 – SEGMENT INFORMATION

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

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NOTE 10 — 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 Exchange Act of 1934, and Rule 10b-5 promulgated there under, by (i)