EMERSON RADIO CORP - 10-Q Quarterly Report

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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 September 30, 2003
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or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
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Commission file number 0-25226
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EMERSON RADIO CORP.
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(Exact name of registrant as specified in its charter)

DELAWARE 22-3285224
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9 Entin Road Parsippany, New Jersey 07054
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(Address of principal executive offices) (Zip code)

(973)884-5800
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(Registrant's telephone number, including area code)

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(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 November 10,
2003: 27,194,759.

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)

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

2

EMERSON RADIO CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

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)

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

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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 - "Us", "We", "Our") and its
majority-owned subsidiaries, including Sport Supply Group, Inc. ("SSG"). We
operate 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(R) LOGO]" trademark for
a variety of products domestically and internationally to certain licensees. The
sporting goods segment, which is operated through Emerson's 53.2% ownership of
SSG, manufactures, markets, and distributes sports related equipment and leisure
products to institutional customers in the United States.

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, 2003 and the results of operations for the three
and six month periods ended September 30, 2003 and 2002. 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, 2003 ("fiscal
2003"), included in our annual report on Form 10-K.

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.

Due to the seasonal nature of both segments, the results of
operations for the three and six month periods ended September 30, 2003 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, 2004 ("fiscal 2004").

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, because the exercise price of the Company's

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employee stock options equals or exceeds the market price of the underlying
stock on 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.
The Company's pro forma information for the three and six month periods ended
September 30, 2003 and 2002 follows:

Certain reclassifications were made to conform prior years
financial statements to the current presentation.

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NOTE 2 - COMPREHENSIVE INCOME

Our comprehensive income for the three and six month periods
ended September 30, 2003 and 2002 is as follows (in thousands):

NOTE 3 - EARNINGS PER SHARE

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

7

NOTE 4- CAPITAL STRUCTURE

Our outstanding capital stock at September 30, 2003 consisted
of common stock and Series A convertible preferred stock in which the conversion
feature expired effective March 31, 2002.

At September 30, 2003, Emerson had outstanding approximately
936,000 options with exercise prices ranging from $1.00 to $1.50 and SSG had
outstanding approximately 272,000 options with exercise prices ranging from
$0.95 to $9.44.

On August 1, 2002 Emerson granted 200,000 warrants with an
exercise price of $2.20, vesting 50% in six months and 50% one year from date of
grant in conjunction with a consulting agreement. The warrants were valued using
the Black-Scholes option valuation model and are charged to earnings over the
related service period of the consulting agreement with $6,163 and $24,664 being
charged to operations for the three and six month periods ending September 30,
2003, and $12,334 and $12,334 for the three and six month periods ending
September 30, 2002, respectively. In February 2003, 100,000 of these warrants
were exercised.

As of August 15, 2002, Emerson's $20.8 million of 8.5% Senior
Subordinated Convertible Debentures (the "Debentures") were fully retired using
funds secured from a financing facility dated June 28, 2002 and from the
generation of cash from operations. See "Note 9 - Borrowings".

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 for the sporting goods segment, standard cost method for items
manufactured and weighted average cost for items purchased for resale. As of
September 30, 2003 and March 31, 2003, inventories consisted of the following
(in thousands):

8

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. At September 30,
2003, approximately $23.3 million of deferred tax assets were reported on our
balance sheet.

NOTE 7 - INVESTMENT IN SPORT SUPPLY GROUP, INC.

As of September 30, 2003 and March 31, 2003, Emerson owned
4,746,023 (53.2% of the issued and outstanding) shares of common stock of SSG.
SSG's results of operations and the minority interest related to those results
have been included in our quarterly results of operations.

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 a fee at terms
reflected in an arms-length transaction. These charges have been eliminated in
consolidation.

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 and, recorded a non-cash
"cumulative effect of change in accounting

9

principle" of approximately $5.5 million ($0.19 per diluted share for the six
month period ended September 30, 2002), associated with the write-off of all of
the goodwill attributed to the sporting goods segment.

As of September 30, 2003, estimated amortization expense of
other intangible assets for each of the next five years is as follows (in
thousands):

2004 $ 504
2005 504
2006 466
2007 406
2008 337
Thereafter 3,171
-----------
$ 5,388
===========

NOTE 9 - BORROWINGS

As of September 30, 2003 and March 31, 2003, short-term
borrowings consisted of the following:

As of September 30, 2003 and March 31, 2003, long-term
borrowings consisted of the following (in thousands):

Refinancing Transaction in fiscal 2003 - On June 28, 2002,
Emerson entered into a $40 million Revolving Credit and Term Loan Agreement
("Loan Agreement") with several U.S. financial institutions. The Loan Agreement
provides for a $25 million revolving line of credit (Revolver A) and a $15
million term loan (Term Loan). The $25 million

10

revolving line of credit replaced Emerson's existing $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 Loan Agreement.

The $15 million term loan (Term Loan) combined with cash
earned from Emerson's operations was used to retire all of Emerson's 8.5% Senior
Subordinated Convertible Debentures (Debentures) in the amount of $20.75 million
in fiscal 2003.

Revolver A and Term Loan - On June 28, 2002, Emerson entered
into a $40 million Loan Agreement with several U.S. financial institutions. The
Loan Agreement provides for a three year, $25 million revolving line of credit
(Revolver A) and a $15 million term loan (Term Loan). The $25 million revolving
line of credit replaced Emerson's existing $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"
amount based on 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 ranges from Prime plus
1.00% to 1.75% or, at Emerson's election, LIBOR plus 2.50% and 3.25% depending
on certain financial covenants and amortizes over a three-year period. Pursuant
to the Loan Agreement, Emerson is restricted from, among other things, paying
cash dividends other than on preferred shares, repurchasing Emerson's 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 assets. As of September 30, 2003, approximately $2.6 million was
outstanding under this term facility, and $4.0 million was outstanding under the
revolver. Pursuant to the terms of Emerson's term loan, excess cash flow earned
in the fiscal year ended March 31, 2003 of approximately $7.4 million was
required to pay down the term loan in July 2003. Repayment of the excess cash
flow provision was made from borrowings under its revolving credit facility,
which was partially repaid as of September 30, 2003. As of September 30, 2003,
Emerson was in compliance with the covenants contained in the senior credit
facility.

Revolver B - Subsequent to September 30, 2003, SSG amended
it's Loan and Security Agreement to finance it's working capital requirements
through October 31, 2007. Under this amendment, SSG's line of credit was reduced
from $25 million to $20 million; it's LIBOR borrowing rates were reduced from
2.5% to 2.25%; and its inventory and accounts receivable borrowing rates were
increased with decreases in associated fees. 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

11

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 and entering into certain transactions without the lender's prior
consent and it is required to maintain certain net worth levels.

As of September 30, 2003, 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 and six month periods ended September 30, 2003
and 2002 (in thousands):

12

NOTE 12 - LEGAL PROCEEDINGS

Putative Class Actions

The following putative class action lawsuits have been filed in the United
States District Court for the District of New Jersey against us and Mssrs.
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"): Kaplan v. Emerson
Radio Corp., et al. 03-cv-4202; Pelone v. Emerson Radio Corp., et al.
03-cv-4201; Howard v. Jurick, et al. 03-cv-4330; Glascoff v. Emerson Radio
Corp., et al. 03-cv-4506; Stromer v. Emerson Radio Corp., et al. 03-cv-4647;
Kaplan v. Emerson Radio Corp., et al. 03-cv-4856; Freitag v. Emerson Radio
Corp., et al. 03-cv-5140; which filing dates were: September 4, 2003, September
5, 2003, September 12, 2003, September 23, 2003, October 1, 2003, October 14,
2003 and October 30, 2003, respectively.

The complaints allege that we 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 issuing certain positive statements
during the Class Period regarding our growth and demand for our products. The
complaints further allege that these statements were each materially false and
misleading when made because we allegedly misrepresented and omitted certain
adverse facts which then existed and disclosure of which was necessary to make
the statements not false and misleading. It is possible that additional class
action complaints will be filed against us, and the Individual Defendants. No
court has yet made any rulings with respect to these complaints, including
whether these lawsuits will be able to proceed as class actions. We, and the
Individual Defendants intend to defend these lawsuits vigorously.

We are also involved in legal proceedings and claims of
various types in the ordinary course of our business. While any such litigation
to which we are a party contains an element of uncertainty, we presently believe
that the outcome of each such proceeding or claim which is pending or known to
be threatened, or all of them combined, will not have a material adverse effect
on our consolidated financial position.

NOTE 13 - DISCONTINUED OPERATIONS

During October 1999, SSG acquired substantially all of the
assets of Spaulding Athletic, which was a team dealer located in Little Rock,
Arkansas. A team dealer is a local sporting goods store that sells it products
primarily to teams in its local market. Spaulding Athletic serviced the local
institutional customers and teams with a

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full line of athletic products, and was the only such team dealer owned by SSG
in this regional marketplace.

On July 15, 2003, SSG discontinued operations at Spaulding
Athletic, SSG's team dealer located in Little Rock, Arkansas, and in October
2003, sold substantially all of the assets (other than cash and accounts
receivable). This closure, and the discontinued operation resulted in a pretax
loss of approximately $358,000 for the six months ended September 30, 2003,
which is included in the discontinued operations in the accompanying
consolidated statement of operations for the three and six month periods ended
September 30, 2003.

The following table represents current assets and liabilities
of discontinued operations as of September 30, 2003 and the results of
operations (in thousands).

NOTE 14 - SUBSEQUENT EVENTS

During February 1999, SSG acquired substantially all of the
assets of Larry Black Sporting Goods, Inc., a team dealer with locations in
Enid, Oklahoma and Wichita, Kansas. Larry Black Sporting Goods, Inc. serviced
local and institutional customers and teams with a full line of athletic
products.

In October 2003, SSG discontinued operations at it's team
dealer located in Enid, Oklahoma. In addition, in November 2003, SSG sold
substantially all the assets (other than cash and accounts receivable) of its
team dealer located in Wichita, Kansas.

14

The following table represents proforma current assets and
liabilities of the Enid, Oklahoma and Wichita, Kansas Larry Black team dealer
operations as of September 30, 2003 and the results of operations (in
thousands). The results of discontinuing the Enid, Oklahoma and Wichita, Kansas
Team Dealer locations will be reflected in the December 2003 quarterly financial
statements.

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.

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

CONSOLIDATED OPERATIONS:

The following table sets forth, for the periods indicated,
certain items related to the consolidated statements of operations as a
percentage of net revenues for the three and six month periods ended September
30, 2003 and 2002. A detailed discussion of the material changes in our
operating results is set forth under our discussion of our two operating
segments: consumer electronics and sporting goods.

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Net Revenues - Consolidated net revenues for the three and six month periods
ended September 30, 2003 decreased $32.8 million (28.5%) and $58.5 million
(29.5%) as compared to the same periods ended September 30, 2002. The decreases
for both the three and six month periods were primarily attributable to
decreases in the consumer electronics segment.

Cost of Sales - Cost of sales, as a percentage of consolidated net revenues for
the three and six month period ended September 30, 2003 increased to 82.1% and
80.6% from 79.7% and 79.0%, respectively. The increase in cost of sales as a
percentage of net revenues for the three and six month periods were primarily
the result of lower margins in both the consumer electronics and sporting goods
segments. In absolute terms, cost of sales decreased $24.1 million and $44.0
million for the three and six month periods of fiscal 2004 as compared to the
same periods in fiscal 2003.

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 increased to 1.6%
from 0.8% for the three months ended September 30, 2003 compared to the same
period in fiscal 2003. For the six months ended September 30, 2003, other
operating costs, as a percentage of consolidated net revenues, increased to 1.8%
from 1.1% for the same period in fiscal 2003. In absolute terms other operating
costs and expenses increased by $397,000 and $356,000 for the three and six
month periods of fiscal 2004 as compared to the same periods in fiscal 2003.

Selling, General and Administrative Expenses ("S,G&A") - S,G&A, as a percentage
of consolidated net revenues, were 13.5% for the three months ended September
30, 2003 as compared to 11.7% for the three months ended September 30, 2002. For
the six months ended September 30, 2003, S,G&A,

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as a percentage of consolidated net revenues, were 15.9% as compared to 12.5%
for the same period in fiscal 2003. In absolute terms S,G&A decreased $2.4
million and $2.7 million for the three and six month periods ended September 30,
2003 as compared to the same periods in fiscal 2003 due to decreases in both
segments.

Interest Expense, Net - Interest expense decreased to $402,000 (0.5% of net
revenues) for the three months ended September 30, 2003 from $788,000 (0.6% of
net revenues) for the three months ended September 30, 2002. For the six months
ended September 30, 2003 interest expense decreased to $816,000 (0.6% of net
revenues) from $1.6 million (0.8% of net revenues) for the same period in fiscal
2003. The decrease in interest expense was a result of lower average borrowings
in the consumer electronics segment and lower borrowing costs in both segments.

Minority Interest in Net Income (Loss) of Consolidated Subsidiary - Minority
interest in net income (loss) of consolidated subsidiary represents that portion
of the sporting goods segment for the three and six month periods ended
September 30, 2003 and 2002, that were not included in the consolidated
statements of operations. See "Note 1 - Background and Basis of Presentation."

Provision for Income Taxes - The provision for income taxes for the three and
six months ended September 30, 2003 and 2002 were primarily the results of
utilizing previously recognized net operating loss carryforwards from the
consumer electronics segment. The high effective tax rate reflected in the
consolidated statement of operations for the three and six months ended
September 30, 2003 was the result of our multinational tax structure, which
yields varying tax effective rates.

Income (loss) from Discontinued Operations - In July 2003, SSG ceased operations
of it's Little Rock, Arkansas Team Dealer location and has recorded losses from
discontinued operations of approximately $289,000 for the six month period ended
September 30, 2003.

Cumulative Effect of Change in Accounting Principle - On April 1, 2002, we
adopted Financial Accounting Standards Board's Statement No. 142, "Goodwill and
Other Intangible Assets" (SFAS 142) that requires that goodwill not be
amortized, but instead be tested for impairment at least annually by reporting
unit. As a result of our impairment testing, we recorded a non-cash "cumulative
effect of accounting change" of approximately $5.5 million for the six months
ended September 30, 2002, due to the impairment of all of the goodwill
attributed to the Company's sporting goods segment. See "Note 8 - Goodwill and
Other Intangible Assets."

Net Income - As a result of the foregoing factors, we earned net income of
$681,000 (0.8% of net revenues) and $236,000 (0.2% of net revenues) for the
three and six months ended September 30, 2003 as compared to

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$6.0 million (5.2% of net revenues) and $3.1 million (1.6% of net revenues) for
the same periods in fiscal 2003.

CONSUMER ELECTRONICS SEGMENT:

The following table summarizes certain financial information relating to the
consumer electronics segment for the three and six month periods ended September
30, 2003 and 2002 (in thousands):

Net Revenues - Consumer electronics net revenues for the three months ended
September 30, 2003 decreased to $56.4 million from $89.5 million for the three
months ended September 30, 2002. For the six months ended September 30, 2003 net
revenues decreased to $88.1 million from $146.3 million for the six months ended
September 30, 2002. 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 represents 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 decrease in net
revenues for the three and six month period was comprised of:

i) A decrease in Emerson branded product sales to $49.0 and $77.2 million
from $68.7 and $117.2 million for the three and six months ended
September 30, 2003 and September 30, 2002, respectively. These
decreases were associated with increased competition, decreased orders
from our primary customers and an overall slower economy.

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ii) A decrease in themed product sales to $5.4 and $5.7 million and $18.8
and $23.2 million for the three and six months ended September 30, 2003
and September 30, 2002. These decreases were due to the discontinuance
of sales of NASCAR, Mary Kate and Ashley and Hello Kitty themed
products, partially offset by the start up sales from Nickelodeon
themed products.

iii) Licensing revenues were relatively unchanged at $2.0 million for the
three months ended September 30, 2003 as compared to the same period in
fiscal 2003. For the six month period ending September 30, 2003,
licensing revenues decreased to $5.2 million from $6.0 million in
fiscal 2003, which was primarily associated with a reduction in our
video licensing fees.

Cost of Sales - Cost of sales for the three months ended September 30, 2003
decreased $25.0 million (33.7%) to $49.0 million from $74.0 million for the
three months ended September 30, 2002. For the six months ended September 30,
2003 cost of sales decreased $44.9 million (37.3%) to $75.6 million from $120.6
million for the six months ended September 30, 2002. The decrease in cost of
sales in absolute terms for the three and six month periods was due to the lower
consumer electronics net revenues. In relative terms, cost of sales for the
three months ended September 30, 2003 increased to 86.9% from 82.7% for the
three months ended September 30, 2002. For the six months ended September 30,
2003 cost of sales increased to 85.9% from 82.4% for the six months ended
September 30, 2002. The increases in cost of sales for the three and six month
periods are due to lower sales of traditionally higher margin themed products,
and lower margins on Emerson branded product, primarily attributable to
competitive market conditions.

Gross profit margins continue to be subject to competitive pressures arising
from pricing strategies associated with the price categories of 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 increased to 2.3% from 1.0% and
to 2.9% from 1.5% for the three and six month period ended September 30, 2003 as
compared to the same periods in fiscal 2003. In absolute terms, other operating
costs and expenses increased to approximately $1.3 million from $896,000 and to
approximately $2.5 million from $2.2 million for the three and six month periods
ended September 30, 2003 as compared to the same periods in fiscal 2003,
respectively. The increase for both the three and six month period in absolute
terms was primarily due to increased inventory servicing costs.

Selling, General and Administrative Expenses ("S,G&A") - S,G&A, decreased in
absolute terms to $3.9 million (6.9% of the consumer electronics net revenues)
from $5.8 million (6.4% of the consumer

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electronics net revenues) for the three months ended September 30, 2003 as
compared to the three months ended September 30, 2002. For the six months ended
September 30, 2003, S,G&A decreased to $8.0 million (9.1% of the consumer
electronics net revenues) from $9.7 million (6.6% of the consumer electronics
net revenues) for the six months ended September 30, 2002. The decreases in
absolute terms for the three months ended September were primarily from
decreases in payroll related costs of approximately $750,000 and a reduction in
bad debt charges of approximately $750,000. The decreases in absolute terms for
the six months ended September were primarily from decreases in payroll related
costs of approximately $580,000 and a reduction in bad debt charges of
approximately $920,000.

Interest Expense, net - Interest expense decreased to $250,000 (0.4% of the
consumer electronics net revenues) for the three months ended September 30,
2003, from $645,000 (0.7% of the consumer electronics net revenues) for the
three months ended September 30, 2002,, and to $528,000 (0.6% of the consumer
electronics net revenues) for the six months ended September 30, 2003 from
$1,256,000 (0.9% of the consumer electronics net revenues) for the six months
ended September 30, 2002. The decreases in interest expense for the three and
six month periods was the result of lower borrowings and lower borrowing costs.

Provision for Income Taxes - The provision for income taxes was $1.1 million and
$975,000 for the three and six months ended September 30, 2003, respectively, as
compared to $2.3 million and $4.2 million for the three and six month periods
ended September 30, 2002, respectively. The decreases in the provisions for the
three and six month periods ended September 30, 2003 were primarily the result
of lower taxable income as compared to the same periods in fiscal 2003. The high
effective tax rate reflected in the statement of operations for the three and
six months ended September 30, 2003 was the result of our multinational tax
structure, which yields varying tax effective rates.

Net Income - As a result of the foregoing factors, the consumer electronics
segment earned net income of $835,000 (1.5% of net revenues) for the three
months ended September 30, 2003 as compared to $5.9 million (6.6% of net
revenues) for the three months ended September 30, 2002. For the six months
ended September 30, 2003 the consumer electronics segment earned $329,000 (0.4%
of net revenues) as compared to $8.5 million (5.8% of net revenues) for the six
months ended September 30, 2002.

SPORTING GOODS SEGMENT:

The following table summarizes certain financial information
relating to the sporting goods segment as reported by SSG for the three and six
month periods ended September 30, 2003 and 2002 (in thousands):

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Net Revenues - Net revenues increased $353,000 (1.4%) and decreased $263,000
(0.5%) for the three and six month periods ended September 30, 2003 as compared
to the three and six month periods ended September 30, 2002. The increase in net
revenues for the three month period was the result of a $1.2 million increase in
core institutional revenues as a result of more aggressive pricing and other
revenue generating programs. This increase in revenues for the three month
period was partially offset by a $383,000 decrease in revenues generated from
SSG's wholly-owned subsidiary, Athletic Training Equipment Company, Inc.
("ATEC"), and a $422,000 decrease in revenues generated from our Team Dealer
operations. The decrease in revenues for the six month period was the result of
an $811,000 decrease in ATEC revenues and a $635,000 decrease in Team Dealer
revenues. This decrease was partially offset by a $1.2 million increase in core
institutional revenues. SSG expects continued revenue challenges in fiscal year
2004, due to increased competition, a decreased salesforce, continued
restrictions in state, federal and school budgets, an overall soft economy, and
declining participation and funding of youth sports organizations.

Cost of Sales - Cost of sales increased by approximately $889,000 (5.0%) and
$957,000 (2.7%) for the three and six month periods ended September 30, 2003 as
compared to same periods last year. As a percentage of net revenues, cost of
sales increased to 71.8% from 69.3%, and increased to 71.7% from 69.5% for the
three and six month periods ended September 30, 2003 as compared to the same
periods in the prior

21

fiscal year. These increases in cost of sales were primarily the result of more
aggressive pricing pressure, and increases in SSG's import freight and
operations costs.

Selling, General and Administrative Expenses ("S,G&A") - S,G&A expenses
decreased approximately $480,000 (6.2%) and $1.0 million (6.7%) for the three
and six month periods ended September 30, 2003, respectively, as compared to the
three and six month periods ended September 30, 2002. As a percentage of
sporting goods net revenues, SG&A decreased to 27.9% from 30.1% and 27.4% from
29.2% for the three and six month periods ended September 30, 2003, as compared
to the same periods in fiscal 2003. The decreases in SG&A, for the three and six
month periods were primarily a result of: i) a decrease in payroll related
expense of approximately $211,000 for the three month period and approximately
$524,000 for the six month period, attributable to reduced headcounts, and ii) a
decrease in selling and promotional expense of approximately $145,000 for the
three month period, and $377,000 for the six month period, primarily as a result
of reduced marketing spending. SSG expects continued decreases in S,G&A this
fiscal year as compared to the prior year due to ongoing cost reduction
programs.

Interest Expense, net - Interest expense increased by approximately $9,000
(6.3%) and decreased by $31,000 (9.7%) for the three and six month periods ended
September 30, 2003, as compared to the same periods in fiscal 2003.

Provision (benefit) for Income Taxes - A tax benefit of approximately $20,000
and a provision of $69,000 was recorded for the three months ended September 30,
2003 as compared to an income tax provision of approximately $4,000 and $134,000
for the three and six months ended September 30, 2002. SSG has a net operating
loss carryforward included in net deferred tax assets that can be used to offset
future taxable income and can be carried forward for 15 to 20 years. We believe
the net deferred tax assets will be realized through tax planning strategies
available in future periods and future profitable operating results. Although
realization is not assured, we believe it is more likely than not that all of
the net deferred tax assets will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced or eliminated in the near
term if certain tax planning strategies are not successfully executed or
estimates of future taxable income during the carryforward period are reduced.

Income (loss) from Discontinued Operations - In July 2003, SSG discontinued
operations at Spaulding Athletic, SSG's team dealer located in Little Rock,
Arkansas. As a result, SSG has recorded losses from discontinued operations, net
of taxes, of approximately $256,000 and $289,000 for the three and six month
periods ended September 30, 2003, respectively. These expenses include estimated
reserves for accounts receivable and inventory.

22

Cumulative Effect of Change in Accounting Principle - On March 30, 2002, SSG
adopted Financial Accounting Standards Board 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. Goodwill is required to be tested for impairment in a transitional test
upon adoption and then at least annually by reporting unit. As a result of its
impairment testing, SSG recorded a non-cash "cumulative effect of accounting
change" impairment write down of approximately $7.4 million for the six month
period ended September 30, 2002.

Net Income (Loss) - As a result of the foregoing factors, the sporting goods
segment incurred a net loss of approximately $290,000 for the three months ended
September 30, 2003 as compared to net income of $22,000 for the three months
ended September 30, 2002. For the six months ended September 30, 2003 the
sporting goods segment incurred a net loss of $175,000 as compared to a net loss
of $7.2 million for the six months ended September 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by continuing operating activities was
$95,000 for the six months ended September 30, 2003. Cash was primarily utilized
by increases in accounts receivable and inventory, partially offset by a
decrease in accounts payable and other current liabilities.

Net cash used by investing activities was $208,000 for the six
months ended September 30, 2003. Cash was utilized for the purchase of fixed
assets, which consisted mainly of computer equipment.

Net cash used for financing activities was $7.7 million for
the six months ended September 30, 2003. Cash was primarily utilized for the
reduction of borrowings and the repurchase of Emerson's common stock. During the
six months ended September 30, 2003, 188,800 shares of Emerson's common stock
were repurchased at a cost of approximately $728,000.

Emerson and SSG maintain credit facilities as described in
Note 9 - Borrowings. At September 30, 2003, there were approximately $20.2
million of borrowings outstanding under these facilities, of which approximately
$6.7 million of borrowings were outstanding by Emerson and $13.5 million of
borrowings were outstanding by SSG. No letters of credit were outstanding under
these facilities by either Emerson or SSG as of September 30, 2003.

Two of our foreign subsidiaries maintain various credit
facilities, as amended, aggregating $52.5 million with Hong Kong banks
consisting of the following: (i) a $7.5 million credit facility with a $2.5
million seasonal increase which is used for inventory purchases and (ii) two
back-to-back letters of credit totaling $45 million. At

23

September 30, 2003, our Hong Kong subsidiary pledged $1.7 million in
certificates of deposit to this bank to assure the availability of the $7.5
million credit facility and a $2.5 million seasonal line increase. At September
30, 2003, there were approximately $5.8 million and $8.7 million, respectively,
of letters of credit outstanding under these credit facilities.

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 September 30, 2003
for the periods shown (in thousands):

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 September 30, 2003.

CONTINGENCIES

During the past several years, SSG used the services of
Strategic Technologies, Inc. ("STI") to process their outbound truck freight
bills. STI audited SSG's freight bills and provided a listing of freight
invoices that were scheduled for payment, at which time SSG transferred funds to
STI. STI was required to issue checks to the various carriers within forty-eight
(48) hours of receipt of SSG's funds. STI filed for reorganization under Chapter
11 of the U.S. Bankruptcy Code on July 19, 2002, which was converted to Chapter
7 of the U.S. Bankruptcy Code on July 31, 2002. In certain circumstances, SSG
has had to pay their freight carriers for invoices that were previously paid to
STI and to attempt to recover such monies from STI. SSG has filed a proof of
claim of approximately $593,000 for unpaid shipping charges and service fees
paid to STI. No assurance can be made that SSG will be able to recover such
money.

During the past several years, SSG used the services of
Consolidated Freightways to ship product to it's customers. Consolidated
Freightways Corporation filed for reorganization under Chapter 11 of the U. S.
Bankruptcy Code on September 2, 2002 in the United States Bankruptcy Court in
the District of California, Case No. RS 02-24284-MG. On August 25, 2003, the
Bankruptcy Trustee for

24

Consolidated Freightways Corporation of Delaware filed a lawsuit in the United
States Bankruptcy Court, Central District of California, to collect fees for the
transportation of goods that are alleged to be owed to the bankruptcy estate.
The Trustee's initial claim is $866,684, which includes approximately $265,000
in collection fees and late payment charges. SSG disputes the amount claimed by
the Trustee and claims an offset of approximately $308,000 for goods lost or
damaged by Consolidated Freightways in transit.

It is not possible at this time to determine the ultimate
liabilities that we may incur resulting from these lawsuits, claims, and
proceedings. If these matters were to be ultimately resolved unfavorably at
amounts exceeding our reserves, an outcome not currently anticipated, it is
possible that such outcome could have a material adverse effect on our
consolidated financial position or results of operations.

CRITICAL ACCOUNTING POLICIES

For the three and six month periods ended September 30, 2003,
there were no significant changes to our accounting policies from those reported
in Form 10-K for the fiscal year ended March 31, 2003.

INFLATION, FOREIGN CURRENCY, AND INTEREST RATES

Neither inflation nor currency fluctuations had a significant
effect on our results of operations during the first or second quarter of fiscal
2004. 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 are not expected to increase significantly during the
coming year.

RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD

In January 2003, the Financial Accounting Standards Board
issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest
Entities," which addresses consolidation of variable interest entities
("VIE's"). FIN 46 requires a variable interest entity to be consolidated by a
parent company if that company is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual

25

returns or both. A variable interest entity is a corporation, partnership, trust
or any other legal structure used for business purposes that either does not
have equity investors with voting rights or has equity investors that do not
provide sufficient financial resources for the entity to support its activities.
In October 2003, the FASB agreed to defer the effective date of FIN 46 for
variable interest held by public companies in all entities that were acquired
prior to February 1, 2003. This deferral is to allow time for certain
implementation issues to be addressed through the issuance of a potential
modification to the interpretation. The deferral revised the effective date for
consolidation of these entities until the end of the first interim or annual
period ending after December 15, 2003. We do not believe that FIN 46 will have
any material impact on our financial statements.

In April 2003, the FASB issued FAS 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." FAS 149 amends
and clarifies financial accounting and reporting for derivative instruments.
This statement is effective for contracts entered into or modified after June
30, 2003. We adopted this statement as of July 1, 2003 and it did not have any
material impact on our financial statements.

In May 2003, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 150 (SFAS 150), "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity," which addresses how an issuer classifies and measures financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances) because that financial instrument
embodies an obligation of the issuers. This Statement shall be effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
shall be effective (except for certain measurement requirements, the effective
date of which has been deferred indefinitely) at the beginning of the first
interim period beginning after June 15, 2003. For financial instruments created
before the issuance date of this Statement and still existing at the beginning
of the interim period of adoption, transition shall be achieved by reporting the
cumulative effect of a change in an accounting principle by initially measuring
the financial instruments at fair value or other measurement attribute required
by this Statement. We adopted this statement as of July 1, 2003 and it did not
have any material impact on our financial statements.

FORWARD-LOOKING INFORMATION

This report contains various forward-looking statements under
the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and
information that is based on management's beliefs as well as assumptions made by
and information currently available to management. Although we believe that the
expectations reflected in such forward-

26

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, 2003 and other filings with
the Securities and Exchange Commission (the "SEC"). For additional risk factors
as they relate to the sporting goods segment, see SSG's Form 10-K for the fiscal
year ended March 28, 2003 Item 7 - "Certain Factors that May Affect the
Company's Business or Future Operating Results" and other filings with 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.

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, 2003.

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, the
Company carried out an evaluation, with the participation of
the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the Company's disclosure controls and
procedures pursuant to Securities Exchange Act Rule 13a-15.
Based upon that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the
Company in the reports that it files or submits 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 the Company's internal control over
financial reporting that occurred during the Company's last
fiscal quarter to which this Quarterly Report on Form 10-Q
relates that have materially affected, or are reasonably
likely to materially affect, the Company's internal control
over financial reporting.

27

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Putative Class Actions

The following putative class action lawsuits have been filed in the United
States District Court for the District of New Jersey against us and Mssrs.
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"): Kaplan v. Emerson
Radio Corp., et al. 03-cv-4202; Pelone v. Emerson Radio Corp., et al.
03-cv-4201; Howard v. Jurick, et al. 03-cv-4330; Glascoff v. Emerson Radio
Corp., et al. 03-cv-4506; Stromer v. Emerson Radio Corp., et al. 03-cv-4647;
Kaplan v. Emerson Radio Corp., et al.03-cv-4856; Freitag v. Emerson Radio Corp.,
et al. 03-cv-5140; which filing dates were: September 4, 2003, September 5,
2003, September 12, 2003, September 23, 2003, October 1, 2003, October 14, 2003
and October 30, 2003, respectively.

The complaints allege that we 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 issuing certain positive statements
during the Class Period regarding our growth and demand for our products. The
complaints further allege that these statements were each materially false and
misleading when made because we allegedly misrepresented and omitted certain
adverse facts which then existed and disclosure of which was necessary to make
the statements not false and misleading. It is possible that additional class
action complaints will be filed against us and the Individual Defendants. No
court has yet made any rulings with respect to these complaints, including
whether these lawsuits will be able to proceed as class actions. We, and the
Individual Defendants intend to defend these lawsuits vigorously.

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

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

None

ITEM 3. DEFAULT UPON SENIOR SECURITIES.

(a) None

(b) None

28

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of the Company's shareholders was held on
September 4, 2003, at which time the shareholders elected the following
slate of nominees to remain on the Board of Directors: Robert H. Brown,
Jr., Peter G. Bunger, Jerome H. Farnum, Stephen H. Goodman and Geoffrey
P. Jurick. Election of the Board of Directors was the only matter
submitted for shareholder vote. There were 27,562,560 shares of
outstanding capital stock of the Company entitled to vote at the record
date for this meeting and there were present at such meeting, in person
or by proxy, stockholders holding 25,601,943 shares of the Company's
Common Stock, which represented 92.9% of the total capital stock
outstanding and entitled to vote. There were 25,601,943 shares voted on
the matter of the election of directors. The result of the votes cast
regarding each nominee for office was:

ITEM 5. OTHER INFORMATION.

(a) None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:

10.29 Separation Agreement dated September 15, 2003 between SSG and John P.
Walker (incorporated by reference to Exhibit 10.1 of Sport Supply's
Quarterly Report on Form 10-Q for the quarter ended September 26,
2003).

10.35.2 Third Amendment to Loan and Security Agreement dated November 6, 2003
by and between Sport Supply Group, Inc. and Congress Financial
Corporation (incorporated by reference to Exhibit 10.4 of Sport
Supply's Quarterly Report on Form 10-Q for the quarter ended September
26, 2003).

29

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 July 14, 2003
furnishing the press release announcing the Company's financial results
for the year ended March 31, 2003.

Current report on Form 8-K, dated July 18, 2003, related to the
earnings teleconference.

Current report on Form 8-K, dated August 12, 2003, furnishing the press
release announcing the Company's financial results for the quarter
ended June 30, 2003.

Current report on Form 8-K, dated August 15, 2003, for the purpose of
furnishing the definition of free cash flow which was discussed on
Emerson's teleconference on August 12, 2003.

Current report on Form 8-K, dated September 2, 2003 furnishing the
press release announcing the Company's share repurchase program.

Current report on Form 8-K, dated September 10, 2003 furnishing the
press release announcing the appointment of S & I Electronics Plc as
its Master Distributor in the United Kingdom.

Current report on Form 8-K, dated November 14, 2003, furnishing the
press release announcing the Company's financial results for the
quarter ended September 30, 2003.

- ---------------------
* filed herewith

30

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: November 14, 2003 /s/ Geoffrey P. Jurick
-----------------------
Geoffrey P. Jurick
Chairman of the Board,
Chief Executive Officer and
President
(Principal Executive Officer)

Date: November 14, 2003 /s/ Kenneth A. Corby
--------------------
Kenneth A. Corby
Executive Vice President and
Chief Financial Officer
(Principal Finance and
Accounting Officer)

31