e10vkza
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year ended March 31, 2009
OR
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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: 001-07731
EMERSON RADIO CORP.
(Exact name of registrant as specified in its charter)
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| Delaware
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22-3285224 |
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| (State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number) |
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| Nine Entin Road, Parsippany, NJ
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07054 |
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| (Address of principal executive offices)
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(Zip Code) |
Registrant’s telephone number, including area code: (973) 884-5800
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class
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Name of each exchange on which registered |
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| Common Stock, par value $.01 per share
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NYSE Amex |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. o YES þ NO.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act).
o YES þ NO.
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 requirement for the past 90 days. þ YES o NO.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that registrant was required to submit and post such files.)
o Yes
o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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| o Large accelerated filer |
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o Accelerated filer |
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o Non-accelerated filer
(Do not check if a smaller reporting
company) |
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þ Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). o YES þ NO.
Aggregate market value of the voting and non-voting common equity of the registrant held by
non-affiliates of the registrant at September 30, 2008 (computed by reference to the last reported
sale price of the Common Stock on the NYSE Amex on such date): $9,777,592
Number of Common Shares outstanding at July 21, 2009: 27,129,832
DOCUMENTS INCORPORATED BY REFERENCE:
None
EXPLANATORY NOTE
Unless the context otherwise requires, the term “the Company” and “Emerson,” refers to Emerson
Radio Corp. and its subsidiaries.
This Amendment No. 1 on Form 10-K/A (the “Form 10/KA”) to the Annual Report on Form 10-K (the
“Annual Report”) of the Company for the fiscal year ended March 31, 2009, filed with the Securities
and Exchange Commission (the “SEC”) on July 14, 2009, is filed solely for the purpose of including
information that was to be incorporated by reference from the Company’s definitive proxy statement
pursuant to Regulation 14A of the Securities Exchange Act of 1934 and to update the Exhibit Index.
The Company will not file its proxy statement for its annual meeting of stockholders within 120
days of its fiscal year ended March 31, 2009, and is therefore amending and restating in their
entirety Items 10, 11, 12, 13 and 14 of Part III of the Annual Report. In addition, pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934, the Company is including with this Form
10-K/A certain currently dated certifications. Except as described above, no other amendments are
being made to the Annual Report. This Form 10-K/A does not reflect events occurring after the
filing of the Annual Report on July 14, 2009 or modify or update the disclosure contained in the
Annual Report in any way other than as required to reflect the amendments discussed above and
reflected below.
TABLE OF CONTENTS
2
PART III
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
The following table sets forth certain information regarding the current directors of Emerson
Radio Corp. (“Emerson,” “us” or the “Company”).
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Year First |
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Became |
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Age |
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Director |
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Principal Occupation or Employment |
Christopher Ho
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59 |
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2006 |
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Christopher Ho has served as the
Company’s Chairman since July
2006. Mr. Ho is presently the
Chairman of The Grande Holdings
Ltd. (“Grande Holdings”), a Hong
Kong based group of companies
engaged in a number of businesses
including the manufacture, sale
and distribution of audio, video
and other consumer electronics
and video products. Grande
Holdings beneficially holds
approximately 57.6% of the
Company’s outstanding common
shares. Mr. Ho also currently
serves as Chairman of Lafe
Corporation Limited, a company
listed on the Singapare Exchange,
and a representative director of
Sanusi Electric Co., Ltd., a
company listed on the Tokyo Stock
Exchange. Mr. Ho graduated with a
Bachelor of Commerce degree from
the University of Toronto in
1974. He is a member of the
Canadian Institute of Chartered
Accountants as well as a member
of the Institute of Management
Accountants of Canada. He also is
a certified public accountant
(Hong Kong) and a member of the
Hong Kong Society of Accountants.
He was a partner in international
accounting firms before joining
Grande Holdings and has extensive
experience in corporate finance,
international trade and
manufacturing. |
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Adrian Ma (1)
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64 |
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2006 |
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Adrian Ma, a director of the
Company since March 30, 2006, has
been the Company’s Chief
Executive Officer since March 30,
2006 and also served as its
Chairman from March 30, 2006
through July 26, 2006. In
addition, Mr. Ma is a director of
Grande Holdings. He has more than
30 years experience as an
Executive Chairman, Executive
Director and Managing Director of
various organizations focused
primarily in the consumer
electronics industry. Mr. Ma also
is Director of Lafe Technology
Ltd., Vice Chairman and Managing
Director of Ross Group Inc. and
Deputy Chairman of Sansui
Electric Co. Ltd. |
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Greenfield Pitts
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59 |
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2006 |
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Greenfield Pitts has served as
the Company’s Chief Financial
Officer since February 2007 and a
director since March 2006. Mr.
Pitts has a 30-year background in
international banking and was
associated with Wachovia Bank,
the Company’s present lender, for
more than 25 years, with
assignments in London, Atlanta
and Hong Kong. From 1997 to 2006,
he was in Hong Kong managing a
joint venture between Wachovia
and HSBC, later working in
Corporate Finance for Wachovia
Securities. |
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Eduard Will (1)
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67 |
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2006 |
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Eduard Will has been the
Company’s Vice Chairman since
October 2007 and a Director since
July 2006. From July 2006 until
October 2007, Mr. Will served as
the Company’s President- North
American Operations. Prior to
becoming President- North
American Operations, Mr. Will was
the Chairman of the Company’s
Audit Committee from January 2006
through July 2006. From 2001 to
2002 Mr. Will served as Chief
Executive Officer of Boca
Research, Inc. Mr. Will has more
than 37 years experience as a
merchant banker, senior advisor
and director of various public
and private companies. Presently,
Mr. Will is serving on the Board
of Directors or acting as Senior
Adviser to Grande Holdings,
KoolConnect Technologies Inc.,
Ricco Capital (Holdings) Ltd.
(Hong Kong), South East Group
(Hong Kong) and Integrated Data
Corporation. |
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Duncan Hon
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48 |
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2009 |
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Duncan Hon has been a director
since February 2009. Mr. Hon
currently serves as Chief
Executive Officer of the Branded
Distribution Division of The
Grande Holdings Limited, a Hong
Kong based group of companies
engaged in a number of businesses
including the manufacture, sale
and distribution of audio, video
and other consumer electronics
and video products (“Grande”).
Mr. Hon has also served as a
director of Grande and several of
its subsidiaries. From 2004 to
2007, Mr. Hon served as a
director of Smart Keen
International Limited, a Hong
Kong company, providing financial
consulting services.
He is a member of |
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Year First |
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Director |
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Principal Occupation or Employment |
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the Hong
Kong Institute of Certified
Public Accountants and the
Association of Chartered
Certified Accountants. |
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Mirzan Mahathir (1)
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50 |
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2007 |
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Mirzan Mahathir has been a
Director since December 2007. Mr.
Mahathir currently manages his
investments in Malaysia and
overseas while facilitating
business collaboration in the
region. Previously, Mr. Mahathir
worked for IBM Corporation and
Salomon Brothers. Since 1992, Mr.
Mahathir has served as the
Executive Chairman and President
of Konsortium Logistik Berhad, a
Malaysian logistic solutions
Provider listed on the Kuala
Lumpar Stock Exchange. He also is
the Chairman and CEO of Crescent
Capital Sdn Bhd, a Malaysian
investment holding and
independent strategic and
financial advisory firm which he
founded and the President of the
Asian Strategy and Leadership
Institute (ASLI), a leading
organizer of business
conferences, secretariat for
business councils and Public
Policy research centre.
Currently, Mr. Mahathir holds
directorships in Worldwide
Holdings Berhad and AHB Holdings
Berhad, companies listed on the
Bursa Malaysia, and Lafe
Technology Ltd., a company listed
on the Singapore Exchange. He is
also a member of the UN/ESCAP
Business Advisory Council, the
American Bureau of Shipping
Southeast Asia Committee and the
Wharton Business School Asian
Executive Board. |
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Kareem E. Sethi
(2)
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2007 |
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Kareem E. Sethi has been a
Director since December 2007. Mr.
Sethi has served as Managing
Director of Streetwise Capital
Partners, Inc. since 2003. From
1999 until 2003, Mr. Sethi was
Manager, Business Recovery
Services for
PricewaterhouseCoopers Inc. |
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Terence A.
Snellings (2)
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59 |
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2008 |
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Terence A. Snellings has been a
Director since August 2008.
Mr. Snellings has served as
Director of Finance and
Administration of Refugee
Resettlement and Immigration
Services of Atlanta, Inc., a
non-profit agency that provides
an entry into the American
culture for refugees. From 1986
until April 2006, Mr. Snellings
served as Managing Director of
Wachovia Services, Ltd., where he
managed investment banking
origination activities of the
Asia-Pacific Group within
Wachovia Securities Corporate and
Investment Banking Division. |
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Member of the Corporate Governance, Nominating and Compensation Committee |
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Member of the Audit Committee |
Board of Directors and Committees
At the beginning of the Company’s fiscal year ended March 31, 2009 (“Fiscal 2009”), the
Company’s Board of Directors consisted of Christopher Ho, Adrian Ma, Greenfield Pitts, Eduard Will,
Michael A.B. Binney, W. Michael Driscoll, Mirzan Mahathir, David R. Peterson and. Norbert
Wirsching. In July 2008, Messrs. Driscoll, Peterson and Wirsching resigned as directors. The
reasons for Mr. Driscoll’s resignation were outlined in a letter submitted by him to the Company’s
Board of Directors, a copy of which letter was filed as an exhibit to the Company’s current report
on Form 8-K filed with the SEC on July 18, 2008, and the reasons for Mr. Wirsching’s resignation
were outlined in a letter submitted by him to the Company’s Board of Directors, a copy of which
letter was filed as an exhibit to the Company’s current report on Form 8-K filed with the SEC on
July 29, 2008. In January 2009, Mr. Binney resigned as director. The Company’s Board of Directors
presently consists of eight directors — Messrs. Ho, Ma, Pitts, Hon, Will, Mahathir, Sethi and
Snellings. Three of the eight current directors, Messrs. Mahathir, Sethi and Snellings, meet the
definition of independence as established by the NYSE Amex and SEC rules.
The Company’s Board of Directors has two standing committees, the Audit Committee, which is a
separately-designated standing audit committee established in accordance with Section 3(a)(58)(A)
of the Exchange Act, and the Corporate Governance, Nominating and Compensation Committee.
The Company’s Audit Committee currently consists of Mr. Sethi and Mr. Snellings, each of whom
meets the definition of independence as established by the NYSE Amex and SEC rules. Mr. Sethi is
currently the Chairman of the Audit Committee and the “audit committee financial expert.” Pursuant
to Section 803(B)(2)(c) of the NYSE Amex Company Guide (the “Company Guide”), the Company is
required to have an audit committee of at least two independent members, as defined by the listing
standards of the NYSE Amex. During a portion of Fiscal 2009, the Audit Committee consisted of Mr.
Sethi, Mr. Driscoll and Mr. Wirsching, each of whom meets the definition of independence as
established by the NYSE Amex and SEC rules. For brief period following the resignations of Mr.
Driscoll and Mr. Wirsching in July 2008 and until the appointment of Mr. Snellings to the Company’s
Board of Directors and Audit Committee on August 12, 2008, the Company’s Audit Committee consisted
of only one independent director and therefore during this brief period the Company was not in
compliance with Section 803(B)(2)(c) of the Company Guide. Following the appointment of Mr.
Snellings to the Audit Committee on August 12, 2008, the Company regained compliance the applicable
NYSE Amex listing standards set forth in Section 803(B)(2)(c) of the Company Guide.
4
The Audit Committee is empowered by the Board of Directors, among other things, to: (i) serve
as an independent and objective party to monitor the Company’s financial reporting process,
internal control system and disclosure control system; (ii) review and appraise the audit efforts
of the Company’s independent accountants; (iii) assume direct responsibility for the appointment,
compensation, retention and oversight of the work of the outside auditors and for the resolution of
disputes between the outside auditors and the Company’s management regarding financial reporting
issues; and (iv) provide the opportunity for direct communication among the independent
accountants, financial and senior management and the Board of Directors. A copy of the Company’s
Audit Committee Charter is posted on the Company’s website: www.emersonradio.com on the Investor
Relations page.
Codes of Ethics
The Company has adopted a Code of Ethics for Senior Financial Officers (“Code of Ethics”) that
applies to its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer,
Controller and Treasurer. This Code of Ethics was established with the intention of focusing Senior
Financial Officers on areas of ethical risk, providing guidance to help them recognize and deal
with ethical issues, providing mechanisms to report unethical conduct, fostering a culture of
honesty and accountability, deterring wrongdoing and promoting fair and accurate disclosure and
financial reporting.
The Company has also adopted a Code of Conduct for Officers, Directors and Employees of
Emerson Radio Corp. and Its Subsidiaries (“Code of Conduct”). We prepared this Code of Conduct to
help all officers, directors and employees understand and comply with its policies and procedures.
Overall, the purpose of the Company’s Code of Conduct is to deter wrongdoing and promote (i) honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest
between personal and professional relationships; (ii) full, fair, accurate, timely and
understandable disclosure in reports and documents that the Company files with, or submits to, the
SEC and in other public communications made by the Company; (iii) compliance with applicable
governmental laws, rules and regulations; (iv) prompt internal reporting of code violations to an
appropriate person or persons identified in the Code of Conduct; and (v) accountability for
adherence to the Code of Conduct.
The Code of Ethics and the Code of Conduct are posted on the Company’s website:
www.emersonradio.com on the Investor Relations page. If the Company makes any substantive
amendments to, or grant any waiver (including any implicit waiver) from a provision of the Code of
Ethics or the Code of Conduct, and that relates to any element of the Code of Ethics definition
enumerated in Item 406 (b) of Regulation S-K, the Company will disclose the nature of such
amendment or waiver on its website or in a current report on Form 8-K.
Executive Officers
The following table sets forth certain information regarding the executive officers of
Emerson:
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Year |
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Position |
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Became Officer |
| Adrian Ma
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64 |
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Chief Executive Officer and Director
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2006 |
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| Greenfield Pitts
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Chief Financial Officer and Director
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2007 |
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| John Spielberger
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President-North American Operations
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2007 |
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Adrian Ma has served as the Company’s Chief Executive Officer since March 30, 2006 and served
as the Company’s Chairman of the Board of Directors from March 30, 2006 through July 26, 2006. Mr.
Ma continues to serve as a director. See Mr. Ma’s biographical information above.
Greenfield Pitts has served as the Company’s Chief Financial Officer since February 2007 and a
director since March 2006. See Mr. Pitts’ biographical information above.
5
John Spielberger has served as the Company’s President-North American Operations since October
2007. From 1995 until 2007, Mr. Spielberger served as a Senior Vice President with Sony BMG Music
Entertainment Sales Co., an entertainment software sales and marketing distribution company. Prior
to this, Mr. Spielberger held various positions with RCA Records Label, a music company. Mr.
Spielberger holds a Bachelor of Science degree in Business Management and Marketing from Cornell
University and a Masters of Business Administration from the University of Michigan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires the Company’s directors, officers, and stockholders who beneficially own more than 10% of
any class of its equity securities registered pursuant to Section 12 of the Exchange Act, to file
initial reports of ownership and reports of changes in ownership with respect to the Company’s
equity securities with the Securities and Exchange Commission and the NYSE Amex. All reporting
persons are required to furnish the Company with copies of all reports that such reporting persons
file with the Securities and Exchange Commission pursuant to Section 16(a) of the Exchange Act.
Based solely upon a review of Forms 3 and 4 and amendments to these forms furnished to the
Company, all parties subject to the reporting requirements of Section 16(a) filed all such required
reports during and with respect to Fiscal 2009.
ITEM 11 — EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following Summary Compensation Table sets forth information concerning compensation for
services rendered in all capacities to us and our subsidiaries for Fiscal 2009 and Fiscal 2008
which was awarded to, earned by or paid to each person who served as our principal executive
officer at any time during Fiscal 2009 and the two most highly compensated executive officers other
than the principal executive officer who were serving as executive officers as of March 31, 2009
(collectively, the “Named Executive Officers”).
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All Other |
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Fiscal |
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Option |
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Compensation |
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Year |
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Salary($) |
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Bonus($)(2) |
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Awards($)(1) |
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($)(3) |
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Total ($) |
Adrian Ma (4) |
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2009 |
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$ |
350,000 |
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— |
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— |
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$ |
350,000 |
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President and
Chief Executive Officer |
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2008 |
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— |
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$ |
50,000 |
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— |
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— |
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$ |
50,000 |
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Greenfield Pitts (5) |
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2009 |
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$ |
250,000 |
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— |
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$ |
9,500 |
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$ |
23,459 |
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$ |
282,959 |
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Chief Financial Officer |
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2008 |
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$ |
250,000 |
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$ |
100,000 |
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$ |
9,500 |
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$ |
22,841 |
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$ |
382,341 |
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John Spielberger (6) |
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2009 |
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$ |
250,000 |
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— |
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$ |
23,461 |
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$ |
273,461 |
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President -North
American Operations |
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2008 |
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$ |
105,769 |
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$ |
60,000 |
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— |
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$ |
9,437 |
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$ |
175,206 |
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Represents the expense to the Company pursuant to FAS 123(R) for the respective year for
stock options granted as long-term incentives pursuant to the Company’s 2004 Non-Employee
Outside Director Stock Option Plan or its 2004 Employee Stock Option Plan. All options
received by Mr. Pitts in the table above were received by him as a non-employee director and
prior to his being named as an executive officer. Immediately following the adoption by the
Company’s stockholders of an amendment to the Company’s 2004 Non-Employee Outside Director
Stock Option Plan (the “Non-Employee Director Plan”) to increase the number of shares
available for issuance thereunder from 250,000 to 500,000 shares in November 2006, Mr. Pitts
received an option to purchase up to 25,000 shares of the Company’s common stock. Mr. Pitts
began to serve as a director at a time when he was not an employee of the Company and no
additional shares were available under the Non-Employee Director Plan. See Notes to the
Company’s financial statements for the fiscal years ended March 31, 2009 and 2008 for the
assumptions used for valuing the expense under FAS 123(R). |
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Represents bonus paid for such fiscal year. |
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Represents the incremental cost to the Company of all personnel benefits, including medical
and dental insurance and the Company’s match for its 401(K) plan, to our Named Executive
Officers. Such personnel benefits are available to all employees of the Company in accordance
with the Company’s standard employment practices. |
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Mr. Ma commenced employment as the Company’s Chief Executive Officer on March 30, 2006 and
began receiving a salary effective April 2008. |
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Mr. Pitts commenced employment as the Company’s Chief Financial Officer on February 19, 2007. |
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Mr. Spielberger commenced employment as the Company’s President-North American Operations on
October 29, 2007. |
Employment Agreements.
During Fiscal 2009, the Company had employment agreements with certain of its Named Executive
Officers, each of which is described below.
Greenfield Pitts. Greenfield Pitts, our Chief Financial Officer, entered into an employment
agreement with the Company on April 3, 2007, which sets forth the terms and conditions pursuant to
which Mr. Pitts shall serve as the Company’s Chief Financial Officer. The agreement provides for
an annual base salary of $250,000 and a discretionary bonus at the end of the Company’s fiscal year
as recommended by the Board of Directors. The initial term expired on March 31, 2008. During the
term extensions, the Company has the right to terminate the agreement upon 90 days prior written
notice and Mr. Pitts has the right to terminate the agreement upon 90 days prior written notice.
John Spielberger. John Spielberger, the Company’s President-North American Operations,
entered into an employment agreement with the Company on October 15, 2007, which provides that Mr.
Spielberger shall serve as the Company’s President-North American Operations. The agreement
provides for an annual base salary of $250,000 and a discretionary bonus at the end of the
Company’s fiscal year as recommended by the Board of Directors. The initial term expired on
October 31, 2008. During the term extensions, the Company has the right to terminate the agreement
upon 90 days prior written notice and Mr. Spielberger has the right to terminate the agreement upon
90 days prior written notice.
7
Outstanding Equity Awards at Fiscal Year End
The following table provides certain information concerning outstanding equity awards held by
each of our Named Executive Officers at March 31, 2009.
Outstanding Equity Awards at Fiscal Year-End
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Option Awards |
| |
|
Number of |
|
Number of |
|
|
|
|
| |
|
Securities |
|
Securities |
|
|
|
|
| |
|
Underlying |
|
Underlying |
|
|
|
|
| |
|
Unexercised |
|
Unexercised |
|
|
|
|
| |
|
Options (#) |
|
Options (#) |
|
Option Exercise |
|
Option Expiration |
| Name |
|
Exercisable |
|
Unexercisable |
|
Price ($) |
|
Date |
Adrian Ma |
|
|
0 |
|
|
|
0 |
|
|
|
— |
|
|
|
— |
|
Greenfield Pitts |
|
|
16,667 |
|
|
|
8,333 |
|
|
$ |
3.19 |
|
|
|
11/21/2016 |
|
John Spielberger |
|
|
0 |
|
|
|
0 |
|
|
|
— |
|
|
|
— |
|
Compensation of Directors
During Fiscal 2009, our directors who were not employees (“Outside Directors”), specifically
Messrs. Binney, Driscoll, Ho, Hon, Mahathir, Peterson, Sethi, Snellings, Will and Wirsching were
paid $33,750, $17,500, $120,625, $5,875, $52,958, $13,125, $60,514, $36,667, $52,597 and $18,333,
respectively, for serving on the Board of Directors and on our various committees during the
period. The Company does not compensate directors who are employees of the Company for their
services as directors.
Outside Directors are each paid an annual director’s fee of $45,000. Beginning October 15,
2008, the Board of Directors resolved that each Outside Director serving on a committee of the
Board of Directors would receive an additional fee of $15,000 per annum with no additional fee paid
an Outside Director serving as chairman of a committee. The Company does not pay any additional
fees for attendance at meetings of the Board of Directors or the committees. All directors’ fees
are paid in four equal quarterly installments per annum and are pro-rated in situations where an
Outside Director serves less than a full one year term.
On September 5, 2008, the Board of Directors resolved that Mr. Ho would begin receiving a
director fee as an Outside Director effective April 1, 2008 and that Mr. Ho would receive a
retroactive director fee as an Outside Director dating from the time he joined the Board of
Directors of the Company on July 26, 2006. As a result of this resolution, Mr. Ho was paid an
aggregate amount of director’s fees in fiscal 2009 of $120,625.
Additionally, each director, who is not an employee of the Company, is eligible to participate
in the Company’s 2004 Non-Employee Outside Director Stock Option Plan. The Company’s directors are
reimbursed their expenses for attendance at meetings.
The following table provides certain information with respect to the compensation earned or
paid to the Company’s Outside Directors during Fiscal 2009.
8
Directors Compensation
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fees |
|
|
|
|
|
|
|
|
| |
|
Earned |
|
|
|
|
|
All Other |
|
|
| |
|
or Paid in |
|
|
|
|
|
Compensation |
|
|
| Name |
|
Cash ($) |
|
Option Awards ($)(1) |
|
($) |
|
Total ($) |
Michael A.B. Binney (2) |
|
$ |
33,750 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
33,750 |
|
W. Michael Driscoll (3) |
|
$ |
17,500 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
17,500 |
|
Christopher Ho (4) |
|
$ |
120,625 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
120,625 |
|
Duncan Hon (5) |
|
$ |
5,875 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
5,875 |
|
Mirzan Mahathir |
|
$ |
52,958 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
52,958 |
|
David R. Peterson (6) |
|
$ |
13,125 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
13,125 |
|
Kareem E. Sethi |
|
$ |
60,514 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
60,514 |
|
Terence A. Snellings (7) |
|
$ |
36,667 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
36,667 |
|
Eduard Will |
|
$ |
52,597 |
|
|
$ |
19,772 |
|
|
$ |
0 |
(8) |
|
$ |
72,369 |
|
Norbert Wirsching (9) |
|
$ |
18,333 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
18,333 |
|
|
|
|
| (1) |
|
Represents the expense to the Company pursuant to FAS 123(R) for stock options granted as
long-term incentives pursuant to the Company’s 2004 Non-Employee Outside Director Stock Option
Plan. See notes to the Company’s financial statements for the fiscal years ended March 31,
2009 and 2008 for the assumptions used for valuing the expense under FAS 123(R). At March 31,
2009, Mr. Will had options to purchase an aggregate of 50,000 shares of the Company’s common
stock. |
| |
| (2) |
|
Mr. Binney served as the Company’s President-International Operations until he resigned from
this position on May 7, 2008, at which time he began receiving a director’s fee as an Outside
Director. Mr. Binney resigned from the Board of Directors of the Company in January 2009. |
| |
| (3) |
|
Mr. Driscoll resigned as a director on July 14, 2008. |
| |
| (4) |
|
On September 5, 2008, the Board of Directors resolved that Mr. Ho would begin receiving a
director fee as an Outside Director effective April 1, 2008 and that Mr. Ho would receive a
retroactive director fee as an Outside Director dating from the time he joined the Board of
Directors of the Company on July 26, 2006. As a result of this resolution, Mr. Ho was paid an
aggregate amount of director’s fees in fiscal 2009 of $120,625. |
| |
| (5) |
|
Mr. Hon began to serve as a director on February 12, 2009. |
| |
| (6) |
|
Mr. Peterson resigned as a director on July 15, 2008. |
| |
| (7) |
|
Mr. Snellings began to serve as a director on August 12, 2008. |
| |
| (8) |
|
Previously, the Company had a policy of offering to provide health care insurance to each of
its Outside Directors. Mr. Will is the only current Outside Director who elected to receive
health care insurance through the Company. Subsequent to Fiscal 2009, the Company decided to
reverse this policy with retroactive effect and to recover the monies paid for such health
care insurance from the applicable Outside Directors by offsetting such monies against future
board fees over a two year period. Accordingly and as agreed between the Company and Mr.
Will, the Company will be recovering the $11,102 paid for health insurance premiums for Mr.
Will against future board fees. Furthermore, the Company paid $7,871 for cell phone charges
for Mr. Will during Fiscal 2009 and, as agreed between the Company and Mr. Will, the Company
will be recovering such monies by offsetting against future board fees over a two year period. |
| |
| (9) |
|
Mr. Wirsching resigned as a director on July 28, 2008. |
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The following table sets forth, as of July 21, 2009, the beneficial ownership of (i) each
current director; (ii) each of the Company’s Named Executive Officers; (iii) the Company’s current
directors and executive officers as a group; and (iv) each stockholder known by the Company to own
beneficially more than 5% of the Company’s outstanding shares of common stock. Common stock
beneficially owned and percentage ownership as of July 21, 2009 were based on 27,129,832 shares
outstanding. Except as otherwise
9
noted, the address of each of the following beneficial owners is c/o Emerson Radio Corp., Nine
Entin Road, Parsippany, New Jersey 07054.
| |
|
|
|
|
|
|
|
|
| |
|
Amount and Nature of |
|
|
| Name and Address of Beneficial Owners |
|
Beneficial Ownership (1) |
|
Percent of Class (1) |
Christopher Ho (2) |
|
|
15,634,482 |
|
|
|
57.6 |
% |
Adrian Ma |
|
|
0 |
|
|
|
0 |
% |
Greenfield Pitts (3) |
|
|
41,667 |
|
|
|
|
* |
John Spielberger |
|
|
0 |
|
|
|
0 |
% |
Duncan Hon |
|
|
0 |
|
|
|
0 |
% |
Eduard Will (4) |
|
|
41,667 |
|
|
|
|
* |
Mirzan Mahathir |
|
|
0 |
|
|
|
0 |
% |
Kareem E. Sethi |
|
|
0 |
|
|
|
0 |
% |
Terence A. Snellings |
|
|
0 |
|
|
|
0 |
% |
Lloyd I. Miller, III (5) |
|
|
2,071,870 |
|
|
|
7.6 |
% |
All Directors and Executive Officers as a Group (9 persons) (6) |
|
|
15,717,816 |
|
|
|
57.9 |
% |
|
|
|
| (*) |
|
Less than one percent. |
| |
| (1) |
|
Based on 27,129,832 shares of common stock outstanding as of July 21, 2009. Each beneficial
owner’s percentage ownership of common stock is determined by assuming that options that are
held by such person (but not those held by any other person) and that are exercisable or
convertible within 60 days of July 21, 2009 have been exercised. Except as otherwise
indicated, the beneficial ownership table does not include common stock issuable upon exercise
of outstanding options, which are not currently exercisable within 60 days of July 21, 2009.
Except as otherwise indicated and based upon the Company’s review of information as filed with
the U.S. Securities and Exchange Commission (“SEC”), the Company believes that the beneficial
owners of the securities listed have sole investment and voting power with respect to such
shares, subject to community property laws where applicable. |
| |
| (2) |
|
S&T International Distribution Ltd. (“S&T”) is the record owner of 15,634,482 shares of
common stock (the “Shares”). As the sole stockholder of S&T, Grande N.A.K.S. Ltd. (“N.A.K.S.”)
may be deemed to own beneficially the Shares. As the sole stockholder of N.A.K.S., Grande
Holdings may be deemed to own beneficially the Shares. Mr. Ho is one of the beneficiaries under a discretionary trust which indirectly owns approximately 67% of the capital stock of Grande Holdings. Information with respect to the ownership
of these shares was obtained from disclosures contained within a Schedule 13D/A filed on November 5, 2007 and information obtained from Mr. Ho. An updated Schedule 13D/A will be filed to reflect the current information as obtained from Mr. Ho. |
| |
| (3) |
|
Mr. Pitts’ ownership consists of 25,000 shares of common stock directly owned by him and
options to purchase 16,667 shares of the Company’s common stock issued pursuant to Emerson’s
2004 Non-Employee Director Stock Option Plan that are exercisable within 60 days of July 21,
2009. Mr. Pitts also has options to purchase 8,333 shares of the Company’s common stock issued
pursuant to Emerson’s 2004 Non-Employee Director Stock Option Plan that are not exercisable
within 60 days of July 21, 2009. |
| |
| (4) |
|
Mr. Will’s ownership consists of options to purchase 41,667 shares of the Company’s common
stock pursuant to Emerson’s 2004 Non-Employee Director Stock Option Plan that are exercisable
within 60 days of July 21, 2009. Mr. Will also has options to purchase 8,333 shares of the
Company’s common stock issued pursuant to Emerson’s 2004 Non-Employee Director Stock Option
Plan that are not exercisable within 60 days of July 21, 2009. |
| |
| (5) |
|
Lloyd I. Miller, III has sole voting and dispositive power with respect to 744,597 of the
reported securities as (i) a manager of a limited liability company that is the general
partner of a certain limited partnership and (ii) an individual. Lloyd I. Miller, III has
shared voting and dispositive power with respect to 1,327,273 of the reported securities as an
investment advisor to the trustee of certain family trusts. The address of Lloyd Miller, III
is 4550 Gordon Drive, Naples, Florida 34102. Information with respect to the ownership of
these shares was obtained from a Schedule 13G filed with the SEC on February 12, 2009. |
| |
| (6) |
|
See footnotes (2) through (4). |
10
Equity Compensation Plan Information
The following table gives information about the Company’s common stock that may be issued upon
the exercise of options and rights under our 1994 Stock Compensation Program, 1994 Non-Employee
Director Stock Option Plan, Emerson Radio Corp. 2004 Employee Stock Incentive Plan and 2004
Non-Employee Outside Director Stock Option Plan and exercise of warrants, as of March 31, 2009 (the
“Plans”). The 1994 Plans expired in July 2004 and the remaining Plans are the only equity
compensation plans in existence as of March 31, 2009.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Number of securities to be |
|
Weighted average exercise |
|
Number of securities |
| |
|
issued upon exercise of |
|
price of outstanding |
|
remaining available for |
| |
|
outstanding options, |
|
options, warrants and |
|
future issuance under |
| |
|
warrants and rights |
|
rights |
|
equity compensation plans |
| |
|
(a) |
|
(b) |
|
(c) |
Equity compensation plans approved by security holders |
|
|
134,000 |
|
|
$ |
2.99 |
|
|
|
2,878,334 |
|
Equity compensation plans not approved by security holders |
|
|
100,000 |
|
|
|
4.00 |
|
|
|
— |
|
Total |
|
|
234,000 |
|
|
$ |
3.42 |
|
|
|
2,878,334 |
|
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
From time to time, the Company engages in business transactions with its controlling
shareholder, The Grande Holdings Limited and its subsidiaries (“Grande”). As of July 21, 2009,
Grande beneficially owned approximately 57.6% of the Company’s outstanding common stock. Mr. Ho,
the Chairman of the Board of Directors of the Company, also serves as Chairman of the Grande
Holdings Limited. Set forth below is a summary of such transactions.
Majority Shareholder
Grande’s Ownership Interest in Emerson. At March 31, 2009, approximately 57.6% of the
Company’s outstanding common stock was owned by direct or indirect subsidiaries of the Grande Group
Limited, a Singapore corporation.
Related Party Transactions
Product Sourcing Transactions. Since August 2006, Emerson has been providing to
Sansui Sales PTE Ltd (“Sansui Sales”) and Akai Sales PTE Ltd (“Akai Sales”), both of which are
subsidiaries of Grande, assistance with acquiring certain products for sale. Emerson issues
purchase orders to third-party suppliers who manufacture these products, and Emerson issues sales
invoices to Sansui Sales’ and Akai Sales’ at gross amounts for these products. Financing is
provided by Sansui Sales’ and Akai Sales’ customers in the form of transfer letters of credit to
the suppliers, and goods are shipped directly from the suppliers to Sansui Sales’ and Akai Sales’
customers. Emerson recorded income totaling $10,000 and $102,000 for providing this service in
fiscal 2009 and 2008, respectively. As of March 31, 2009 and March 31, 2008, Sansui Sales and Akai
Sales collectively owed Emerson $7,600 and $134,000, respectively, relating to this activity.
Sales of goods. In addition to the product sourcing transactions described in the
preceding paragraph, Emerson also has purchased products on behalf of Sansui Sales and Akai Sales
from third-party suppliers and sold these goods to Sansui Sales and Akai Sales. These transactions,
the latest of which occurred in February 2008, were similar to the transactions described in the
preceding paragraph; however, instead of utilizing transfer letters of credit provided by Sansui
Sales’ and Akai Sales’ customers, Emerson utilized its own cash to pay Sansui Sales’ and Akai
Sales’ suppliers. Emerson invoices Sansui Sales and Akai Sales an amount that is marked up between
two and three percent from the cost of the product. As a result of this arrangement, Emerson
recorded sales to Sansui Sales and Akai Sales, collectively, of $0 and $242,000 in fiscal 2009 and
2008, respectively. At March 31, 2009 and March 31, 2008, Sansui Sales and Akai Sales collectively
owed Emerson $1,500 and $5,000 relating to these activities, respectively. Akai Sales deducted
$9,600 for storage charges from its June 30, 2008 settlement payment to Emerson for this activity,
which was deemed to be in error by Emerson, which resulted in an outstanding balance owed to
Emerson of $9,600 at March 31, 2009. At March 31, 2009 and March 31, 2008, Emerson had outstanding
liabilities to suppliers of product invoiced to Sansui Sales and Akai Sales totaling $0 and $3,000,
respectively.
Leases and Other Real Estate Transactions. Effective May 15, 2009, Emerson entered into
an amended lease agreement with Grande pursuant to which the space rented from Grande was increased
from 18,476 square feet to 19,484 square feet. This amended agreement by its terms expires on
December 31, 2009. Rent expense and related service charges with Grande totaled $414,000 and
$270,000 for fiscal 2009 and fiscal 2008, respectively. Rent and related service charges described
in this activity are included in the
11
Consolidated Statements of Operations as a component of selling, general, and administrative
expenses. Emerson owed Grande $41,600 and $0 related to this activity at March 31, 2009 and
March 31, 2008, respectively. A security deposit of $81,900 on the leased property is held by
Grande as of March 31, 2009. Emerson is also due an $11,500 refund from Grande for previously paid
warehouse charges.
Emerson utilizes the services of Grande employees for certain administrative and
executive functions. Grande pays Emerson’s quality assurance personnel in Renminbi in China on
Emerson’s behalf for which Emerson subsequently pays a reimbursement to Grande. Payroll and travel
expenses, including utilization of Grande employees as well as payroll and travel expenses paid on
Emerson’s behalf and reimbursed to Grande, were $85,000 and $515,000 for fiscal 2009 and fiscal
2008, respectively. Emerson owed Grande $0 at March 31, 2009 and $70,000 related to this activity
at March 31, 2008.
In December 2008, Emerson signed a lease agreement with Akai Electric (China) Ltd.
concerning the rental of office space, office equipment, and lab equipment for Emerson’s quality
assurance personnel in Zhong Shan, China. The lease term began in July 2007 and ends June 2009, and
the agreement renews automatically at the end of the term unless canceled by either party. Rent
charges with Akai Electric (China) Ltd. totaled $264,000 for fiscal 2009. Emerson owed Grande
$9,500 related to the agreement at March 31, 2009. A security deposit of $31,600 on the leased
property is held by Akai Electric (China) Ltd. as of March 31, 2009
From May to October 2007, Emerson occupied office space in Shenzhen, China under a lease
agreement with Akai AV Multimedia (Zhongshan) Co Ltd, an affiliate of Grande. Rent expense and
related charges totaled $12,000 for the three months ended December 31, 2007 and $108,000 for the
nine months ended December 31, 2007. The agreement was not renewed after its termination in October
2007.
In May 2007 Emerson paid a $10,000 commission to Vigers Hong Kong Ltd, a property agent
and a subsidiary of Grande, related to the sale of a building owned by Emerson to an unaffiliated
buyer. Also, Emerson received a deposit of approximately $300,000 from the buyer on this date. The
sale was concluded on September 27, 2007, on which date Emerson received the balance of the
purchase price of approximately $1,700,000 and paid an additional $10,000 commission to Vigers.
Toy Musical Instruments. In May 2007, Emerson entered into an agreement with Goldmen
Electronic Co. Ltd. (“Goldmen”), pursuant to which the Company agreed to pay $1,682,220 in exchange
for Goldmen’s manufacture and delivery to Emerson of musical instruments in order for it to meet
its delivery requirements of these instruments in the first week of September 2007.
In July 2007, the Company learned that Goldmen had filed for bankruptcy and was unable to
manufacture the ordered musical instruments. Promptly thereafter, Capetronic Displays Limited
(“Capetronic”), a subsidiary of Grande, agreed to manufacture the musical instruments at the same
price and on substantially the same terms and conditions. Accordingly, on July 12, 2007, Emerson
paid Tomei Shoji Limited, an affiliate of Grande, $125,000 to acquire from Goldmen and deliver to
Capetronic the molds and equipment necessary for Capetronic to manufacture the musical instruments.
In July 2007, Emerson made two upfront payments to Capetronic totaling $546,000. On July 20, 2007,
Capetronic advised Emerson that it was unable to manufacture the musical instruments because it did
not have the requisite governmental licenses to do so.
In June 2008, Capetronic repaid the $546,000 advance it received from Emerson in
July 2007.
In August 2008, Capetronic requested that Emerson reimburse it for the costs it had
incurred to purchase the production materials required to produce the musical instruments. After a
review of the facts, the material purchase orders, the physical material at the Capetronic
premises, and deducting an agreed upon scrap value of the material, Emerson decided to honor the
request and paid $313,000 to Capetronic on September 30, 2008. These materials are the property of
Capetronic.
Capetronic is currently in physical possession of Emerson’s molds originally required to
produce the musical instruments, which Emerson wrote off in fiscal 2008.
Freight Forwarding Services. In June 2007, Emerson and Capetronic signed an agreement for
Emerson to provide freight forwarding services to Capetronic. Under this agreement, which contains
no specified termination date, Emerson will pay the costs of importation into the United States of
Capetronic’s inventory on Capetronic’s behalf, and to arrange for the inventory to be received at a
port of entry, cleared through the United States Customs Service using Emerson’s regularly engaged
broker, and transfer the inventory to a common carrier as arranged by Capetronic’s customer. If
Capetronic’s customer failed to make such arrangements with a common carrier, Emerson agreed to
transfer the inventory to Emerson’s warehouse for storage or make other arrangements with a public
warehouse. Following the transfer of Capetronic’s inventory, Emerson is required to provide Next
Day delivery of all
12
importation documents and bills of lading to Capetronic’s customer. Capetronic agreed to reimburse
Emerson for all costs incurred by Emerson in connection with the activity just described within
thirty days of demand by Emerson, after which interest accrues. As compensation, Capetronic agreed
to pay Emerson a service fee of 12% of the importation costs. Emerson billed Capetronic for the
reimbursement of importation costs totaling $246,000 and a commission of $29,000 for the nine month
period of December 31, 2007. Capetronic paid Emerson the full amount due of $275,000 on
November 14, 2007.
Hong Kong Electronics Fairs (“HKEF”). Emerson incurred costs totaling $152,633 for its
participation in the 2008 HKEF. The total includes $5,138 billed by Grande to Emerson for services
rendered in connection with the event, and, as of March 31, 2009, Emerson owes Lafe Technology
(Hong Kong) Ltd $4,396 for storage and delivery charges. In addition, Emerson has billed $33,823 to
its affiliates for expenses incurred on their behalf for the 2008 HKEF; and as of March 31, 2009,
$19,657 from Nakamichi Corporation Ltd, $8,222 from Akai Sales PTE Ltd, and $5,944 from Sansui
Sales PTE Ltd is due to Emerson.
Between August and December 2007, Emerson paid invoices and incurred charges for goods
and services relating to the 2007 HKEF of $153,069. Portions of these charges, totaling $87,353,
have been allocated and invoiced to affiliates of Grande in proportion to their respective share of
space occupied and services rendered during the 2007 HKEF as follows: Nakamichi Corporation Ltd.
$17,143, Akai Sales PTE Ltd $44,495 and Sansui Sales PTE Ltd $25,715. Akai Sales and Sansui Sales
collectively owed Emerson $6,437 and $70,210 in connection with the 2007 HKEF as of March 31, 2009
and March 31, 2008, respectively.
Also related to the 2006 and 2007 annual Hong Kong Electronics Fairs, Capetronic incurred
charges and paid invoices on behalf of Emerson in the amount of $76,000 for which Emerson
reimbursed Capetronic $48,000 for the 2007 Hong Kong Electronics Fair in March 2008. Emerson paid
Capetronic the remaining balance due of $28,000 for the 2006 Hong Kong Electronics Fair on
September 30, 2008.
Other. In June 2007 Emerson paid a one-time sales commission in an amount of $14,000 to a
Director of Grande who, at the time, was also a Director of Emerson. The commission was 50% of the
net margin on a sale by Emerson to an unaffiliated customer.
In January and February 2008, Emerson invoiced The GEL Engineering Corp. Ltd (“GEL”), an
affiliate of Grande, for a portion of $7,900 travel expenses paid by Emerson, of which 70%
pertained to travel for the benefit of GEL and 30% pertained to travel for Emerson. As of March 31,
2009 and March 31, 2008, GEL owed Emerson $5,500 as a result of this activity.
In June 2008, Emerson paid Capetronic $160,000 for reimbursement of payroll and travel
expenses that Capetronic paid on behalf of Emerson from October 2007 through May 2008 for expenses
related to Emerson employees located in mainland China.
In September 2008, Akai Sales invoiced Emerson for travel expenses and courier fees which
Akai Sales paid on Emerson’s behalf. As of March 31, 2009 Emerson owed Akai Sales $2,700 as a
result of this invoice.
In September 2008, the Emerson Board of Directors resolved that, effective as of April 1,
2008, the annual base salary of the Chief Executive Officer of the Company shall be $350,000, and,
that because all members of the Board are to receive board fees according to a schedule approved by
the Board, and because no such fees had been paid to the Chairman of the Board from July 2006
through March 31, 2008, the Chairman of the Board shall be paid compensation in full for his
services for that period of time, to be calculated using the standard annual fee structure in place
for board members then currently in effect. As a result of these resolutions, in September 2008 the
Company began paying the Chief Executive Officer the stated annual salary, made a one time
retroactive salary payment to the Chief Executive Officer of $145,833 covering the period April 1,
2008 through August 31, 2008, and made a one time cash payment of $75,625 to the Chairman of the
Board covering the period July 2006 through March 31, 2008.
In October 2008, the Emerson Board of Directors resolved that those remaining directors
currently serving on the Board who, from the date of joining the Board, had received no
compensation as either a Board member or as an employee of the Company, receive a cash payment
covering such periods of time, to be calculated using the standard annual fee structure in place
for board members then currently in effect. As a result of this resolution, in October 2008 the
Company made onetime cash payments of $90,000 and $37,500 to two members of the Board of Directors.
In November 2008, Emerson determined that it needed to temporarily maintain access to a
material amount of Renminbi to ensure an uninterrupted supply of factory product in mainland China,
due to the tightening of the local credit and exchange markets. Emerson does not have independent
access to Renminbi because it does not maintain a physical presence in Mainland China. Emerson
advanced to Zhongshan Tomei Audio & Video Products Company Ltd. (Zhongshan Tomei) an amount of
HK$20,705,300 – approximately US$2,655,000 – for which Zhongshan Tomei was prepared to disburse, as
may be needed, an equivalent amount of
13
Renminbi to Emerson’s factory suppliers upon Emerson’s direction. Once the need to transact in
Renminbi passed,US$2,670,922 was repaid to Emerson by Soshin Onkyo International Ltd in
December 2008, resulting in a foreign exchange gain to Emerson of $16,000 in December 2008. This
transaction was executed without the proper approvals per the Company’s internal policies governing
related party transactions and led management to conclude that a material weakness over related
party transactions existed as of March 31, 2009.
In February 2009, Akai Sales invoiced Emerson for travel expenses which Akai Sales paid
on Emerson’s behalf. As of March 31, 2009 Emerson owed Akai Sales $3,100 as a result of this
invoice.
Review and Approval of Transactions with Related Parties
It is the policy of the Company that all proposed transactions between the Company and related
parties, as defined by Statement of Financial Accounting Standard (SFAS) Number 57, which are (1)
less than $500,000 but greater than $100,000 be pre-approved by the Company’s Chief Executive
Officer, Chief Financial Officer and President-North American Operations and (2) greater than
$500,000 be pre-approved by the Company’s Chief Executive Officer, Chief Financial Officer,
President-North American Operations and Audit Committee of the Board of Directors.
Management of the Company concluded during its fiscal 2009 assessment of internal controls
over financial reporting that the Company’s policy is not effective to prevent related party
transactions which give rise to potential conflicts of interest. As a result, the Company entered
into a material transaction in which a subsidiary advanced funds to a related party without proper
approval. The transaction was noted immediately as an unapproved transaction, and all the advanced
funds were repaid to the Company on a timely basis.
Director Independence
As of July 21, 2009, Grande beneficially owned an aggregate of 15,634,482 shares of the
Company’s common stock, which represents approximately 57.6% of the shares of common stock
currently outstanding. Accordingly, the Company is a “controlled company” (a “Controlled Company”),
as such term is defined in Section 801(a) of the Company Guide. Because the Company is a Controlled
Company, it is exempt from (i) the requirement that at least a majority of the directors on its
Board of Directors be “independent” as defined under the NYSE Amex listing standards, (ii) the
requirement to have the compensation of the Company’s executives determined by a compensation
committee comprised solely of independent directors or by a majority of the board’s independent
directors and (iii) from the requirement to have director nominees selected by a nominating
committee comprised entirely of independent directors or by a majority of the independent
directors.
The Company’s Board of Directors presently consists of eight directors — Messrs. Ho, Ma,
Pitts, Hon, Will, Mahathir, Sethi and Snellings. Three of the eight current directors, Messrs.
Mahathir, Sethi and Snellings, meet the definition of independence as established by the NYSE Amex
listing standards and SEC rules. Until their respective resignations during Fiscal 2009, the
following individuals also served on the Company’s Board of Directors — Messrs. Michael A.B.
Binney, W. Michael Driscoll, David R. Peterson and Norbert Wirsching. The Company’s Board of
Directors determined that W. Michael Driscoll and Norbert R. Wirsching, each of whom served as a
member of our Board of Directors during Fiscal 2009, were “independent” as defined under the NYSE
Amex listing standards.
The Company’s Audit Committee currently consists of Mr. Sethi and Mr. Snellings, each of whom
meets the definition of independence as established by the NYSE Amex and SEC rules. Mr. Sethi is
currently the Chairman of the Audit Committee and the “audit committee financial expert.” Pursuant
to Section 803(B)(2)(c) of the NYSE Amex Company Guide (the “Company Guide”), the Company is
required to have an audit committee of at least two independent members, as defined by the listing
standards of the NYSE Amex. During a portion of Fiscal 2009, the Audit Committee consisted of Mr.
Sethi, Mr. Driscoll and Mr. Wirsching, each of whom meets the definition of independence as
established by the NYSE Amex and SEC rules. For brief period following the resignations of Mr.
Driscoll and Mr. Wirsching in July 2008 and until the appointment of Mr. Snellings to the Company’s
Board of Directors and Audit Committee on August 12, 2008, the Company’s Audit Committee consisted
of only one independent director and therefore during this brief period the Company was not in
compliance with Section 803(B)(2)(c) of the Company Guide. Following the appointment of Mr.
Snellings to the Audit Committee on August 12, 2008, the Company regained compliance the applicable
NYSE Amex listing standards set forth in Section 803(B)(2)(c) of the Company Guide.
Under Sections 804 and 805 of the Company Guide, the Company is exempt from the requirement to
have the compensation of its executives determined by a compensation committee comprised solely of
independent directors or by a majority of the board’s
14
independent directors and from the requirement to have director nominees selected by a
nominating committee comprised entirely of independent directors or by a majority of the
independent directors because the Company is a Controlled Company. In April 2008, the Company’s
Board of Directors established a Corporate Governance, Nominating and Compensation Committee, which
was to be comprised of three members, at least two of whom were to be “independent” as such term is
defined in Section 803A of the Company Guide. On June 24, 2008, our Corporate Governance,
Nominating and Compensation Committee was fully constituted with three directors, Messrs. Ma,
Peterson and Sethi, two of whom the Board had determined were independent as such term is defined
in Section 803A of the Company Guide. Following Mr. Peterson’s resignation as a director on July
15, 2008, the Board of Directors resolved on September 19, 2008 to reconstitute the Corporate
Governance, Nominating and Compensation Committee as being comprised of Messrs. Ma, Will and
Mahathir, one of whom the Board had determined was “independent” as defined under the NYSE Amex
listing standards.
The Company’s Board of Directors currently is considering the adoption of a charter of the
Corporate Governance, Nominating and Compensation Committee. The Company expects that the charter,
as finally adopted, will provide that the Corporate Governance, Nominating and Compensation
Committee will be responsible for, among other things (i) the development and implementation of a
set of corporate governance principles applicable to the Company; (ii) the determination of the
slate of director nominees for election to the Company’s Board and recommendation to the Board
individuals to fill vacancies occurring between annual meetings of shareholders; and (iii) the
recommendation to the Board for compensation arrangements of the Company’s directors and executive
officers.
ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit
Committee’s charter, all audit and audit-related work and all non-audit work performed by the
Company’s independent accountants, MSPC Certified Public Accountants and Advisors, A Professional
Corporation (“MSPC”), is approved in advance by the Audit Committee, including the proposed fees
for such work. The Audit Committee is informed of each service actually rendered.
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Audit Fees. Audit fees billed to the Company by MSPC for the audit of the financial
statements included in the Company’s Annual Reports on Form 10-K, and reviews by MSPC of the
financial statements included in the Company’s Quarterly Reports on Form 10-Q, for the fiscal
years ended March 31, 2008 and 2009 totaled approximately $247,400 and $270,000,
respectively. |
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Audit-Related Fees. The Company was billed $117,200 and $125,000 by MSPC for the fiscal
years ended March 31, 2008 and 2009, respectively, for assurance and related services that
are reasonably related to the performance of the audit or review of the Company’s financial
statements and are not reported under the caption Audit Fees above. Audit-related fees were
principally related to procedures in connection with the audit of the Company’s majority
shareholder’s consolidated financial statement for its fiscal years ended December 31, 2007
and December 31, 2008, portions of which were credited to our audit fees for the audit of our
financial statements for our fiscal years ended March 31, 2008 and March 31, 2009. |
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Tax Fees. MSPC billed the Company an aggregate of $98,600 and $70,000 for the fiscal years
ended March 31, 2008 and 2009, respectively, for tax services, principally related to the
preparation of income tax returns and related consultation. |
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All Other Fees. The Company was not billed by MSPC for the fiscal years ended March 31,
2008 and 2009, respectively, for any permitted non-audit services. |
Applicable law and regulations provide an exemption that permits certain services to be
provided by the Company’s outside auditors even if they are not pre-approved. We have not relied on
this exemption at any time since the Sarbanes-Oxley Act was enacted.
15
PART IV.
ITEM 15 — Exhibits, Financial Statement Schedules
a(3) Exhibits. The following exhibits are filed with this Amendment No. to the
Annual Report on Form 10-K/A or are incorporated herein by reference, as indicated.
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| Exhibit Number |
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3.1
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Certificate of Incorporation of Emerson (incorporated by reference to Exhibit (3)
(a) of Emerson’s Registration Statement on Form S-1, Registration No. 33-53621, declared
effective by the SEC on August 9, 1994). |
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3.4
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Certificate of Designation for Series A Preferred Stock (incorporated by reference
to Exhibit (3) (b) of Emerson’s Registration Statement on Form S-1, Registration No.
33-53621, declared effective by the SEC on August 9, 1994). |
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3.5
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Amendment dated February 14, 1996 to the Certificate of Incorporation of Emerson
(incorporated by reference to Exhibit (3) (a) of Emerson’s Quarterly Report on Form 10-Q
for the quarter ended December 31, 1995). |
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3.6
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By-Laws of Emerson (incorporated by reference to Exhibit 3.1 of Emerson’s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2007). |
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10.12
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License Agreement effective as of January 1, 2001 by and between Funai Corporation
and Emerson (incorporated by reference to Exhibit (10) (z) of Emerson’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2000). |
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10.12.1
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First Amendment to License Agreement dated February 19, 2002 by and between Funai
Corporation and Emerson (incorporated by reference to Exhibit (10.12.1) of Emerson’s
Annual Report on Form 10-K for the year ended March 31, 2002). |
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10.12.2
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Second Amendment to License Agreement effective August 1, 2002 by and between Funai
Corporation and Emerson (incorporated by reference to Exhibit (10.12.2) of Emerson’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2002). |
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10.12.3
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Third Amendment to License Agreement effective February 18, 2004 by and between Funai
Corporation and Emerson (incorporated by reference to Exhibit 10.12.3 of Emerson’s Annual
Report on Form 10-K for the year ending March 31, 2004) |
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10.12.4
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Fourth Amendment to License Agreement effective December 3, 2004 by and between Funai
Corporation, Inc. and Emerson (incorporated by reference to Exhibit (10.12.4) of
Emerson’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004). |
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10.12.5
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Fifth Amendment to License Agreement effective May 18, 2005 by and between Funai
Corporation, Inc. and Emerson (incorporated by reference to Exhibit (10.12.5) of
Emerson’s Annual Report on Form 10-K for the year ending March 31, 2005) |
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10.12.7
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Seventh Amendment to License Agreement effective December 22, 2005 by and between
Funai Corporation, Inc. and Emerson (incorporated by reference to Exhibit 10.1 of
Emerson’s Current Report on Form 8-K filed on December 28, 2005) |
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10.13
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Second Lease Modification dated as of May 15, 1998 between Hartz Mountain,
Parsippany and Emerson (incorporated by reference to Exhibit (10) (v) of Emerson’s Annual
Report on Form 10-K for the year ended April 3, 1998). |
16
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| Exhibit Number |
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10.13.1
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Third Lease Modification made the 26 day of October, 1998 between Hartz Mountain
Parsippany and Emerson (incorporated by reference to Exhibit (10) (b) of Emerson’s
Quarterly Report on Form 10-Q for the quarter ended October 2, 1998). |
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10.13.2
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Fourth Lease Modification made the 12th day of February, 2003 between Hartz Mountain
Parsippany and Emerson (incorporated by reference to Exhibit (10.13.2) of Emerson’s
Annual Report on Form 10-K for the year ended March 31, 2003). |
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10.13.4
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Fifth Lease Modification Agreement made the 2nd day of December, 2004 between Hartz
Mountain Industries, Inc. and Emerson (incorporated by reference to Exhibit (10.13.3) of
Emerson’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004). |
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10.13.3
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Lease Agreement dated as of October 8, 2004 between Sealy TA Texas, L.P., a Georgia
limited partnership, and Emerson Radio Corp. (incorporated by reference to Exhibit
(10.13.3) of Emerson’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2004). |
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10.13.5
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Lease Agreement (Single Tenant) between Ontario
Warehouse I, Inc., a Florida corporation, as Landlord, and Emerson Radio Corp., a
Delaware corporation, as Tenant, effective as of December 6, 2005 (incorporated by
reference to Exhibit 10.1 to Emerson’s Current Report on Form 8-K filed on January 4,
2006). |
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10.13.6
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Letter agreement, dated November 28, 2005, between Emerson Radio Corp. and The
Grande Group (Hong Kong) Limited regarding lease of office space. (Incorporated by
reference to Exhibit 10.13.6 to Emerson’s Annual Report on Form 10-K for the year ended
March 31, 2006.) |
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10.13.7
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Letter agreement, dated November 28, 2005, between Emerson Radio Corp. and The
Grande Group (Hong Kong) Limited regarding management services for office space.
(Incorporated by reference to Exhibit 10.13.7 to Emerson’s Annual Report on Form 10-K for
the year ended March 31, 2006.) |
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10.18.1
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Emerson Radio Corp. 2004 Employee Stock Incentive Plan (incorporated by reference to
Exhibit 1 of Emerson’s 2004 Proxy Statement). |
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10.18.2
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Emerson Radio Corp. 2004 Non-Employee Outside Director Stock Option Plan (incorporated
by reference to Exhibit 2 of Emerson’s 2004 Proxy Statement). |
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10.25
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Employment Agreement, dated as of April 3, 2007, by and between Emerson Radio
Corp. and Greenfield Pitts (incorporated by reference to Exhibit 10.1 to Emerson’s
Current Report on Form 8-K filed with the SEC on April 6, 2007). |
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10.26
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Employment Agreement, dated as of October 15, 2007, by and between Emerson Radio
Corp. and John Spielberger (incorporated by reference to Exhibit 10.26 to the Company’s
Annual Report on Form 10-K filed with the SEC on July 11, 2008). |
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10.27.5
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Loan and Security Agreement dated as of December 23, 2005, among Emerson Radio Corp.,
Emerson Radio Macao Commercial Offshore Limited, Majexco Imports, Inc., Emerson Radio
(Hong Kong) Ltd., and Emerson Radio International Ltd. (as Borrowers) and Wachovia Bank,
National Association (incorporated by reference to Exhibit 10.2 of Emerson’s Form 8-K
dated December 28, 2005). |
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10.27.6
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Seventh Amendment to the Loan and Security Agreement dated as of December 23, 2005,
among Emerson Radio Corp., Emerson Radio Macao Commercial Offshore Limited, Majexco
Imports, Inc., Emerson Radio (Hong Kong) Ltd., and Emerson Radio International Ltd. (as
Borrowers) and Wachovia Bank, National Association* |
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10.28.1
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Form of Common Stock Warrant Agreement entered into on October 7, 2003 by and between
Emerson Radio Corp. and Ladenburg Thalmann & Co., Inc. (incorporated by reference to
Exhibit 10.28.1 of Emerson’s Quarterly Report on Form 10-Q for the quarter ended December
31, 2003). |
17
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10.28.2
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Common Stock Purchase Warrant Agreement entered into on August 1, 2004 by and between
Emerson Radio Corp. and EPOCH Financial Services, Inc. (incorporated by reference to
Exhibit 10.28.2 of Emerson’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2004). |
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10.28.3
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Stock Purchase Agreement among Emerson Radio Corp., Collegiate Pacific Inc.
and Emerson Radio (Hong Kong) Limited, dated July 1, 2005 (incorporated by reference
to Exhibit 2.1 to Emerson’s Current Report on Form 8-K filed on July 8, 2005). |
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14.1
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Code of Ethics for Senior Financial Officers (incorporated by reference to
Exhibit 14.1 of Emerson’s Annual Report on Form 10-K for the year ended March 31,
2004). |
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21.1
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Subsidiaries of the Company as of March 31, 2009. (incorporated by reference to Exhibit 21.1 of Emerson’s Annual Report on Form 10-K for the year ended March 31, 2009). |
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31.1
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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.* |
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31.2
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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.* |
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32
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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.* |
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| * |
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Filed herewith. |
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| ** |
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Furnished herewith. |
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Amendment No. 1 on Form 10-K/A to the Registrant’s
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
EMERSON RADIO CORP.
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By: |
/s/ Adrian Ma
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Adrian Ma |
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Chief Executive Officer |
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Dated: July 29, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
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/s/ Christopher Ho
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Chairman of the Board of the
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July 29, 2009 |
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Directors |
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/s/ Eduard Will
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Vice Chairman of the Board of the
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July 29, 2009 |
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Directors |
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/s/ Adrian Ma
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Chief Executive Officer
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July 29, 2009 |
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(Principal
Executive Officer) and Director |
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/s/ Greenfield Pitts
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Chief Financial Officer
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July 29, 2009 |
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(Principal
Financial and Accounting Officer), and Director |
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/s/ Duncan Hon
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Director
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July 29, 2009 |
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/s/ Mirzan Mahathir
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Director
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July 29, 2009 |
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/s/ Kareem E. Sethi
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Director
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July 29, 2009 |
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/s/ Terence A. Snellings
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Director
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July 29, 2009 |
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19