LIONEL Z. GLANCY MICHAEL GOLDBERG GLANCY & BINKOW LLP 1801 Avenue of the Stars, Suite 311 , California 90067 : (310) 201-9150 Facsimile: (310) 201-9160

Attorneys for Plaintiff Scott Howard

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

SCOTT HOWARD, Individually And On No. Behalf of All Others Similarly Situated,

Plaintiffs, CLASS ACTION COMPLAINT v. FOR VIOLATIONS OF FEDERAL SECURITIES LAWS GEOFFREY P. JURICK, KENNETH A. CORBY, JOHN J. RABB and EMERSON JURY TRIAL DEMANDED RADIO CORP.,

Defendants.

Plaintiff, by his attorneys, for his Class Action Complaint, alleges the following upon personal knowledge as to himself and its own acts, and upon information and belief based upon the investigation of plaintiff’s attorneys as to all other matters. The investigation includes the thorough review and analysis of public statements, publicly filed documents of Emerson Radio

Corp. (“Emerson” or the "Company”), press releases, news articles and the review and analysis of accounting rules and related literature. Plaintiff believes that further substantial evidentiary support will exist for the allegations set forth below after a reasonable opportunity for discovery.

SUMMARY OF ACTION

1. This is a securities class action on behalf of public investors who purchased the securities of Emerson during the period from January 29, 2003 through August 12, 2003 (the

"Class Period"). Plaintiff complains of a fraudulent scheme and deceptive course of business that injured purchasers of Emerson stock during the Class Period.

2. Emerson, a Delaware corporation, headquartered in New Jersey, is a distributor that designs, sources, imports and markets and other products, microwave ovens, audio, home theater, specialty and other consumer electronic products. Emerson was originally formed in the State of New York in 1956 under the name Major Electronics Corp. In 1977, the Company reincorporated in the State of New

Jersey and changed its name to Emerson Radio Corp. In 1994, Emerson reincorporated in

Delaware. In the , Emerson markets its products primarily through mass merchandisers, distributors and various retailers and distributors.

3. Throughout the Class Period, defendants artificially inflated the price of Emerson stock by disseminating materially misleading statements concerning the Company’s financial performance, business operations and prospects.

4. Additionally, Emerson’s annual report filed with the SEC during the Class Period on Form 10-K was also materially misleading as its repeated the misleading financial results published in the Company press release described herein and failed to disclose the Company’s problems during the period being reported.

JURISDICTION AND VENUE

5. The claims asserted arise under §§10(b) and 20(a) of the Securities

Exchange Act of 1934 (the “Exchange Act” or the "1934 Act"). Jurisdiction is conferred by §27 of the 1934 Act. Venue is proper pursuant to §27 of the 1934 Act as defendant and/or the

2 individual defendants conduct business in and the wrongful conduct took place in this District.

THE PARTIES

6. Plaintiff Scott Howard purchased Emerson publicly traded securities as detailed in the attached Certification and was damaged thereby.

7. Defendant Emerson is a corporation organized under the laws of Delaware with its principal place of business located at Nine Entin Road, Parsippany, New Jersey 07054.

Emerson conducts operations 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 its trademarks for a variety of products world wide.

The sporting goods segment, which is operated through its 53% ownership of Sport Supply

Group, Inc., distributes and markets sports-related equipment and leisure products primarily to institutional customers in the United States.

8. Defendant Geoffrey P. Jurick was during the Class Period, and at all times relevant hereto, Chairman, President and Chief Executive Officer of Emerson.

9. Defendant Kenneth A. Corby was during the Class Period, and at all times relevant hereto, Executive Vice President and Chief Financial Officer of Emerson.

10. Defendant John J. Rabb was during the Class Period and at all times relevant hereto Executive Vice President of Emerson.

11. Defendants Jurick, Corby and Rabb are referred to herein as the "Individual

Defendants."

12. Because of the Individual Defendants' positions with the Company, they had access to the adverse undisclosed information about the Company's business, operations,

3 operational trends, financial statements, markets, and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with

other corporate officers and employees, attendance at management and Board of Directors meetings and committees thereof and via reports and other information provided to them in

connection therewith.

13. It is appropriate to treat the Individual Defendants as a group for pleading

purposes and to presume that the misleading and incomplete information conveyed in the

Company's public filings, press releases and other publications as alleged herein are the

collective actions of the narrowly defined group of defendants identified above. Each of the

above officers of Emerson, by virtue of their high-level positions with the Company, directly

participated in the management of the Company, was directly involved in the day-to-day

operations of the Company at the highest levels and was privy to confidential proprietary

information concerning the Company and its business, operations, growth, financial statements

and financial condition, as alleged herein. Said defendants were involved in drafting, producing,

reviewing and/or disseminating the false and misleading statements and information alleged

herein, were aware, or recklessly disregarded, that the false and misleading statements were being

issued regarding the Company, and approved or ratified these statements, in violation of the

federal securities laws.

14. As officers and controlling persons of a publicly held company whose common

stock was, and is, registered with the Securities and Exchange Commission (“SEC”) pursuant to

the Exchange Act, and was traded on the AMEX and governed by the provisions of the federal

4 securities laws, the Individual Defendants each had a duty to disseminate promptly, accurate and truthful information with respect to the Company's financial condition and performance, growth, operations, financial statements, business, markets, management, earnings and present and future business prospects, and to correct any previously issued statements that had become materially misleading or untrue, so that the market price of the Company's publicly traded securities would be based upon truthful and accurate information. The Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations.

15. The Individual Defendants participated in the drafting, preparation and/or approval of the various public and shareholder and investor reports and other communications complained of herein and were aware of, or recklessly disregarded, the misstatements contained therein and omissions therefrom, and were aware of their materially misleading nature. Because of their Board membership and/or executive and managerial positions with Emerson, each of the

Individual Defendants had access to the adverse undisclosed information about Emerson’s business operations and financial condition and performance as particularized herein and knew

(or recklessly disregarded) that these adverse facts rendered the positive representations, made by or about Emerson and its business, issued or adopted by the Company materially false and misleading.

16. The Individual Defendants, because of their positions of control and authority as officers and/or directors of the Company, were able to and did control the content of the various

SEC filings, press releases and other public statements pertaining to the Company during the

Class Period. Each Individual Defendant was provided with copies of the documents alleged herein to be misleading prior to or shortly after their issuance and/or had the ability and/or

5 opportunity to prevent their issuance or cause them to be corrected. Accordingly, each of the

Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for the representations contained therein.

17. Each of the defendants is liable as a participant in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Emerson common stock by disseminating materially false and misleading statements and/or concealing material adverse facts. The scheme deceived the investing public regarding Emerson’s business, operations, management and the intrinsic value of Emerson common stock and caused plaintiff and other members of the Class to purchase Emerson securities at artificially inflated prices.

Because of the Individual Defendants' positions with the Company, they had access to the adverse undisclosed information about the Company's business, operations, operational trends, financial statements, markets and present and future business prospects via access to internal corporate documents (including the Company's operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management meetings and committees thereof and via reports and other information provided to them in connection therewith.

18. Each of the Individual Defendants and Emerson are liable in that they inflated the price of Emerson stock by making materially misleading statements and omitting material adverse information. The defendants' wrongful course of business (I) artificially inflated the price of Emerson’s stock during the Class Period; (ii) deceived the investing public, including plaintiff and other Class members, into acquiring Emerson’s securities at artificially inflated prices; and

(iii) permitted Emerson to grow and benefit economically from the wrongful course of conduct.

6 CLASS ACTION ALLEGATIONS

19. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure on behalf of all persons who purchased Emerson publicly traded securities (the "Class") on the open market during the Class Period. Excluded from the Class are defendants, directors and officers of Emerson and their families and affiliates.

20. The members of the Class are so numerous that joinder of all members is impracticable. The disposition of their claims in a class action will provide substantial benefits to the parties and the Court.

21. There is a well-defined community of interest in the questions of law and fact involved in this case. Questions of law and fact common to the members of the Class which predominate over questions which may affect individual Class members include:

(a) Whether the 1934 Act was violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants' statements omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and

(d) Whether defendants knew or recklessly disregarded that their statements were false and misleading.

SUBSTANTIVE ALLEGATIONS

False and Misleading Statements During the Class Period

22. The Class Period begins on January 29, 2003, when Emerson issued a press release announcing the Company’s financial results for the third quarter of fiscal 2003. The press release included a statement from defendant Jurick, who commented in part:

7 “Emerson’s consolidated balance sheet remains strong with substantial cash and liquidity available through its lending arrangements. Major aspects of each segment continue to show continued strength. On-going business development measures recently resulted in the signing of a letter of intent with a major Chinese based retailer, which should offer Emerson significant new revenue opportunities beginning in the next fiscal year. Cultivating this and other international markets combined with the continued focus on the domestic market leads us to believe fiscal 2004 will be another strong year. ” [Emphasis added.]

* * *

23. On March 17, 2003, Emerson announced the filing of a registration statement with the SEC “relating to a public offering of and sale of shares by Geoffrey P. Jurick, Emerson’s

Chairman and Chief Executive Officer,” and covering 4,817,321 shares including a 628,346 share option granted to the underwriter to cover over-allotments, if any. The press release stated in pertinent part:

Most of the offering proceeds are expected to be used by Mr. Jurick to settle his long outstanding litigation, to pay for various expenses associated with the litigation and to defray certain costs incurred to affect the registration and offering. The Registration Statement more fully describes the use of proceeds and litigation. Following the offering, and assuming the over-allotment option is not exercised, Mr. Jurick will continue to own approximately 5.7 million shares or approximately 21% of the 27.3 million Emerson shares currently outstanding.

24. On July 14, 2003, Emerson issued a press release announcing the Company’s financial results for fourth-quarter and full-year fiscal 2003. The press release reported

“continued strength in the consumer electronics segment” and “solid margin improvement” in both consumer electronics and sporting goods segments. The press release quoted defendant

Jurick, who stated part:

"This has been a successful year for Emerson on several fronts. A combination of efforts focused on increasing revenues through expanded offerings of core and themed products, additional retail store placements and strengthening our licensee network have provided solid top line results. We are pleased with the performance

8 of the consumer electronics business in several key areas. Gross margins continued expanding through the introduction of new models and the use of several inward license agreements. Additionally, outward licensing revenues continue to grow significantly on several fronts domestically and internationally. ... We are pleased that our continued progress was favorably noted by a number of financial institutions during the course of last year leading to a substantial increase in the market value of our company." [Emphasis added.]

25. The financial results reported in the July 14, 2003, press release were repeated in

the Company’s Form 10-K for the period ending March 31, 2003, which was signed by the

Individual Defendants, among others, and filed that same day, July 14, with the SEC.

26. Defendants knew or recklessly disregarded that the statements described in ¶¶22-

25 were each materially false and misleading when made as they misrepresented or omitted the following adverse facts which then existed and the disclosure of which was necessary to make the statements not false and misleading, including but not limited to:

(a) Emerson customers were deferring and foregoing purchasers of product and

reducing inventory levels as they shifted to just-in-time stocking;

(b) Since at least March 20003, the outbreak of severe acute respiratory syndrome

(SARS) in Asia was dramatically reducing Emerson’s product demand and supply;

(c) Emerson was planning to and did discontinue the Mary-Kate and Ashley and

Nascar and business; and

(d) Based on the foregoing, Emerson had no reasonable basis to project

“significant” and “strong” growth and revenues for fiscal 2004.

27. Additionally, as detailed in ¶30 below, Emerson insiders sold thousands of their

personally held shares of Emerson stock to the unsuspecting market during the Class Period.

9 THE TRUTH IS REVEALED

28. The Class Period ends on August 12, 2003, the day that Emerson shocked the

market when it issued a press release announcing the Company’s financial results for the first quarter of fiscal 2004, the period ending June 30, 2003. The Company announced, among other

things, a 44.3% revenue decline in its consumer electronics segment. The Company’s press

release stated, in pertinent part, as follows:

Consumer Electronics Segment - Revenue Decline

Net Revenues decreased 44.3% to $31.6 million from $56.8 million due to a decline in revenues in all product categories, a decline in licensing revenues and increases in product returns. Gross margins decreased to 15.9% in the current quarter from 18.1% in the same year over year period associated with gross margin improvements in audio products more than offset by declines in microwave oven products and the decline in sales of higher margin themed products. A net loss of $506,000 was incurred for the three month period as compared to net income of $2.5 million for the same year ago period.

Geoffrey P. Jurick, Chairman & Chief Executive Officer of Emerson Radio, stated, "Our consumer electronics segment was impacted by the prolonged slow down in consumer spending in our industry. Store closures by K mart negatively affected revenues compared to last year's levels with fewer sell through locations for our products. This, combined with reductions in inventory levels maintained by some of our larger accounts in a shift to more just-in-time stocking further contributed to the revenue decline. Additionally, uncertainties concerning of the Iraq war and the SARS outbreak affected our business domestically as well as internationally." * * * [Executive Vice President & Chief Financial Officer Kenneth A.] Corby concluded, "It is too difficult to comment on the full year due to the uncertainties being brought about by prolonged and continued economic pull back in consumer spending and by continued conservative retailer buying patterns. Recent statistical data suggest tax cuts, tax refund checks and cautious spending by consumers on lower priced products is beginning to look positive. We expect September quarter revenues to be lower than last year's same period strong revenues due to these various factors."

10 29. Investor reaction to the August 12, 2003 press release was swift and highly negative, with Emerson stock plummeting 49% in one day on heavy trading volume.

30. The next day, an article published in the Parsippany Daily Record, titled

“Emerson Radio’s Revenues Down 31%,” provided additional details about Emerson’s problems. The article stated in part:

Shares of Emerson Radio Corp. plunged by half after a weak first-quarter report that caught investors off-guard.

Revenues plunged 31 percent to $57.6 million for the period ended June 30, as sales of its signature consumer electronics items dropped by an even steeper 44 percent. ...

In a conference call, analysts and investors vented their anger that none of the bad news was hinted at in a call just one month ago, after the quarter had closed.

"You basically have dropped a bomb this morning," said Mark D. Cooper, president of the investment firm Benson Associates in Portland, Ore.

Besides the problems with the income statement, Cooper said growing inventories and negative cash flow made the company appear to "rapidly becoming cash-poor, and that's not a good sign" despite rising total assets. ...

Chairman and chief executive Geoffrey P. Jurick said the company's shortcomings were being fixed but it would take time. "I can't be a 90-day wonder against all odds."

Investors also were upset that some of the company's top officers had exercised options and sold the stock after the July call, when they said the tenor of impending bad news should have been known. ... [Emphasis added.]

SCIENTER ALLEGATIONS

31. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and misleading; knew that such statements or documents would be issued or

11 disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Emerson, their control over, and/or receipt and/or modification of allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Emerson, participated in the fraudulent scheme alleged herein.

32. Additionally, defendants’ scienter is further evidenced by the insider selling of

Emerson insiders. This insider selling was unusual in both timing and amount, as set forth in the following table:

Emerson Radio Corp. Insider Sales

INSIDER/TITLE DATE OF NUMBER OF PRICE PER PROCEEDS SALE SHARES SOLD SHARE

Paul R. Gullett 02/05/2003 12,000 $7.850 $94,200.00 President

02/06/2003 - 14,000 7.000 98,000.00 02/07/2003

TOT AL 26,000 $192,200.00

Jerome H. Farnum 02/14/2003 10,000 $6,400 $64,000.00 Director

07/23/2003 2,300 6.310 14,513.00 2,600 6.300 16,380.00

07/24/2003 4,600 6.310 29,026.00

07/24/2003 400 6.350 2,540.00

07/26/2003 100 6.350 635.00

12 07/28/2003 500 6.450 3,225.00 900 6.390 5,751.00 500 6.470 3,235.00 200 6.480 1,296.00 7,900 6.380 50,402.00

TOT AL 30,000 $191,003.00

Applicability Of Presumption Of Reliance: Fraud-On-The-Market Doctrine

33. At all relevant times, the market for Emerson securities was an efficient market for the following reasons, among others:

(a) Emerson stock met the requirements for listing, and was listed and actively traded on a highly efficient and automated market;

(b) As a regulated issuer, Emerson filed periodic public reports with the SEC;

(c) Emerson regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services; and

(d) Emerson was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace.

34. As a result of the foregoing, the market for Emerson securities promptly digested current information regarding Emerson from all publicly available sources and reflected such information in Emerson’s stock price. Under these circumstances, all purchasers of Emerson

13 securities during the Class Period suffered similar injury through their purchase of Emerson

securities at artificially inflated prices and a presumption of reliance applies.

NO SAFE HARBOR

35. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking statements" when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are liable for those false forward-looking statements because at the time each of those forward-looking statements was made, the particular speaker knew that the particular forward-

looking statement was false, and/or the forward-looking statement was authorized and/or

approved by an executive officer of Emerson who knew that those statements were false when

made.

COUNT I

Violations of Section 10(b) of the Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants

53. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

36. During the Class Period, defendants disseminated or approved the false

statements specified above, which they knew or recklessly disregarded were materially false and

14 misleading in that they contained material misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

37. Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they:

(a) Employed devices, schemes and artifices to defraud;

(b) Made untrue statements of material facts or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made not misleading; or

(c) Engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiff and others similarly situated in connection with their purchases of Emerson publicly traded securities during the Class Period.

38. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of the market, they paid artificially inflated prices for Emerson publicly traded securities.

Plaintiff and the Class would not have purchased Emerson publicly traded securities at the prices they paid, or at all, if they had been aware that the market prices had been artificially and falsely inflated by defendants' misleading statements.

39. As a direct and proximate result of these defendants' wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their purchases of

Emerson publicly traded securities during the Class Period.

15 COUNT II

Violations of Section 20(a) of The Exchange Act Against the Individual Defendants

40. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.

41. This count is asserted against the Individual Defendants and is based upon Section

20(a) of the 1934 Act. The defendants, by virtue of their offices, directorships, stock ownership and specific acts were, at the time of the wrongs alleged herein and as set forth in Count I, controlling persons of Emerson within the meaning of Section 20(a) of the 1934 Act. Defendants had the power and influence and exercised the same to cause Emerson to engage in the illegal

conduct and practices complained of herein by causing the Company to disseminate the false and

misleading information referred to above.

42. The Defendants’ position made them privy to and provided them with actual

knowledge of the material facts concealed from Plaintiffs and the Class.

43. By virtue of the conduct alleged in Count I, the Defendants are liable for the

aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered.

JURY DEMAND

Plaintiff hereby demands a trial by jury.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff demands judgment:

1. Determining that the instant action is a proper class action maintainable

under Rule 23 of the Federal Rules of Civil Procedure;

16 2. Awarding compensatory damages and/or rescission as appropriate against

Defendants, in favor of Plaintiff and all members of the Class for damages sustained as a result of Defendants' wrongdoing;

3. Awarding Plaintiff and members of the Class the costs and disbursements of this suit, including reasonable attorneys', accountants' and experts' fees; and

4. Awarding such other and further relief as the Court may deem just and proper.

Dated: September 11, 2003 SQUITERI & FEARON, LLP

By: ______Lee Squitieri One Gateway Center, Suite 2500 Newark, NJ 07102 Telephone: (201) 445-8595 Facsimile: (646) 487-3095 GLANCY & BINKOW LLP Lionel Z. Glancy Michael Goldberg 1801 Avenue of the Stars, Suite 311 Los Angeles, California 90067 Telephone: (310) 201-9150 Facsimile: (310) 201-9160 Attorneys for Plaintiff

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