A class action has been filed against Emerson Radio Corporation (AMEX: MSN) and certain of its officers and directors by stockholders who purchased the company's common stock between January 29 and August 12, 2003. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

The action alleges that the defendants' statements were each materially false and misleading when made as they misrepresented and omitted the following adverse facts: (1) that Emerson customers were deferring and foregoing purchases of product and reducing inventory levels as they shifted to just-in-time stocking; (2) that since at least March 2003, the outbreak of severe acute respiratory syndrome in Asia was dramatically reducing Emerson's product demand and supply; (3) that Emerson was planning to, and did, discontinue Mary-Kate and Ashley and Nascar brands and business; and (4) that based on the foregoing, Emerson had no reasonable basis to project "significant" and "strong" growth and revenues for fiscal 2004.

On August 12, 2003, Emerson shocked the investing public when it released its financial and operational results for the first quarter of fiscal 2004, ended June 30, 2003, announcing, among other things, a 44.3% revenue decline in its consumer electronics segment. In response to this announcement, the price of shares of Emerson stock fell more than 49% on August 12, on heavy trading volume.