Singing Machine Announces 1st Quarter Earnings Release
COCONUT CREEK, Fla., Aug. 19, /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announces the results for its first fiscal quarter ended June 30, 2009.
The Company reported net sales of approximately $814,000 (after one-time discounts of $235,000). This is down from approximately $1,770,000 as compared to the same period last fiscal year. The primary reason for the reduction in net sales was a steep decline in sales of Bratz licensed merchandise as that product life-cycle winds down. In addition, the Company issued several one-time price discounts and concessions to some of its larger customers to assist with slow-moving inventory in an effort to retain future business.
In a move to generate sales and cash, the Company elected to take approximately $180,000 in write-downs to lower its cost to market value for Bratz licensed product and musical instruments. These inventory write-downs coupled with price discounts, totaling approximately $415,000, led the Company to report negative gross margin of -35.1%. As a result of these adjustments the Company reported a first quarter net loss of approximately $1,553,000 as compared with a net loss in the first quarter ended June 30, 2008 of approximately $1,042,000.
Tony Handal, CEO, states, "The Company's loss, while larger than last year's first quarter, is reflective of an improved infrastructure. This is evidenced by the fact that after eliminating the one-time charge offs, the net loss for this quarter was similar to last year's first quarter, despite a 28% decrease in gross sales." Handal continued, "We remain optimistic that with our new product line-up for the upcoming season, including our new Sound X Kids(TM) line we can rebound in the second half of the year. We have already heard tremendous positive buzz surrounding our new pedestal karaoke unit and our other fresh new designs for this year. We are also excited to offer two free karaoke music downloads with the purchase of each new unit for this season which we believe will boost online music revenue."
About The Singing Machine
Incorporated in 1982, The Singing Machine Company develops and distributes a full line of consumer-oriented karaoke machines and music under The Singing Machine(TM), SMDigital(TM), SoundX(TM), and Sound X Kids(TM) and other brand names. The first to provide karaoke systems for home entertainment in the United States, The Singing Machine sells its products in North America, Europe and Australia. The Singing Machine is also the first to offer digital music downloads for play on home karaoke machines. See www.singingmachine.com for more details.
This press release contains forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forwardlooking statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management and include, but are not limited to statements about our financial statements for the fiscal year ended March 31, 2009. You should review our risk factors in our SEC filings which are incorporated herein by reference. Such forwardlooking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forwardlooking statement to reflect events or circumstances after the date of this release.
(Financial statements attached) The Singing Machine Company, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, 2009 March 31, 2009 ------------- -------------- (Unaudited) (Audited) Assets ------ Current Assets Cash and cash equivalents $616,865 $957,163 Accounts receivable, net of allowances of $327,293 and $261,980, respectively 591,902 972,345 Due from factor 4,004 73,854 Inventories, net 4,211,919 4,729,667 Prepaid expenses and other current assets 420,824 526,563 Total Current Assets 5,845,514 7,259,592 Property and Equipment, net 822,395 886,770 Other Non-Current Assets 179,362 179,362 Total Assets $6,847,271 $8,325,724 Liabilities and Shareholders' Equity ------------------------------------ Current Liabilities Accounts payable $1,352,525 $2,588,769 Due to related parties - net 619,569 1,498,391 Accrued expenses 348,231 422,260 Short-term loan - bank 1,742,140 - Current portion of long-term financing obligation 18,186 18,186 Customer credits on account 1,643,994 908,449 Deferred gross profit on estimated returns 73,125 288,039 Total Current Liabilities 5,797,770 5,724,094 Long-term financing obligation, less current portion 19,702 22,733 Total Liabilities 5,817,472 5,746,827 Shareholders' Equity Preferred stock, $1.00 par value; 1,000,000 shares authorized, no shares issued and outstanding - - Common stock, Class A, $.01 par value; 100,000 shares authorized; no shares issued and outstanding - - Common stock, $0.01 par value; 100,000,000 shares authorized; 37,449,432 and 37,449,432 shares issued and outstanding 374,494 374,494 Additional paid-in capital 19,079,689 19,075,750 Accumulated deficit (18,424,384) (16,871,347) Total Shareholders' Equity 1,029,799 2,578,897 Total Liabilities and Shareholders' Equity $6,847,271 $8,325,724 The accompanying notes are an integral part of these consolidated financial statements. The Singing Machine Company, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For Three Months Ended ----------------------- June 30, 2009 June 30, 2008 ------------- ------------- Net Sales $814,008 $1,770,346 Cost of Goods Sold 1,099,630 1,567,697 Gross (Loss) Profit (285,622) 202,649 Operating Expenses Selling expenses 304,141 221,534 General and administrative expenses 860,254 922,199 Depreciation and amortization 99,752 101,161 Total Operating Expenses 1,264,147 1,244,894 Loss from Operations (1,549,769) (1,042,245) Other Expenses Interest expense (3,268) (7,316) Loss before taxes (1,553,037) (1,049,561) Provision for income taxes - - Net Loss $(1,553,037) $(1,049,561) Loss per Common Share Basic $(0.04) $(0.03) Diluted $(0.04) $(0.03) Weighted Average Common and Common Equivalent Shares: Basic 37,449,432 31,990,298 Diluted 37,449,432 31,990,298 The accompanying notes are an integral part of these consolidated financial statements. The Singing Machine Company, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For Three Months Ended ----------------------- June 30, 2009 June 30, 2008 ------------- ------------- Cash flows from operating activities Net Loss $(1,553,037) $(1,049,561) Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: Depreciation and amortization 99,752 101,161 Inventory reserve charge 181,142 9,267 Change in allowance for bad debts 65,313 (83,072) Stock compensation 3,939 3,640 Deferred gross profit on estimated sales returns (214,914) (157,052) Changes in assets and liabilities: (Increase) Decrease in: Accounts receivable 950,861 959,838 Inventories 336,605 (1,529,507) Prepaid expenses and other current assets 105,739 (75,667) Other non-current assets - (5,747) Increase (Decrease) in: Accounts payable (1,236,244) 2,144,814 Accounts payable - related party (878,822) - Accrued expenses (74,028) (59,167) Customer credits on account 735,545 (205,334) Net cash (used in) provided by operating activities (1,478,149) 53,613 Cash flows from investing activities Purchase of property and equipment (35,377) (276,769) Net cash used in investing activities (35,377) (276,769) Cash flows from financing activities Borrowings from factor, net 69,850 56,042 Net payments pursuant to factoring facility (635,731) - Net proceeds from short-term bank loan 1,742,140 - Payments on long-term financing obligation (3,031) - Net loan proceeds from related parties - 180,448 Net cash provided by financing activities 1,173,228 236,490 Change in cash and cash equivalents (340,298) 13,334 Cash and cash equivalents at beginning of period 957,163 447,816 Cash and cash equivalents at end of period $616,865 $461,150 Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $3,268 $7,316 Supplemental Disclosures of Non-Cash Financing Activities: Payment of trade payable with stock $- $197,500 The accompanying notes are an integral part of these consolidated financial statements.
SOURCE The Singing Machine Company, Inc.
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