Singing Machine Announces 2nd Quarter Earnings Release
COCONUT CREEK, Fla., Nov. 16 /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announces the results for its second fiscal quarter ended September 30, 2009.
The Company reported net sales of approximately $6.99 million, representing a decline in net sales of $5.62 million, as compared to the same period last year. Net loss from operations increased to $285,293 as compared to net profit from operations of $128,354 in the same period last year. The Company believes that the decrease in sales volume is primarily attributable to a decline in direct import business, which is consistent with a conservative economy-wide trend among retailers to reduce and hold down their levels of inventory.
Despite sustaining a loss, the Company's gross margin improved over the same period last year from 16% to 19.8% (increase of 3.8%). Anticipating reduced sales volume, the Company also committed to reduce overhead and streamline operations resulting in a reduction in operating expenses of approximately $244,000 as compared to the same period last year (approximately a 14% reduction in overhead).
"The Company is moving in the right direction, despite the loss for the quarter," commented Tony Handal, CEO of the Company. "We have made deep and significant cuts this year in an effort to improve efficiency and move toward profitability. Additionally, we have been bolstering our reserves this fiscal year in order to restore health to the balance sheet. Unfortunately during this second quarter, we have seen our customers shift away from direct import programs in favor of traditional domestic programs. This requires the Company to import goods for its own stock for domestic sales. As a result, we have seen a slump in direct import business during the second quarter which has negatively impacted sales." Added Handal, "as consumer confidence builds we hope to see a return of our direct import business."
Regarding the online download business, Bernardo Melo, VP of Global Sales & Marketing, stated, "the online music program has been well received by our customers. This quarter we have seen promising results in traffic and conversion rates and we have received a lot of positive feedback. As our hardware product continues to reach retail shelves, the online volume continues to grow. We are also excited about our online music gift card program, initially launching at Toys R' Us this holiday season. We expect this program to add incremental traffic to our online store and also increase consumer awareness of karaoke content available in a digital format." Melo added, "In other positive news, we have seen very encouraging sell-thru from our customers so far which is very promising entering our key 6-week sales stretch. To date we are exceeding our initial forecasts with our key customers. Karaoke is still alive and well."
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.
Forward-Looking Statements
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.
The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30, March 31,
2009 2009
------------- ----------
(Unaudited) (Audited)
Assets
------
Current Assets
Cash $2,005,386 $957,163
Accounts receivable, net of allowances
of $353,716 and $261,980, respectively 2,196,694 972,345
Due from factor 15,945 73,854
Inventories, net 5,033,324 4,729,667
Prepaid expenses and other current
assets 403,681 526,563
------------- ----------
Total Current Assets 9,655,030 7,259,592
Property and equipment, net 721,234 886,770
Other non-current assets 179,751 179,362
------------- ----------
Total Assets $10,556,015 $8,325,724
============= =========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Accounts payable $4,384,804 $2,588,769
Due to related parties, net 2,103,531 1,498,391
Accrued expenses 497,466 422,260
Short-term loan - bank 1,322,884 -
Current portion of long-term financing
obligation 18,186 18,186
Customer credits on account 1,361,982 908,449
Deferred gross profit on estimated returns 131,185 288,039
------------- ----------
Total Current Liabilities 9,820,038 5,724,094
Long-term financing obligation, less current
portion 15,155 22,733
Total Liabilities 9,835,193 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 19,083,688 19,075,750
Accumulated deficit (18,737,360) (16,871,347)
------------- ----------
Total Shareholders' Equity 720,822 2,578,897
------------- ----------
Total Liabilities and
Shareholders' Equity $10,556,015 $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 For Six Months Ended
----------------------- ------------------------
September September September September
30, 30, 30, 30,
2009 2008 2009 2008
---------- ----------- ----------- -----------
Net Sales $6,991,372 $12,616,396 $7,805,380 $14,386,742
Cost of Goods Sold 5,607,768 10,595,445 6,707,398 12,163,142
---------- ----------- ----------- -----------
Gross Profit 1,383,604 2,020,951 1,097,982 2,223,600
Operating Expenses
Selling expenses 636,031 792,542 940,172 1,014,076
General and
administrative
expenses 930,353 996,556 1,790,607 1,918,755
Depreciation and
amortization 102,513 103,499 202,265 204,660
---------- ----------- ----------- -----------
Total Operating
Expenses 1,668,897 1,892,597 2,933,044 3,137,491
---------- ----------- ----------- -----------
(Loss) Income from
Operations (285,293) 128,354 (1,835,062) (913,891)
Other Expenses
Interest expense (27,683) (25,684) (30,951) (33,000)
---------- ----------- ----------- -----------
Net (Loss) Income $(312,976) $102,670 $(1,866,013) $(946,891)
========== =========== =========== ===========
(Loss) Income per
Common Share
Basic and Diluted $(0.01) $ 0.00 $(0.05) $(0.03)
Weighted Average Common
and Common Equivalent
Shares:
Basic and Diluted 37,449,332 32,698,876 37,449,332 32,227,250
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 Six Months Ended
--------------------
September 30, September 30,
2009 2008
------------- -------------
Cash flows from operating activities
Net Loss $(1,866,013) $(946,891)
Adjustments to reconcile net loss to net cash
and cash equivalents (used in) provided by
operating activities:
Depreciation and amortization 202,265 204,660
Inventory reserve charge 191,179 (15,745)
Change in allowance for bad debts 91,736 (40,088)
Stock based compensation 7,938 7,280
Deferred gross profit on estimated sales
returns (156,854) (1,543)
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable (3,084,916) (5,949,946)
Inventories (494,836) (6,370,484)
Prepaid expenses and other current
assets 122,882 (100,173)
Other non-current assets (390) (8,958)
Increase (Decrease) in:
Accounts payable 1,796,035 7,945,552
Accounts payable - related party 605,140 5,473,963
Accrued expenses 75,207 181,142
Customer credits on account 453,533 (105,701)
------- --------
Net cash (used in) provided by operating
activities (2,057,094) 273,068
---------- -------
Cash flows from investing activities
Purchase of property and equipment (38,377) (401,293)
Disposal of property and equipment 1,648 -
----- -
Net cash used in investing activities (36,729) (401,293)
------- --------
Cash flows from financing activities
Borrowings from factor, net 57,909 2,782
Net proceeds pursuant to factoring
facility 1,768,830 -
Net proceeds from short-term bank loan 1,322,884 153,845
Payments on long-term financing obligation (7,577) 51,528
Net loan proceeds from related parties - 452,321
--------- -------
Net cash provided by financing
activities 3,142,046 660,476
--------- -------
Change in cash and cash equivalents 1,048,223 532,251
Cash and cash equivalents at beginning
of period 957,163 447,816
------- -------
Cash and cash equivalents at end
of period $2,005,386 $980,067
========== =======
Supplemental Disclosures of Cash
Flow Information:
Cash paid for Interest $30,951 $33,000
======= ======
Non-Cash Financing Activities:
Conversion of trade payable to equity $- $197,500
======= ========
The accompanying notes are an integral part of these consolidated
financial statements.
SOURCE The Singing Machine Company, Inc.
RELATED LINKS
http://www.singingmachine.com
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