Singing Machine Announces 3rd Quarter Earnings Release
COCONUT CREEK, Fla., Feb. 12 /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) today announced financial results for its third fiscal quarter ended December 31, 2009. The Company reported approximately $11.9 million in net sales for the third quarter, representing a decrease of approximately $4.6 million over the same period last year. The decrease in sales is primarily due to continued economic concerns and excess inventory left over with customers from last year.
The Company reported $247,309 in net income, down $216,392 from last year's third quarter net income of $463,701. The decrease in net income is primarily due to the decrease in sales. However, the Company did report an increase in gross profit margin from 22.7% to 25% as compared to the same period last year. The Company was also successful in lowering operating expenses by approximately $500,000 as compared to the same quarter last year. The decrease in operating expenses is primarily due to a decrease in general and administrative expenses caused by payroll reductions and budget cuts. The Company has also made significant strides toward lowering and managing inventory, reporting approximately $3.6 million in inventory at the end of the quarter, as compared to inventory of $4.7 million at the end of the fiscal year 2009.
"While the financials do not necessarily reflect it, Singing Machine had a positive holiday season with very strong sell-through reported by all of our retail partners," commented Gary Atkinson, Interim CEO. "Last year at this time, amid the peak of the recession, many of our customers finished their season with excess inventory, which burdened the Company going into the start of this fiscal year. For fiscal year 2011 the Company hopes to start with a much cleaner slate. In addition, the strong sell-through this year tells us the karaoke category is still alive and that there is an avid demand for music and singing." Atkinson furthered, "Looking forward to the next fiscal year, the Company recently finished a very optimistic and successful showing at the Consumer Electronics Show where it met with many large retail customers and unveiled some new, exciting projects."
Atkinson also commented on the recently launched karaoke music download store, "During this third quarter, the Company saw an impressive increase in traffic and high conversion rate for music downloads, signifying that there is willingness and a demand for downloadable karaoke music.
However, despite these positive things, we know the Company still has tremendous strides it must take to achieve profitability. The Company will continue to look for ways to reduce overhead, better manage its current accounts, and reach new retail distribution."
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™, SMDigital™, SoundX™, and Sound X Kids™ 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.
(Financial statements attached)
The Singing Machine Company, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, March 31, 2009 2009 ---- ---- (Unaudited) (Audited) Assets ------ Current Assets Cash $1,777,340 $957,163 Accounts receivable, net of allowances of $289,659 and $261,980, respectively 2,677,848 972,345 Due from factor 280,484 73,854 Inventories, net 3,588,653 4,729,667 Prepaid expenses and other current assets 400,997 526,563 ------- ------- Total Current Assets 8,725,322 7,259,592 Property and equipment, net 778,323 886,770 Other non-current assets 179,751 179,362 ------- ------- Total Assets $9,683,396 $8,325,724 ========== ========== Liabilities and Shareholders' Equity ------------------------------------ Current Liabilities Accounts payable $2,733,828 $2,588,769 Due to related parties, net 3,353,258 1,498,391 Accrued expenses 627,140 422,260 Short-term loan - bank 1,092,323 - Current portion of long-term financing obligation 18,186 18,186 Customer credits on account 526,948 908,449 Deferred gross profit on estimated returns 351,940 288,039 ------- ------- Total Current Liabilities 8,703,623 5,724,094 Long-term financing obligation, less current portion 10,609 22,733 ------ ------ Total Liabilities 8,714,232 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 19,084,721 19,075,750 Accumulated deficit (18,490,051) (16,871,347) ----------- ----------- Total Shareholders' Equity 969,164 2,578,897 ----------- ----------- Total Liabilities and Shareholders' Equity $9,683,396 $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 Nine Months Ended ---------------------- --------------------- December 31, December 31, December 31, December 31, ------------ ------------ ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Net Sales $11,975,761 $16,611,566 $19,781,141 $30,998,308 Cost of Goods Sold 8,981,999 12,839,723 15,689,397 25,002,865 ---------- ---------- ---------- ---------- Gross Profit 2,993,762 3,771,843 4,091,744 5,995,443 Operating Expenses Selling expenses 1,708,663 1,642,309 2,648,835 2,656,385 General and administrative expenses 875,864 1,436,477 2,666,471 3,355,232 Depreciation and amortization 120,682 121,604 322,947 326,264 ---------- ---------- ---------- ---------- Total Operating Expenses 2,705,209 3,200,390 5,638,253 6,337,881 ---------- ---------- ---------- ---------- Income (Loss) from Operations 288,553 571,453 (1,546,509) (342,438) Other Expenses Interest expense (41,244) (71,670) (72,195) (104,671) ---------- ---------- ---------- ---------- Income (Loss) before provision for income taxes 247,309 499,783 (1,618,704) (447,109) Provision for income taxes (36,082) (36,082) ---------- ---------- ---------- ---------- Net Income (Loss) $247,309 $463,701 $(1,618,704) $(483,191) ========== ========== ============ =========== Net Income (Loss) per Common Share Basic and Diluted $0.01 $0.01 $(0.04) $(0.01) Weighted Average Common and Common Equivalent Shares: Basic and Diluted 37,449,432 32,729,990 37,449,432 32,472,073 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 Nine Months Ended --------------------- December 31, 2009 December 31, 2008 ----------------- ----------------- Cash flows from operating activities Net Loss $(1,618,704) $(483,191) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: Depreciation and amortization 322,947 326,264 Inventory reserve charge 91,330 95,149 Change in allowance for bad debts 27,679 236,267 Stock based compensation 8,971 28,890 Deferred gross profit on estimated sales returns 63,901 261,285 Changes in assets and liabilities: (Increase) Decrease in: Accounts receivable (3,502,013) (6,710,288) Inventories 1,049,684 (2,598,292) Prepaid expenses and other current assets 125,566 16,506 Other non-current assets (388) (8,958) Increase (Decrease) in: Accounts payable 145,059 5,476,800 Accounts payable - related party 1,558,187 2,449,709 Accrued expenses 204,880 187,123 Customer credits on account (381,501) (199,027) -------- -------- Net cash used in operating activities (1,904,402) (921,763) ---------- -------- Cash flows from investing activities Purchase of property and equipment (216,148) (720,150) Disposal of property and equipment 1,648 - ----- --- Net cash used in investing activities (214,500) (720,150) -------- -------- Cash flows from financing activities Borrowings from factor, net (206,630) (916,496) Net proceeds pursuant to factoring facility 1,768,830 4,159,414 Net proceeds from short-term bank loan 1,092,323 - Payments on long-term financing obligation (12,124) 46,980 Net loan proceeds from related parties 296,680 (296,650) ------- -------- Net cash provided by financing activities 2,939,079 2,993,248 --------- --------- Change in cash and cash equivalents 820,177 1,351,335 Cash and cash equivalents at beginning of period 957,163 447,816 ------- ------- Cash and cash equivalents at end of period $1,777,340 $1,799,151 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $72,195 $103,183 ======== ======== Cash paid for Income Taxes - 36,802 === ====== 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.
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