Singing Machine Announces Profit in 2nd Quarter Earnings Release
COCONUT CREEK, Fla., Nov. 12, 2010 /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announced the results for its second fiscal quarter ended September 30, 2010.
The Company announced net sales of approximately $8.36 million in the second quarter as compared with approximately $6.99 million reported in the same period last year, an increase of approximately $1.37 million (or increase of approximately 19%). The second quarter increase to net sales is primarily due to increased demand as well as earlier shipments to customers buying goods direct from China. Gross margin in the second quarter slightly improved to 20.3% as compared to 19.8% in the same period last year.
The Company also reported reduced G&A expenses of $634,033 for the period ended September 30, 2010 as compared to $930,353 reported in the same period last year (representing a decrease of $296,320, or approximately 32%). The decrease to expenses is primarily due to the Company's ongoing commitment to reducing costs, improving its logistics operation and operating with a leaner workforce. As a result of the increase to net sales and reduction to expenses, the Company reported net profit of $291,653 for the quarter as compared to a net loss of $312,976 in the same quarter last year. This change in net income represents approximately a $600,000 improvement from last year's second quarter.
"We're very excited about the progress we're making," commented Gary Atkinson, Interim CEO. "The Company has successfully shown strong improvement in two consecutive quarters, highlighted by a $2.6 million increase in net sales and reduced expenses by approximately $487,000 through the first half of the fiscal year as compared to the same period last year. As a result, we are almost break-even through the first 6 months of this fiscal year." Atkinson continued, "We're not resting on our recent success. As our financials improve, we continue to work and develop our new lines for 2011. The Company recently attended the Hong Kong Electronics Show and previewed its new line for 2011 to select customers." Bernardo Melo, VP of Sales, commented, "The feedback we received from buyers on our new product concept was overwhelmingly positive. We're hopeful that the new product line will bring excitement back to the category and attract some large retailers that are not currently in karaoke." Melo added, "For this season, I'm pleased to report that our customers are still reporting strong sell-thru in karaoke. I'm optimistic that the trend will continue with the momentum from numerous Black Friday promotions and increased visibility from retail holiday gift catalogs."
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, 2010. 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 |
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CONSOLIDATED BALANCE SHEETS |
||||||
September 30, 2010 |
March 31, 2010 |
|||||
(Unaudited) |
(Audited) |
|||||
Assets |
||||||
Current Assets |
||||||
Cash |
$ |
1,094,647 |
$ |
865,777 |
||
Accounts receivable, net of allowances of $208,638 and |
||||||
$185,407, respectively |
4,106,769 |
983,791 |
||||
Due from factor |
- |
14,987 |
||||
Inventories, net |
4,665,720 |
2,804,848 |
||||
Prepaid expenses and other current assets |
82,522 |
118,465 |
||||
Total Current Assets |
9,949,658 |
4,787,868 |
||||
Property and equipment, net |
495,198 |
736,966 |
||||
Other non-current assets |
164,677 |
164,644 |
||||
Total Assets |
$ |
10,609,533 |
$ |
5,689,478 |
||
Liabilities and Shareholders' Deficit |
||||||
Current Liabilities |
||||||
Accounts payable |
$ |
4,405,272 |
$ |
895,713 |
||
Due to related parties, net |
5,671,181 |
3,033,801 |
||||
Accrued expenses |
485,217 |
227,257 |
||||
Short-term loan - bank |
- |
1,091,828 |
||||
Current portion of long-term financing obligation |
13,640 |
18,186 |
||||
Customer credits on account |
351,903 |
742,009 |
||||
Deferred gross profit on estimated returns |
309,459 |
123,708 |
||||
Total Current Liabilities |
11,236,672 |
6,132,502 |
||||
Long-term financing obligation, less current portion |
- |
4,547 |
||||
Total Liabilities |
11,236,672 |
6,137,049 |
||||
Shareholders' Deficit |
||||||
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; |
||||||
35,835,793 and 37,585,794 shares issued and outstanding |
378,357 |
375,857 |
||||
Additional paid-in capital |
19,104,465 |
19,098,726 |
||||
Accumulated deficit |
(20,109,961) |
(19,922,154) |
||||
Total Shareholders' Deficit |
(627,139) |
(447,571) |
||||
Total Liabilities and Shareholders' Deficit |
$ |
10,609,533 |
$ |
5,689,478 |
||
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 30, 2010 |
September 30, 2009 |
September 30, 2010 |
September 30, 2009 |
||||||||
Net Sales |
$ 8,357,672 |
$ 6,991,372 |
$ 10,449,299 |
$ 7,805,380 |
|||||||
Cost of Goods Sold |
6,664,996 |
5,607,768 |
8,180,730 |
6,707,398 |
|||||||
Gross Profit |
1,692,676 |
1,383,604 |
2,268,569 |
1,097,982 |
|||||||
Operating Expenses |
|||||||||||
Selling expenses |
644,921 |
636,031 |
894,010 |
940,172 |
|||||||
General and administrative expenses |
634,033 |
930,353 |
1,309,609 |
1,790,607 |
|||||||
Depreciation and amortization |
119,716 |
102,513 |
241,768 |
202,265 |
|||||||
Total Operating Expenses |
1,398,670 |
1,668,897 |
2,445,387 |
2,933,044 |
|||||||
Income (Loss) from Operations |
294,006 |
(285,293) |
(176,818) |
(1,835,062) |
|||||||
Other Expenses |
|||||||||||
Interest expense |
(2,353) |
(27,683) |
(10,989) |
(30,951) |
|||||||
Net Income (Loss) |
$ 291,653 |
$ (312,976) |
$ (187,807) |
$ (1,866,013) |
|||||||
Income (Loss) per Common Share |
|||||||||||
Basic and Diluted |
$ 0.01 |
$ (0.01) |
$ (0.00) |
$ (0.05) |
|||||||
Weighted Average Common and Common |
|||||||||||
Equivalent Shares: |
|||||||||||
Basic and Diluted |
37,668,211 |
37,449,332 |
37,627,003 |
37,449,332 |
|||||||
The accompanying notes are an integral part of these consolidated financial statements. |
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The Singing Machine Company, Inc. and Subsidiaries |
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(Unaudited) |
||||||||
For Six Months Ended |
||||||||
September 30, 2010 |
September 30, 2009 |
|||||||
Cash flows from operating activities |
||||||||
Net Loss |
$ |
(187,807) |
$ |
(1,866,013) |
||||
Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
241,768 |
202,265 |
||||||
Inventory reserve charge |
- |
191,179 |
||||||
Change in allowance for bad debts |
23,231 |
91,736 |
||||||
Stock based compensation |
8,239 |
7,938 |
||||||
Deferred gross profit on estimated returns |
185,751 |
(156,854) |
||||||
Changes in assets and liabilities: |
||||||||
(Increase) Decrease in: |
||||||||
Accounts receivable |
(2,526,642) |
(3,084,916) |
||||||
Inventories |
(1,860,872) |
(494,836) |
||||||
Prepaid expenses and other current assets |
35,943 |
122,882 |
||||||
Other non-current assets |
(33) |
(390) |
||||||
Increase (Decrease) in: |
||||||||
Accounts payable |
3,509,559 |
1,796,035 |
||||||
Accounts payable - related party |
2,637,380 |
605,140 |
||||||
Accrued expenses |
257,960 |
75,207 |
||||||
Customer credits on account |
(390,106) |
453,533 |
||||||
Net cash provided by (used in) operating activities |
1,934,371 |
(2,057,094) |
||||||
Cash flows from investing activities |
||||||||
Purchase of property and equipment |
- |
(38,377) |
||||||
Disposal of property and equipment |
- |
1,648 |
||||||
Net cash used in investing activities |
- |
(36,729) |
||||||
Cash flows from financing activities |
||||||||
Borrowings from factor, net |
14,987 |
57,909 |
||||||
Net (repayments)proceeds pursuant to factoring facility |
(619,567) |
1,768,830 |
||||||
Net (repayments)proceeds from short-term bank loan |
(1,091,828) |
1,322,884 |
||||||
Payments on long-term financing obligation |
(9,093) |
(7,577) |
||||||
Net cash (used in) provided by financing activities |
(1,705,501) |
3,142,046 |
||||||
Change in cash and cash equivalents |
228,870 |
1,048,223 |
||||||
Cash and cash equivalents at beginning of period |
865,777 |
957,163 |
||||||
Cash and cash equivalents at end of period |
$ |
1,094,647 |
$ |
2,005,386 |
||||
Supplemental Disclosures of Cash Flow Information: |
||||||||
Cash paid for Interest |
$ |
10,989 |
$ |
30,951 |
||||
The accompanying notes are an integral part of these consolidated financial statements. |
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SOURCE The Singing Machine Company, Inc.
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