The Singing Machine Releases Fiscal 2010 Financial Results

14 Jul, 2010, 18:40 ET from The Singing Machine Company, Inc.

COCONUT CREEK, Fla., July 14 /PRNewswire-FirstCall/ -- The Singing Machine Company  ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) today announced financial results for fiscal year ended Mach 31, 2010.

Year-End Highlights:

The Singing Machine reported net sales of approximately $21.3 million, down from approximately $32.2 million in fiscal-year ended March 31, 2009 (a decline of approximately 34%). The Company also reported a net loss of approximately $3.1 million as compared to a net loss of approximately $2.2 million in the same period last year. As a result of the loss, the Company's shareholders' equity fell to negative $447,571 as compared to approximately $2.6 million for fiscal year end 2009. The Company reported approximately $2.8 million in inventory as compared to approximately $4.7 million in inventory at the end of the same period last year (decrease of approximately 40%).

During Fiscal 2010, the Company continued to face a declining global economic market, sagging consumer confidence, and an uncertain retail market. Further, the Company was faced with excess carryover inventory from the year before, high returns in its first quarter due to overstock by its customers, and increasing freight costs.  Included in the net loss are one time charges and markdowns and additional inventory reserves which are based upon management's assessment of the market value of the remaining inventory at the fiscal year end.  The additional reserve and one-time charges are reflected in the fiscal year ended March 31, 2010 financial statements.

Gary Atkinson, interim C.E.O. stated, "Despite the weak financial results, there were some bright takeaways from this recent holiday season which indicate to us that karaoke is rebounding. Across the board, we saw extremely positive sell-thru at the retail level with some key customers reporting over 100% growth in karaoke sales.  Unfortunately our drop in overall sales was due to the loss of a few key accounts, both domestic and abroad, that withdrew from the category entirely. We are hopeful to re-open these major accounts based upon the recent sell-thru success during the holiday season." Atkinson furthered, "While we are seeing a significant rebound with the customers that are carrying karaoke, the Company also understands that its overhead and expenses are still too high. Since the fiscal year-end, we have already made substantial cost-cutting moves to reduce our overhead to bring it in-line with our forecasted sales. We have also fundamentally changed the way we do business with a few key accounts which should greatly reduce our selling expenses."  

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™, SoundX™, 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.

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.  These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forwardlooking statements due to numerous factors, including the risks that our vendors in China may not ship our products on the scheduled basis and that we will have sufficient cash flow to finance our working capital needs in the remaining periods of this fiscal year.  In addition, 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.

(tables attached)

THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

March 31, 2010

March 31, 2009

Assets

Current Assets

Cash

$

865,777

$

957,163

Accounts receivable, net of allowances of $185,407 and

  $261,980, respectively

983,791

972,345

Due from factor

14,987

73,854

Inventories, net

2,804,848

4,729,667

Prepaid expenses and other current assets

118,465

526,563

          Total Current Assets

4,787,868

7,259,592

Property and Equipment, net

736,966

886,770

Other Non-Current Assets

164,644

179,362

         Total Assets

$

5,689,478

$

8,325,724

Liabilities and Shareholders' (Deficit) Equity

Current Liabilities

Accounts payable

$

895,713

$

2,588,769

Due to related parties - net

3,033,801

1,498,391

Accrued expenses

227,257

422,260

Short-term loan - bank

1,091,828

-

Current portion of long-term financing obligation

18,186

18,186

Customer credits on account

742,009

908,449

Deferred gross profit on estimated returns

123,708

288,039

       Total Current Liabilities

6,132,502

5,724,094

Long-term financing obligation, less current portion

4,547

22,733

         Total Liabilities

6,137,049

5,746,827

Shareholders' (Deficit) 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;  

37,585,794 and 37,449,432 shares issued and outstanding

375,857

374,494

Additional paid-in capital

19,098,726

19,075,750

Accumulated deficit

(19,922,154)

(16,871,347)

       Total Shareholders' (Deficit) Equity

(447,571)

2,578,897

       Total Liabilities and Shareholders' (Deficit) Equity

$

5,689,478

$

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

For the Years Ended

March 31, 2010

March 31, 2009

March 30, 2008

Net Sales

$     21,277,370

$      31,780,709

$       34,067,871

Cost of Goods Sold

17,291,011

25,836,586

26,389,070

Gross Profit

3,986,359

5,944,123

7,678,801

Operating Expenses

Selling expenses

3,114,552

3,160,950

2,931,416

General and administrative expenses

3,388,203

4,346,627

4,279,728

Depreciation and amortization

439,432

459,354

311,273

Total Operating Expenses

6,942,187

7,966,931

7,522,417

(Loss) Income from Operations

(2,955,828)

(2,022,808)

156,384

Other Expenses

Loss on sale of subsidiary and other assets

-

-

(27,654)

Interest expense

(94,979)

(131,755)

(127,018)

Net Other Expenses

(94,979)

(131,755)

(154,672)

(Loss) Income before provision for income taxes

(3,050,807)

(2,154,563)

1,712

Provision for  income taxes

-

(36,652)

-

Net (Loss) Income

$      (3,050,807)

$       (2,191,215)

$               1,712

(Loss) Income per Common Share

Basic

$            (0.081)

$             (0.067)

$               0.000

Diluted

$            (0.081)

$             (0.067)

$               0.000

Weighted Average Common and Common

Equivalent Shares:

Basic

37,519,668

32,712,191

29,925,952

Diluted

37,519,668

32,712,191

30,910,424

The accompanying notes are an integral part of these consolidated financial statements.

THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended

March 31, 2010

March 31, 2009

March 31, 2008

Cash flows from operating activities

Net (Loss) Income

$

(3,050,807)

$

(2,191,215)

$

1,712

Adjustments to reconcile (net loss) net income to net cash and cash equivalents used in operating activities:

Depreciation and amortization

439,432

459,354

311,273

Change in inventory reserve

(396,319)

247,404

131,154

Change in allowance for bad debts

(76,573)

141,081

17,284

Stock compensation

24,339

32,826

38,112

Deferred gross profit on estimated sales returns

(164,331)

70,227

4,094

Changes in assets and liabilities:

 (Increase) Decrease in:

Accounts receivable

244,671

49,182

(924,634)

Inventories

2,321,139

(1,462,087)

(1,366,055)

Prepaid expenses and other current assets

408,098

(114,011)

109,339

Other non-current assets

14,718

(10,000)

(113,308)

 Increase (Decrease) in:

Accounts payable

(1,693,056)

1,670,341

441,906

Accounts payable - related party

1,535,410

1,992,407

-

Accrued expenses

(195,003)

12,845

(215,579)

Customer credits on account

(166,440)

129,456

184,824

Net cash (used in) provided by operating activities

(754,722)

1,027,810

(1,379,878)

Cash flows from investing activities

Purchase of property and equipment

(291,276)

(747,844)

(490,697)

Proceeds from disposal of property and equipment

1,648

-

27,654

Net cash used in investing activities

(289,628)

(747,844)

(463,043)

Cash flows from financing activities

Borrowings from (retention by) factor, net

58,867

57,597

(21,460)

Proceeds from issuance of stock

-

-

630,881

Net proceeds from short-term bank obligation

1,091,828

-

-

(Payments) proceeds pursuant to factoring facility

(179,545)

799,113

-

Net (payments on) proceeds from long-term financing obligation

(18,186)

40,919

-

Net (payments to) advances from related parties

-

(668,248)

492,416

Net cash provided by financing activities

952,964

229,381

1,101,837

Change in cash and cash equivalents

(91,386)

509,347

(741,084)

Cash and cash equivalents at beginning of period

957,163

447,816

1,188,900

Cash and cash equivalents at end of period

$

865,777

$

957,163

$

447,816

Supplemental Disclosures of Cash Flow Information:

Cash paid for Interest

$

94,979

$

136,826

$

78,898

Cash (refunded) paid for Income Taxes

$

(23,520)

$

60,322

$

-

Non-Cash Financing Activities:

Conversion of trade payable to equity

$

-

$

669,222

$

500,000

The accompanying notes are an integral part of these consolidated financial statements.

SOURCE The Singing Machine Company, Inc.



RELATED LINKS

http://www.singingmachine.com