The Singing Machine Releases Fiscal 2010 Financial Results

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

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