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. |
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SOURCE The Singing Machine Company, Inc.
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