Singing Machine Announces 1st Quarter Earnings Release
Date:8/20/2009 5:30:00 AM
COCONUT CREEK, Fla., Aug. 19, /-FirstCall/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announces the results for its first fiscal quarter ended June 30, 2009.
The Company reported net sales of approximately $814,000 (after one-time discounts of $235,000). This is down from approximately $1,770,000 as compared to the same period last fiscal year. The primary reason for the reduction in net sales was a steep decline in sales of Bratz licensed merchandise as that product life-cycle winds down. In addition, the Company issued several one-time price discounts and concessions to some of its larger customers to assist with slow-moving inventory in an effort to retain future business.
In a move to generate sales and cash, the Company elected to take approximately $180,000 in write-downs to lower its cost to market value for Bratz licensed product and musical instruments. These inventory write-downs coupled with price discounts, totaling approximately $415,000, led the Company to report negative gross margin of -35.1%. As a result of these adjustments the Company reported a first quarter net loss of approximately $1,553,000 as compared with a net loss in the first quarter ended June 30, 2008 of approximately $1,042,000.
Tony Handal, CEO, states, "The Company's loss, while larger than last year's first quarter, is reflective of an improved infrastructure. This is evidenced by the fact that after eliminating the one-time charge offs, the net loss for this quarter was similar to last year's first quarter, despite a 28% decrease in gross sales." Handal continued, "We remain optimistic that with our new product line-up for the upcoming season, including our new Sound X Kids(TM) line we can rebound in the second half of the year. We have already heard tremendous positive buzz surrounding our new pedestal karaoke unit and our other fresh new designs for this year. We are also excited to offer two free karaoke music downloads with the purchase of each new unit for this season which we believe will boost online music revenue."
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(TM), SMDigital(TM), SoundX(TM), and Sound X Kids(TM) 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
June 30, 2009 March 31, 2009
------------- --------------
(Unaudited) (Audited)
Assets
------
Current Assets
Cash and cash equivalents $616,865 $957,163
Accounts receivable, net of allowances
of $327,293 and $261,980, respectively 591,902 972,345
Due from factor 4,004 73,854
Inventories, net 4,211,919 4,729,667
Prepaid expenses and other current assets 420,824 526,563
Total Current Assets 5,845,514 7,259,592
Property and Equipment, net 822,395 886,770
Other Non-Current Assets 179,362 179,362
Total Assets $6,847,271 $8,325,724
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Accounts payable $1,352,525 $2,588,769
Due to related parties - net 619,569 1,498,391
Accrued expenses 348,231 422,260
Short-term loan - bank 1,742,140 -
Current portion of long-term
financing obligation 18,186 18,186
Customer credits on account 1,643,994 908,449
Deferred gross profit on estimated
returns 73,125 288,039
Total Current Liabilities 5,797,770 5,724,094
Long-term financing obligation, less
current portion 19,702 22,733
Total Liabilities 5,817,472 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 19,079,689 19,075,750
Accumulated deficit (18,424,384) (16,871,347)
Total Shareholders' Equity 1,029,799 2,578,897
Total Liabilities and Shareholders'
Equity $6,847,271 $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
-----------------------
June 30, 2009 June 30, 2008
------------- -------------
Net Sales $814,008 $1,770,346
Cost of Goods Sold 1,099,630 1,567,697
Gross (Loss) Profit (285,622) 202,649
Operating Expenses
Selling expenses 304,141 221,534
General and administrative expenses 860,254 922,199
Depreciation and amortization 99,752 101,161
Total Operating Expenses 1,264,147 1,244,894
Loss from Operations (1,549,769) (1,042,245)
Other Expenses
Interest expense (3,268) (7,316)
Loss before taxes (1,553,037) (1,049,561)
Provision for income taxes - -
Net Loss $(1,553,037) $(1,049,561)
Loss per Common Share
Basic $(0.04) $(0.03)
Diluted $(0.04) $(0.03)
Weighted Average Common and Common
Equivalent Shares:
Basic 37,449,432 31,990,298
Diluted 37,449,432 31,990,298
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 Three Months Ended
-----------------------
June 30, 2009 June 30, 2008
------------- -------------
Cash flows from operating activities
Net Loss $(1,553,037) $(1,049,561)
Adjustments to reconcile net loss to
net cash and cash equivalents
provided by (used in) operating
activities:
Depreciation and amortization 99,752 101,161
Inventory reserve charge 181,142 9,267
Change in allowance for bad debts 65,313 (83,072)
Stock compensation 3,939 3,640
Deferred gross profit on estimated
sales returns (214,914) (157,052)
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable 950,861 959,838
Inventories 336,605 (1,529,507)
Prepaid expenses and other current
assets 105,739 (75,667)
Other non-current assets - (5,747)
Increase (Decrease) in:
Accounts payable (1,236,244) 2,144,814
Accounts payable - related party (878,822) -
Accrued expenses (74,028) (59,167)
Customer credits on account 735,545 (205,334)
Net cash (used in) provided by
operating activities (1,478,149) 53,613
Cash flows from investing activities
Purchase of property and equipment (35,377) (276,769)
Net cash used in investing activities (35,377) (276,769)
Cash flows from financing activities
Borrowings from factor, net 69,850 56,042
Net payments pursuant to factoring
facility (635,731) -
Net proceeds from short-term bank loan 1,742,140 -
Payments on long-term financing
obligation (3,031) -
Net loan proceeds from related parties - 180,448
Net cash provided by financing
activities 1,173,228 236,490
Change in cash and cash equivalents (340,298) 13,334
Cash and cash equivalents at beginning
of period 957,163 447,816
Cash and cash equivalents at end of period $616,865 $461,150
Supplemental Disclosures of Cash Flow
Information:
Cash paid for Interest $3,268 $7,316
Supplemental Disclosures of Non-Cash
Financing Activities:
Payment of trade payable with stock $- $197,500
The accompanying notes are an integral part of these consolidated
financial statements.
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