The Singing Machine Company Announces First Quarter Financial Results
COCONUT CREEK, Fla.--Aug. 1, 20046, 2004--The Singing Machine Company (AMEX:SMD) today announced financial results for the first quarter of fiscal 2005.For the three months ended June 30, 2004, The Singing Machine reported revenue of $3.86 million compared to $7.63 million for the first quarter of fiscal 2004. The net loss declined to $1.57 million, or $0.18 per share, from $2.32 million, or $0.28 per share, for the same period last year.
Interim CEO Y.P. Chan said, "With the highly seasonal nature of our business, the company historically has reported a loss in the first fiscal quarter. What's important is the dramatic decline in the loss compared to last year, as our intense focus on reducing costs led to a 51% decrease in operating expenses. Revenue declined as planned, primarily because the ramp-up of new product shipments occurred later this year than it did last year."
Chan continued, "Volume shipments by our vendors in China have now begun as we enter the seasonally strongest period of the year. Our cash remains limited, although we expect cash flow from operations to improve in the second quarter. In the meantime, we plan to finance our working capital needs by collecting accounts receivable and selling what remains of our old inventory, and we may seek financing from a third party. We also plan to use credit facilities available to our Hong Kong subsidiary to finance all direct shipments against customer-issued letters of credit."
Conference Call
Singing Machine has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast may be accessed at www.fulldisclosure.com/company.asp?client=cb&ticker=smd. A replay will be available at this same Internet address after 1:00 p.m. ET. For a telephone replay, dial (800) 633-8284, reservation #21204791 after 1:00 p.m. ET.
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), MTV(TM), Nickelodeon(TM), Hardrock Academy(TM), Motown(TM) and Care Bears(TM) brand names. The first to provide karaoke systems for home entertainment in the United States, Singing Machine sells its products in North America, Europe and Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking 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, 2004. 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 forward-looking 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 second and third quarter of this fiscal year. In addition, you should review our risk factors in our SEC filings which are incorporated herein by reference. Such forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
June 30,
2004 2003
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Net Sales $ 3,856,872 $ 7,627,975
Cost of Sales 3,086,733 5,901,866
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Gross Profit 770,139 1,726,109
Operating Expenses:
Advertising 69,589 270,770
Commissions 45,520 --
Compensation 739,215 1,299,195
Freight & Handling 90,688 225,866
Royalty Expense 32,731 83,964
Selling, General & Administrative Expenses 929,691 1,980,552
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Total Operating Expenses 1,907,434 3,860,347
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Loss from Operations (1,137,295) (2,134,238)
Other Income (Expenses):
Other Income 11,700 7,669
Interest Expense (114,200) (188,468)
Interest Expense - Amortization (332,715) --
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Net Other Expenses (435,215) (180,799)
Loss Before Provision for Income Taxes (1,572,510) (2,315,037)
Provision for Income Taxes -- 2,315
Net Loss $ (1,572,510)$ (2,317,352)
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Loss Per Common Share:
Basic & Diluted $ (0.18)$ (0.28)
Weighted Average Common and Common
Equivalent Shares:
Basic & Diluted 8,787,483 8,278,469
THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
2004 2004
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Assets (unaudited) (audited)
Current Assets:
Cash and cash equivalents $ 313,574 $ 356,342
Restricted Cash 863,968 874,283
Accounts Receivable, less allowances
of $76,617 and $98,000, respectively 2,020,834 3,806,166
Due from manufacturers 228,169 95,580
Inventories 4,763,060 5,923,267
Prepaid expense and other current assets 1,112,962 783,492
Insurance receivable 800,000 800,000
Refundable tax 1,111,401 1,178,512
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Total Current Assets 11,213,968 13,817,642
Property and Equipment, at cost less
accumulated depreciation of $2,700,000 and
$2,567,000, respectively 869,782 983,980
Other non-current assets 551,070 615,773
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Total Assets $ 12,634,820 $ 15,417,395
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Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
Bank overdraft $ 55,505 $ 62,282
Accounts payable 3,852,160 4,651,675
Accrued expenses 2,849,912 3,481,905
Customer credits on account 1,806,784 2,111,484
Convertible debentures, net of
unamortized discount of $2,221,796 and
$2,554,511, respectively 1,778,204 1,445,489
Subordinated debt - related parties 1,000,000 1,000,000
Note payable - related party 40,000 --
Income taxes payable 2,554,952 2,447,746
---------- ----------
Total Current Liabilities 13,937,516 15,200,581
Shareholders' Equity (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; 18,900,000
shares authorized; 8,802,318 and
8,171,678 shares issued and outstanding 88,023 87,523
Additional paid-in capital 10,104,998 10,052,498
Accumulated (deficit)/retained earnings (11,495,717) (9,923,207)
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Total Shareholders' Equity (Deficit) (1,302,696) 216,814
------------- -----------
Total Liabilities and Shareholders'
Equity $ 12,634,820 $ 15,417,395
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