SMD Spectral Md Holdings Ltd

COCONUT CREEK, Fla., June 29 /PRNewswire-FirstCall/ -- The Singing Machine Company ("Singing Machine" or the "Company") (NYSE Amex: SMD) today announced financial results for fiscal year ended Mach 31, 2009. Year-End Highlights: On the heels of a tumultuous 2009 in the global economy and lack of consumer confidence in the domestic retail market, the Singing Machine reported net sales of approximately $31.8 million, down from approximately $34.1 million in fiscal-year ended March 31, 2008 (a decline of 6.7%). The Company also reported a net loss of approximately $2.2 million as compared to slight net income in the same period last year. As a result of the loss, the Company's shareholders' equity fell to approximately $2.6 million, down from approximately $4.0 million in fiscal-year ended 2008. In addition, the Company also had approximately $4.7 million in inventory as compared to approximately $3.5 million in inventory at the end of the same period last year (increase of approximately 34.3%). The Company cites an overall decline in the world economic market, increased competitive pricing pressures, significant increase in returns, and quality issues with a supplier as primary reasons for the Company's financial results. More specifically, during fiscal 2009 the Company lost a major customer, Circuit City, to bankruptcy after shipping them approximately $150,000 in merchandise. In addition, the Company had manufactured goods for Circuit City, which was taken into inventory. The Company experienced an unusually high rate of returned merchandise after the holiday season which the Company believes is attributed to overstock returns, decreased consumer spending, buyer's remorse, and certain quality issues with a supplier. In light of the uncertain economic climate, the Company elected to increase its inventory reserves by approximately $250,000 over last year based upon management's concerns that the economic downturn will continue into next year. The reserve is reflected in the fiscal year ended March 31, 2009 financial statements. Tony Handal, C.E.O. states, "We are all disappointed over these financial results, which we believe to be largely the result of forces beyond our control. Despite this, we were generally able to maintain our net sales as compared to last year. However, due to shrinking gross margins and higher-than-expected returns, we were not able to sustain profitability. However, I do not believe fiscal 2009 to be a complete loss. The Company has instituted a number of initiatives to improve performance and profitability which we were committed to finalizing regardless of the downturn in the economy. In spite of the challenging economic climate, last year the Company laid the foundation for an online retail store, put the final touches on its new download karaoke music store and signed new brand licensing deals. We believe that the changes and enhancements made in fiscal 2009 will position the company for improved top line revenue and increased profitability in the years to come." Handal continued, "By all indications, we don't anticipate the retail markets to fully recover by the upcoming holiday season and we want to be prepared for it. More than ever, we are committed to cutting overhead and expenses in all departments while trying to maintain gross margins. On the other hand, the launch of our various online projects should distinguish us from our competitors as we look to improve profitability in fiscal 2010." 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), Disney(TM), Karoake for Dummies(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. 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. 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. THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2009 March 31, 2008 Assets Current Assets Cash $957,163 $447,816 Accounts receivable, net of allowances of $261,980 and $120,899, respectively 972,345 1,961,721 Due from factor 73,854 131,451 Inventories, net 4,729,667 3,514,984 Prepaid expenses and other current assets 526,563 412,552 Total Current Assets 7,259,592 6,468,524 Property and Equipment, net 886,770 598,280 Other Non-Current Assets 179,362 169,362 Total Assets $8,325,724 $7,236,166 Liabilities and Shareholders' Equity Current Liabilities Accounts payable $2,588,769 $1,145,150 Due to related parties - net 1,498,391 616,732 Accrued expenses 422,260 409,415 Current portion of long-term financing obligation 18,186 - Customer credits on account 908,449 778,993 Deferred gross profit on estimated returns 288,039 217,812 Total Current Liabilities 5,724,094 3,168,102 Long-term financing obligation, less current portion 22,733 - Total Liabilities 5,746,827 3,168,102 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 31,758,400 shares issued and outstanding 374,494 317,584 Additional paid-in capital 19,075,750 18,430,612 Accumulated deficit (16,871,347) (14,680,132) Total Shareholders' Equity 2,578,897 4,068,064 Total Liabilities and Shareholders' Equity $8,325,724 $7,236,166 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, March 31, March 31, 2009 2008 2007 Net Sales $31,780,709 $34,067,871 $26,732,144 Cost of Goods Sold 25,836,586 26,389,070 20,616,541 Gross Profit 5,944,123 7,678,801 6,115,603 Operating Expenses Selling expenses 3,160,950 2,931,416 2,308,959 General and administrative expenses 4,346,627 4,279,728 4,952,254 Depreciation and amortization 459,354 311,273 556,051 Total Operating Expenses 7,966,931 7,522,417 7,817,264 (Loss) Income from Operations (2,022,808) 156,384 (1,701,661) Other Expenses (Loss) Gain on sale of subsidiary and other assets - (27,654) 29,028 Interest expense (131,755) (127,018) (42,355) - Net Other Expenses (131,755) (154,672) (13,327) (Loss) Income before provision for income taxes (2,154,563) 1,712 (1,714,988) (Provision) reversal of provision for income taxes (36,652) - 2,453,576 Net (Loss) Income $(2,191,215) $ 1,712 $738,588 (Loss) Income per Common Share Basic $ (0.067) $ 0.000 $ 0.035 Diluted $ (0.067) $ 0.000 $ 0.030 Weighted Average Common and Common Equivalent Shares: Basic 32,712,191 29,925,952 21,145,003 Diluted 32,712,191 30,910,424 24,753,864 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, March 31, March 31, 2009 2008 2007 Cash flows from operating activities Net (Loss) Income $(2,191,215) $1,712 $738,588 Adjustments to reconcile (net loss) net income to net cash and cash equivalents used in operating activities: Reversal of provision for income taxes - - (2,453,576) Gain on sale of subsidiary and other assets - - (29,028) Loss on disposal of property and equipment - 27,654 - Depreciation and amortization 459,354 311,273 556,051 Change in inventory reserve 247,404 131,154 (902,071) Change in allowance for bad debts 141,081 17,284 (41,790) Stock compensation 32,826 38,112 194,870 Deferred gross profit on estimated sales returns 70,227 4,094 27,436 Changes in assets and liabilities: (Increase) Decrease in: Accounts receivable 49,182 (924,634) 156,690 Inventories (1,462,087) (1,366,055) 310,046 Prepaid expenses and other current assets (114,011) 109,339 (293,489) Other non-current assets (10,000) (113,308) 42,633 Increase (Decrease) in: Accounts payable 1,670,341 441,906 (160,565) Accounts payable - related party 1,992,407 - - Accrued expenses 12,845 (215,579) (23,190) Customer credits on account 129,456 184,824 (440,046) Net cash from (used in) operating activities 1,027,810 (1,352,224) (2,317,441) Cash flows from investing activities Purchase of property and equipment (747,844) (490,697) (488,946) Receipt of restricted cash - - 268,405 Proceeds from sales of assets - - 29,028 Net cash used in investing activities (747,844) (490,697) (191,513) Cash flows from financing activities Borrowings from (retention by) factor, net 57,597 (21,460) 24,290 Proceeds from issuance of stock - 630,881 3,125,700 Proceeds pursuant to factoring facility 799,113 - - Net proceeds from long-term financing obligation 40,919 - - Net loan (payments to) proceeds from related parties (668,248) 492,416 124,316 Net cash provided by financing activities 229,381 1,101,837 3,274,306 Change in cash and cash equivalents 509,347 (741,084) 765,352 Cash and cash equivalents at beginning of period 447,816 1,188,900 423,548 Cash and cash equivalents at end of period $957,163 $447,816 $1,188,900 Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $136,826 $78,898 $57,769 Cash paid for Income Taxes $60,322 $- $- Non-Cash Financing Activities: Conversion of loan payable to equity $- $- $2,000,000 Conversion of trade payable to equity $669,222 $500,000 $500,000 The accompanying notes are an integral part of these consolidated financial statements. DATASOURCE: The Singing Machine Company, Inc. CONTACT: Gary Atkinson, +1-954-596-1000, GaryAtkinson at singingmachine.com Web Site: http://www.singingmachine.com/

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