-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RAIwqrDredvoxJ7aRC3f6/8pFMMpfh1Q84RDjJcF8Mz+yBxRE21WAdsr/8N5OawV bgWQJcePJMhQpoJsYrUotw== 0000943440-99-000113.txt : 19990908 0000943440-99-000113.hdr.sgml : 19990908 ACCESSION NUMBER: 0000943440-99-000113 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SINGING MACHINE CO INC CENTRAL INDEX KEY: 0000923601 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 953795478 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24968 FILM NUMBER: 99706638 BUSINESS ADDRESS: STREET 1: 3101 N W 25TH AVENUE CITY: POMPANO STATE: FL ZIP: 33069 BUSINESS PHONE: 9549688006 MAIL ADDRESS: STREET 1: 3101 N W 25TH AVENUE CITY: POMPANO BEACH STATE: FL ZIP: 33069 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 0 - 24968 Commission File Number THE SINGING MACHINE COMPANY, INC. (Exact Name of Small Business Issuer as Specified in its Charter) Delaware 95-3795478 (State of Incorporation ) (IRS Employer I.D. No.) 6601 Lyons Road, Building A-7 , Coconut Creek, FL 33073 (Address of principal executive offices ) (954) 596-1000 (Issuer's telephone number, including area code) Check whether the Issuer: (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes x No APPLICABLE ONLY TO CORPORATE ISSUERS There were 2,548,500 shares of Common Stock, $.01 par value, issued and outstanding at June 30, 1999. THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - June 30, 1999 (Unaudited) and March 31, 1999. Consolidated Statement of Operations - Three months ended June 30, 1999 and 1998 (Unaudited). Consolidated Statement of Cash Flows - Three months ended June 30, 1999 and 1998 (Unaudited). Notes to Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES 2 THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY PART I - FINANCIAL INFORMATION Item I. Financial Statements 3 THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET ASSETS
June 30, March 31, 1999 1999 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 280,447 $ 49,288 Accounts receivable - net of $19,900 allowance for doubtful accounts 1,378,096 1,127,970 Due from Officer 134,270 13,880 Inventories - net 633,756 424,806 Prepaid expenses and other assets 163,878 27,154 Deferred tax asset 170,000 170,000 TOTAL CURRENT ASSETS 2,760,447 1,813,098 PROPERTY & EQUIPMENT - NET 38,193 16,447 OTHER ASSETS Reorganization intangible - net 537,672 549,790 TOTAL ASSETS $ 3 336,312 $ 2,379,335 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 443,959 $ 830,088 Accrued expenses 101,925 392,926 Notes payable 167,266 63,000 Due to factor 243,480 128,581 TOTAL CURRENT LIABILITIES 956,630 1,414,595 STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value, 1,000,000 shares authorized, issued and outstanding 1,000,000 - Common stock, $.01 par value - 75,000,000 shares authorized, 2,498,451 issued and outstanding at June 30, 1999 and March 31, 1999 24,984 24,984 Additional paid in capital 390,600 15,600 Retain earnings (net deficit) 924,156 924,156 Earnings for the period 39,942 - TOTAL STOCKHOLDERS' EQUITY 2,379,682 964,740 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,336,312 $ 2,379,335
See accompany notes to financial statements. 4 THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS ( Unaudited )
Three Months Ended June 30, 1999 1998 (Unaudited) (Unaudited) NET SALES $1,589,713 $1,650,782 COST OF SALES 1,179,579 1,222,331 GROSS PROFIT 410,134 428,451 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 346,549 366,614 INCOME FROM OPERATIONS 63,585 61,837 OTHER INCOME (EXPENSES): Other income 26,168 - Interest expense (7,596) (21,679) Interest income 437 578 Factoring fees (42,652) (15,814) NET OTHER EXPENSES (23,643) (36,915) INCOME BEFORE INCOME TAX BENEFIT 39,942 24,922 INCOME TAX BENEFIT (PROVISION) - - NET INCOME $ 39,942 $ 24,922 NET INCOME PER COMMON SHARE Basic $ .02 $ .01 Diluted $ .01 $ .01 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Basic 2,548,500 2,468,066 Diluted 3,312,500 2,468,066
See accompanying notes to financial statements. 5 THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS ( Unaudited )
Three Months Ended June 30, 1999 1998 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(1,105,400) $ 37,704 CASH FLOWS FROM INVESTING ACTIVITIES: Receivable from related parties 437 578 Computer equipment (19,454) - Leasehold improvements (3,690) - Net cash provided by (used in) investing activities (22,707) 578 CASH FLOWS FROM FINANCING ACTIVITIES: Notes payable - related party (120,000) - Repayment of notes payable (63,000) (40,000) Proceeds from packing loan - Belgium Bank - HK 167,266 - Proceeds from notes payable - 43,000 Issuance of preferred stock 1,375,000 - Net cash provided by (used in) financing activities 1,359,266 3,000 INCREASE IN CASH 231,159 41,282 CASH - BEGINNING OF PERIOD 49,288 13,916 CASH - END OF PERIOD $ 280,447 $ 55,198
See accompanying notes to financial statements. 6 NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-QSB and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with generally accepted accounting principles. It is suggested that these consolidated condensed financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's audited financial statements on Form 10-KSB for the fiscal year ended March 31, 1999. The accounting policies followed for interim financial reporting are the same as those disclosed in Note 1 of the Notes to Financial Statements included in the Company's audited financial statements for the fiscal year ended March 31, 1999 which are included in Form 10- KSB. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary to present fairly the financial positions, results of operations, and cash flows for all periods presented have been made. The results of operations for the three month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the entire fiscal year ending March 31, 2000. The accompanying consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter company balances and transactions have been eliminated. Assets and liabilities of the foreign subsidiary are translated at the rate of exchange in effect at the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustment is not material. NOTE 2 - REORGANIZATION On April 1, 1998, the Company effectuated a one-for-ten (1:10) reverse stock split. The primary purpose of the 7 NOTE 2 - REORGANIZATION (Cont'd) reverse stock split was to comply with the Company's Plan of Reorganization, as Amended, which was confirmed on March 17, 1998. Trading in the post-split shares commenced at the opening of business on April 1, 1998. No additional shares were issued in connection with the reverse split and those stockholders entitled to receive fractional shares received shares based on rounding to the nearest whole number. During April 1998, the Company filed an amendment to its Articles of Incorporation increasing the authorized shares of the Company's common stock to ten million (10,000,000) shares. The Company's creditors, pursuant to the Company's Plan of Reorganization, as Amended, who elected to receive shares were issued an aggregate of 2,180,052 post-split shares of common stock. The financial statements reflect the issuance of 2,180,052 post-split shares of common stock to the Company's creditors. These financial statements also reflect the one-for-ten (1:10) reverse stock split in computing the weighted average common and common equivalent shares outstanding and the net loss per common share amounts and account for the subsequent increase of authorized common shares pursuant to the Company's amendment to its Articles of Incorporation during April 1998. NOTE 3 - MAJOR CUSTOMERS As a percentage of total revenues, the Company's net sales in the aggregate to its five (5) largest customers during the quarters ended June 30, 1999 and 1998 were approximately 94% and 91%, respectively. For the quarter ending June 30, 1999, three (3) major retailers accounted for 39%, 32% and 11% each of total revenues. Because of the seasonality of the Company's sales, these results may be distorted due to the historically low percentage of overall sales during the Company's first fiscal quarter of each year. NOTE 4 - PRIVATE PLACEMENT OFFERING On April 1, 1999, the Company issued a Private Placement Memorandum (the "Memorandum") offering a minimum of 40 Units ($1,100,000) and a maximum of 50 Units ($1,375,000). The purchase price for each Unit was 8 $27,500. Each Unit consists of 20,000 shares of the Company's Convertible Preferred Stock ("Preferred Stock") and 4,000 Common Stock Purchase Warrants ("Warrants"). Each share of Preferred Stock is convertible, at the option of the Holder, into one (1) share of the Company's Common Stock at any time after issuance. Each share of Preferred Stock will automatically convert into one (1) share of the Company's Common Stock at 5:00 p.m. eastern time on April 1, 2000, which is one (1) year from the date of the Memorandum. Each Warrant entitles the Holder to purchase, at any time during the period commencing from the date of issuance and ending three (3) years from the date of the Memorandum, one (1) share of the Company's Common Stock at a purchase price of $2.00 per share. Fractional Units could be purchased at the discretion of the Company. The Units were being offered only to "accredited investors" as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). The Units were offered on a "$1,100,000 minimum - $1,375,000 maximum" basis pursuant to Rule 506 of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). Purchasers of the Units will receive securities that are not registered with the Securities and Exchange Commission (the "Commission") as a result of this Offering. The Company, however, will use its best efforts to file a registration statement with the Commission to register the Company's Common Stock underlying the securities comprising the Units within ninety (90) days after the completion of the Offering. There is no assurance as to when or if the registration statement will be declared effective by the Commission. There is no public market for the Units, Preferred Stock, or the Warrants, and none will develop as a result of the Offering. As a result of this Private Placement, fifty (50) units were sold and $1,375,000 gross funds have been raised. One million shares of the Company's Convertible Preferred Stock and 200,000 Common Stock Purchase Warrants were issued, effective as of the closing date of the Offering, June 30, 1999. NOTE 5 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On June 28, 1999, the Board of Directors of the Company authorized a loan in the amount of $55,000 to Edward 9 Steele, the Company's Chairman and Chief Executive Officer. The proceeds will be used to purchase two (2) Units of the Company's Private Placement of April 1, 1999. The Note will accrue simple interest at the rate of nine percent (9%) per annum and be payable in full one (1) year from the date of execution of the Note. The Note shall be secured by the securities comprising the Units. On June 28, 1999, the Board of Directors of the Company authorized a loan in the amount of $55,000 to John Klecha, the Company's Chief Operating Officer and Chief Financial Officer. The proceeds will be used to purchase two (2) Units of the Company's Private Placement of April 1, 1999. The Note will accrue simple interest at the rate of nine percent (9%) per annum and be payable in full one (1) year from the date of execution of the Note. The Note shall be secured by the securities comprising the Units. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The analysis of the Company's financial condition, liquidity, capital resources, and results of operations should be reviewed in conjunction with the accompanying financial statements, including the notes thereto. General The Singing Machine Company Inc., incorporated in Delaware in 1994, together with its wholly owned subsidiary, International (SMC) HK, Ltd. (hereafter referred to as the "Company"), engages in the production and distribution of karaoke audio software and electronic recording equipment. The Company's electronic karaoke machines and audio software products are marketed under The Singing Machine trademark. The Company's products are sold throughout the United States, primarily through department stores, lifestyle merchants, mass merchandisers, direct mail catalogs and showrooms, music and record stores, national chains, specialty stores and warehouse clubs. The Company's karaoke machines and karaoke software are currently sold in such retail outlets as Target, Best Buy, J.C. Penney and Fingerhut. For the first quarter of fiscal 1999, the Company's net income was approximately $40,000. The Company's working capital as of June 30, 1999 was approximately $1,804,000. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999 AND 1998 REVENUES Total revenues decreased by approximately $61,000 or 4% during the first quarter of fiscal 2000 compared to the first quarter of fiscal 1999. The decrease in revenue is not significant as historically the Company ships a low percentage of its total sales during its fiscal first quarter. GROSS PROFIT Gross profit from equipment and music sales decreased approximately $18,000 to $410,000 or 25.8% for the first quarter of fiscal 2000, compared to $428,000 or 25.9% for the first quarter of fiscal 1999. The decrease in gross profit was a direct result of increased equipment sales yielding a lower gross profit. Partially offsetting the decrease was an increase in music sales at a higher gross profit for the quarter ending June 30, 1999. 11 SELLING, GENERAL ADMINISTRATIVE EXPENSES Selling, general & administrative expenses decreased approximately $20,000 or 5%, during the first quarter of fiscal 2000 compared to the first quarter of fiscal 1999. The decrease is primarily due to lower Hong Kong office expenses resulting from a change of Hong Kong agents. DEPRECIATION AND AMORTIZATION EXPENSES Depreciation and amortization expense decreased approximately $2,000 or 13% to $14,000 for the first quarter of fiscal 2000 compared to the $16,000 recorded last year. The decrease is primarily the result of the write off of the software library during the 1999 fiscal year. During fiscal year 2000, the software library was fully amortized. OTHER EXPENSES Net interest expense decreased approximately $14,000 or 66% during the first quarter of fiscal 2000 compared to the same period a year ago. The decrease is primarily due to decreased banking and interest charges of the Company's Hong Kong subsidiary to finance increased shipments of hardware. Loss on sales of accounts receivable was 2.6% and 1.0% of total revenues during the first quarter of fiscal 2000 and 1999 respectively. The loss increased $26,800 to $42,600, compared to the $15,800 recorded last year primarily due to an increase of invoices factored during the first quarter of fiscal 2000. SEASONALITY AND QUARTERLY RESULTS Historically, the Company's operations have been seasonal, with the highest net sales occurring in the second and third quarters (reflecting increased orders for equipment and music merchandise during the Christmas selling months) and to a lesser extent the first and fourth quarters of the fiscal year. The Company's results of operations may also fluctuate from quarter to quarter as a result of the amount and timing of orders placed and shipped to customers, as well as other factors. The fulfillment of orders can therefore significantly affect results of operations on a quarter- to-quarter basis. FINANCIAL CONDITION At June 30, 1999, the Company had current assets of 12 $2,760,447, compared to $1,813,098 at March 31, 1999; total assets of $3,336,312 as compared to $2,379,335 at March 31, 1999; current liabilities of $956,630 as compared to $1,414,595 at March 31, 1999, and a current net worth of $2,379,682 as compared to $964,740 at March 31, 1999. The increase is primarily due to additional capital raised through the sale of preferred shares of the Company's stock by the Private Placement Offering during the quarter ended June 30, 1999. CAPITAL RESOURCES The Company has obtained significant financing for continuing operations and growth. Four specific lines of credit have been opened, two financing agreements in Hong Kong and two financing agreements through its U.S. operations. Effective May 19, 1999, the Company, through its Hong Kong subsidiary, International SMC(HK) Ltd., obtained a credit facility of (US) $200,000 from Belgian Bank, Hong Kong, a subsidiary of Generale Bank, Belgium. This facility is a revolving line based upon drawing down a maximum of 15% of the value of export letters of credit lodged with Belgian Bank. There is no expiration except that Belgian Bank reserves the right to revise the terms and conditions at the Bank's discretion. The cost of this credit facility is the U.S. Dollar prime rate plus 1.25%. Repayment of principal plus interest shall be made upon negotiation of the export letters of credit, but not later than ninety (90) days after the advance. Effective July 7, 1999, the Company, through its Hong Kong subsidiary, International SMC(HK) Ltd., obtained a credit facility of $300,000 (US) from Hong Kong Bank. This facility is a revolving line based upon drawing down a maximum of 15% of the value of export letters of credit lodged with Hong Kong Bank. There is no expiration except that Hong Kong Bank reserves the right to revise the terms and conditions at the Bank's discretion. The cost of this credit facility is the U.S. dollar prime rate plus 1.50%. Repayment of principal plus interest shall be made upon negotiation of the export letters of credit, but not later than ninety (90) days after the advance. The Company is a party to a factoring agreement, dated June 16, 1999, with Main Factors, Inc. ("Main Factors") pursuant to which Main Factors purchases certain of the Company's accounts receivable. Under the agreement, Main Factors purchases certain selected accounts receivable from the Company and advances 70% of the face value of those receivables to the Company. The accounts 13 receivable are purchased by Main Factors without recourse and Main Factors therefore performs an intensive credit review prior to purchase the receivable. The factoring agreement is personally guaranteed by John Klecha, the Company's Chief Operating Officer and Chief Financial Officer. The Company is charged a fixed percentage fee of the invoice. The purchase of receivables of the Company by Main Factors is absolute and is a true sale of receivables. Main Factors has placed no maximum limit on the amount of the Company's receivables they will purchase. The Company has also entered into an agreement with EPK Financial Corporation ("EPK") whereby EPK will open letters of credit with the Company's factories to import inventory for distribution to the Company's customers. This allows the Company to purchase domestic hardware inventory for distribution to customers in less than container load quantities and provides the flexibility to customers of not opening a letter of credit in favor of the Company. The selling price to these customers is considerably higher because the Company pays financing costs to EPK and incurs costs of ocean freight, duty, and handling charges. Upon shipment of product from these financed transactions, the receivables are factored by Berkshire Financial, thereby buying the shipments and related interest from EPK. The Company pays EPK a flat fee per transaction, which is negotiated for each shipment, and the maximum purchase price per transaction is $1,000,000. There has been no maximum total shipments established under this agreement. Main Factors has entered into this agreement as a third party agreeing to purchase all receivables invoiced under these transactions. The transactions financed by EPK are supported by personal guarantees of Edward Steele, the Company's Chairman and Chief Executive Officer and John Klecha, the Company's Chief Operating Officer, and Chief Financial Officer. The agreement is in effect until July 1, 2001, unless terminated by either party upon thirty (30) days written notice. The Company has no present commitment that is likely to result in its liquidity increasing or decreasing in any material way. In addition, the Company knows of no trend, additional demand, event or uncertainty that will result in, or that are reasonably likely to result in, the Company's liquidity increasing or decreasing in any material way. 14 The Company has no material commitments for capital expenditures. The Company knows of no material trends, favorable or unfavorable, in the Company's capital resources. The Company has no additional outstanding credit lines or credit commitments in place and has no additional current need for financial credit. YEAR 2000 Management has compiled a list of both internally and externally supplied information systems that utilize imbedded date codes which could experience operational difficulties in the year 2000. The Company uses third party applications or suppliers for all high level systems and reporting. These systems will either be upgraded and tested to be in compliance for the year 2000 or the Company will take necessary steps to replace the supplier. Management is testing new systems for which it is responsible. It is the Company's objective to be in year 2000 compliance for all systems by the end of fiscal 1999, however, no assurance can be given that such objective will be met. 15 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On or about November 24, 1998, the Company was named as a defendant for allegedly infringing upon patents for tape decks owned by Tanashin Denki Co., Ltd. ("Tanashin"), a Japanese manufacturing concern. The Company was one of multiple defendants named in the suit filed in the United States District Court for the Eastern District of Virginia. The case has been transferred to the U.S. District Court for the Southern District of Florida, Miami Division. The Company is a co-defendant with Memcorp, from whom the Company purchases the product which is the subject of the alleged infringement. Tanashin alleges damages of approximately $100,000, of which a maximum of $50,000 would be attributable to the Company. However, the Company has viable defenses to the Tanashin claims. Additionally, the Company may have rights of indemnification from Memcorp pursuant to an agreement between the companies. The Company believes that an adverse adjudication would not have a material affect upon the Company's operations. Item 2. CHANGES IN SECURITIES On April 1, 1999, the Company issued a Private Placement Memorandum (the "Memorandum") offering a minimum of 40 Units ($1,100,000) and a maximum of 50 Units ($1,375,000). The purchase price for each Unit was $27,500. Each Unit consists of 20,000 shares of the Company's Convertible Preferred Stock ("Preferred Stock") and 4,000 Common Stock Purchase Warrants ("Warrants"). Each share of Preferred Stock is convertible, at the option of the Holder, into one (1) share of the Company's Common Stock at any time after issuance. Each share of Preferred Stock will automatically convert into one (1) share of the Company's Common Stock at 5:00 p.m. eastern time on April 1, 2000, which is one (1) year from the date of the Memorandum. Each Warrant entitles the Holder to purchase, at any time during the period commencing from the date of issuance and ending three (3) years from the date of the Memorandum, one (1) share of the Company's Common Stock at a purchase price of $2.00 per share. Fractional Units could be purchased at the discretion of the Company. The Units were being offered only to "accredited investors" as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). The Units were offered on a "$1,100,000 minimum - $1,375,000 maximum" basis pursuant to Rule 506 of 16 Regulation D under the Securities Act of 1933, as amended (the "Securities Act"). Purchasers of the Units will receive securities that are not registered with the Securities and Exchange Commission (the "Commission") as a result of this Offering. The Company, however, will use its best efforts to file a registration statement with the Commission to register the Company's Common Stock underlying the securities comprising the Units within ninety (90) days after the completion of the Offering. There is no assurance as to when or if the registration statement will be declared effective by the Commission. There is no public market for the Units, Preferred Stock, or the Warrants, and none will develop as a result of the Offering. As a result of this Private Placement, fifty (50) units were sold and $1,375,000 gross funds have been raised. One million shares of the Company's Convertible Preferred Stock and 200,000 Common Stock Purchase Warrants were issued, effective as of the closing date of the Offering, June 30, 1999. Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS Not applicable Item 5. OTHER INFORMATION On June 28, 1999, the Company appointed John Klecha as Chief Operating Officer. In addition to his new duties as Chief Operating Officer, Mr. Klecha will retain his title as the Company's Chief Financial Officer. On June 28, 1999, the Board of Directors of the Company authorized the Company to issue to John Klecha 150,000 shares of the Company's Common stock in consideration for his personal guaranty of the Company's credit facilities provided by Main Factors, Inc. and EPK Financial Corporation. The shares will be restricted under the Securities Act of 1933, as Amended. (See: "Capital Resources"). On June 28, 1999, the Board of Directors of the Company authorized the Company to issue to Edward Steele 200,000 shares of the Company's Common stock in consideration for his personal guaranty of the Company's credit facilities provided by EPK Financial Corporation. The shares will be restricted under the Securities Act of 1933, as Amended. (See: "Capital Resources"). 17 Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) There are no exhibits required to be filed for the period covered by this Report. (b) The Company filed a Current Report on Form 8-K dated May 19, 1999. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE SINGING MACHINE COMPANY, INC. Dated: August 31, 1999 By:/s/ John F. Klecha John F. Klecha Chief Financial Officer 19 EX-27 2
5 This schedule contains summary financial information extracted from Balance Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto incorporated in Part I, Item 1. of this Form 10-Q and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-31-2000 JUN-30-1999 280,447 0 1,378,096 19,900 633,756 2,720,447 38,193 1,398 3,336,312 956,630 0 0 0 24,984 2,379,682 3,336,312 1,589,713 1,615,881 1,179,579 1,549,771 42,215 0 7,596 39,942 0 39,942 0 0 0 39,942 .02 .01
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