Singing Machine Announces 1st Quarter Earnings Release

Aug 23, 2010, 15:52 ET from The Singing Machine Company, Inc.

COCONUT CREEK, Fla., Aug. 23 /PRNewswire-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, 2010.

The Company announced net sales of approximately $2.09 million in the first quarter as compared with approximately $814,000 over the same period last year (increase of approximately 257%). The substantial increase to first quarter sales is primarily due to increasing year-round demand from the Company's largest customer and earlier commitments from all customers, resulting in earlier shipments. The Company also reported gross margin of 27.1%, a significant improvement from -35.1% gross margin reported in the same period last year. This improvement to gross margin is related to improved sell-through at the retail-level. Due to exceptional sell-through success with all customers at the end of last year, the Company was not forced to give markdown concessions or take one-time inventory write-downs.

Selling expenses and general & administrative expenses have also decreased significantly as compared with the same quarter ended June 30, 2009. Selling expenses, as a percentage of net sales, have been reduced to 11.9%, down from 37.4% in the same period last year. G&A expenses were reduced to approximately $675,000 as compared with approximately $860,000 in the first quarter last year (reduction of approximately 21.5%). Both reductions can be attributed to more efficient operations, improved freight programs with all major customers, staff reductions, and general cost cutting. Due to these improvements, the Company reported a net loss of approximately $479,000 for the quarter ended June 30, 2010 as compared with a net loss of approximately $1,553,000 in the same period last year.

"All things considered, we've gotten out of the gate to a strong start," commented Gary Atkinson, Interim CEO. "Since the end of the last fiscal year, the Company has been working with tremendous focus to cut costs, improve freight efficiency, and improve gross margin. This first quarter gives a glimpse into the work we've been doing and the strides we've made so far. While we still reported a net loss, historically, due to the high seasonality of our business the Company has always had a slow first quarter." Added Atkinson, "There are still many more challenges to face and obstacles to overcome but I'm happy to say the Company appears to be on the right track. In addition to our cost-cutting efforts we are also progressing on a new line of product and features for next year which will be consistent with the Company's long history of karaoke innovation."

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™, SMDigital™, SoundX™, and 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. 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 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, 2010.  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.

(Financial statements attached)

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30, 2010

March 31, 2010

(Unaudited)

(Audited)

Assets

Current Assets

Cash and cash equivalents

$

282,060

$

865,777

Accounts receivable, net of allowances of $207,557 and    

 $185,407,  respectively

1,444,981

983,791

Due from factor

147,427

14,987

Inventories, net

2,824,212

2,804,848

Prepaid expenses and other current assets

98,677

118,465

          Total Current Assets

4,797,357

4,787,868

Property and Equipment, net

614,915

736,966

Other Non-Current Assets

164,644

164,644

         Total Assets

$

5,576,916

$

5,689,478

Liabilities and Shareholders' Deficit

Current Liabilities

Accounts payable

$

1,663,443

$

895,713

Due to related parties - net

3,523,895

3,033,801

Accrued expenses

192,239

227,257

Short-term loan - bank

280,533

1,091,828

Current portion of long-term financing obligation

18,186

18,186

Customer credits on account

703,353

742,009

Deferred gross profit on estimated returns

120,412

123,708

       Total Current Liabilities

6,502,061

6,132,502

Long-term financing obligation, less current portion

1,516

4,547

         Total Liabilities

6,503,577

6,137,049

Shareholders'  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;  100,000,000 shares authorized;

 37,585,794 and 37,585,794 shares issued and outstanding

375,857

375,857

Additional paid-in capital

19,099,096

19,098,726

Accumulated deficit

(20,401,614)

(19,922,154)

       Total Shareholders' Deficit

(926,661)

(447,571)

       Total Liabilities and Shareholders' Deficit

$

5,576,916

$

5,689,478

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, 2010

June 30, 2009

Net Sales

$              2,091,627

$                 814,008

Cost of Goods Sold

1,515,734

1,099,630

Gross (Loss) Profit

575,893

(285,622)

Operating Expenses

Selling expenses

249,089

304,141

General and administrative expenses

675,576

860,254

Depreciation and amortization

122,052

99,752

Total Operating Expenses

1,046,717

1,264,147

Loss  from Operations

(470,824)

(1,549,769)

Other Expenses

Interest expense

(8,636)

(3,268)

Net Loss

$                (479,460)

$             (1,553,037)

Loss per Common Share

Basic  and Diluted

$                     (0.01)

$                     (0.04)

Weighted Average Common and Common

Equivalent Shares:

Basic and Diluted

37,585,794

37,449,432

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, 2010

June 30, 2009

Cash flows from operating activities

Net Loss

$

(479,460)

$

(1,553,037)

Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities:

Depreciation and amortization

122,052

99,751

Change in allowance for bad debts

22,150

65,313

Change due to lower of cost or market write-off

-

(181,142)

Stock compensation

370

3,939

Deferred gross profit on estimated sales returns

(3,296)

(214,914)

Changes in assets and liabilities:

 (Increase) Decrease in:

Accounts receivable

50,590

950,861

Inventories

(19,364)

698,890

Prepaid expenses and other current assets

19,788

105,739

 Increase (Decrease) in:

Accounts payable

767,730

(1,236,244)

Accounts payable - related party

264,341

(878,822)

Accrued expenses

(35,019)

(74,028)

Customer credits on account

(38,656)

735,545

Net cash provided by (used in) operating activities

671,226

(1,478,149)

Cash flows from investing activities

Purchase of property and equipment

-

(35,377)

Net cash used in investing activities

-

(35,377)

Cash flows from financing activities

(Retention by)borrowings from factor, net

(132,440)

69,850

Net payments pursuant to factoring facility

(533,929)

(635,731)

Net (repayment of) proceeds from short-term bank loan

(811,295)

1,742,140

Payments on long-term financing obligation

(3,031)

(3,031)

Net loan proceeds from related parties

225,752

-

Net cash (used in) provided by financing activities

(1,254,943)

1,173,228

Change in cash and cash equivalents

(583,717)

(340,298)

Cash and cash equivalents at beginning of period

865,777

957,163

Cash and cash equivalents at end of period

$

282,060

$

616,865

Supplemental Disclosures of Cash Flow Information:

Cash paid for Interest

$

8,636

$

3,268

The accompanying notes are an integral part of these consolidated financial statements.

www.singingmachine.com

SOURCE The Singing Machine Company, Inc.



RELATED LINKS

http://www.singingmachine.com