Singing Machine Announces 3rd Quarter Earnings Release

COCONUT CREEK, Fla., Feb. 12 /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) today announced financial results for its third fiscal quarter ended December 31, 2009.  The Company reported approximately $11.9 million in net sales for the third quarter, representing a decrease of approximately $4.6 million over the same period last year. The decrease in sales is primarily due to continued economic concerns and excess inventory left over with customers from last year.

The Company reported $247,309 in net income, down $216,392 from last year's third quarter net income of $463,701. The decrease in net income is primarily due to the decrease in sales. However, the Company did report an increase in gross profit margin from 22.7% to 25% as compared to the same period last year. The Company was also successful in lowering operating expenses by approximately $500,000 as compared to the same quarter last year. The decrease in operating expenses is primarily due to a decrease in general and administrative expenses caused by payroll reductions and budget cuts.  The Company has also made significant strides toward lowering and managing inventory, reporting approximately $3.6 million in inventory at the end of the quarter, as compared to inventory of $4.7 million at the end of the fiscal year 2009.

"While the financials do not necessarily reflect it, Singing Machine had a positive holiday season with very strong sell-through reported by all of our retail partners," commented Gary Atkinson, Interim CEO. "Last year at this time, amid the peak of the recession, many of our customers finished their season with excess inventory, which burdened the Company going into the start of this fiscal year. For fiscal year 2011 the Company hopes to start with a much cleaner slate. In addition, the strong sell-through this year tells us the karaoke category is still alive and that there is an avid demand for music and singing." Atkinson furthered, "Looking forward to the next fiscal year, the Company recently finished a very optimistic and successful showing at the Consumer Electronics Show where it met with many large retail customers and unveiled some new, exciting projects."

Atkinson also commented on the recently launched karaoke music download store, "During this third quarter, the Company saw an impressive increase in traffic and high conversion rate for music downloads, signifying that there is willingness and a demand for downloadable karaoke music.

However, despite these positive things, we know the Company still has tremendous strides it must take to achieve profitability. The Company will continue to look for ways to reduce overhead, better manage its current accounts, and reach new retail distribution."

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 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
    
                                                December 31,       March 31,
                                                    2009             2009
                                                    ----             ----
                                                  (Unaudited)     (Audited)
    
                                               Assets
                                               ------
    Current Assets
      Cash                                         $1,777,340       $957,163
      Accounts receivable, net of allowances of
       $289,659 and $261,980, respectively          2,677,848        972,345
      Due from factor                                 280,484         73,854
      Inventories, net                              3,588,653      4,729,667
      Prepaid expenses and other current assets       400,997        526,563
                                                      -------        -------
    
                 Total Current Assets               8,725,322      7,259,592
    
    Property and equipment, net                       778,323        886,770
    Other non-current assets                          179,751        179,362
                                                      -------        -------
    
                Total Assets                       $9,683,396     $8,325,724
                                                   ==========     ==========
    
                                Liabilities and Shareholders' Equity
                                ------------------------------------
    Current Liabilities
      Accounts payable                             $2,733,828     $2,588,769
      Due to related parties, net                   3,353,258      1,498,391
      Accrued expenses                                627,140        422,260
      Short-term loan - bank                        1,092,323              -
      Current portion of long-term
       financing obligation                            18,186         18,186
      Customer credits on account                     526,948        908,449
      Deferred gross profit on estimated
       returns                                        351,940        288,039
                                                      -------        -------
              Total Current Liabilities             8,703,623      5,724,094
    
    Long-term financing obligation, less
     current portion                                   10,609         22,733
                                                       ------         ------
                Total Liabilities                   8,714,232      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                   19,084,721     19,075,750
      Accumulated deficit                         (18,490,051)   (16,871,347)
                                                  -----------    -----------
              Total Shareholders' Equity              969,164      2,578,897
                                                  -----------    -----------
              Total Liabilities and Shareholders'
               Equity                              $9,683,396     $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           For Nine Months Ended
                   ----------------------           ---------------------
                  December 31,   December 31,    December 31,    December 31,
                  ------------   ------------    ------------    ------------
                      2009           2008           2009            2008
                      ----           ----           ----            ----
    
    Net Sales     $11,975,761    $16,611,566    $19,781,141     $30,998,308
                                  
    Cost of Goods 
     Sold           8,981,999     12,839,723     15,689,397      25,002,865
                   ----------     ----------     ----------      ----------
                                  
    Gross Profit    2,993,762      3,771,843      4,091,744       5,995,443
    Operating Expenses           
       Selling 
        expenses    1,708,663      1,642,309      2,648,835       2,656,385
       General and 
        administrative 
        expenses      875,864      1,436,477      2,666,471       3,355,232
       Depreciation and 
        amortization  120,682        121,604        322,947         326,264
                   ----------     ----------     ----------      ----------   
    Total Operating 
     Expenses       2,705,209      3,200,390      5,638,253       6,337,881
                   ----------     ----------     ----------      ---------- 
    Income (Loss) 
     from 
     Operations       288,553        571,453     (1,546,509)       (342,438)
                                  
    Other Expenses               
     Interest 
      expense         (41,244)       (71,670)       (72,195)       (104,671)
                   ----------     ----------     ----------      ----------
    Income (Loss) 
     before provision 
     for income taxes 247,309        499,783     (1,618,704)       (447,109)
                                  
    Provision for 
     income taxes                    (36,082)                       (36,082)
                   ----------     ----------     ----------      ---------- 
    Net Income 
     (Loss)          $247,309       $463,701    $(1,618,704)      $(483,191)
                   ==========     ==========    ============     ===========
                                  
    Net Income (Loss) 
     per Common Share             
        Basic and     
         Diluted        $0.01          $0.01         $(0.04)         $(0.01)
    
    Weighted Average Common and
     Common Equivalent Shares:
        Basic and 
        Diluted    37,449,432     32,729,990     37,449,432      32,472,073
    
    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 Nine Months Ended
                                             ---------------------
                                     December 31, 2009  December 31, 2008
                                     -----------------  -----------------
    
    Cash flows from operating activities
      Net Loss                         $(1,618,704)          $(483,191)
      Adjustments to reconcile net
       loss to net cash and cash
       equivalents used in 
       operating activities:
        Depreciation and
         amortization                      322,947             326,264
        Inventory reserve charge            91,330              95,149
        Change in allowance for 
         bad debts                          27,679             236,267
        Stock based compensation             8,971              28,890
        Deferred gross profit on
         estimated sales returns            63,901             261,285
      Changes in assets and 
       liabilities:
        (Increase) Decrease in:
        Accounts receivable             (3,502,013)         (6,710,288)
        Inventories                      1,049,684          (2,598,292)
        Prepaid expenses and other 
         current assets                    125,566              16,506
        Other non-current assets              (388)             (8,958)
      Increase
       (Decrease) in:
        Accounts payable                   145,059           5,476,800
        Accounts payable - related 
         party                           1,558,187           2,449,709
        Accrued expenses                   204,880             187,123
        Customer credits on 
         account                          (381,501)           (199,027)
                                          --------            --------
          Net cash used in
           operating activities         (1,904,402)           (921,763)
                                        ----------            --------
    Cash flows from investing activities
      Purchase of property 
       and equipment                      (216,148)           (720,150)
      Disposal of property and
       equipment                             1,648                   -
                                             -----                 ---
          Net cash used in
           investing activities           (214,500)           (720,150)
                                          --------            --------
    Cash flows from financing
     activities
      Borrowings from factor, net         (206,630)           (916,496)
      Net proceeds pursuant to
       factoring facility                1,768,830           4,159,414
      Net proceeds from    
       short-term bank loan              1,092,323                   -
      Payments on long-term 
       financing obligation                (12,124)             46,980
      Net loan proceeds
       from related parties                296,680            (296,650)
                                           -------            --------
          Net cash provided by 
           financing activities          2,939,079           2,993,248
                                         ---------           ---------
    Change in cash and cash 
     equivalents                           820,177           1,351,335
    
    Cash and cash equivalents at
     beginning of period                   957,163             447,816
                                           -------             -------
    Cash and cash equivalents at
     end of period                      $1,777,340          $1,799,151
                                        ==========          ==========
    
    Supplemental Disclosures of
     Cash Flow Information:
    
      Cash paid for Interest               $72,195            $103,183
                                          ========            ========
      Cash paid for Income Taxes                 -              36,802
                                               ===              ======
    Non-Cash Financing Activities:
    
      Conversion of trade payable
       to equity                            $    -            $197,500
                                               ===            ========
    
    The accompanying notes are an integral part of these consolidated 
    financial statements.
    
    

SOURCE The Singing Machine Company, Inc.



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http://www.singingmachine.com

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