Singing Machine Announces 70% Increase in Net Sales, Profit in 2nd Quarter Earnings Release

FORT LAUDERDALE, Fla., Nov. 14, 2011 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) announces the results for its second fiscal quarter ended September 30, 2011.

For the quarter, the Company reported net sales of approximately $14.1 million compared to $8.3 million in the same period last year, an increase of approximately $5.8 million (approximately 70% increase). Gross margins also improved for the quarter from 20.3% to 22.6% (increase of 2.3%) as compared to the same period last year. Despite the 70% increase in net sales, the Company was also able to hold G&A expenses relatively steady, reporting approximately $655,000 in G&A expenses for the quarter, as compared to approximately $634,000 in the same period last year. The drastic improvement in net sales over last year is attributed to new business from Target and BJ's Wholesale Club in addition to earlier commitments from existing customers.  

As a result, the Company reported net income of approximately $1.5 million for the quarter ended September 30, 2011, compared to approximately $290,000 over the same period last year, representing an increase of approximately $1.2 million in net income. For the six months ended September 30, 2011 the Company reported net income of approximately $957,000 as compared to a net loss of approximately $188,000 over the same period last year.  

"This marks a truly remarkable turnaround," commented Gary Atkinson, Singing Machine CEO.  "Our goal for this year was to improve distribution and so far the numbers show we've done a good job. Through the first half of this year, the Company has added almost an additional $6 million in net sales over last year and recognized almost $1.1 million improvement in net income compared to last year. A lot of credit goes to our Sales Department for aggressively growing our sales distribution channels without compromising our gross margin."

Added Bernardo Melo, VP of Global Sales and Marketing, "It's been a fun year to see the excitement of the home karaoke segment continue its steady climb back up and be COOL again with consumers.  With the support of our key retailers, the Singing Machine continues to be the leading brand in karaoke.  We will be well represented this holiday season with features on toy and electronic holiday catalogs, multiple Black Friday deals, Cyber Monday promotions, and many dot com email blasts. We look forward to carrying our momentum throughout the holiday season."  

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, 2011.  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








September 30, 2011


March 31, 2011



(Unaudited)


(Audited)

Assets

Current Assets






Cash and cash equivalents

$

187,651

$

674,712


Accounts receivable, net of allowances of $219,798 and      






  $175,804, respectively


11,400,301


1,205,209


Due from related party - Starlight Consumer Electronics USA, Inc.


111,031


73,348


Due from related party - Starlight Electronics Co., Ltd.


851,796


-


Due from related party - Other Starlight Group Companies


29,257


-


Inventories, net


4,066,581


3,016,945


Prepaid expenses and other current assets


53,246


59,310


          Total Current Assets


16,699,863


5,029,524






Property and equipment, net


351,802


333,851

Other non-current assets


165,336


164,678


         Total Assets

$

17,217,001

$

5,528,053






Liabilities and Shareholders' Deficit

Current Liabilities






Accounts payable

$

6,533,869

$

1,118,674


Due to related party - Starlight Marketing Development, Ltd.


2,077,802


2,063,213


Due to related party - Starfair Electronics Company, Ltd.


922,524


-


Due to related party - Ram Light Management, Ltd.


1,683,247


1,683,247


Due to related party - Starlight R&D, Ltd.


431,373


431,373


Due to related party - Cosmo Communications USA, Inc.


235,495


217,493


Due to related party - Starlight Consumer Electronics Co., Ltd.


2,354,779


132,386


Due to related parties - Other Starlight Group Companies


9,534


88,249


Accrued expenses


943,007


256,535


Short-term loan - bank


1,293,327


-


Current portion of long-term financing obligation


-


4,547


Obligations to clients for returns and allowances


368,895


435,341


Warranty provisions


438,368


144,022


       Total Current Liabilities


17,292,220


6,575,080






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;  






  37,835,793 and 37,835,793 shares issued and outstanding, respectively


378,357


378,357


Additional paid-in capital


19,130,503


19,116,318


Accumulated deficit


(19,584,079)


(20,541,702)


       Total Shareholders' Deficit


(75,219)


(1,047,027)


       Total Liabilities and Shareholders' Deficit

$

17,217,001

$

5,528,053






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 Six Months Ended


September 30, 2011


September 30, 2010


September 30, 2011


September 30, 2010

















Net Sales

$          14,149,564


$             8,357,672


$          15,937,610


$           10,449,299









Cost of Goods Sold

10,956,081


6,664,996


12,315,584


8,180,730









Gross Profit

3,193,483


1,692,676


3,622,026


2,268,569









Operating Expenses









Selling expenses

1,041,388


644,921


1,390,064


894,010


General and administrative expenses

654,992


634,033


1,210,604


1,309,609


Depreciation and amortization

29,313


119,716


61,391


241,768

Total Operating Expenses

1,725,693


1,398,670


2,662,059


2,445,387









Income (Loss) from Operations

1,467,790


294,006


959,967


(176,818)









Other Expenses









Interest expense

(2,250)


(2,353)


(2,344)


(10,989)









Net Other Expenses

(2,250)


(2,353)


(2,344)


(10,989)









Income (loss) before provision for income taxes

1,465,540


291,653


957,623


(187,807)









Provision for  income taxes

-


-


-


-









Net Income (Loss)

$            1,465,540


$               291,653


$               957,623


$              (187,807)









Income (Loss) per Common Share









Basic and Diluted

$                    0.04


$                     0.01


$                    0.03


$                    (0.00)









Weighted Average Common and Common









Equivalent Shares:









Basic and Diluted

37,835,793


37,668,211


37,835,793


37,627,003









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 Six Months Ended



September 30, 2011


September 30, 2010











Cash flows from operating activities






Net Income (Loss)

$

957,623

$

(187,807)


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






  Depreciation and amortization


61,391


241,768


  Inventory reserve charge


153,926


-


  Disposal of property and equipment


4,027


-


  Change in allowance for bad debts


43,994


23,231


  Stock based compensation


14,185


8,239


  Warranty provisions


294,346


185,751


  Changes in assets and liabilities:






    (Increase) Decrease in:







Accounts receivable


(10,239,086)


(2,526,642)



Inventories


(1,203,562)


(1,860,872)



Prepaid expenses and other current assets


6,064


35,943



Other non-current assets


(658)


(33)


     Increase (Decrease) in:







Accounts payable


5,415,195


3,509,559



Accounts payable - related party


2,180,058


2,637,380



Accrued expenses


686,472


257,960



Obligations to clients for returns and allowances


(66,446)


(390,106)




Net cash (used in) provided by operating activities


(1,692,471)


1,934,371

Cash flows from investing activities






Purchase of property and equipment


(83,369)


-




Net cash used in investing activities


(83,369)


-

Cash flows from financing activities






Borrowings from factor, net


-


14,987


Net repayments pursuant to factoring facility


-


(619,567)


Net proceeds (repayments) from short-term bank loan


1,293,326


(1,091,828)


Payments on long-term financing obligation


(4,547)


(9,093)




Net cash provided by (used in) financing activities


1,288,779


(1,705,501)

Change in cash and cash equivalents


(487,061)


228,870






Cash and cash equivalents at beginning of period


674,712


865,777

Cash and cash equivalents at end of period

$

187,651

$

1,094,647






Supplemental Disclosures of Cash Flow Information:






Cash paid for interest

$

2,344

$

10,989








SOURCE The Singing Machine Company, Inc.



RELATED LINKS
http://www.singingmachine.com

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