2014

Singing Machine Announces Profit in 2nd Quarter Earnings Release

COCONUT CREEK, Fla., Nov. 12, 2010 /PRNewswire-FirstCall/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announced the results for its second fiscal quarter ended September 30, 2010.

The Company announced net sales of approximately $8.36 million in the second quarter as compared with approximately $6.99 million reported in the same period last year, an increase of approximately $1.37 million (or increase of approximately 19%). The second quarter increase to net sales is primarily due to increased demand as well as earlier shipments to customers buying goods direct from China. Gross margin in the second quarter slightly improved to 20.3% as compared to 19.8% in the same period last year.

The Company also reported reduced G&A expenses of $634,033 for the period ended September 30, 2010 as compared to $930,353 reported in the same period last year (representing a decrease of $296,320, or approximately 32%). The decrease to expenses is primarily due to the Company's ongoing commitment to reducing costs, improving its logistics operation and operating with a leaner workforce.  As a result of the increase to net sales and reduction to expenses, the Company reported net profit of $291,653 for the quarter as compared to a net loss of $312,976 in the same quarter last year. This change in net income represents approximately a $600,000 improvement from last year's second quarter.

"We're very excited about the progress we're making," commented Gary Atkinson, Interim CEO. "The Company has successfully shown strong improvement in two consecutive quarters, highlighted by a $2.6 million increase in net sales and reduced expenses by approximately $487,000 through the first half of the fiscal year as compared to the same period last year. As a result, we are almost break-even through the first 6 months of this fiscal year." Atkinson continued, "We're not resting on our recent success. As our financials improve, we continue to work and develop our new lines for 2011. The Company recently attended the Hong Kong Electronics Show and previewed its new line for 2011 to select customers." Bernardo Melo, VP of Sales, commented, "The feedback we received from buyers on our new product concept was overwhelmingly positive. We're hopeful that the new product line will bring excitement back to the category and attract some large retailers that are not currently in karaoke." Melo added, "For this season, I'm pleased to report that our customers are still reporting strong sell-thru in karaoke. I'm optimistic that the trend will continue with the momentum from numerous Black Friday promotions and increased visibility from retail holiday gift catalogs."

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, 2010.  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






September 30,

2010


March 31,

2010




(Unaudited)


(Audited)

Assets

Current Assets






Cash

$

1,094,647

$

865,777


Accounts receivable, net of allowances of $208,638 and      






  $185,407, respectively


4,106,769


983,791


Due from factor


-


14,987


Inventories, net


4,665,720


2,804,848


Prepaid expenses and other current assets


82,522


118,465


          Total Current Assets


9,949,658


4,787,868







Property and equipment, net


495,198


736,966

Other non-current assets


164,677


164,644


         Total Assets

$

10,609,533

$

5,689,478







Liabilities and Shareholders' Deficit

Current Liabilities






Accounts payable

$

4,405,272

$

895,713


Due to related parties, net


5,671,181


3,033,801


Accrued expenses


485,217


227,257


Short-term loan - bank


-


1,091,828


Current portion of long-term financing obligation


13,640


18,186


Customer credits on account


351,903


742,009


Deferred gross profit on estimated returns


309,459


123,708


       Total Current Liabilities


11,236,672


6,132,502







Long-term financing obligation, less current portion


-


4,547


         Total Liabilities


11,236,672


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;  






35,835,793 and 37,585,794 shares issued and outstanding


378,357


375,857


Additional paid-in capital


19,104,465


19,098,726


Accumulated deficit


(20,109,961)


(19,922,154)


       Total Shareholders' Deficit


(627,139)


(447,571)


       Total Liabilities and Shareholders' Deficit

$

10,609,533

$

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


For Six Months Ended





September 30,

2010


September 30,

2009


September 30,

2010


September 30,

2009























Net Sales



$      8,357,672


$     6,991,372


$   10,449,299


$     7,805,380












Cost of Goods Sold

6,664,996


5,607,768


8,180,730


6,707,398












Gross Profit

1,692,676


1,383,604


2,268,569


1,097,982












Operating Expenses









Selling expenses

644,921


636,031


894,010


940,172


General and administrative expenses

634,033


930,353


1,309,609


1,790,607


Depreciation and amortization

119,716


102,513


241,768


202,265

Total Operating Expenses

1,398,670


1,668,897


2,445,387


2,933,044












Income (Loss) from Operations

294,006


(285,293)


(176,818)


(1,835,062)












Other Expenses









Interest expense

(2,353)


(27,683)


(10,989)


(30,951)























Net Income (Loss)

$           291,653


$       (312,976)


$       (187,807)


$    (1,866,013)












Income (Loss) per Common Share









Basic and Diluted

$                  0.01


$              (0.01)


$              (0.00)


$              (0.05)












Weighted Average Common and Common









Equivalent Shares:









Basic and Diluted

37,668,211


37,449,332


37,627,003


37,449,332












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,

2010


September 30,

2009

















Cash flows from operating activities






Net Loss

$

(187,807)

$

(1,866,013)


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






 Depreciation and amortization


241,768


202,265


 Inventory reserve charge


-


191,179


 Change in allowance for bad debts


23,231


91,736


 Stock based compensation


8,239


7,938


 Deferred gross profit on estimated returns


185,751


(156,854)


 Changes in assets and liabilities:






    (Increase) Decrease in:







Accounts receivable


(2,526,642)


(3,084,916)



Inventories


(1,860,872)


(494,836)



Prepaid expenses and other current assets


35,943


122,882



Other non-current assets


(33)


(390)


    Increase (Decrease) in:







Accounts payable


3,509,559


1,796,035



Accounts payable - related party


2,637,380


605,140



Accrued expenses


257,960


75,207



Customer credits on account


(390,106)


453,533




Net cash provided by (used in) operating activities


1,934,371


(2,057,094)

Cash flows from investing activities






Purchase of property and equipment


-


(38,377)


Disposal of property and equipment


-


1,648




Net cash used in investing activities


-


(36,729)

Cash flows from financing activities






Borrowings from factor, net


14,987


57,909


Net (repayments)proceeds pursuant to factoring facility


(619,567)


1,768,830


Net (repayments)proceeds from short-term bank loan


(1,091,828)


1,322,884


Payments on long-term financing obligation


(9,093)


(7,577)




Net cash (used in) provided by financing activities


(1,705,501)


3,142,046

Change in cash and cash equivalents


228,870


1,048,223









Cash and cash equivalents at beginning of period


865,777


957,163

Cash and cash equivalents at end of period

$

1,094,647

$

2,005,386









Supplemental Disclosures of Cash Flow Information:






Cash paid for Interest

$

10,989

$

30,951









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



SOURCE The Singing Machine Company, Inc.



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