Singing Machine Announces Profit in 2nd Quarter Earnings Release

Nov 12, 2010, 10:00 ET from The Singing Machine Company, Inc.

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.



RELATED LINKS

http://www.singingmachine.com