Singing Machine Announces 1st Quarter Earnings Release

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Aug 23, 2010, 03:52 ET

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.***