Singing Machine Announces 1st Quarter Earnings Release

Aug 19, 2009, 20:00 ET from The Singing Machine Company, Inc.

COCONUT CREEK, Fla., Aug. 19, /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, 2009.

The Company reported net sales of approximately $814,000 (after one-time discounts of $235,000). This is down from approximately $1,770,000 as compared to the same period last fiscal year. The primary reason for the reduction in net sales was a steep decline in sales of Bratz licensed merchandise as that product life-cycle winds down. In addition, the Company issued several one-time price discounts and concessions to some of its larger customers to assist with slow-moving inventory in an effort to retain future business.

In a move to generate sales and cash, the Company elected to take approximately $180,000 in write-downs to lower its cost to market value for Bratz licensed product and musical instruments. These inventory write-downs coupled with price discounts, totaling approximately $415,000, led the Company to report negative gross margin of -35.1%. As a result of these adjustments the Company reported a first quarter net loss of approximately $1,553,000 as compared with a net loss in the first quarter ended June 30, 2008 of approximately $1,042,000.

Tony Handal, CEO, states, "The Company's loss, while larger than last year's first quarter, is reflective of an improved infrastructure. This is evidenced by the fact that after eliminating the one-time charge offs, the net loss for this quarter was similar to last year's first quarter, despite a 28% decrease in gross sales." Handal continued, "We remain optimistic that with our new product line-up for the upcoming season, including our new Sound X Kids(TM) line we can rebound in the second half of the year. We have already heard tremendous positive buzz surrounding our new pedestal karaoke unit and our other fresh new designs for this year. We are also excited to offer two free karaoke music downloads with the purchase of each new unit for this season which we believe will boost online music revenue."

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(TM), SMDigital(TM), SoundX(TM), and Sound X Kids(TM) 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 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

                                                June 30, 2009  March 31, 2009
                                                -------------  --------------
                                                  (Unaudited)    (Audited)
    Current Assets
       Cash and cash equivalents                    $616,865     $957,163
       Accounts receivable, net of allowances
        of $327,293 and $261,980, respectively       591,902      972,345
       Due from factor                                 4,004       73,854
       Inventories, net                            4,211,919    4,729,667
       Prepaid expenses and other current assets     420,824      526,563
          Total Current Assets                     5,845,514    7,259,592

    Property and Equipment, net                      822,395      886,770
    Other Non-Current Assets                         179,362      179,362
          Total Assets                            $6,847,271   $8,325,724

           Liabilities and Shareholders' Equity
    Current Liabilities
       Accounts payable                           $1,352,525   $2,588,769
       Due to related parties - net                  619,569    1,498,391
       Accrued expenses                              348,231      422,260
       Short-term loan - bank                      1,742,140            -
       Current portion of long-term
        financing obligation                          18,186       18,186
       Customer credits on account                 1,643,994      908,449
       Deferred gross profit on estimated
        returns                                       73,125      288,039
          Total Current Liabilities                5,797,770    5,724,094

    Long-term financing obligation, less
     current portion                                  19,702       22,733
          Total Liabilities                        5,817,472    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                 19,079,689   19,075,750
       Accumulated deficit                       (18,424,384) (16,871,347)
          Total Shareholders' Equity               1,029,799    2,578,897
          Total Liabilities and Shareholders'
           Equity                                 $6,847,271   $8,325,724

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

                   The Singing Machine Company, Inc. and Subsidiaries

                                                  For Three Months Ended
                                               June 30, 2009  June 30, 2008
                                               -------------  -------------

    Net Sales                                       $814,008   $1,770,346

    Cost of Goods Sold                             1,099,630    1,567,697

    Gross (Loss) Profit                             (285,622)     202,649

    Operating Expenses
       Selling expenses                              304,141      221,534
       General and administrative expenses           860,254      922,199
       Depreciation and amortization                  99,752      101,161
    Total Operating Expenses                       1,264,147    1,244,894

    Loss  from Operations                         (1,549,769)  (1,042,245)

    Other Expenses
       Interest expense                               (3,268)      (7,316)

    Loss before taxes                             (1,553,037)  (1,049,561)

    Provision for income taxes                             -            -

    Net Loss                                     $(1,553,037) $(1,049,561)

    Loss per Common Share
       Basic                                          $(0.04)      $(0.03)
       Diluted                                        $(0.04)      $(0.03)

    Weighted Average Common and Common
       Equivalent Shares:
       Basic                                      37,449,432   31,990,298
       Diluted                                    37,449,432   31,990,298

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

                   The Singing Machine Company, Inc. and Subsidiaries

                                                  For Three Months Ended
                                               June 30, 2009  June 30, 2008
                                               -------------  -------------

    Cash flows from operating activities
       Net Loss                                  $(1,553,037) $(1,049,561)
       Adjustments to reconcile net loss to
        net cash and cash equivalents
        provided by (used in) operating
          Depreciation and amortization               99,752      101,161
          Inventory reserve charge                   181,142        9,267
          Change in allowance for bad debts           65,313      (83,072)
          Stock compensation                           3,939        3,640
          Deferred gross profit on estimated
           sales returns                            (214,914)    (157,052)
       Changes in assets and liabilities:
        (Increase) Decrease in:
          Accounts receivable                        950,861      959,838
          Inventories                                336,605   (1,529,507)
          Prepaid expenses and other current
           assets                                    105,739      (75,667)
          Other non-current assets                         -       (5,747)
       Increase (Decrease) in:
          Accounts payable                        (1,236,244)   2,144,814
          Accounts payable - related party          (878,822)           -
          Accrued expenses                           (74,028)     (59,167)
          Customer credits on account                735,545     (205,334)
             Net cash (used in) provided by
              operating activities                (1,478,149)      53,613
    Cash flows from investing activities
       Purchase of property and equipment            (35,377)    (276,769)
          Net cash used in investing activities      (35,377)    (276,769)
    Cash flows from financing activities
       Borrowings from factor, net                    69,850       56,042
       Net payments pursuant to factoring
        facility                                    (635,731)           -
       Net proceeds from short-term bank loan      1,742,140            -
       Payments on long-term financing
        obligation                                    (3,031)           -
       Net loan proceeds from related parties              -      180,448
          Net cash provided by financing
           activities                              1,173,228      236,490
    Change in cash and cash equivalents             (340,298)      13,334

    Cash and cash equivalents at beginning
     of period                                       957,163      447,816
    Cash and cash equivalents at end of period      $616,865     $461,150

    Supplemental Disclosures of Cash Flow
       Cash paid for Interest                         $3,268       $7,316
    Supplemental Disclosures of Non-Cash
     Financing Activities:
       Payment of trade payable with stock                $-     $197,500

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

SOURCE The Singing Machine Company, Inc.