Singing Machine Announces 25% Increase Net Sales in 3rd Quarter Earnings Release

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Feb 10, 2012, 11:55 ET

FORT LAUDERDALE, Fla., Feb. 10, 2012 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announces the results for its third fiscal quarter ended December 31, 2011.

For the quarter, the Company reported net sales of approximately $8.6 million compared to $6.9 million in the same period last year, an increase of approximately $1.7 million (approximately 25% increase). Operating expenses for the December 31, 2011 quarter increased slightly due to the increased net sales, however as a percentage of net sales, operating expenses dropped to 19.2% as compared with 22.2% in the same period last year. As a result, the Company reported net income for the quarter of approximately $134,000, compared to net income of approximately $81,000 over the same period last year.

For the nine month period ended December 31, 2011, the Company reported net sales of approximately $24.6 million as compared to approximately $17.4 million in the same period last year. Net income for the nine months ended December 31, 2011 grew to approximately $1.1 million as compared to a net loss of approximately $100,000 in the same period last year.

"We're thrilled with our year-to-date results and strong sales of our Singing Machines this past holiday season," commented Gary Atkinson, CEO. "We're achieving a milestone we haven't met in many, many years which is to show a strong profit through the first three quarters." Atkinson continued, "With some new products and services in the pipeline, we're optimistic about our future growth potential."

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.

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

			December 31, 2011		March 31, 2011
			(Unaudited)		(Audited)
Assets
Current Assets
	Cash	$	1,976,985	$	674,712
	Accounts receivable, net of allowances of $229,865 and
	$175,804, respectively		3,293,972		1,205,209
	Due from related party - Starlight Consumer Electronics USA, Inc.		85,650		73,348
	Due from related party - Other Starlight Group Companies		500		-
	Inventories, net		3,608,023		3,016,945
	Prepaid expenses and other current assets		54,866		59,310
	Total Current Assets		9,019,996		5,029,524

Property and equipment, net			273,490		333,851
Other non-current assets			159,674		164,678
	Total Assets	$	9,453,160	$	5,528,053

Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
	Accounts payable	$	1,193,793	$	1,118,674
	Due to related party - Starlight Marketing Development, Ltd.		1,942,431		2,063,213
	Due to related party - Starlight Electronics Company, Ltd.		303,552		-
	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.		232,996		217,493
	Due to related party - Starlight Consumer Electronics Co., Ltd.		1,736,855		132,386
	Due to related parties - Other Starlight Group Companies		9,534		88,249
	Accrued expenses		816,807		256,535
	Short-term loan - bank		253,750		-
	Current portion of long-term financing obligation		-		4,547
	Obligations to clients for returns and allowances		291,294		435,341
	Warranty provisions		488,792		144,022
	Total Current Liabilities		9,384,424		6,575,080

Shareholders' Equity (Deficit)
	Preferred stock, $1.00 par value; 1,000,000 shares authorized; no
	shares issued and outstanding		-		-
	Common stock, Class A, $0.01 par value; 100,000 shares
	authorized; no shares issued and outstanding		-		-
	Common stock, $0.01 par value; 100,000,000 shares authorized;
	37,960,794 and 37,835,793 shares issued and outstanding, respectively		379,607		378,357
	Additional paid-in capital		19,139,448		19,116,318
	Accumulated deficit		(19,450,319)		(20,541,702)
	Total Shareholders' Equity (Deficit)		68,736		(1,047,027)
	Total Liabilities and Shareholders' Equity (Deficit)	$	9,453,160	$	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 Nine Months Ended
		December 31, 2011	December 31, 2010	December 31, 2011	December 31, 2010


Net Sales		$ 8,650,557	$ 6,935,843	$ 24,588,167	$ 17,385,142

Cost of Goods Sold		6,854,398	5,303,075	19,169,982	13,483,805

Gross Profit		1,796,159	1,632,768	5,418,185	3,901,337

Operating Expenses
	Selling expenses	841,591	816,375	2,231,655	1,710,385
	General and administrative expenses	760,198	628,642	1,970,802	1,938,251
	Depreciation and amortization	55,159	98,090	116,550	339,858
Total Operating Expenses		1,656,948	1,543,107	4,319,007	3,988,494

Income (Loss) from Operations		139,211	89,661	1,099,178	(87,157)

Other Expenses
	Interest expense	(5,452)	(8,992)	(7,796)	(19,981)

Income (Loss) before provision for income taxes		133,759	80,669	1,091,382	(107,138)

Provision for income taxes		-	-	-	-

Net Income (Loss)		$ 133,759	$ 80,669	$ 1,091,382	$ (107,138)

Income (Loss) per Common Share
	Basic and Diluted	$ 0.00	$ 0.00	$ 0.03	$ (0.00)

Weighted Average Common and Common
	Equivalent Shares:
	Basic and Diluted	37,877,002	37,835,793	37,849,479	37,697,107

*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 Nine Months Ended
					December 31, 2011		December 31, 2010


Cash flows from operating activities
	Net Income (Loss)			$	1,091,382	$	(107,138)
	Adjustments to reconcile net income (loss) to net cash and cash
	equivalents provided by operating activities:
	Depreciation and amortization				116,550		339,858
	Inventory reserve charge				301,999		-
	Change in allowance for bad debts				54,061		27,452
	Disposal of property and equipment				31,028		-
	Stock based compensation				24,380		13,000
	Warranty provisions				344,770		260,798
	Changes in assets and liabilities:
	(Increase) Decrease in:
		Accounts receivable			(2,142,824)		(951,213)
		Inventories			(893,077)		(643,398)
		Prepaid expenses and other current assets			4,444		47,217
		Other non-current assets			5,003		(34)
	Increase (Decrease) in:
		Accounts payable			75,119		1,059,576
		Net due to related parties			1,711,226		1,955,914
		Accrued expenses			560,272		305,730
		Customer credits on account			(144,047)		(124,252)
			Net cash provided by operating activities		1,140,286		2,183,510
Cash flows from investing activities
	Purchase of property and equipment				(87,216)		(27,000)
			Net cash used in investing activities		(87,216)		(27,000)
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				253,750		(1,091,828)
	Payments on long-term financing obligation				(4,547)		(13,640)
			Net cash provided by (used in) financing activities		249,203		(1,710,048)
Change in cash and cash equivalents					1,302,273		446,462

Cash and cash equivalents at beginning of period					674,712		865,777
Cash and cash equivalents at end of period				$	1,976,985	$	1,312,239

Supplemental Disclosures of Cash Flow Information:
	Cash paid for Interest			$	7,796	$	19,981

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