Singing Machine Announces 26% Increase in Net Sales, Profit in Fiscal 2012 Annual Report

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Jun 29, 2012, 01:06 ET

FORT LAUDERDALE, Fla., June 29, 2012 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced financial results for its fiscal year ended March 31, 2012.

For the 2012 fiscal year, the Company reported net sales of approximately $25.9 million compared to $19.1 million in the same period last year, an increase of approximately $6.8 million (approximately 26% increase). Gross margin dipped slightly to 21.8% compared to 22.1% in the same period last year, however G&A expenses held steady at approximately $2.5 million. Due to the increase in net sales and no change to the overhead structure, the Company reported net income of approximately $463,000 compared to a net loss of approximately $599,000 in the last fiscal year (an improvement of approximately $1.1 million). The significant improvement in net sales over last year is directly attributed to the Company gaining new retail accounts and the overall resurgence of karaoke popularity.

"I'm thrilled with the positive turnaround the Company was able to achieve this fiscal year," commented Gary Atkinson, Singing Machine CEO. "Our Management Team did an impressive job growing sales and holding gross margin, while maintaining our overhead. I believe the Company is well positioned for the coming year with our experienced management team, seasoned manufacturing relationships in China, and recent success coming off a strong holiday season at retail."

Bernardo Melo, VP of Global Sales and Marketing, commented, "I'm hopeful the Company's turnaround success will continue with the support of our new and existing retail partners. We continue to look for more top line revenue growth without compromising gross margin. Additionally, we continue to develop and diversify our karaoke assortment to appeal to a wide base of consumers. We're broadening our entry-level assortment, adding rich features to our Pedestal line of karaoke machines, and developing more iOS-compatible hardware to support the popularity of Apple™ devices. This coming year will be an exciting year for karaoke with Singing Machine positioned as the market leader."

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™ and SoundX™ brand names. The first to provide karaoke systems for home entertainment in the United States, The Singing Machine sells its products in North America and Europe. 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, 2012. 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.

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

			March 31, 2012		March 31, 2011
Assets
Current Assets
	Cash	$	267,465	$	674,712
	Accounts receivable, net of allowances of $168,554 and $175,804, respectively		785,490		1,205,209
	Due from related party - Starlight Consumer Electronics USA, Inc.		36,036		73,348
	Due from related party - Starlight Electronics USA, Inc.		58,536		-
	Due from related party - Cosmo Communications Canada, Ltd		68,291		-
	Inventories,net		4,008,392		3,016,945
	Prepaid expenses and other current assets		53,233		59,310
	Total Current Assets		5,277,443		5,029,524

Property and Equipment,net			296,222		333,851
Other Non-Current Assets			159,674		164,678
	Total Assets	$	5,733,339	$	5,528,053

Liabilities and Shareholders' Deficit
Current Liabilities
	Accounts payable	$	1,303,395	$	1,118,674
	Due to related party - Starlight Marketing Development, Ltd.		1,924,431		2,063,213
	Due to related party - Ram Light Management, Ltd.		1,683,247		1,683,247
	Due to related party - Starlight R&D, Ltd.		416,026		431,373
	Due to related party - Cosmo Communications USA, Inc.		226,747		217,493
	Due to related party - Starlight Electronics Co., Ltd.		103,545		132,386
	Due to related parties - Other Starlight Group Companies		3,534		88,249
	Accrued expenses		168,156		256,535
	Current portion of long-term financing obligation		-		4,547
	Obligations to clients for returns and allowances		242,379		435,341
	Warranty provisions		219,760		144,022
	Total Current Liabilities		6,291,220		6,575,080

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; 37,960,794 and 37,835,793 shares issued and outstanding		379,607		378,357
	Additional paid-in capital		19,141,098		19,116,318
	Accumulated deficit		(20,078,586)		(20,541,702)
	Total Shareholders' Deficit		(557,881)		(1,047,027)
	Total Liabilities and Shareholders' Deficit	$	5,733,339	$	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



		For the Years Ended
		March 31, 2012	March 31, 2011	March 31, 2010


Net Sales		$ 25,943,832	$ 19,165,979	$ 21,277,370

Cost of Goods Sold		20,292,738	14,921,289	17,291,011

Gross Profit		5,651,094	4,244,690	3,986,359

Operating Expenses
	Selling expenses	2,470,985	1,838,217	3,114,552
	General and administrative expenses	2,537,379	2,575,032	3,388,203
	Depreciation and amortization	171,818	430,115	439,432
Total Operating Expenses		5,180,182	4,843,364	6,942,187

Net Income (Loss) from Operations		470,912	(598,674)	(2,955,828)

Other Expenses
	Interest expense	(7,796)	(20,874)	(94,979)

Net Income (Loss) before provision for income taxes		463,116	(619,548)	(3,050,807)

Provision for income taxes		-	-	-

Net Income (Loss)		$ 463,116	$ (619,548)	$ (3,050,807)

Net Income (Loss) per Common Share
	Basic	$ 0.012	$ (0.016)	$ (0.081)
	Diluted	$ 0.012	$ (0.016)	$ (0.081)

Weighted Average Common and Common
	Equivalent Shares:
	Basic	37,877,460	37,731,684	37,519,668
	Diluted	37,877,460	37,751,773	37,519,668

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

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

					For the Years Ended
					March 31, 2012		March 31, 2011		March 31, 2010


Cash flows from operating activities
	Net Income (Loss)			$	463,116	$	(619,548)	$	(3,050,807)
	Adjustments to reconcile net income (loss) to net cash and cash equivalents (used in) provided by operating activities:
		Depreciation and amortization			171,818		430,115		439,432
		Loss on disposal of property and equipment			31,027		-		-
		Change in inventory reserve			211,999		101,932		(396,320)
		Change in allowance for bad debts			(7,250)		(9,603)		(76,572)
		Stock compensation			26,030		20,092		24,339
		Warranty provisions			75,738		20,314		(164,331)
	Changes in assets and liabilities:
	(Increase) Decrease in:
		Accounts receivable			426,969		(211,815)		244,671
		Inventories			(1,203,446)		(314,029)		2,321,139
		Prepaid expenses and other current assets			6,077		59,156		408,098
		Other non-current assets			5,004		(34)		14,718
	Increase (Decrease) in:
		Accounts payable			184,721		222,961		(1,693,056)
		Accounts payable - related party			(347,946)		1,508,811		1,535,410
		Accrued expenses			(88,379)		29,278		(195,003)
		Obligations to clients for returns and allowances			(192,962)		(306,668)		(166,440)
			Net cash (used in) provided by operating activities		(237,484)		930,962		(754,722)
Cash flows from investing activities
	Purchase of property and equipment				(165,216)		(27,000)		(291,276)
	Proceeds from disposal of property and equipment				-		-		1,648
			Net cash used in investing activities		(165,216)		(27,000)		(289,628)
Cash flows from financing activities
	Borrowings from factor, net				-		14,987		58,867
	Net (payments on) proceeds from short-term bank obligation				-		(1,091,828)		1,091,828
	Payments pursuant to factoring facility				-		-		(179,545)
	Payments on long-term financing obligation				(4,547)		(18,186)		(18,186)
			Net cash (used in) provided by financing activities		(4,547)		(1,095,027)		952,964
Change in cash and cash equivalents					(407,247)		(191,065)		(91,386)

Cash and cash equivalents at beginning of period					674,712		865,777		957,163
Cash and cash equivalents at end of period				$	267,465	$	674,712	$	865,777

Supplemental Disclosures of Cash Flow Information:
	Cash paid for Interest			$	7,796	$	20,874	$	94,979
	Cash paid (refunded) for Income Taxes			$	4,332	$	1,600	$	(23,520)

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