The Singing Machine Releases Fiscal 2011 Financial Results

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Jun 29, 2011, 05:28 ET

COCONUT CREEK, Fla., June 29, 2011 /PRNewswire/ -- The Singing Machine Company ("Singing Machine" or the "Company") (OTC BB: SMDM) today announced financial results for fiscal year ended March 31, 2011.

Year-End Highlights:

For fiscal year-ended 2011, the Singing Machine reported net sales of approximately $19.2 million as compared to $21.3 million over the same period last year (a decline of approximately 9.8%). Despite less net sales, the Company significantly reduced its expenses, improved gross margin, and consequently reported a net loss of $619,548 as compared to a net loss of approximately $3.0 million in the same period last year.

The Company cut total operating expenses by approximately $2.1 million from $6.9 million in the same period last year to $4.8 million for the fiscal year-ended March 31, 2011 (a decline of approximately 30%). Gross margin improved over the same period by 3.4% from 18.7% to 22.1%. The result was that the Company was able to generate more gross profit from less sales compared to the preceding year.

Gary Atkinson, interim C.E.O. stated, "Our goal for the year was simple: stop the bleeding. Our plans were to reduce selling and overhead expenses, be conservative with inventory, and improve gross margin with the goal of finishing the year EBITDA neutral (earnings before interest, taxes, depreciation and amortization). I'm happy to announce that the Company has taken many positive strides this year and has substantially succeeded on our goals for Fiscal 2011. I'm confident the Company is restructured now to properly grow in the coming years. For fiscal 2012 our goals are to grow our distribution, maintain our expenses and innovate on our product lines."

Bernardo Melo, VP of Sales added, "Singing Machine is still the market leader in home karaoke. This past year our products sold extremely well over the retail counter, putting us in great shape going into this current season. For the 2011-2012 year, our initiatives are to leverage our logistics warehouse to grow our dot com distribution and to increase our market share. Given the current karaoke landscape, we are confident we can do that. So far, we have been successful maintaining our existing key customers like Costco, Toys"R"Us, and Kohl's. We're also in process of gaining new distribution into major accounts like Target, Radioshack, Walmart Canada, Sears/Kmart, Walmart.com, Costco.com and many others. Look out for Singing Machine on the shelves of many new major retailers this coming season!"

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™, SoundX™, 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.

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, 2011. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including the risks that our vendors in China may not ship our products on the scheduled basis and that we will have sufficient cash flow to finance our working capital needs in the remaining periods of this fiscal year. In addition, 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, 2011				March 31, 2010
Assets
Current Assets
	Cash	$	674,712		$		865,777
	Accounts receivable, net of allowances of $175,804 and $185,407, respectively		1,205,209				983,791
	Due from factor		-				14,987
	Due from related party - Starlight Consumer Electronics USA, Inc.		73,348				73,918
	Due from related party - Starlight Electronics Co., Ltd.		-				75,316
	Inventories,net		3,016,945				2,804,848
	Prepaid expenses and other current assets		59,310				118,465
	Total Current Assets		5,029,524				4,937,102

Property and Equipment, net			333,851				736,966
Other Non-Current Assets			164,678				164,644
	Total Assets	$	5,528,053		$		5,838,712

Liabilities and Shareholders' (Deficit) Equity
Current Liabilities
	Accounts payable	$	1,118,674	$		895,713
	Due to related party - Starlight Marketing Development, Ltd.		2,063,213			860,355
	Due to related party - Ram Light Management, Ltd.		1,683,247			1,683,747
	Due to related party - Starlight R&D, Ltd.		431,373			431,653
	Due to related party - Cosmo Communications USA, Inc.		217,493			199,996
	Due to related party - Starlight Electronics Co., Ltd.		132,386			-
	Due to related parties - Other Starlight Group Companies		88,249			7,284
	Accrued expenses		256,535			227,257
	Short-term loan - bank		-			1,091,828
	Current portion of long-term financing obligation		4,547			18,186
	Obligations to clients for returns and allowances		435,341			742,009
	Warranty provisions		144,022			123,708
	Total Current Liabilities		6,575,080			6,281,736

Long-term financing obligation, less current portion			-			4,547
	Total Liabilities		6,575,080			6,286,283

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;
	37,835,793 and 37,585,794 shares issued and outstanding		378,357			375,857
	Additional paid-in capital		19,116,318			19,098,726
	Accumulated deficit		(20,541,702)			(19,922,154)
	Total Shareholders' Deficit		(1,047,027)			(447,571)
	Total Liabilities and Shareholders' Deficit	$	5,528,053	$		5,838,712

*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, 2011	March 31, 2010	March 31, 2009


Net Sales		$ 19,165,979	$ 21,277,370	$ 31,780,709

Cost of Goods Sold		14,921,289	17,291,011	25,836,586

Gross Profit		4,244,690	3,986,359	5,944,123

Operating Expenses
	Selling expenses	1,838,217	3,114,552	3,160,950
	General and administrative expenses	2,575,032	3,388,203	4,346,627
	Depreciation and amortization	430,115	439,432	459,354
Total Operating Expenses		4,843,364	6,942,187	7,966,931

Loss from Operations		(598,674)	(2,955,828)	(2,022,808)

Other Expenses
	Interest expense	(20,874)	(94,979)	(131,755)

Net Other Expenses		(20,874)	(94,979)	(131,755)

Loss before provision for income taxes		(619,548)	(3,050,807)	(2,154,563)

Provision for income taxes		-	-	(36,652)

Net Loss		$ (619,548)	$ (3,050,807)	$ (2,191,215)

Loss per Common Share
	Basic	$ (0.016)	$ (0.081)	$ (0.067)
	Diluted	$ (0.016)	$ (0.081)	$ (0.067)

Weighted Average Common and Common
	Equivalent Shares:
	Basic	37,731,684	37,519,668	32,712,191
	Diluted	37,751,773	37,519,668	32,712,191

*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, 2011		March 31, 2010		March 31, 2009


Cash flows from operating activities
	Net Loss			$	(619,548)	$	(3,050,807)	$	(2,191,215)
	Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities:
		Depreciation and amortization			430,115		439,432		459,354
		Change in inventory reserve			101,932		(396,320)		247,404
		Change in allowance for bad debts			(9,603)		(76,572)		141,081
		Stock compensation			20,092		24,339		32,826
		Warranty provisions			20,314		(164,331)		70,227
	Changes in assets and liabilities:
	(Increase) Decrease in:
		Accounts receivable			(211,815)		244,671		49,182
		Inventories			(314,029)		2,321,139		(1,462,087)
		Prepaid expenses and other current assets			59,156		408,098		(114,011)
		Other non-current assets			(34)		14,718		(10,000)
	Increase (Decrease) in:
		Accounts payable			222,961		(1,693,056)		1,670,341
		Accounts payable - related party			1,508,811		1,535,410		1,992,407
		Accrued expenses			29,278		(195,003)		12,845
		Obligations to clients for returns and allowances			(306,668)		(166,440)		129,456
			Net cash provided by (used in) operating activities		930,962		(754,722)		1,027,810
Cash flows from investing activities
	Purchase of property and equipment				(27,000)		(291,276)		(747,844)
	Proceeds from disposal of property and equipment				-		1,648		-
			Net cash used in investing activities		(27,000)		(289,628)		(747,844)
Cash flows from financing activities
	Borrowings from factor, net				14,987		58,867		57,597
	Net (payments on) proceeds from short-term bank obligation				(1,091,828)		1,091,828		-
	(Payments) proceeds persuant to factoring facility				-		(179,545)		799,113
	Net (payments on) proceeds from long-term financing obligation				(18,186)		(18,186)		40,919
	Net payments on advances from related parties				-		-		(668,248)
			Net cash (used in) provided by financing activities		(1,095,027)		952,964		229,381
Change in cash and cash equivalents					(191,065)		(91,386)		509,347

Cash and cash equivalents at beginning of period					865,777		957,163		447,816
Cash and cash equivalents at end of period				$	674,712	$	865,777	$	957,163

Supplemental Disclosures of Cash Flow Information:
	Cash paid for Interest			$	20,874	$	94,979	$	136,826
	Cash paid (refunded) for Income Taxes			$	1,600	$	(23,520)	$	60,322
Non-Cash Financing Activities:
	Conversion of trade payable to equity			$	-	$	-	$	669,222

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