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Singing Machine Announces Profit in 2nd Quarter Earnings Release

COCONUT CREEK, Fla., Nov. 12, 2010 /PRNewswire via COMTEX/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTC Bulletin Board: SMDM) announced the results for its second fiscal quarter ended September 30, 2010.

The Company announced net sales of approximately $8.36 million in the second quarter as compared with approximately $6.99 million reported in the same period last year, an increase of approximately $1.37 million (or increase of approximately 19%). The second quarter increase to net sales is primarily due to increased demand as well as earlier shipments to customers buying goods direct from China. Gross margin in the second quarter slightly improved to 20.3% as compared to 19.8% in the same period last year.

The Company also reported reduced G&A expenses of $634,033 for the period ended September 30, 2010 as compared to $930,353 reported in the same period last year (representing a decrease of $296,320, or approximately 32%). The decrease to expenses is primarily due to the Company's ongoing commitment to reducing costs, improving its logistics operation and operating with a leaner workforce. As a result of the increase to net sales and reduction to expenses, the Company reported net profit of $291,653 for the quarter as compared to a net loss of $312,976 in the same quarter last year. This change in net income represents approximately a $600,000 improvement from last year's second quarter.

"We're very excited about the progress we're making," commented Gary Atkinson, Interim CEO. "The Company has successfully shown strong improvement in two consecutive quarters, highlighted by a $2.6 million increase in net sales and reduced expenses by approximately $487,000 through the first half of the fiscal year as compared to the same period last year. As a result, we are almost break-even through the first 6 months of this fiscal year." Atkinson continued, "We're not resting on our recent success. As our financials improve, we continue to work and develop our new lines for 2011. The Company recently attended the Hong Kong Electronics Show and previewed its new line for 2011 to select customers." Bernardo Melo, VP of Sales, commented, "The feedback we received from buyers on our new product concept was overwhelmingly positive. We're hopeful that the new product line will bring excitement back to the category and attract some large retailers that are not currently in karaoke." Melo added, "For this season, I'm pleased to report that our customers are still reporting strong sell-thru in karaoke. I'm optimistic that the trend will continue with the momentum from numerous Black Friday promotions and increased visibility from retail holiday gift catalogs." 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 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, 2010. 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 September 30, March 31, ---------- --------- 2010 2010 ---- ---- (Unaudited) (Audited) Assets ------ Current Assets Cash $1,094,647 $865,777 Accounts receivable, net of allowances of $208,638 and $185,407, respectively 4,106,769 983,791 Due from factor - 14,987 Inventories, net 4,665,720 2,804,848 Prepaid expenses and other current assets 82,522 118,465 Total Current Assets 9,949,658 4,787,868 Property and equipment, net 495,198 736,966 Other non-current assets 164,677 164,644 ------- ------- Total Assets $10,609,533 $5,689,478 Liabilities and Shareholders' Deficit ------------------------------------- Current Liabilities Accounts payable $4,405,272 $895,713 Due to related parties, net 5,671,181 3,033,801 Accrued expenses 485,217 227,257 Short-term loan - bank - 1,091,828 Current portion of long- term financing obligation 13,640 18,186 Customer credits on account 351,903 742,009 Deferred gross profit on estimated returns 309,459 123,708 ------- ------- Total Current Liabilities 11,236,672 6,132,502 Long-term financing obligation, less current portion - 4,547 --- ----- Total Liabilities 11,236,672 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; 35,835,793 and 37,585,794 shares issued and outstanding 378,357 375,857 Additional paid-in capital 19,104,465 19,098,726 Accumulated deficit (20,109,961) (19,922,154) ----------- ----------- Total Shareholders' Deficit (627,139) (447,571) -------- Total Liabilities and Shareholders' Deficit $10,609,533 $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 ---------------------- September September 30, 30, ---------- ---------- 2010 2009 --- ---- Net Sales $8,357,672 $6,991,372 Cost of Goods Sold 6,664,996 5,607,768 --------- --------- Gross Profit 1,692,676 1,383,604 Operating Expenses Selling expenses 644,921 636,031 General and administrative expenses 634,033 930,353 Depreciation and amortization 119,716 102,513 ------- ------- Total Operating Expenses 1,398,670 1,668,897 --------- --------- Income (Loss) from Operations 294,006 (285,293) Other Expenses Interest expense (2,353) (27,683) ------ ------- Net Income (Loss) $291,653 $(312,976) ======== ========= Income (Loss) per Common Share Basic and Diluted $0.01 $(0.01) Weighted Average Common and Common Equivalent Shares: Basic and Diluted 37,668,211 37,449,332 For Six Months Ended -------------------- September September 30, 30, ---------- ---------- 2010 2009 --- ---- Net Sales $10,449,299 $7,805,380 Cost of Goods Sold 8,180,730 6,707,398 --------- --------- Gross Profit 2,268,569 1,097,982 Operating Expenses Selling expenses 894,010 940,172 General and administrative expenses 1,309,609 1,790,607 Depreciation and amortization 241,768 202,265 ------- ------- Total Operating Expenses 2,445,387 2,933,044 --------- --------- Income (Loss) from Operations (176,818) (1,835,062) Other Expenses Interest expense (10,989) (30,951) ------- ------- Net Income (Loss) $(187,807) $(1,866,013) ========= =========== Income (Loss) per Common Share Basic and Diluted $(0.00) $(0.05) Weighted Average Common and Common Equivalent Shares: Basic and Diluted 37,627,003 37,449,332 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 Six Months Ended -------------------- September September 30, 30, ---------- ---------- 2010 2009 ---- ---- Cash flows from operating activities Net Loss $(187,807) $(1,866,013) Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: Depreciation and amortization 241,768 202,265 Inventory reserve charge - 191,179 Change in allowance for bad debts 23,231 91,736 Stock based compensation 8,239 7,938 Deferred gross profit on estimated returns 185,751 (156,854) Changes in assets and liabilities: (Increase) Decrease in: Accounts receivable (2,526,642) (3,084,916) Inventories (1,860,872) (494,836) Prepaid expenses and other current assets 35,943 122,882 Other non-current assets (33) (390) Increase (Decrease) in: Accounts payable 3,509,559 1,796,035 Accounts payable -related party 2,637,380 605,140 Accrued expenses 257,960 75,207 Customer credits on account (390,106) 453,533 Net cash provided by (used in) operating activities 1,934,371 (2,057,094) --------- ---------- Cash flows from investing activities Purchase of property and equipment - (38,377) Disposal of property and equipment - 1,648 --- ----- Net cash used in investing activities - (36,729) --- ------- Cash flows from financing activities Borrowings from factor, net 14,987 57,909 Net (repayments)proceeds pursuant to factoring facility (619,567) 1,768,830 Net (repayments)proceeds from short-term bank loan (1,091,828) 1,322,884 Payments on long-term financing obligation (9,093) (7,577) ------ ------ Net cash (used in) provided by financing activities (1,705,501) 3,142,046 ---------- --------- Change in cash and cash equivalents 228,870 1,048,223 Cash and cash equivalents at beginning of period 865,777 957,163 ------- ------- Cash and cash equivalents at end of period $1,094,647 $2,005,386 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $10,989 $30,951 ======= ======= The accompanying notes are an integral part of these consolidated financial statements.

SOURCE The Singing Machine Company, Inc.

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