Singing Machine Announces 70% Increase in Net Sales, Profit in 2nd Quarter Earnings Release

News provided by

The Singing Machine Company, Inc.

Nov 14, 2011, 02:18 ET

FORT LAUDERDALE, Fla., Nov. 14, 2011 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) announces the results for its second fiscal quarter ended September 30, 2011.

For the quarter, the Company reported net sales of approximately $14.1 million compared to $8.3 million in the same period last year, an increase of approximately $5.8 million (approximately 70% increase). Gross margins also improved for the quarter from 20.3% to 22.6% (increase of 2.3%) as compared to the same period last year. Despite the 70% increase in net sales, the Company was also able to hold G&A expenses relatively steady, reporting approximately $655,000 in G&A expenses for the quarter, as compared to approximately $634,000 in the same period last year. The drastic improvement in net sales over last year is attributed to new business from Target and BJ's Wholesale Club in addition to earlier commitments from existing customers.  

As a result, the Company reported net income of approximately $1.5 million for the quarter ended September 30, 2011, compared to approximately $290,000 over the same period last year, representing an increase of approximately $1.2 million in net income. For the six months ended September 30, 2011 the Company reported net income of approximately $957,000 as compared to a net loss of approximately $188,000 over the same period last year.  

"This marks a truly remarkable turnaround," commented Gary Atkinson, Singing Machine CEO.  "Our goal for this year was to improve distribution and so far the numbers show we've done a good job. Through the first half of this year, the Company has added almost an additional $6 million in net sales over last year and recognized almost $1.1 million improvement in net income compared to last year. A lot of credit goes to our Sales Department for aggressively growing our sales distribution channels without compromising our gross margin."

Added Bernardo Melo, VP of Global Sales and Marketing, "It's been a fun year to see the excitement of the home karaoke segment continue its steady climb back up and be COOL again with consumers.  With the support of our key retailers, the Singing Machine continues to be the leading brand in karaoke.  We will be well represented this holiday season with features on toy and electronic holiday catalogs, multiple Black Friday deals, Cyber Monday promotions, and many dot com email blasts. We look forward to carrying our momentum throughout the holiday 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™, 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.

(Financial statements attached)

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS








September 30, 2011

March 31, 2011



(Unaudited)


(Audited)

Assets

Current Assets




Cash and cash equivalents

$

187,651

$

674,712

Accounts receivable, net of allowances of $219,798 and      




  $175,804, respectively

11,400,301

1,205,209

Due from related party - Starlight Consumer Electronics USA, Inc.

111,031

73,348

Due from related party - Starlight Electronics Co., Ltd.

851,796

-

Due from related party - Other Starlight Group Companies

29,257

-

Inventories, net

4,066,581

3,016,945

Prepaid expenses and other current assets

53,246

59,310

          Total Current Assets

16,699,863

5,029,524





Property and equipment, net

351,802

333,851

Other non-current assets

165,336

164,678

         Total Assets

$

17,217,001

$

5,528,053





Liabilities and Shareholders' Deficit

Current Liabilities




Accounts payable

$

6,533,869

$

1,118,674

Due to related party - Starlight Marketing Development, Ltd.

2,077,802

2,063,213

Due to related party - Starfair Electronics Company, Ltd.

922,524

-

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.

235,495

217,493

Due to related party - Starlight Consumer Electronics Co., Ltd.

2,354,779

132,386

Due to related parties - Other Starlight Group Companies

9,534

88,249

Accrued expenses

943,007

256,535

Short-term loan - bank

1,293,327

-

Current portion of long-term financing obligation

-

4,547

Obligations to clients for returns and allowances

368,895

435,341

Warranty provisions

438,368

144,022

       Total Current Liabilities

17,292,220

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;  






  37,835,793 and 37,835,793 shares issued and outstanding, respectively

378,357

378,357

Additional paid-in capital

19,130,503

19,116,318

Accumulated deficit

(19,584,079)

(20,541,702)

       Total Shareholders' Deficit

(75,219)

(1,047,027)

       Total Liabilities and Shareholders' Deficit

$

17,217,001

$

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 Six Months Ended

September 30, 2011

September 30, 2010

September 30, 2011

September 30, 2010
















Net Sales

$          14,149,564

$             8,357,672

$          15,937,610

$           10,449,299








Cost of Goods Sold

10,956,081

6,664,996

12,315,584

8,180,730








Gross Profit

3,193,483

1,692,676

3,622,026

2,268,569








Operating Expenses







Selling expenses

1,041,388

644,921

1,390,064

894,010

General and administrative expenses

654,992

634,033

1,210,604

1,309,609

Depreciation and amortization

29,313

119,716

61,391

241,768

Total Operating Expenses

1,725,693

1,398,670

2,662,059

2,445,387








Income (Loss) from Operations

1,467,790

294,006

959,967

(176,818)








Other Expenses







Interest expense

(2,250)

(2,353)

(2,344)

(10,989)








Net Other Expenses

(2,250)

(2,353)

(2,344)

(10,989)








Income (loss) before provision for income taxes

1,465,540

291,653

957,623

(187,807)








Provision for  income taxes

-

-

-

-








Net Income (Loss)

$            1,465,540

$               291,653

$               957,623

$              (187,807)








Income (Loss) per Common Share







Basic and Diluted

$                    0.04

$                     0.01

$                    0.03

$                    (0.00)








Weighted Average Common and Common









Equivalent Shares:







Basic and Diluted

37,835,793

37,668,211

37,835,793

37,627,003








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 30, 2011

September 30, 2010










Cash flows from operating activities




Net Income (Loss)

$

957,623

$

(187,807)

Adjustments to reconcile net income (loss) to net cash and cash equivalents (used in) provided by operating activities:




  Depreciation and amortization

61,391

241,768

  Inventory reserve charge

153,926

-

  Disposal of property and equipment

4,027

-

  Change in allowance for bad debts

43,994

23,231

  Stock based compensation

14,185

8,239

  Warranty provisions

294,346

185,751

  Changes in assets and liabilities:




    (Increase) Decrease in:





Accounts receivable

(10,239,086)

(2,526,642)


Inventories

(1,203,562)

(1,860,872)


Prepaid expenses and other current assets

6,064

35,943


Other non-current assets

(658)

(33)

     Increase (Decrease) in:





Accounts payable


5,415,195

3,509,559


Accounts payable - related party

2,180,058

2,637,380


Accrued expenses

686,472

257,960


Obligations to clients for returns and allowances

(66,446)

(390,106)



Net cash (used in) provided by operating activities

(1,692,471)

1,934,371

Cash flows from investing activities




Purchase of property and equipment

(83,369)

-



Net cash used in investing activities

(83,369)

-

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


1,293,326

(1,091,828)

Payments on long-term financing obligation

(4,547)

(9,093)



Net cash provided by (used in) financing activities

1,288,779

(1,705,501)

Change in cash and cash equivalents

(487,061)

228,870





Cash and cash equivalents at beginning of period

674,712

865,777

Cash and cash equivalents at end of period

$

187,651

$

1,094,647





Supplemental Disclosures of Cash Flow Information:




Cash paid for interest

$

2,344

$

10,989





SOURCE The Singing Machine Company, Inc.

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