Singing Machine Announces Profit in 2nd Quarter Earnings Release

Singing Machine Announces Profit in 2nd Quarter Earnings Release

COCONUT CREEK, Fla., Nov. 12, 2010 /PRNewswire-FirstCall/ -- 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.

The Singing Machine Company, Inc.

CONTACT: Gary Atkinson, +1-954-596-1000, GaryAtkinson at singingmachine.com

Web Site: http://www.singingmachine.com

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