Singing Machine Announces 1st Quarter Earnings Release

Singing Machine Announces 1st Quarter Earnings Release

COCONUT CREEK, Fla., Aug. 9, 2011 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCBB: SMDM) announces the results for its first fiscal quarter ended June 30, 2011.

The Company announced net sales of approximately $1.78 million in the first quarter as compared with approximately $2.09 million over the same period last year (decrease of approximately 14.8%). The decrease in net sales is primarily a result of the Company taking a risk-adverse approach to carrying inventory in the first quarter. As a result of lack of inventory, the Company had to cancel some orders. The Company reported gross margin of approximately 24% as compared to approximately 27.5% in the same period of the prior year. This decline in gross margin is attributable to the Company offering aggressive pricing to European customers to grow its international distribution.

During the first quarter, selling expenses increased by approximately 7.6% as compared to the same period last year as the Company reached a cash settlement with MGA Entertainment, Inc. regarding their respective lawsuits against each other involving the "Bratz" license. Despite this, the Company reported Total Operating Expenses of approximately $936,000, a decline of approximately $100,000 as compared to the same period last year. As a result of reduced sales, the MGA settlement, and lower gross margin, the Company reported a net loss of approximately $500,000, a slight increase over last year's first quarter net loss of $470,000.

"Despite the slow first quarter, we feel confident about this fiscal-year," commented Gary Atkinson, Interim CEO. "This year Singing Machine will be coming out with thirteen new items for the fall. Due to this large investment in new product, we will be able to offer a broad and diverse product line-up to our growing distribution channels." Atkinson added, "We believe we are well-positioned to grow our market share this year."

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, 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

June 30,
2011
---------
(Unaudited)
Assets
------
Current Assets
Cash and cash equivalents $755,682
Accounts receivable, net of allowances of
$169,765 and
$175,804, respectively 851,747
Due from related party -Starlight Consumer
Electronics USA, Inc. 119,431
Due from related party -Starlight
Electronics Co., Ltd. 61,234
Inventories, net 2,976,674
Prepaid expenses and other current assets 40,705
Total Current Assets 4,805,473

Property and Equipment, net 379,074
Other Non-Current Assets 164,678
-------
Total Assets $5,349,225
==========

Liabilities and Shareholders' Deficit
-------------------------------------
Current Liabilities
Accounts payable $1,598,217
Due to related party -Starlight Marketing
Development, Ltd. 2,011,470
Due to related party -Ram Light Management,
Ltd. 1,683,247
Due to related party - Starlight R&D, Ltd. 431,373
Due to related party -Cosmo Communications
USA, Inc. 237,994
Due to related party -Starlight Electronics
Co., Ltd. 91,477
Due to related parties -Other Starlight
Group Companies 9,534
Accrued expenses 247,702
Current portion of long-term financing
obligation -
Obligations to clients for returns and
allowances 522,730
Warranty provisions 63,333
------
Total Current Liabilities 6,897,077

Total Liabilities 6,897,077
---------

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
Additional paid-in capital 19,123,410
Accumulated deficit (21,049,619)
-----------
Total Shareholders' Deficit (1,547,852)
Total Liabilities and Shareholders' Deficit $5,349,225
==========

March 31,
2011
---------
(Audited)
Assets
------
Current Assets
Cash and cash equivalents $674,712
Accounts receivable, net of allowances of
$169,765 and
$175,804, respectively 1,205,209
Due from related party -Starlight Consumer
Electronics USA, Inc. 73,348
Due from related party -Starlight
Electronics Co., Ltd. -
Inventories, net 3,016,945
Prepaid expenses and other current assets 59,310
Total Current Assets 5,029,524

Property and Equipment, net 333,851
Other Non-Current Assets 164,678
-------
Total Assets $5,528,053
==========

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

Total Liabilities 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
Additional paid-in capital 19,116,318
Accumulated deficit (20,541,702)
-----------
Total Shareholders' Deficit (1,047,027)
Total Liabilities and Shareholders' Deficit $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
June 30, 2011 June 30, 2010
------------- -------------

Net Sales $1,788,046 $2,091,627

Cost of Goods Sold 1,359,503 1,515,734
--------- ---------

Gross Profit 428,543 575,893

Operating Expenses
Selling expenses 348,676 249,089
General and administrative
expenses 555,612 675,576
Depreciation and amortization 32,078 122,052
------ -------
Total Operating Expenses 936,366 1,046,717
------- ---------

Loss from Operations (507,823) (470,824)

Other Expenses
Interest expense (94) (8,636)
--- ------

Net Other (Expenses) (94) (8,636)
--- ------

Loss before provision for
income taxes (507,917) (479,460)

Provision for income taxes - -
--- ---

Net Loss $(507,917) $(479,460)
========= =========

Loss per Common Share
Basic and Diluted $(0.01) $(0.01)

Weighted Average Common and
Common
Equivalent Shares:
Basic and Diluted 37,835,793 37,585,794

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 Three Months Ended
----------------------
June 30, June 30,
2011 2010
--------- ---------

Cash flows from operating activities
Net Loss $(507,917) $(479,460)
Adjustments to reconcile net loss to net
cash and cash equivalents provided by
operating activities:
Depreciation and amortization 32,078 122,052
Change in inventory reserve 1,004 -
Change in allowance for bad debts (6,039) 22,150
Stock compensation 7,092 370
Warranty provisions (80,690) (3,296)
Changes in assets and liabilities:
(Increase) Decrease in:
Accounts receivable 359,502 50,590
Inventories 39,267 (19,364)
Prepaid expenses and other current assets 18,605 19,788
Increase (Decrease) in:
Accounts payable 479,543 767,730
Accounts payable - related party (258,182) 264,341
Accrued expenses (8,833) (35,019)
Obligations to clients for returns and
allowances 87,388 (38,656)
------ -------
Net cash provided by operating activities 162,818 671,226
------- -------
Cash flows from investing activities
Purchase of property and equipment (77,301) -
------- ---
Net cash used in investing activities (77,301) -
------- ---
Cash flows from financing activities
Retention by factor, net - (132,440)
Net payments pursuant to factoring
facility - (533,929)
Net repayment of short-term bank loan - (811,295)
Payments on long-term financing
obligation (4,547) (3,031)
Net loan proceeds from related parties - 225,752
--- -------
Net cash used in financing activities (4,547) (1,254,943)
------ ----------
Change in cash and cash equivalents 80,970 (583,717)

Cash and cash equivalents at beginning of
period 674,712 865,777
------- -------
Cash and cash equivalents at end of
period $755,682 $282,060
======== ========

Supplemental Disclosures of Cash Flow
Information:

Cash paid for Interest $94 $8,636
=== ======

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

-------
Profile: intent