The Singing Machine Releases Fiscal 2010 Financial Results

The Singing Machine Releases Fiscal 2010 Financial Results

COCONUT CREEK, Fla., July 14 /PRNewswire-FirstCall/ -- The Singing Machine Company ("Singing Machine" or the "Company") (BULLETIN BOARD: SMDM) today announced financial results for fiscal year ended Mach 31, 2010.

Year-End Highlights:

The Singing Machine reported net sales of approximately $21.3 million, down from approximately $32.2 million in fiscal-year ended March 31, 2009 (a decline of approximately 34%). The Company also reported a net loss of approximately $3.1 million as compared to a net loss of approximately $2.2 million in the same period last year. As a result of the loss, the Company's shareholders' equity fell to negative $447,571 as compared to approximately $2.6 million for fiscal year end 2009. The Company reported approximately $2.8 million in inventory as compared to approximately $4.7 million in inventory at the end of the same period last year (decrease of approximately 40%).

During Fiscal 2010, the Company continued to face a declining global economic market, sagging consumer confidence, and an uncertain retail market. Further, the Company was faced with excess carryover inventory from the year before, high returns in its first quarter due to overstock by its customers, and increasing freight costs. Included in the net loss are one time charges and markdowns and additional inventory reserves which are based upon management's assessment of the market value of the remaining inventory at the fiscal year end. The additional reserve and one-time charges are reflected in the fiscal year ended March 31, 2010 financial statements.

Gary Atkinson, interim C.E.O. stated, "Despite the weak financial results, there were some bright takeaways from this recent holiday season which indicate to us that karaoke is rebounding. Across the board, we saw extremely positive sell-thru at the retail level with some key customers reporting over 100% growth in karaoke sales. Unfortunately our drop in overall sales was due to the loss of a few key accounts, both domestic and abroad, that withdrew from the category entirely. We are hopeful to re-open these major accounts based upon the recent sell-thru success during the holiday season." Atkinson furthered, "While we are seeing a significant rebound with the customers that are carrying karaoke, the Company also understands that its overhead and expenses are still too high. Since the fiscal year-end, we have already made substantial cost-cutting moves to reduce our overhead to bring it in-line with our forecasted sales. We have also fundamentally changed the way we do business with a few key accounts which should greatly reduce our selling expenses."

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), SoundX(TM), 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.

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. 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 forwardlooking 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 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.

(tables attached)

THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

March 31, March 31,
2010 2009
---------- ----------
Assets
------
Current Assets
Cash $865,777 $957,163
Accounts receivable, net of
allowances of $185,407 and
$261,980, respectively 983,791 972,345
Due from factor 14,987 73,854
Inventories, net 2,804,848 4,729,667
Prepaid expenses and other
current assets 118,465 526,563
Total Current Assets 4,787,868 7,259,592

Property and Equipment, net 736,966 886,770
Other Non-Current Assets 164,644 179,362
------- -------
Total Assets $5,689,478 $8,325,724

Liabilities and Shareholders' (Deficit) Equity
----------------------------------------------
Current Liabilities
Accounts payable $895,713 $2,588,769
Due to related parties - net 3,033,801 1,498,391
Accrued expenses 227,257 422,260
Short-term loan - bank 1,091,828 -
Current portion of long-term
financing obligation 18,186 18,186
Customer credits on account 742,009 908,449
Deferred gross profit on
estimated returns 123,708 288,039
------- -------
Total Current Liabilities 6,132,502 5,724,094

Long-term financing obligation,
less current portion 4,547 22,733
----- ------
Total Liabilities 6,137,049 5,746,827
--------- ---------

Shareholders' (Deficit) Equity
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;
37,585,794 and 37,449,432 shares
issued and outstanding 375,857 374,494
Additional paid-in capital 19,098,726 19,075,750
Accumulated deficit (19,922,154) (16,871,347)
----------- -----------
Total Shareholders' (Deficit)
Equity (447,571) 2,578,897
Total Liabilities and
Shareholders' (Deficit)
Equity $5,689,478 $8,325,724

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, March 31, March 30,
2010 2009 2008
---------- ---------- ----------

Net Sales $21,277,370 $31,780,709 $34,067,871

Cost of Goods Sold 17,291,011 25,836,586 26,389,070
---------- ---------- ----------

Gross Profit 3,986,359 5,944,123 7,678,801
--------- --------- ---------

Operating Expenses
Selling expenses 3,114,552 3,160,950 2,931,416
General and administrative
expenses 3,388,203 4,346,627 4,279,728
Depreciation and
amortization 439,432 459,354 311,273
------- ------- -------
Total Operating Expenses 6,942,187 7,966,931 7,522,417
--------- --------- ---------

(Loss) Income from
Operations (2,955,828) (2,022,808) 156,384

Other Expenses
Loss on sale of subsidiary
and other assets - - (27,654)
Interest expense (94,979) (131,755) (127,018)
------- -------- --------

Net Other Expenses (94,979) (131,755) (154,672)
------- -------- --------

(Loss) Income before
provision for income taxes (3,050,807) (2,154,563) 1,712

Provision for income taxes - (36,652) -
--- ------- ---

Net (Loss) Income $(3,050,807) $(2,191,215) $1,712
=========== =========== ======

(Loss) Income per Common
Share
Basic $(0.081) $(0.067) $0.000
Diluted $(0.081) $(0.067) $0.000

Weighted Average Common and
Common
Equivalent Shares:
Basic 37,519,668 32,712,191 29,925,952
Diluted 37,519,668 32,712,191 30,910,424

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, March 31, March 31,
2010 2009 2008
---------- ---------- ----------

Cash flows from
operating activities
Net (Loss) Income $(3,050,807) $(2,191,215) $1,712
Adjustments to
reconcile (net loss)
net income to net
cash and cash
equivalents used in
operating
activities:
Depreciation and
amortization 439,432 459,354 311,273
Change in inventory
reserve (396,319) 247,404 131,154
Change in allowance
for bad debts (76,573) 141,081 17,284
Stock compensation 24,339 32,826 38,112
Deferred gross profit
on estimated sales
returns (164,331) 70,227 4,094
Changes in assets and
liabilities:
(Increase) Decrease
in:
Accounts receivable 244,671 49,182 (924,634)
Inventories 2,321,139 (1,462,087) (1,366,055)
Prepaid expenses and
other current assets 408,098 (114,011) 109,339
Other non-current
assets 14,718 (10,000) (113,308)
Increase (Decrease)
in:
Accounts payable (1,693,056) 1,670,341 441,906
Accounts payable -
related party 1,535,410 1,992,407 -
Accrued expenses (195,003) 12,845 (215,579)
Customer credits on
account (166,440) 129,456 184,824
-------- ------- -------
Net cash (used in)
provided by
operating activities (754,722) 1,027,810 (1,379,878)
-------- --------- ----------
Cash flows from
investing activities
Purchase of property
and equipment (291,276) (747,844) (490,697)
Proceeds from
disposal of property
and equipment 1,648 - 27,654
----- --- ------
Net cash used in
investing activities (289,628) (747,844) (463,043)
-------- -------- --------
Cash flows from
financing activities
Borrowings from
(retention by)
factor, net 58,867 57,597 (21,460)
Proceeds from
issuance of stock - - 630,881
Net proceeds from
short-term bank
obligation 1,091,828 - -
(Payments) proceeds
pursuant to
factoring facility (179,545) 799,113 -
Net (payments on)
proceeds from long-
term financing
obligation (18,186) 40,919 -
Net (payments to)
advances from
related parties - (668,248) 492,416
--- -------- -------
Net cash provided by
financing activities 952,964 229,381 1,101,837
------- ------- ---------
Change in cash and
cash equivalents (91,386) 509,347 (741,084)

Cash and cash
equivalents at
beginning of period 957,163 447,816 1,188,900
------- ------- ---------
Cash and cash
equivalents at end
of period $865,777 $957,163 $447,816
======== ======== ========

Supplemental
Disclosures of Cash
Flow Information:

Cash paid for
Interest $94,979 $136,826 $78,898
======= ======== =======
Cash (refunded) paid
for Income Taxes $(23,520) $60,322 $ -
======== ======= ===
Non-Cash Financing
Activities:

Conversion of trade
payable to equity $ - $669,222 $500,000
=== ======== ========

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

Source: 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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