Singing Machine Announces $14.3 Million in Net Sales, Profit in 2nd Quarter Earnings Release

From the Wires

Nov. 13, 2012 07:25 PM

FORT LAUDERDALE, Fla., Nov. 13, 2012 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCBB: SMDM) announces the results for its second fiscal quarter ended September 30, 2012.

For the quarter, the Company reported net sales of approximately $14.3 million compared to $14.1 million in the same period last year, an increase of approximately $0.2 million (approximately 1% increase). Gross margins also improved for the quarter from 22.6% to 24.1% (increase of 1.5%) as compared to the same period last year. Total operating expenses went up from approximately $1.7 million to $2.0 million, compared to the same period last year.

As a result, the Company reported net income of approximately $1.4 million for the quarter ended September 30, 2011, compared to approximately $1.5 million over the same period last year. For the quarter, income per share remained steady at $0.04 cents per share as compared to the same period last year. The Company reports the flat growth in net sales and net income is primarily a timing issue due to retail customers taking delivery later in the year for the holiday.

"We're pleased with our results so far," commented Gary Atkinson, Singing Machine CEO. "We were able to meet our 2^nd quarter numbers from the prior year, despite being forced to delay some shipments to some of our retail customers. As we head into our holiday season, look for us in new and existing retail stores and keep your eyes out for some Black Friday deals. We're also pleased to announce our new website launch which you can visit at www.singingmachine.com."

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 forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward‑looking 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 forward‑looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward‑looking statement to reflect events or circumstances after the date of this release.

(Financial statements attached)

The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS

			September 30, 2012		March 31, 2012
			(Unaudited)		(Audited)
Assets
Current Assets
	Cash	$	2,828,669	$	267,465
	Accounts receivable, net of allowances of $198,717 and
	$168,554, respectively		4,786,689		785,490
	Due from related party - Starlight Consumer Electronics USA, Inc.		236,267		36,036
	Due from related party - Starlight Electronics USA, Inc.		43,509		58,536
	Due from related party - Starlight Electronics Co., Ltd.		369,692		-
	Due from related party - Cosmo Communications Canada, Ltd		310,974		68,291
	Inventories, net		7,524,056		4,008,392
	Prepaid expenses and other current assets		47,155		53,233
	Total Current Assets		16,147,011		5,277,443

Property and equipment, net			338,633		296,222
Other non-current assets			159,957		159,674
	Total Assets	$	16,645,601	$	5,733,339

Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
	Accounts payable	$	7,984,620	$	1,303,395
	Due to related party - Starlight Marketing Development, Ltd.		1,924,431		1,924,431
	Due to related party - Starfair Electronics Company, Ltd.		276,524		-
	Due to related party - Ram Light Management, Ltd.		1,683,247		1,683,247
	Due to related party - Starlight R&D, Ltd.		512,061		416,026
	Due to related party - Cosmo Communications USA, Inc.		240,394		226,747
	Due to related party - Starlight Consumer Electronics Co., Ltd.		1,996,133		103,545
	Due to related parties - Other Starlight Group Companies		3,534		3,534
	Accrued expenses		1,050,055		168,156
	Obligations to clients for returns and allowances		112,367		242,379
	Warranty provisions		462,387		219,760
	Total Current Liabilities		16,245,753		6,291,220

Shareholders' Equity (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; 37,960,794 and 37,960,794 shares issued and outstanding, respectively
			379,607		379,607
	Additional paid-in capital		19,144,379		19,141,098
	Accumulated deficit		(19,124,138)		(20,078,586)
	Total Shareholders' Equity (Deficit)		399,848		(557,881)
	Total Liabilities and Shareholders' Equity (Deficit)	$	16,645,601	$	5,733,339

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

The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	For Three Months Ended		For Six Months Ended
	September 30, 2012	September 30, 2011	September 30, 2012	September 30, 2011


Net Sales	$ 14,376,086	$ 14,149,564	$ 16,138,791	$ 15,937,610

Cost of Goods Sold	10,905,307	10,956,081	12,223,934	12,315,584

Gross Profit	3,470,779	3,193,483	3,914,857	3,622,026

Operating Expenses
Selling expenses	1,250,642	1,041,388	1,499,290	1,390,064
General and administrative expenses	742,708	654,992	1,385,826	1,210,604
Depreciation and amortization	34,076	29,313	66,851	61,391
Total Operating Expenses	2,027,426	1,725,693	2,951,967	2,662,059

Income from Operations	1,443,353	1,467,790	962,890	959,967

Other Expenses
Interest expense	(8,442)	(2,250)	(8,442)	(2,344)

Income before provision for income taxes	1,434,911	1,465,540	954,448	957,623

Provision for income taxes	-	-	-	-

Net Income	$ 1,434,911	$ 1,465,540	$ 954,448	$ 957,623

Income per Common Share
Basic and Diluted	$ 0.04	$ 0.04	$ 0.03	$ 0.03

Weighted Average Common and Common
Equivalent Shares:
Basic and Diluted	37,960,794	37,835,793	37,960,794	37,835,793

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

The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
					For Six Months Ended
					September 30, 2012		September 30, 2011


Cash flows from operating activities
	Net Income			$	954,448	$	957,623
	Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
		Depreciation and amortization			66,851		61,391
		Change in inventory reserve			(167,000)		153,926
		Change in allowance for bad debts			22,913		43,994
		Disposal of property and equipment			-		4,027
		Stock based compensation			3,281		14,185
		Warranty provisions			242,627		294,346
	Changes in assets and liabilities:
	(Increase) Decrease in:
		Accounts receivable			(4,024,112)		(10,239,086)
		Inventories			(3,348,664)		(1,203,562)
		Prepaid expenses and other current assets			6,078		6,064
		Other non-current assets			(283)		(658)
	Increase (Decrease) in:
		Accounts payable			6,681,225		5,415,195
		Net due to related parties			1,481,215		2,180,058
		Accrued expenses			881,899		686,472
		Obligations to clients for returns and allowances			(130,012)		(66,446)
			Net cash provided by (used in) operating activities		2,670,466		(1,692,471)
Cash flows from investing activities
	Purchase of property and equipment				(109,262)		(83,369)
			Net cash used in investing activities		(109,262)		(83,369)
Cash flows from financing activities
	Net proceeds from short-term bank loan				-		1,293,326
	Payments on long-term financing obligation				-		(4,547)
			Net cash provided by financing activities		-		1,288,779
Change in cash					2,561,204		(487,061)

Cash at beginning of period					267,465		674,712
Cash at end of period				$	2,828,669	$	187,651

Supplemental Disclosures of Cash Flow Information:
	Cash paid for interest			$	8,442	$	2,344

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

SOURCE The Singing Machine Company, Inc.

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