Singing Machine Announces $10.8 Million in Net Sales in 2nd Quarter Earnings Release.

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS 

September 30,
2013

 March 31,
2013 

 (Unaudited) 

 (Audited) 

Assets

Current Assets

Cash and cash equivalents

$

1,008,880

$

1,652,996

Restricted Cash

137,967

-

Accounts receivable, net of allowances of $222,858 and      

   $180,306, respectively

7,913,643

1,100,475

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

293,575

291,343

Due from related party - Starlight Electronics USA, Inc.

51,196

50,501

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

807,529

-

Due from related party - Cosmo Communications Canada, Ltd

427,198

61,310

Inventories, net

9,471,472

4,123,407

Prepaid expenses and other current assets

187,584

84,441

Deferred tax asset, net

560,534

421,340

           Total Current Assets

20,859,578

7,785,813

Property and equipment, net

610,887

482,777

Other non-current assets

17,630

159,956

Deferred tax asset, net non-current portion

1,198,119

1,198,119

          Total Assets

$

22,686,214

$

9,626,665

Liabilities and Shareholders' Equity 

Current Liabilities

Accounts payable

$

7,373,726

$

1,135,125

Due to related party - Starlight Marketing Development, Ltd.

1,107,678

1,107,678

Due to related party - Starfair Electronics Company, Ltd.

478,346

-

Due to related party - Starlight R&D, Ltd.

427,528

419,600

Due to related party - Cosmo Communications USA, Inc.

12,077

-

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

4,871,396

585,125

Due to related parties - Other Starlight Group Companies

3,534

3,534

Accrued expenses

1,157,106

686,012

Due to Crestmark Bank

1,566,278

Current portion of long-term financing obligation

11,809

-

Obligations to clients for returns and allowances

388,467

376,289

Warranty provisions

365,467

215,471

        Total Current Liabilities

17,763,412

4,528,834

Long-term financing obligation

19,811

-

Subordinated related party debt - Starlight Marketing

Development, Ltd., net of current portion

816,753

816,753

Subordinated related party debt - Ram Light Management, Ltd.

1,683,247

1,683,247

          Total Liabilities

20,283,223

7,028,834

Shareholders' 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; 38,070,462 and 38,028,975 shares issued and

  outstanding, respectively

380,706

380,289

Additional paid-in capital

19,177,051

19,155,193

Accumulated deficit

(17,154,766)

(16,937,651)

        Total Shareholders' Equity 

2,402,991

2,597,831

        Total Liabilities and Shareholders' Equity 

$

22,686,214

$

9,626,665

The accompanying notes are an integral part of these 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, 2013

September 30, 2012

September 30, 2013

September 30, 2012

Net Sales

$   10,834,570

$   14,376,086

$   12,248,137

$   16,138,791

Cost of Goods Sold

8,431,835

10,905,307

9,543,978

12,223,934

Gross Profit

2,402,735

3,470,779

2,704,159

3,914,857

Operating Expenses

Selling expenses

902,066

1,250,642

1,182,840

1,499,290

General and administrative expenses

950,171

742,708

1,809,942

1,385,826

Depreciation 

30,659

34,076

57,977

66,851

Total Operating Expenses

1,882,896

2,027,426

3,050,759

2,951,967

Income (Loss) from Operations

519,839

1,443,353

(346,600)

962,890

Other Expenses

Interest expense

(8,741)

(8,442)

(9,709)

(8,442)

Income (loss) before income tax (provision) benefit

511,098

1,434,911

(356,309)

954,448

Income tax (provision) benefit

(187,147)

-

139,194

-

Net Income (Loss)

$       323,951

$     1,434,911

$       954,448

Income (Loss) per Common Share

Basic 

$             0.01

$              0.04

$             (0.01)

$             0.03

Diluted

$             0.01

$              0.04

$             (0.01)

$             0.03

Weighted Average Common and Common 

Equivalent Shares:

Basic 

38,060,569

37,960,794

38,044,772

37,960,794

Diluted

38,590,502

37,960,794

38,044,772

37,960,794

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

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For Six Months Ended

September 30, 2013

September 30, 2012

Cash flows from operating activities

Net Income 

$

(217,115)

$

954,448

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

Depreciation and amortization

57,977

66,851

Change in inventory reserve 

150,000

(167,000)

Change in allowance for bad debts

42,552

22,913

Disposal of property and equipment

4,479

-

Stock based compensation

22,275

3,281

Warranty provisions

149,996

242,627

Change in net deferred tax assets

(139,194)

-

   Changes in assets and liabilities:

     (Increase) Decrease in:

Accounts receivable

(6,855,720)

(4,335,086)

Inventories

(5,498,065)

(3,348,664)

Prepaid expenses and other current assets

(103,143)

6,078

Other non-current assets

142,326

(283)

      Increase (Decrease) in:

Accounts payable 

6,238,600

11,939,167

Net due to related parties

3,608,279

(3,465,753)

Accrued expenses

471,094

881,899

Obligations to clients for returns and allowances

12,178

(130,012)

Net cash (used in) provided by operating activities

(1,913,481)

2,670,466

Cash flows from investing activities

Purchase of property and equipment

(154,179)

(109,262)

Deposit of restricted cash

(137,967)

-

Net cash used in investing activities

(292,146)

(109,262)

Cash flows from financing activities

Net proceeds from credit facility

1,566,278

-

Payments on long-term financing obligation

(4,767)

-

Net cash provided by financing activities

1,561,511

-

Change in cash and cash equivalents

(644,116)

2,561,204

Cash and cash equivalents at beginning of period

1,652,996

1,652,996

Cash and cash equivalents at end of period

$

1,008,880

$

4,214,200

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest

$

9,709

$

8,442

 Supplemental Disclosures of Non-cash Investing Activities: 

 Property and equipment purchased under capital lease 

$

36,388

$

-

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