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

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.