Singing Machine Announces 25% Increase Net Sales in 3rd Quarter Earnings Release

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, 2011

March 31, 2011

(Unaudited)

(Audited)

Assets

Current Assets

Cash

$

1,976,985

$

674,712

Accounts receivable, net of allowances of $229,865 and      

  $175,804, respectively

3,293,972

1,205,209

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

85,650

73,348

Due from related party - Other Starlight Group Companies

500

-

Inventories, net

3,608,023

3,016,945

Prepaid expenses and other current assets

54,866

59,310

          Total Current Assets

9,019,996

5,029,524

Property and equipment, net

273,490

333,851

Other non-current assets

159,674

164,678

         Total Assets

$

9,453,160

$

5,528,053

Liabilities and Shareholders' Equity (Deficit)

Current Liabilities

Accounts payable

$

1,193,793

$

1,118,674

Due to related party - Starlight Marketing Development, Ltd.

1,942,431

2,063,213

Due to related party - Starlight Electronics Company, Ltd.

303,552

-

Due to related party - Ram Light Management, Ltd.

1,683,247

1,683,247

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

431,373

431,373

Due to related party - Cosmo Communications USA, Inc.

232,996

217,493

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

1,736,855

132,386

Due to related parties - Other Starlight Group Companies

9,534

88,249

Accrued expenses

816,807

256,535

Short-term loan - bank

253,750

-

Current portion of long-term financing obligation

-

4,547

Obligations to clients for returns and allowances

291,294

435,341

Warranty provisions

488,792

144,022

       Total Current Liabilities

9,384,424

6,575,080

Shareholders' Equity (Deficit)

Preferred stock, $1.00 par value; 1,000,000 shares authorized; no  

 shares issued and outstanding

-

-

Common stock, Class A, $0.01 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 37,835,793 shares issued and outstanding, respectively

379,607

378,357

Additional paid-in capital

19,139,448

19,116,318

Accumulated deficit

(19,450,319)

(20,541,702)

       Total Shareholders' Equity (Deficit)

68,736

(1,047,027)

       Total Liabilities and Shareholders' Equity (Deficit)

$

9,453,160

$

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

For Nine Months Ended

December 31, 2011

December 31, 2010

December 31, 2011

December 31, 2010

Net Sales

$          8,650,557

$           6,935,843

$        24,588,167

$         17,385,142

Cost of Goods Sold

6,854,398

5,303,075

19,169,982

13,483,805

Gross Profit

1,796,159

1,632,768

5,418,185

3,901,337

Operating Expenses

Selling expenses

841,591

816,375

2,231,655

1,710,385

General and administrative expenses

760,198

628,642

1,970,802

1,938,251

Depreciation and amortization

55,159

98,090

116,550

339,858

Total Operating Expenses

1,656,948

1,543,107

4,319,007

3,988,494

Income (Loss) from Operations

139,211

89,661

1,099,178

(87,157)

Other Expenses

Interest expense

(5,452)

(8,992)

(7,796)

(19,981)

Income (Loss) before provision for income taxes

133,759

80,669

1,091,382

(107,138)

Provision for income taxes

-

-

-

-

Net Income (Loss)

$             133,759

$               80,669

$          1,091,382

$             (107,138)

Income (Loss) per Common Share

Basic and Diluted

$                  0.00

$                   0.00

$                  0.03

$                  (0.00)

Weighted Average Common and Common

Equivalent Shares:

Basic and Diluted

37,877,002

37,835,793

37,849,479

37,697,107

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 Nine Months Ended

December 31, 2011

December 31, 2010

Cash flows from operating activities

Net Income (Loss)

$

1,091,382

$

(107,138)

Adjustments to reconcile net income (loss) to net cash and cash  

equivalents provided by operating activities:

   Depreciation and amortization

116,550

339,858

   Inventory reserve charge

301,999

-

   Change in allowance for bad debts

54,061

27,452

   Disposal of property and equipment

31,028

-

   Stock based compensation

24,380

13,000

   Warranty provisions

344,770

260,798

   Changes in assets and liabilities:

     (Increase) Decrease in:

  Accounts receivable

(2,142,824)

(951,213)

  Inventories

(893,077)

(643,398)

  Prepaid expenses and other current assets

4,444

47,217

  Other non-current assets

5,003

(34)

      Increase (Decrease) in:

  Accounts payable  

75,119

1,059,576

  Net due to related parties

1,711,226

1,955,914

  Accrued expenses

560,272

305,730

  Customer credits on account

(144,047)

(124,252)

  Net cash provided by operating activities

1,140,286

2,183,510

Cash flows from investing activities

Purchase of property and equipment

(87,216)

(27,000)

  Net cash used in investing activities

(87,216)

(27,000)

Cash flows from financing activities

Borrowings from factor, net

-

14,987

Net repayments pursuant to factoring facility

-

(619,567)

Net proceeds (repayments) from short-term bank loan  

253,750

(1,091,828)

Payments on long-term financing obligation

(4,547)

(13,640)

  Net cash provided by (used in) financing activities

249,203

(1,710,048)

Change in cash and cash equivalents

1,302,273

446,462

Cash and cash equivalents at beginning of period

674,712

865,777

Cash and cash equivalents at end of period

$

1,976,985

$

1,312,239

Supplemental Disclosures of Cash Flow Information:

Cash paid for Interest

$

7,796

$

19,981

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