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

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

FORT LAUDERDALE, Fla., Nov. 15, 2013 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCBB: SMDM) announces the results for its second fiscal quarter ended September 30, 2013.

For the quarter, the Company reported net sales of approximately $10.8 million compared to $14.3 million in the same period last year, a decrease of approximately $3.5 million. The decrease in net sales is primarily attributable to the following circumstances: late supplier deliveries from China due to failed inspections, torrential weather which flooded a major supplier, and subcontract factory audit issues. As a result, significant orders had to be rescheduled for October delivery. Gross margins also decreased for the quarter from 24.1% to 22.2% as compared to the same period last year. The reduced gross margin is a result of a higher concentration of products shipped to the Company's related parties during the quarter which yield a lower margin. Total operating expenses went down from approximately $2.0 million to $1.9 million, compared to the same period last year, due mainly to a decrease variable selling expenses.

The Company reported net income of approximately $324,000 for the quarter ended September 30, 2013, compared to approximately $1.4 million over the same period last year.

"We've encountered a lot of challenges this quarter from our Chinese suppliers," commented Gary Atkinson, Singing Machine CEO. "Unfortunately due to some circumstances beyond our control we were forced to delay some shipments to our retail customers. We anticipate these shipments to be rescheduled to the 3rd quarter, but as a result we lost a lot of top line revenue which we traditionally report in the 2nd quarter." Atkinson continued, "Despite the slow start to our holiday shipping season, we are excited to announce our new Singing Machine Home product is launching with select Best Buy stores nationwide beginning this week. We are hopeful this product will appeal to a totally different consumer than our core product offering."

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), SMDigital(TM), SoundX(TM), and 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. 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, 2013. 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

CONSOLIDATED BALANCE SHEETS


September 30, March 31,
2013 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 $(217,115.27) $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.




SOURCE The Singing Machine Company, Inc.

The Singing Machine Company, Inc.

CONTACT: Company, Gary Atkinson, (954) 596 - 1000, GaryAtkinson at singingmachine.com

Web Site: http://www.singingmachine.com


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