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

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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, 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, 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,
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


$  (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.



RELATED LINKS
http://www.singingmachine.com

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