Singing Machine Announces 1st Quarter Earnings Release

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

June 30, 2011

March 31, 2011

(Unaudited)

(Audited)

Assets

Current Assets

Cash and cash equivalents

$

755,682

$

674,712

Accounts receivable, net of allowances of $169,765 and      

  $175,804, respectively

851,747

1,205,209

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

119,431

73,348

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

61,234

-

Inventories, net

2,976,674

3,016,945

Prepaid expenses and other current assets

40,705

59,310

          Total Current Assets

4,805,473

5,029,524

Property and Equipment, net

379,074

333,851

Other Non-Current Assets

164,678

164,678

         Total Assets

$

5,349,225

$

5,528,053

Liabilities and Shareholders' Deficit

Current Liabilities

Accounts payable

$

1,598,217

$

1,118,674

Due to related party - Starlight Marketing Development, Ltd.

2,011,470

2,063,213

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.

237,994

217,493

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

91,477

132,386

Due to related parties - Other Starlight Group Companies

9,534

88,249

Accrued expenses

247,702

256,535

Current portion of long-term financing obligation

-

4,547

Obligations to clients for returns and allowances

522,730

435,341

Warranty provisions

63,333

144,022

       Total Current Liabilities

6,897,077

6,575,080

         Total Liabilities

6,897,077

6,575,080

Shareholders'  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;  

37,835,793 and 37,835,793 shares issued and outstanding, respectively

378,357

378,357

Additional paid-in capital

19,123,410

19,116,318

Accumulated deficit

(21,049,619)

(20,541,702)

       Total Shareholders' Deficit

(1,547,852)

(1,047,027)

       Total Liabilities and Shareholders' Deficit

$

5,349,225

$

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

June 30, 2011

June 30, 2010

Net Sales

$              1,788,046

$              2,091,627

Cost of Goods Sold

1,359,503

1,515,734

Gross Profit

428,543

575,893

Operating Expenses

Selling expenses

348,676

249,089

General and administrative expenses

555,612

675,576

Depreciation and amortization

32,078

122,052

Total Operating Expenses

936,366

1,046,717

Loss  from Operations

(507,823)

(470,824)

Other Expenses

Interest expense

(94)

(8,636)

Net Other (Expenses)

(94)

(8,636)

Loss before provision for income taxes

(507,917)

(479,460)

Provision for  income taxes

-

-

Net Loss

$                (507,917)

$                (479,460)

Loss per Common Share

Basic  and Diluted

$                     (0.01)

$                     (0.01)

Weighted Average Common and Common

Equivalent Shares:

Basic and Diluted

37,835,793

37,585,794

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 Three Months Ended

June 30, 2011

June 30, 2010

Cash flows from operating activities

Net Loss

$

(507,917)

$

(479,460)

Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:

Depreciation and amortization

32,078

122,052

Change in inventory reserve

1,004

-

Change in allowance for bad debts

(6,039)

22,150

Stock compensation

7,092

370

Warranty provisions

(80,690)

(3,296)

Changes in assets and liabilities:

 (Increase) Decrease in:

Accounts receivable

359,502

50,590

Inventories

39,267

(19,364)

Prepaid expenses and other current assets

18,605

19,788

 Increase (Decrease) in:

Accounts payable

479,543

767,730

Accounts payable - related party

(258,182)

264,341

Accrued expenses

(8,833)

(35,019)

Obligations to clients for returns and allowances

87,388

(38,656)

Net cash provided by operating activities

162,818

671,226

Cash flows from investing activities

Purchase of property and equipment

(77,301)

-

Net cash used in investing activities

(77,301)

-

Cash flows from financing activities

Retention by factor, net

-

(132,440)

Net payments pursuant to factoring facility

-

(533,929)

Net repayment of short-term bank loan

-

(811,295)

Payments on long-term financing obligation

(4,547)

(3,031)

Net loan proceeds from related parties

-

225,752

Net cash used in financing activities

(4,547)

(1,254,943)

Change in cash and cash equivalents

80,970

(583,717)

Cash and cash equivalents at beginning of period

674,712

865,777

Cash and cash equivalents at end of period

$

755,682

$

282,060

Supplemental Disclosures of Cash Flow Information:

Cash paid for Interest

$

94

$

8,636

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