Singing Machine Announces 25% Increase in Net Sales, $3.1 Million Profit in Fiscal 2013 Annual Report

FORT LAUDERDALE, Fla., June 28, 2013 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced financial results for its fiscal year ended March 31, 2013.

For the 2013 fiscal year, the Company reported net sales of $34.4 million compared to $25.9 million in the same period last year, an increase of $8.5 million (25% increase). Gross margin also improved to 23.2% compared to 21.8% in the same period last year. As a result of these improvements, the Company reported a significant increase in income from operations of approximately $1.6 million. The Company also determined that it is more than likely that it will continue to utilize its deferred tax assets to offset future income taxes on profits. Consequently, the Company reversed 50% of its reserve on its deferred tax asset which resulted in an income tax benefit of $1.6 million.

As a result, the Company reported net income for fiscal 2013 of $3.1 million, or $0.08 cents per share, compared to net income of $460,000 in the last fiscal year (an improvement of approximately $2.6 million). The Company's balance sheet also improved significantly as stockholder equity increased to $2.6 million, compared to -$550,000 in the prior year.

The significant improvement in net sales over last year is directly attributed to the Company gaining new retail accounts and growing its dot com distribution to end consumers, which grew by 144% and accounted for 25% of the Company's overall net sales increase.

"Fiscal 2013 was an absolutely unreal year," commented Gary Atkinson, Singing Machine CEO.  "In Fiscal 2013 we saw the Company ship a total of almost 1 million karaoke machines or accessories to almost every single major big box retailer in North America. We look forward to building on our success as our team is hard at work on some new, amazing product for the coming year."  

Bernardo Melo, VP of Sales & Marketing commented, "We have successfully positioned the Singing Machine brand to be synonymous with home entertainment – an area which is continuing to grow in U.S. homes. With major retailers giving this category more retail shelf space, the Singing Machine brand will continue to play a major role in the future. We will continue to innovate with our product assortment, so stay tuned to see some incredible new things."

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 and SoundX™ brand names.  The first to provide karaoke systems for home entertainment in the United States, The Singing Machine sells its products in North America and Europe. 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 






March 31, 2013


 March 31, 2012 

Assets

Current Assets






Cash 

$

1,652,996

$

267,465


Accounts receivable, net of allowances of $180,306 and      






   $168,554, respectively


1,100,475


785,490


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


291,343


36,036


Due from related party - Starlight Electronics USA, Inc.


50,501


58,536


Due from related party - Cosmo Communications Canada, Ltd


61,310


68,291


Inventories, net


4,123,407


4,008,392


Prepaid expenses and other current assets


84,441


53,233


Deferred tax asset, net


421,340


-


           Total Current Assets


7,785,813


5,277,443







Property and Equipment, net


482,777


296,222

Other Non-Current Assets


159,956


159,674

Deferred Tax Asset, net Non-Current Portion


1,198,119


-


          Total Assets

$

9,626,665

$

5,733,339







Liabilities and Shareholders' Equity (Deficit)

Current Liabilities






Accounts payable

$

1,135,125

$

1,303,395


Due to related party - Starlight Marketing Development, Ltd.


1,107,678


1,924,431


Due to related party - Ram Light Management, Ltd.


-


1,683,247


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


419,600


416,026


Due to related party - Cosmo Communications USA, Inc.


-


226,747


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


585,125


103,545


Due to related parties - Other Starlight Group Companies


3,534


3,534


Accrued expenses


686,012


168,156


Obligations to clients for returns and allowances


376,289


242,379


Warranty provisions


215,471


219,760


        Total Current Liabilities


4,528,834


6,291,220







Subordinated related party debt - Starlight Marketing Development, Ltd.,





net of current portion


816,753


-

Subordinated related party debt - Ram Light Management, Ltd.


1,683,247


-


          Total Liabilities


7,028,834


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;   






38,028,975 and 37,960,794 shares issued and outstanding


380,289


379,607


Additional paid-in capital


19,155,193


19,141,098


Accumulated deficit


(16,937,651)


(20,078,586)


        Total Shareholders' Equity (Deficit)


2,597,831


(557,881)


        Total Liabilities and Shareholders' Equity (Deficit)

$

9,626,665

$

5,733,339







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







 

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS 





























For the Years Ended






March 31, 2013


March 31, 2012


March 31, 2011





















Net Sales



$       34,437,774


$       25,943,832


$     19,165,979











Cost of Goods Sold


26,368,945


20,292,738


14,921,289











Gross Profit


8,068,829


5,651,094


4,244,690











Operating Expenses








Selling expenses


3,078,340


2,470,985


1,838,217


General and administrative expenses


3,310,325


2,537,379


2,575,032


Depreciation and amortization


110,267


171,818


430,115

Total Operating Expenses


6,498,932


5,180,182


4,843,364











Net Income (Loss) from Operations


1,569,897


470,912


(598,674)











Other Expenses








Interest expense


(48,421)


(7,796)


(20,874)











Net Income (Loss) before income tax benefit


1,521,476


463,116


(619,548)











Income tax benefit


1,619,459


-


-











Net Income (Loss)


$         3,140,935


$            463,116


$        (619,548)











Net Income (Loss) per Common Share








Basic 



$                 0.08


$                 0.01


$              (0.02)


Diluted


$                 0.08


$                 0.01


$              (0.02)











Weighted Average Common and Common 








Equivalent Shares:








Basic 



37,973,309


37,877,460


37,731,684


Diluted


38,360,324


37,877,460


37,731,684











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











 

The Singing Machine Company, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS









For the Years Ended






March 31, 2013


March 31, 2012


March 31, 2011





















Cash flows from operating activities








Net Income (Loss)

$

3,140,935

$

463,116

$

(619,548)


Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:









Depreciation and amortization


110,267


171,818


430,115



Loss on disposal of property and equipment


-


31,027


-



Change in inventory reserve 


(160,000)


211,999


101,932



Change in allowance for bad debts


11,752


(7,250)


(9,603)



Stock compensation


14,777


26,030


20,092



Warranty provisions


(4,289)


75,738


20,314



Change in net deferred tax assets


(1,619,459)


-


-


Changes in operating assets and liabilities:








  (Increase) Decrease in:









Accounts receivable


(326,737)


426,969


(211,815)



Inventories


44,985


(1,203,446)


(314,029)



Prepaid expenses and other current assets


(31,208)


6,077


59,156



Other non-current assets


(282)


5,004


(34)


  Increase (Decrease) in:









Accounts payable 


(168,270)


184,721


222,961



Net due to related parties


18,116


(347,946)


1,508,811



Accrued expenses


517,856


(88,379)


29,278



Obligations to clients for returns and allowances


133,910


(192,962)


(306,668)




Net cash provided by (used in) operating activities


1,682,353


(237,484)


930,962

Cash flows from investing activities








Purchase of property and equipment


(296,822)


(165,216)


(27,000)




Net cash used in investing activities


(296,822)


(165,216)


(27,000)

Cash flows from financing activities








Borrowings from factor, net


-


-


14,987


Net payments on short-term bank obligation


-


-


(1,091,828)


Payments on long-term financing obligation


-


(4,547)


(18,186)




Net cash used in financing activities


-


(4,547)


(1,095,027)

Change in cash 


1,385,531


(407,247)


(191,065)











Cash at beginning of period


267,465


674,712


865,777

Cash at end of period

$

1,652,996

$

267,465

$

674,712











Supplemental Disclosures of Cash Flow Information:








Cash paid for interest

$

48,421

$

7,796

$

20,874


Cash paid for income taxes

$

3,988

$

4,332

$

1,600











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




SOURCE The Singing Machine Company, Inc.



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