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Singing Machine Announces 90% Increase in Net Sales, $1.4 Million Profit in 3rd Quarter Earnings Release

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FORT LAUDERDALE, Fla., Feb. 14, 2013 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced the results for its third fiscal quarter ended December 31, 2012.

The Company reported third-quarter net sales of approximately $16.6 million, as compared to net sales of approximately $8.7 million in the same quarter last year (increase of 90%). The Company also posted quarterly net income of approximately $1.4 million for the quarter ($0.04 per share), and year-to-date net income of approximately $2.4 million ($0.06 per share). Gross margin was 24.2% compared to 20.8% in the year-ago quarter.

Singing Machine attributed the significant increase in overall sales to being the exclusive karaoke hardware vendor at a large "big-box" retailer this past holiday season. The Company also reported a record-breaking quarter for its eCommerce business where the Company increased its internet sales volume by over 145% compared to the year-ago quarter.

"We're extremely proud and thrilled with the results this quarter," said Gary Atkinson, Singing Machine CEO. "We're delighted to report one of the best third quarter results in recent memory. Year-to-date, the Company has added over $8 million in new additional net sales compared to the same period last year and improved our bottom line by almost $1.3 million." Atkinson added, "Our eCommerce growth this quarter was staggering with over 65,000 units shipped direct to customers during the holiday quarter."

Bernardo Melo, VP of Sales, added, "We have positioned ourselves with the right retail and eCommerce partners that have allowed us to continue our growth by increasing market share and establishing Singing Machine as the top brand in home karaoke.  For the coming year, we intend to concentrate on products over $100 retail as a key segment in our growth.  We are anticipating this "Semi-Professional" trend to continue to grow in FY2014."

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, 2012.  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

CONDENSED CONSOLIDATED BALANCE SHEETS 






December 31, 2012


 March 31, 2012 




 (Unaudited) 


 (Audited) 

Assets

Current Assets






Cash 

$

3,547,860

$

267,465


Accounts receivable, net of allowances of $259,871 and $168,554, respectively


5,220,312


785,490



Due from Crestmark Bank


477,577


-


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


258,721


36,036


Due from related party - Starlight Electronics USA, Inc.


58,158


58,536


Due from related party - Cosmo Communications Canada, Ltd.


34,739


68,291


Inventories,net


4,794,887


4,008,392


Prepaid expenses and other current assets


52,430


53,233


           Total Current Assets


14,444,684


5,277,443







Property and equipment, net


353,489


296,222

Other non-current assets


159,956


159,674


          Total Assets

$

14,958,129

$

5,733,339







Liabilities and Shareholders' Equity (Deficit)

Current Liabilities






Accounts payable

$

3,518,257

$

1,303,395


Due to related party - Starlight Marketing Development, Ltd., current portion


1,107,678


1,924,431


Due to related party - Starlight Electronics Company, Ltd.


167,083


-


Due to related party - Ram Light Management, Ltd.


-


1,683,247


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


574,283


416,026


Due to related party - Cosmo Communications USA, Inc.


364,218


226,747


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


2,093,643


103,545


Due to related parties - Other Starlight Group Companies


3,534


3,534


Accrued expenses


1,846,698


168,156


Obligations to clients for returns and allowances


114,310


242,379


Warranty provisions


869,866


219,760


        Total Current Liabilities


10,659,570


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


13,159,570


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; 37,960,794 and 37,960,794 shares issued and outstanding


379,607


379,607



Additional paid-in capital


19,146,019


19,141,098


Accumulated deficit


(17,727,067)


(20,078,586)


        Total Shareholders' Equity (Deficit)


1,798,559


(557,881)


        Total Liabilities and Shareholders' Equity (Deficit)

$

14,958,129

$

5,733,339







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

 

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited)



























For Three Months Ended


For Nine Months Ended





December 31, 2012


December 31, 2011


December 31, 2012


December 31, 2011























Net Sales


$           16,617,000


$            8,650,557


$            32,755,791


$       24,588,167












Cost of Goods Sold

12,594,626


6,854,398


24,818,560


19,169,982












Gross Profit

4,022,374


1,796,159


7,937,231


5,418,185












Operating Expenses









Selling expenses

1,445,728


841,591


2,945,018


2,231,655


General and administrative expenses

1,123,998


760,198


2,509,824


1,970,802


Depreciation and amortization

24,145


55,159


90,996


116,550

Total Operating Expenses

2,593,871


1,656,948


5,545,838


4,319,007












Income from Operations

1,428,503


139,211


2,391,393


1,099,178












Other Expenses









Interest expense

(31,433)


(5,452)


(39,875)


(7,796)












Income before provision for

 income taxes

1,397,070


133,759


2,351,518


1,091,382












Provision for income taxes

-


-


-


-












Net Income 

$            1,397,070


$               133,759


$             2,351,518


$         1,091,382












Income per Common Share









Basic 


$                    0.04


$                    0.00


$                     0.06


$                 0.03


Diluted

$                    0.04


$                    0.00


$                     0.06


$                 0.03












Weighted Average Common

 and Common 









Equivalent Shares:









Basic 


37,960,794


37,877,002


37,960,794


37,849,479


Diluted

38,286,865


37,877,002


38,286,865


37,849,479












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

 

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






For Nine Months Ended






December 31, 2012


December 31, 2011

















Cash flows from operating activities






 Net Income  

$

2,351,518

$

1,091,382


 Adjustments to reconcile net income to net cash provided by operating activities: 








 Depreciation and amortization 


90,996


116,550



 Change in inventory reserve 


(110,000)


301,999



 Change in allowance for bad debts 


84,067


54,061



 Disposal of property and equipment 


-


31,028



 Stock based compensation 


4,921


24,380



 Warranty provisions 


650,106


344,770


    Changes in operating assets and liabilities: 






      (Increase) Decrease in: 







 Accounts receivable 


(4,518,889)


(2,142,824)



 Due from Crestmark Bank 


(477,577)


-



 Inventories 


(676,495)


(893,077)



 Prepaid expenses and other current assets 


803


4,444



 Other non-current assets 


(282)


5,003


       Increase (Decrease) in: 







 Accounts payable  


2,214,862


75,119



 Net due to related parties 


2,264,154


1,711,226



 Accrued expenses 


1,678,542


560,272



 Obligations to clients for returns and allowances 


(128,069)


(144,047)




 Net cash provided by operating activities 


3,428,657


1,140,286

 Cash flows from investing activities 






 Purchase of property and equipment 


(148,262)


(87,216)




 Net cash used in investing activities 


(148,262)


(87,216)

 Cash flows from financing activities 






 Net proceeds from short-term bank loan  


-


253,750


 Payments on long-term financing obligation 


-


(4,547)




 Net cash provided by financing activities 


-


249,203

 Change in cash  


3,280,395


1,302,273









 Cash at beginning of period 


267,465


674,712

 Cash at end of period 

$

3,547,860

$

1,976,985









 Supplemental Disclosures of Cash Flow Information: 






 Cash paid for interest 

$

39,875

$

7,796









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

 

SOURCE The Singing Machine Company, Inc.



RELATED LINKS
http://www.singingmachine.com

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