Singing Machine Announces 1st Quarter Earnings Release

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS 

June 30, 2013

 March 31, 2013 

 (Unaudited) 

 (Audited) 

Assets

Current Assets

Cash 

$

270,788

$

1,652,996

Restricted cash

137,967

-

Accounts receivable, net of allowances of $189,143 and      

   $180,306, respectively

802,873

1,100,475

Due from Crestmark Bank

120,196

-

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

334,293

291,343

Due from related party - Starlight Electronics USA, Inc.

88,676

50,501

Due from related party - Cosmo Communications Canada, Ltd.

26,975

61,310

Inventories, net

4,316,779

4,123,407

Prepaid expenses and other current assets

174,058

84,441

Deferred tax asset, net

747,681

421,340

           Total Current Assets

7,020,286

7,785,813

Property and equipment, net

609,545

482,777

Other non-current assets

17,630

159,956

Deferred Tax Asset, net of current portion

1,198,119

1,198,119

          Total Assets

$

8,845,580

$

9,626,665

Liabilities and Shareholders' Equity 

Current Liabilities

Accounts payable

$

1,490,628

$

1,135,125

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

1,107,678

1,107,678

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

422,106

419,600

Due to related party - Cosmo Communications USA, Inc.

12,495

-

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

24,178

585,125

Due to related parties - Other Starlight Group Companies

3,534

3,534

Accrued expenses

674,265

686,012

Current portion of long-term capital lease

11,679

-

Obligations to clients for returns and allowances

382,815

376,289

Warranty provisions

134,270

215,471

        Total Current Liabilities

4,263,648

4,528,834

Long-term capital lease, net of current portion

22,813

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

6,786,461

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;   

 38,028,975 shares issued and outstanding

380,289

380,289

Additional paid-in capital

19,157,547

19,155,193

Accumulated deficit

(17,478,717)

(16,937,651)

        Total Shareholders' Equity 

2,059,119

2,597,831

        Total Liabilities and Shareholders' Equity 

$

8,845,580

$

9,626,665

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

June 30, 2013

June 30, 2012

Net Sales

$         1,413,567

$         1,762,705

Cost of Goods Sold

1,112,143

1,318,627

Gross Profit

301,424

444,078

Operating Expenses

Selling expenses

280,774

248,648

General and administrative expenses

859,771

643,118

Depreciation

27,318

32,775

Total Operating Expenses

1,167,863

924,541

Loss from Operations

(866,439)

(480,463)

Other Expenses

Interest expense

(968)

-

Loss before income tax benefit

(867,407)

(480,463)

Income tax benefit

326,341

-

Net Loss 

$           (541,066)

$           (480,463)

Loss per Common Share

Basic and diluted

$                (0.01)

$                (0.01)

Weighted Average Common and Common 

Equivalent Shares:

Basic and diluted

38,028,975

37,960,794

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 Three Months Ended

June 30, 2013

June 30, 2012

Cash flows from operating activities

 Net Loss 

$

(541,066)

$

(480,463)

 Adjustments to reconcile net loss to net cash (used in) provided by  

 operating activities: 

   Depreciation 

27,318

32,775

   Change in inventory reserve 

47,551

(40,709)

   Change in allowance for bad debts 

8,837

2,143

   Disposal of property and equipment 

4,479

-

   Stock based compensation 

2,355

1,642

   Warranty provisions 

(81,201)

(158,279)

   Change in net deferred tax assets

(326,341)

-

    Changes in operating assets and liabilities: 

(Increase) Decrease in:

   Accounts receivable 

288,765

(16,587)

   Due from Crestmark Bank 

(120,196)

-

   Inventories 

(240,923)

461,386

   Prepaid expenses and other current assets 

(89,617)

9,799

   Other non-current assets 

142,325

(282)

Increase (Decrease) in:

   Accounts payable  

355,503

241,987

   Net due to related parties 

(592,736)

62,796

   Accrued expenses 

(11,747)

39,316

   Obligations to clients for returns and allowances 

6,526

(76,307)

 Net cash (used in) provided by operating activities 

(1,120,168)

79,217

 Cash flows from investing activities 

 Purchase of property and equipment 

(122,177)

(43,262)

 Deposit of restricted cash 

(137,967)

-

 Net cash used in investing activities 

(260,144)

(43,262)

 Cash flows from financing activities 

Payment of long-term capital lease

(1,896)

-

 Net cash used in financing activities 

(1,896)

-

 Change in cash  

(1,382,208)

35,955

 Cash at beginning of period 

1,652,996

267,465

 Cash at end of period 

$

270,788

$

303,420

 Supplemental Disclosures of Cash Flow Information: 

 Cash paid for interest 

$

968

$

-

 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 condensed consolidated financial statements.