Singing Machine Announces $16.8 million in Net Sales in 3rd Quarter Earnings Report.

Singing Machine Announces $16.8 million in Net Sales in 3rd Quarter Earnings Report.

FORT LAUDERDALE, Fla., Feb. 14, 2014 /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, 2013.

The Company reported third-quarter net sales of approximately $16.8 million, as compared to net sales of approximately $16.6 million in the same quarter last year. The Company also posted quarterly pre-tax income of approximately $1.4 million for the quarter and maintained gross margin of 24.4%. For the nine months ended, the Company reported net sales of approximately $29 million as compared with $32.7 million in the same period last year. The decrease in net sales is primarily attributed to a major customer switching from a seasonal program to a year-round program in 2012 and therefore having existing inventory to start the recent holiday season. Consequently, this customer did not need to order as much new inventory.

Bernardo Melo, VP of Sales, commented, "Due to softer sell through trends in 2012 and a slow start to the holiday season this year, a few retailers were more conservative and bought less inventory for the 2013 holiday season since they had left over inventory from the prior season. Despite that, our overall retail sales exceeded last years figures with higher sell-through reported across the board. A couple highlights of the recent holidays season worth mentioning are: A major retailer sold 70,000 more units year-over-year on core models. A key online retailer experienced 25% growth in sales volume and increased sales dollar by 50% compared to the prior year. This success is attributed to an inventory mix that included higher price point merchandise that sold through extremely well. As higher price point goods were well received by consumer electronics enthusiasts, we are confident that we are on the right path to continued success with the market expansion of the Singing Machine Home." Melo added, "We are already off to a solid start in 2014 and have received some early commitments from existing and new customers."

Gary Atkinson, CEO, commented, "We were also pleased with the reception of our new Singing Machine Home. We saw immediate buzz by the media and demand from our early adopting fans. Sales during the pilot test of the Home exceeded the expectations of our major retail customer. We believe there is strong market demand and proof of concept to continue development and plans are already under way to expand distribution of the Home in 2014."

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(TM), SMDigital(TM), SoundX(TM), and Sound X Kids(TM) 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

CONDENSED CONSOLIDATED BALANCE SHEETS


December 31, March 31,
2013 2013
---- ----

(Unaudited) (Audited)

Assets
------

Current Assets

Cash $2,356,028 $1,652,996

Restricted cash 137,967 -

Accounts receivable, net of allowances of $296,732
and $180,306, respectively 6,069,648 1,100,475

Due from Crestmark Bank 212,505 -

Due from related party -Starlight Consumer
Electronics USA, Inc. 284,182 291,343

Due from related party -Starlight Electronics
USA, Inc. 51,196 50,501

Due from related party -Cosmo Communications
Canada, Ltd 235,439 61,310

Inventories, net 5,723,801 4,123,407

Prepaid expenses and other current assets 86,318 84,441

Deferred tax asset, net 294,427 421,340

Total Current Assets 15,451,511 7,785,813


Property and equipment, net 609,381 482,777

Other non-current assets 17,630 159,956

Deferred tax asset, net non-current portion 836,948 1,198,119
------- ---------

Total Assets $16,915,470 $9,626,665



Liabilities and Shareholders' Equity
------------------------------------

Current Liabilities

Accounts payable $4,214,078 $1,135,125

Due to related party -Starlight Marketing
Development, Ltd. 1,111,212 1,107,678

Subordinated related party debt -Starlight
Marketing Development, Ltd. 816,753

Due to related party -Starfair Electronics
Company, Ltd. 166,228 -

Subordinated related party debt -Ram Light
Management, Ltd. 1,683,247 -

Due to related party - Starlight R&D, Ltd. 238,429 419,600

Due to related party -Starlight Consumer
Electronics Co., Ltd. 2,927,285 585,125

Due to related parties -Other Starlight Group
Companies 13,260 3,534

Accrued expenses 1,310,234 686,012

Current portion of capital lease 11,942 -

Obligations to clients for returns and allowances 355,717 376,289

Warranty provisions 773,966 215,471
------- -------

Total Current Liabilities 13,622,351 4,528,834


Long-term capital lease, net of current portion 16,776 -

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 13,639,127 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, $0.01 par value; 100,000
shares authorized; no shares issued and
outstanding - -

Common stock, $0.01 par value; 100,000,000 shares
authorized; 38,070,642 and 38,028,975 shares
issued and outstanding, respectively 380,706 380,289

Additional paid-in capital 19,229,729 19,155,193

Accumulated deficit (16,334,092) (16,937,651)
----------- ----------

Total Shareholders' Equity 3,276,343 2,597,831

Total Liabilities and Shareholders' Equity $16,915,470 $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 For Nine Months Ended
---------------------- ---------------------

December 31, December 31, December 31, December 31,
2013 2012 2013 2012
---- ---- ---- ----



Net Sales $16,814,794 $16,617,000 $29,062,931 $32,755,791


Cost of Goods Sold 12,707,912 12,594,626 22,251,890 24,818,560
---------- ---------- ---------- ----------


Gross Profit 4,106,882 4,022,374 6,811,041 7,937,231


Operating Expenses

Selling
expenses 1,218,688 1,445,728 2,401,528 2,945,018

General and
administrative
expenses 1,344,634 1,123,998 3,154,577 2,509,824

Depreciation 54,506 24,145 112,483 90,996

Total Operating Expenses 2,617,828 2,593,871 5,668,588 5,545,838
--------- --------- --------- ---------


Income from Operations 1,489,054 1,428,503 1,142,453 2,391,393


Other Expenses

Interest
expense (41,102) (31,433) (50,810) (39,875)
---------


Income before provision for income
taxes 1,447,952 1,397,070 1,091,643 2,351,518


Provision for income taxes (627,278) - (488,084) -
-------- --- -------- ---


Net Income $820,674 $1,397,070 $603,559 $2,351,518
======== ========== ======== ==========


Income per Common Share

Basic $0.02 $0.04 $0.02 $0.06

Diluted $0.02 $0.04 $0.02 $0.06


Weighted Average Common and Common

Equivalent
Shares:

Basic and
Diluted 38,070,642 37,960,794 38,053,458 37,960,794

Diluted 38,650,355 38,286,865 38,633,171 38,286,865


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, 2013 December 31, 2012
----------------- -----------------



Cash flows from
operating activities

Net Income $603,559 $2,351,518

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

Depreciation 112,483 90,996

Change in
inventory
reserve 25,000 (110,000)

Change in
allowance for
bad debts 116,426 84,067

Loss from
disposal of
property and
equipment 4,479 -

Stock based
compensation 74,953 4,921

Warranty
provisions 558,495 650,106

Change in net
deferred tax
assets 488,084 -

Changes in
operating
assets and
liabilities:

(Increase)
Decrease in:

Accounts
receivable (5,085,599) (4,518,889)

Due from
Crestmark Bank (212,505) (477,577)

Inventories (1,625,394) (676,495)

Prepaid expenses
and other
current assets (1,877) 803

Other non-
current assets 142,326 (282)

Increase
(Decrease) in:

Accounts payable 3,078,953 2,214,862

Net due to
related parties 2,172,814 2,264,154

Accrued expenses 624,222 1,678,542

Obligations to
clients for
returns and
allowances (20,572) (128,069)

Net cash provided by
operating activities 1,055,847 3,428,657
--------- ---------

Cash flows from
investing activities

Purchase of
property and
equipment (207,178) (148,262)

Deposit of
restricted cash (137,967) -

Net cash used in
investing activities (345,145) (148,262)
-------- --------

Cash flows from
financing activities

Payments on
long-term
capital lease (7,670) -

Net cash used in
financing activities (7,670) -
------ ---

Change in cash 703,032 3,280,395


Cash at beginning of
period 1,652,996 267,465
--------- -------

Cash at end of
period $2,356,028 $3,547,860



Supplemental
Disclosures of Cash
Flow Information:

Cash paid for
interest $50,810 $39,875


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.






SOURCE The Singing Machine Company, Inc.

The Singing Machine Company, Inc.

CONTACT: Gary Atkinson, (954) 596 - 1000, GaryAtkinson at singingmachine.com

Web Site: http://www.singingmachine.com


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