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

February 14, 2013

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(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, 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                                                                                                               1,397,070                                                    133,759                                                    2,351,518                                              1,091,382
     income taxes

    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.


Source: PR Newswire