Singing Machine Announces 1st Quarter (June 30) Earnings Release

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Aug 14, 2014, 03:39 ET

FORT LAUDERDALE, Fla., Aug. 14, 2014 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) announces the results for its first fiscal quarter ended June 30, 2014.

The Company announced net sales of approximately $2.5 million in the quarter ended June 30, 2014, up from approximately $1.4 million reported for the same period last year (an increase of 80%). The increase in net sales is attributable to inventory replenishment by retailers due to favorable retail sell-through of the Company's products, the move by several retailers to carry and promote Singing Machine products on a year-around basis, and increased sales to distributors in Mexico and the United Kingdom. Gross profit for the quarter ended June 30, 2014 was similarly up 71% from the prior year quarter. Primarily due to the overall increase in net sales and gross profits, the Company reported a net loss for the first quarter of approximately $500,000 as compared to a net loss of approximately $541,000 reported in the same period last year. Singing Machine's quarter ended June 30 is historically its lowest sales quarter, with that quarter representing 4% of total sales in the fiscal year ended March 31, 2014.

Gary Atkinson, CEO, commented, "We've made a lot of accomplishments so far this fiscal year which have not yet reflected in the financial numbers. Today, we already have a backlog of purchase orders that exceed purchase orders on-hand at this same time last year. We anticipate that Singing Machine products will be carried in over 8,000 retail locations nationwide this coming holiday season." Atkinson added, "From a new product perspective, we've developed significant technological improvements to our Singing Machine Home™ product which should bolster the quality of the product to make it an everyday Bluetooth speaker with built-in karaoke capability with access to the world's largest karaoke music library. While the late timing in completing the development may delay the roll-out of this product with some retailers, we expect Singing Machine Home™ version 2.0 to be ready for shipping this coming fall and contribute to our hardware and music sales for years to come."

About The Singing Machine
Based in the US, Singing Machine is the North American leader in consumer karaoke products. We offer the widest line of at-home karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. As the most recognized brand in karaoke, Singing Machine has over 32 years of history offering quality products that incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine sells its products through major retailers in North America and also internationally. For more information on Singing Machine, visit www.singingmachine.com.

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, 2014. 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

			June 30, 2014		March 31, 2014
			(Unaudited)		(Audited)
Assets
Current Assets
	Cash	$	364,830	$	1,354,099
	Restricted cash		138,042		138,042
	Accounts receivable, net of allowances of $148,708 and
	$172,465, respectively		1,049,795		955,551
	Due from Crestmark Bank		-		19,638
	Due from related party - Starlight Consumer Electronics USA, Inc.		224,534		233,004
	Due from related party - Starlight Electronics USA, Inc.		51,196		51,196
	Due from related party - Starlight Electronics Co., Ltd		-		83,320
	Due from related party - Cosmo Communications Canada, Ltd		53,197		-
	Inventories, net		11,528,668		5,827,613
	Prepaid expenses and other current assets		171,701		91,088
	Deferred tax asset, net		894,175		604,284
	Total Current Assets		14,476,138		9,357,835

Property and equipment, net			564,907		561,225
Other non-current assets			18,289		17,630
Deferred tax asset, net of non-current portion			1,793,972		1,793,972
	Total Assets	$	16,853,306	$	11,730,662

Liabilities and Shareholders' Equity
Current Liabilities
	Accounts payable	$	6,797,582	$	1,918,076
	Due to related party - Starlight Marketing Development, Ltd.		-		1,107,678
	Subordinated related party debt - Starlight Marketing Development, Ltd.		-		816,753
	Note payable related party - Ram Light Management, Ltd.		393,039		-
	Subordinated related party debt - Ram Light Management, Ltd.		-		1,683,247
	Due to related party - Ram Light Management, Ltd		583,247		-
	Due to related party - Starlight Electronics Co., Ltd		61,500		-
	Due to related party - Starfair Electronics Company, Ltd.		17,738		17,738
	Due to related party - Starlight R&D, Ltd.		169,911		194,678
	Due to related party - Cosmo Communications USA, Inc.		-		50,441
	Due to related party - Starlight Consumer Electronics Co., Ltd.		1,669,568		1,051,913
	Due to related parties - Other Starlight Group Companies		3,534		3,534
	Accrued expenses		543,589		446,314
	Due to Crestmark Bank		64,776		-
	Current portion of capital lease		12,212		12,076
	Obligations to customers for returns and allowances		495,426		469,838
	Warranty provisions		156,824		235,172
	Total Current Liabilities		10,968,946		8,007,458

Long-term capital lease, net of current portion			10,601		13,706
Note payable related party debt - Ram Light Management, Ltd.
	net of current portion		706,961		-
Subordinated related party debt - Starlight Marketing Development, Ltd.			1,924,431		-
	Total Liabilities		13,610,939		8,021,164

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 38,070,642 shares issued and outstanding, respectively		380,706		380,706
	Additional paid-in capital		19,294,525		19,262,127
	Accumulated deficit		(16,432,864)		(15,933,335)
	Total Shareholders' Equity		3,242,367		3,709,498
	Total Liabilities and Shareholders' Equity	$	16,853,306	$	11,730,662

*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, 2014	June 30, 2013


Net Sales		$ 2,544,959	$ 1,413,567

Cost of Goods Sold		2,029,068	1,112,143

Gross Profit		515,891	301,424

Operating Expenses
	Selling expenses	345,267	280,774
	General and administrative expenses	928,871	859,771
	Depreciation	29,331	27,318
Total Operating Expenses		1,303,469	1,167,863

Loss from Operations		(787,578)	(866,439)

Other Expenses
	Interest expense	(1,842)	(968)

Loss before income tax benefit		(789,420)	(867,407)

Income tax benefit		289,891	326,341

Net Loss		$ (499,529)	$ (541,066)

Loss per Common Share
	Basic and Diluted	$ (0.01)	$ (0.01)

Weighted Average Common and Common
	Equivalent Shares:
	Basic and Diluted	38,070,642	38,028,975

*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, 2014		June 30, 2013


Cash flows from operating activities
	Net Loss			$	(499,529)	$	(541,066)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation			29,331		27,318
		Change in inventory reserve			-		47,551
		Change in allowance for bad debts			(23,757)		8,837
		Loss from disposal of property and equipment			-		4,479
		Stock based compensation			32,398		2,355
		Warranty provisions			(78,348)		(81,201)
		Change in net deferred tax assets			(289,891)		(326,341)
	Changes in operating assets and liabilities:
	(Increase) Decrease in:
		Accounts receivable			(70,487)		288,765
		Due from Crestmark Bank			-		(120,196)
		Inventories			(5,701,055)		(240,923)
		Prepaid expenses and other current assets			(80,613)		(89,617)
		Other non-current assets			(659)		142,325
	Increase (Decrease) in:
		Accounts payable			4,879,506		355,503
		Net due to related parties			642,540		(592,736)
		Accrued expenses			97,275		(11,747)
		Obligations to customers for returns and allowances			25,588		6,526
			Net cash used in operating activities		(1,037,701)		(1,120,168)
Cash flows from investing activities
	Purchase of property and equipment				(33,013)		(122,177)
	Deposit of restricted cash				-		(137,967)
			Net cash used in investing activities		(33,013)		(260,144)
Cash flows from financing activities
	Net proceeds from credit facility				84,414		-
	Payments on long-term capital lease				(2,969)		(1,896)
			Net cash provided by (used in) financing activities		81,445		(1,896)
Change in cash					(989,269)		(1,382,208)

Cash at beginning of period					1,354,099		1,652,996
Cash at end of period				$	364,830	$	270,788

Supplemental Disclosures of Cash Flow Information:
	Cash paid for interest			$	1,842	$	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.*