Singing Machine Announces 47% Increase in Net Sales to $15.9 Million in Second Quarter Earnings Release.

News provided by

The Singing Machine Company, Inc.

Nov 14, 2014, 02:23 ET

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

For the September Quarter, the Company reported net sales of approximately $16.0 million compared to $10.8 million in the same quarter last year, an increase of approximately $5.1 million or 47%.  The increase in net sales was primarily attributable to new distribution with Wal-Mart retail stores nationwide and the expanded product assortment with two major wholesale club retailers. Gross margins decreased for the quarter from 22.2% to 19.8% as compared to the same quarter last year.  The reduced gross margin for the quarter was primarily a result of shipping a higher mix of product for special November Black Friday programs.  Total operating expenses increased to approximately $2.6 million, compared to approximately $1.8 million in the same quarter last year.  The increase in operating expenses of $0.3 million was a result of higher variable selling expenses due to the increase in net sales and also an investment into promotional fixture displays. There was also an increase of approximately $0.3 million in the Company's general and administrative expenses.  The increase in G&A expenses was due to increase in payroll expenses and increase in warehouse supplies and temporary labor for building special December pallet displays for the holiday season.

Income from operations for the September Quarter was $579,449 up from $519,839 in the same quarter last year. Interest expense increased in the September Quarter compared to the prior year due to greater borrowings to finance inventory and receivables growth.  Net income for the September Quarter was $321,171 compared to $323,951 in the prior year.

Gary Atkinson, Company CEO, commented, "These financial results reflect Management's decision to invest in the future for long term growth. With this fiscal second quarter, Singing Machine is beginning to show the sales growth we anticipated from expanding our product assortment carried by major customers and our new relationship with Wal-Mart Stores.  With Wal-Mart, the Company gains exposure to almost 3,700 Wal-Mart store-fronts and expanded Singing Machine brand awareness among their consumer base. We believe in the long-term benefit of Wal-Mart carrying our product and are optimistic that this year's marketing program will be a hit among Wal-Mart's consumers and that we can build and develop the relationship for the coming years."

Atkinson added, "During this second quarter, Management also made a decision to invest in prime end-cap space display fixtures with working demos of our products on display at almost 800 Toys 'R' Us stores nationwide for the fall and holiday selling season.  We are confident that this investment decision, which was expensed in the second quarter, will help make our karaoke products more of a top-of-mind buying decision for consumers that are looking for musically educational products that are fun, entertaining, and involve social activities for the holiday season.  Finally, our investors should note that we are experiencing continued sales growth into our current third quarter as the Company continues to fulfill demand for the holiday season.  We look forward to reporting our Q3 results in February." 

About The Singing Machine
Based in the US, Singing Machine® is the North American leader in consumer karaoke products.  We offer the industry's 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, 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 





September 30,
2014

 March 31,
2014 



 (Unaudited) 

 (Audited) 

Assets

Current Assets




Cash 

$

174,314

$

1,354,099

Restricted cash

138,042

138,042

Accounts receivable, net of allowances of $235,621 and      




   $172,465, respectively

8,952,305

955,551

Due from Crestmark Bank

-

19,638

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

-

233,004

Due from related party - Starlight Electronics USA, Inc.

-

51,196

Due from related party - Starlight Electronics Co., Ltd

43,320

83,320

Due from related party - Cosmo Communications Canada, Inc.

197,547

-

Due from related party - Winglight Pacific, Ltd

973,172

-

Inventories, net

15,057,895

5,827,613

Prepaid expenses and other current assets

158,866

91,088

Deferred financing costs

74,078

-

Deferred tax asset, net

715,541

604,284

           Total Current Assets

26,485,080

9,357,835






Property and equipment, net

532,034

561,225

Other non-current assets

11,394

17,630

Deferred financing costs, net current portion

132,721

-

Deferred tax asset, net current portion

1,793,972

1,793,972

          Total Assets

$

28,955,201

$

11,730,662






Liabilities and Shareholders' Equity 

Current Liabilities




Accounts payable

$

11,357,205

$

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 - Starfair Electronics Company, Ltd.

-

17,738

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

2,489,234

194,678

Due to related party - Cosmo Communications Canada, Inc.

-

50,441

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

399,063

1,051,913

Due to related parties - Other Starlight Group Companies

2,579

3,534

Accrued expenses

1,158,599

446,314

Revolving Line of Credit

5,350,881

-

Current portion of capital lease

12,349

12,076

Obligations to clients for returns and allowances

468,878

469,838

Warranty provisions

528,031

235,172

        Total Current Liabilities

22,743,105

8,007,458






Long-term capital lease, net of current portion

7,462

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

25,381,959

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, Class B, $0.01 par value;  100,000,000 shares authorized;   




   38,117,517 and 38,070,642 shares issued and outstanding, respectively

381,175

380,706

Additional paid-in capital

19,303,760

19,262,127

Accumulated deficit

(16,111,693)

(15,933,335)

        Total Shareholders' Equity 

3,573,242

3,709,498

        Total Liabilities and Shareholders' Equity 

$

28,955,201

$

11,730,662






See notes to the condensed consolidated financial statements.

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


























For Three Months Ended

For Six Months Ended




September 30,
2014

September 30,
2013

September 30,
2014

September 30,
2013






















Net Sales

$          15,952,059

$          10,834,570

$     18,497,018

$           12,248,137











Cost of Goods Sold

12,790,291

8,431,835

14,819,359

9,543,978











Gross Profit

3,161,768

2,402,735

3,677,659

2,704,159











Operating Expenses







Selling expenses

1,266,767

902,066

1,612,034

1,182,840

General and administrative expenses

1,267,246

950,171

2,196,118

1,809,942

Depreciation and amortization

48,306

30,659

77,637

57,977

Total Operating Expenses

2,582,319

1,882,896

3,885,789

3,050,759











Income (Loss) from Operations

579,449

519,839

(208,130)

(346,600)











Other Expenses







Interest expense

(79,644)

(8,741)

(81,485)

(9,709)











Income (Loss) before income tax (provision) benefit

499,805

511,098

(289,615)

(356,309)











Income tax (provision) benefit

(178,634)

(187,147)

111,257

139,194











Net Income (Loss)

$               321,171

$               323,951

$         (178,358)

$              (217,115)











Income (Loss) per Common Share







Basic 

$                     0.01

$                     0.01

$                      -

$                    (0.01)

Diluted

$                     0.01

$                     0.01

$                      -

$                    (0.01)











Weighted Average Common and Common 







Equivalent Shares:







Basic

38,083,663

38,060,569

38,077,116

38,044,772

Diluted

38,538,510

38,590,502

38,077,116

38,044,772











See  notes to the condensed consolidated financial statements.

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





For Six Months Ended





September 30, 2014

September 30, 2013
















Cash flows from operating activities:




Net Loss

$

(178,358)

$

(217,115)

Adjustments to reconcile net loss to net cash used in operating activities:





Depreciation 

62,204

57,977


Amortization of deferred financing costs

15,433

-


Change in inventory reserve 

50,000

150,000


Change in allowance for bad debts

63,156

42,552


Loss from disposal of property and equipment

-

4,479


Stock based compensation

42,103

22,275


Warranty provisions

292,859

149,996


Change in net deferred tax assets

(111,257)

(139,194)

Changes in operating assets and liabilities:




     (Increase) Decrease in:





Accounts receivable

(8,059,910)

(6,855,720)


Inventories

(9,280,282)

(5,498,065)


Prepaid expenses and other current assets

(67,778)

(103,143)


Other non-current assets

6,236

142,326

      Increase (Decrease) in:





Accounts payable 

9,439,129

6,238,600


Net due to related parties

726,052

3,608,279


Accrued expenses

712,285

471,094


Obligations to clients for returns and allowances

(960)

12,178



Net cash used in operating activities

(6,289,088)

(1,913,481)

Cash flows from investing activities:




Purchase of property and equipment

(33,013)

(154,179)

Deposit of restricted cash

-

(137,967)



Net cash used in investing activities

(33,013)

(292,146)

Cash flows from financing activities:




Net proceeds from revolving line of credit

5,350,881

-

Net proceeds from Crestmark Bank credit facility

19,638

1,566,278

Payment of deferred financing costs

(222,232)

-

Payments on long-term capital lease

(5,971)

(4,767)



Net cash provided by financing activities

5,142,316

1,561,511

Net decrease in cash 

(1,179,785)

(644,116)








Cash at beginning of year

1,354,099

1,652,996

Cash at end of period

$

174,314

$

1,008,880








Supplemental Disclosures of Cash Flow Information:




Cash paid for interest

$

63,205

$

9,709

Supplemental Disclosures of Non-cash Investing Activities: 




 Property and equipment purchased under capital lease 

$

-

$

36,388








See notes to the condensed consolidated financial statements.

SOURCE The Singing Machine Company, Inc.

Related Links

http://www.singingmachine.com