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

News provided by

The Singing Machine Company, Inc.

Feb 14, 2014, 03:11 ET

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™, SMDigital™, SoundX™, and Sound X Kids™ 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,
2013

 March 31,
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,
2013

December 31,
2012

December 31,
2013

December 31,
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.

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