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

News provided by

The Singing Machine Company, Inc.

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.

SOURCE The Singing Machine Company, Inc.

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