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

News provided by

The Singing Machine Company, Inc.

Feb 14, 2013, 03:41 ET

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™, 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, 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

 income taxes

1,397,070

133,759

2,351,518

1,091,382











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.

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