FORT LAUDERDALE, Fla., Aug. 14, 2015 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (OTCQB:SMDM) announces the financial results for its first fiscal quarter ended June 30, 2015.
Singing Machine reports net sales of approximately $3.5 million in its first fiscal quarter ended June 30, 2015, up from approximately $2.5 million reported for the same period last year (an increase of 40%). The increase in net sales was attributable to spring inventory replenishment by some of the Company’s major retailers now carrying Singing Machine products year-around and sales to a new international distributor. Gross margin increased to 24.8% compared to 20.3% in the same quarter in 2014 as a result of more favorable pricing and sales volume, reflected in gross profits of approximately $0.9 million up from $0.5 million the prior year (a 67% increase in gross profits).
Operating expenses in the quarter ended June 30 increased by approximately $0.3 million to $1.6 million compared to $1.3 million in the same quarter of 2014. A large portion of this increase was the result of an increase in selling expenses due to advertising expense to promote products with a major retailer for the spring and an overall increase in general and administrative expenses for professional fees and warehouse expenses.
Singing Machine’s first fiscal quarter ended June 30 is historically its lowest sales quarter. The first fiscal quarter last year represented 6% of total sales in the fiscal year ended March 31, 2015.
Gary Atkinson, CEO, commented, “Our business strategy for this coming fiscal year emphasizes three elements – continued product innovation across a wide range of models and price points, continued sales growth by retaining and growing our retail relationships both domestically and abroad, and margin improvement. We believe if we successfully implement this strategy we will create value for our shareholders."
“Singing Machine just announced the launch of a new lineup of all digital karaoke systems that improve the karaoke experience and song downloading process. All our new models are USB compatible and most are now Bluetooth™ enabled so our customers can use them as everyday audio speakers as well as karaoke machines.”
“From a sales perspective, we continue to have the strongest retailing relationships in the industry and the largest share of market in North America for consumer karaoke machines. Our backlog of purchase indications from our retail customers exceed those held at this same time last year. In addition to sales growth we anticipate margin improvement as well compared to last year.”
About The Singing Machine
Based in the US, Singing Machine® is the North American leader in consumer karaoke products. The first to provide karaoke systems for home entertainment in the United States, the Company sells its products world-wide through major mass merchandisers and on-line retailers. 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 products incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine provides consumers the best warranties in the industry and access to over 10,000 songs for streaming and download. Singing Machine products are sold through most major retailers in North America and also internationally. 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, 2015. 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.
| The Singing Machine Company, Inc. and Subsidiaries | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| June 30, 2015 | March 31, 2015 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 363,410 | $ | 116,286 | ||||
| Accounts receivable, net of allowances of $46,698 and | ||||||||
| $174,131, respectively | 1,673,628 | 1,466,168 | ||||||
| Due from PNC Bank | - | 137,415 | ||||||
| Due from related party - Starlight Electronics Co., Ltd. | 17,240 | - | ||||||
| Due from related party - Cosmo Communications Canada, Ltd. | 77,012 | - | ||||||
| Inventories, net | 8,110,348 | 7,448,167 | ||||||
| Prepaid expenses and other current assets | 90,695 | 92,609 | ||||||
| Deferred financing costs | 74,077 | 74,077 | ||||||
| Deferred tax asset, net | 761,599 | 449,274 | ||||||
| Total Current Assets | 11,168,009 | 9,783,996 | ||||||
| Property and equipment, net | 471,395 | 466,571 | ||||||
| Other non-current assets | 11,394 | 11,394 | ||||||
| Deferred financing costs, net of current portion | 77,164 | 95,683 | ||||||
| Deferred tax asset, net of current portion | 1,856,281 | 1,856,281 | ||||||
| Total Assets | $ | 13,584,243 | $ | 12,213,925 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 3,025,272 | $ | 2,767,180 | ||||
| Note payable related party - Ram Light Management, Ltd. | 551,177 | 496,496 | ||||||
| Due to related party - Ram Light Management, Ltd. | 583,247 | 583,247 | ||||||
| Due to related party - Starlight R&D, Ltd. | 582,072 | 554,031 | ||||||
| Due to related party - Cosmo Communications Canada, Inc. | - | 40,256 | ||||||
| Due to related party - Starlight Consumer Electronics Co., Ltd. | 256,343 | 208,672 | ||||||
| Accrued expenses | 617,901 | 452,651 | ||||||
| Revolving line of credit | 1,537,014 | - | ||||||
| Current portion of capital lease | 10,601 | 12,628 | ||||||
| Customer deposits | 287,110 | - | ||||||
| Obligations to customers for returns and allowances | 10,361 | 399,419 | ||||||
| Warranty provisions | 153,074 | 197,873 | ||||||
| Total Current Liabilities | 7,614,172 | 5,712,453 | ||||||
| Long-term capital lease, net of current portion | - | 1,078 | ||||||
| Note payable related party debt - Ram Light Management, Ltd. | ||||||||
| net of current portion | 548,823 | 603,504 | ||||||
| Accrued expenses, net of current portion | 63,778 | 46,495 | ||||||
| Subordinated related party debt - Starlight Marketing Development, Ltd. | 1,924,431 | 1,924,431 | ||||||
| Total Liabilities | 10,151,204 | 8,287,961 | ||||||
| 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 38,117,517 shares issued and outstanding, respectively | 381,175 | 381,175 | ||||||
| Additional paid-in capital | 19,309,967 | 19,307,966 | ||||||
| Accumulated deficit | (16,258,103 | ) | (15,763,177 | ) | ||||
| Total Shareholders' Equity | 3,433,039 | 3,925,964 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 13,584,243 | $ | 12,213,925 | ||||
| The Singing Machine Company, Inc. and Subsidiaries | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
| (Unaudited) | |||||||
| For Three Months Ended | |||||||
| June 30, 2015 | June 30, 2014 | ||||||
| Net Sales | $ | 3,466,874 | $ | 2,544,959 | |||
| Cost of Goods Sold | 2,608,453 | 2,029,068 | |||||
| Gross Profit | 858,421 | 515,891 | |||||
| Operating Expenses | |||||||
| Selling expenses | 457,727 | 345,267 | |||||
| General and administrative expenses | 1,101,981 | 928,871 | |||||
| Depreciation | 37,333 | 29,331 | |||||
| Total Operating Expenses | 1,597,041 | 1,303,469 | |||||
| Loss from Operations | (738,620 | ) | (787,578 | ) | |||
| Other Expenses | |||||||
| Interest expense | (50,112 | ) | (1,842 | ) | |||
| Financing costs | (18,519 | ) | - | ||||
| Net Other Expenses | (68,631 | ) | (1,842 | ) | |||
| Loss before income tax benefit | (807,251 | ) | (789,420 | ) | |||
| Income tax benefit | 312,325 | 289,891 | |||||
| Net Loss | $ | (494,926 | ) | $ | (499,529 | ) | |
| Loss per Common Share | |||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | |
| Weighted Average Common and Common | |||||||
| Equivalent Shares: | |||||||
| Basic and Diluted | 38,117,517 | 38,070,642 | |||||
| The Singing Machine Company, Inc. and Subsidiaries | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (Unaudited) | |||||||||||
| For Three Months Ended | |||||||||||
| June 30, 2015 | June 30, 2014 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net Loss | $ | (494,926 | ) | $ | (499,529 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation | 37,333 | 29,331 | |||||||||
| Amortization of deferred financing costs | 18,519 | - | |||||||||
| Change in inventory reserve | (37,560 | ) | - | ||||||||
| Change in allowance for bad debts | (127,433 | ) | (23,757 | ) | |||||||
| Stock based compensation | 2,001 | 32,398 | |||||||||
| Warranty provisions | (44,799 | ) | (78,348 | ) | |||||||
| Change in net deferred tax assets | (312,325 | ) | (289,891 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| (Increase) decrease in: | |||||||||||
| Accounts receivable | (80,027 | ) | (70,487 | ) | |||||||
| Inventories | (624,621 | ) | (5,701,055 | ) | |||||||
| Prepaid expenses and other current assets | 1,914 | (80,613 | ) | ||||||||
| Other non-current assets | - | (659 | ) | ||||||||
| Increase (decrease) in: | |||||||||||
| Accounts payable | 258,092 | 4,879,506 | |||||||||
| Net due to related parties | (58,796 | ) | 642,540 | ||||||||
| Accrued expenses | 182,533 | 97,275 | |||||||||
| Customer deposits | 287,110 | - | |||||||||
| Obligations to customers for returns and allowances | (389,058 | ) | 25,588 | ||||||||
| Net cash used in operating activities | (1,382,043 | ) | (1,037,701 | ) | |||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | (42,157 | ) | (33,013 | ) | |||||||
| Net cash used in investing activities | (42,157 | ) | (33,013 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Net proceeds from revolving line of credit | 1,674,429 | - | |||||||||
| Net proceeds from credit facility | - | 84,414 | |||||||||
| Payments on long-term capital lease | (3,105 | ) | (2,969 | ) | |||||||
| Net cash provided by financing activities | 1,671,324 | 81,445 | |||||||||
| Net change in cash | 247,124 | (989,269 | ) | ||||||||
| Cash at beginning of year | 116,286 | 1,354,099 | |||||||||
| Cash at end of the period | $ | 363,410 | $ | 364,830 | |||||||
| Supplemental Disclosures of Cash Flow Information: | |||||||||||
| Cash paid for interest | $ | 9,665 | $ | 1,842 | |||||||