Singing Machine Company Announces 40% Increase in Sales in 1st Quarter Ended June 30 Earnings Release


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, 2015June 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 
       

            

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