FORT LAUDERDALE, Fla., Aug. 14, 2018 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (OTCQX:SMDM) – the North American leader in consumer karaoke products – today announced its financial results for its first quarter ended June 30, 2018.
First Quarter Snapshot:
- Net sales of $1.8 million for the quarter ended June 30, 2018.
- Gross margin of 21.3%.
- Net loss of $1.0 million for the quarter.
- Streaming music subscription sales increased 54% YoY.
- Fees received from 3PL logistics services increased to $0.2 million for the quarter, an increase of 136% YoY.
Singing Machine reports net sales of approximately $1.8 million for the quarter-ended June 30, 2018 period. The decrease in net sales was primarily due to the bankruptcy of Toys ‘R’ Us which accounted for approximately $1.0 million in sales in the prior year same quarter. The Company also experienced a one-time unexpected factory closing during the first quarter which caused shipments of approximately $0.8 million to shift into the second quarter.
Gross profit margin decreased by approximately 6.1% percent to 21.3% net sales compared to approximately 27.4% of net sales reported in the prior year. The decrease in gross margin was mainly due to a one-time expense related to moving products from one factory to new suppliers due to an unexpected supplier interruption.
Total operating expenses decreased to $1.7 million compared to $1.9 million in the prior year. The reduction in expenses was primarily due to a reduction in general and administrative expenses related to a decrease in bad debt reserve of approximately $0.14 million due to lower sales and accounts receivable.
As a result, the Company reported a net loss of $1.0 million compared to a net loss of $0.53 million in the prior year.
Management Commentary:
Gary Atkinson, Singing Machine CEO, commented, “Due to the bankruptcy and liquidation of Toys ‘R’ Us in March 2018, we experienced a first quarter slow down. We also experienced a disruption in our supply chain during the first quarter which caused a timing delay in shipments that were not able to be fulfilled in the first quarter. Those supply chain disruptions have since been resolved and those effected products are back in-stock. Despite the slow quarter and one-time market disruptions, we remain confident as the market leader in our category. We believe the singing and music entertainment category is a growing market that is prime for international expansion.”
Earnings Call Information:
The Company will host a conference call today, Tuesday, August 14, beginning at 10:00 am Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial 866-831-8713 and use conference ID: SMDM.
An audio rebroadcast of the call will be available later in the day after the earnings call and can be heard at: www.singingmachine.com/investors.
About The Singing Machine
Based in the U.S., 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 worldwide 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 13,000 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.
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
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, 2018. 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, 2018 | March 31, 2018 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Current Assets | ||||||
| Cash | $ | 117,767 | $ | 813,908 | ||
| Accounts receivable, net of allowances of $63,473 and | ||||||
| $82,102 respectively | 1,213,105 | 1,066,839 | ||||
| Due from PNC Bank | - | 6,212 | ||||
| Accounts receivable related party - Starlight Consumer Electronics USA, Inc. | 7,054 | 7,054 | ||||
| Accounts receivable related party - Winglight Pacific, Ltd | 293,651 | 1,150,104 | ||||
| Inventories, net | 8,834,930 | 8,536,934 | ||||
| Prepaid expenses and other current assets | 272,989 | 137,970 | ||||
| Deferred financing costs | 13,333 | 13,333 | ||||
| Total Current Assets | 10,752,829 | 11,732,354 | ||||
| Property and equipment, net | 708,500 | 450,305 | ||||
| Deferred financing costs, net of current portion | 13,333 | 16,667 | ||||
| Deferred tax assets | 1,261,136 | 937,137 | ||||
| Other non-current assets | 12,039 | 11,523 | ||||
| Total Assets | $ | 12,747,837 | $ | 13,147,986 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 1,687,655 | $ | 1,614,748 | ||
| Accrued expenses | 765,035 | 701,932 | ||||
| Current portion of bank term note payable | 625,000 | 500,000 | ||||
| Due to related party - Starlight Electronics Co., Ltd | 306,480 | 210,756 | ||||
| Due to related party - Starlight R&D, Ltd. | 112,359 | 113,116 | ||||
| Due to related party - Merrygain Holding Co., Ltd. | 128,290 | 89,803 | ||||
| Revolving line of credit | 1,089,822 | - | ||||
| Refunds due to customers | 256,154 | 445,484 | ||||
| Reserve for sales returns | 137,536 | 726,000 | ||||
| Current portion of capital leases | 14,065 | - | ||||
| Current portion of subordinated related party debt - Starlight Marketing Development, Ltd. | 815,367 | 689,792 | ||||
| Total Current Liabilities | 5,937,763 | 5,091,631 | ||||
| Bank term note payable, net of current portion | - | 125,000 | ||||
| Capital leases, net of current portion | 27,167 | - | ||||
| Subordinated related party debt - Starlight Marketing Development, Ltd., | ||||||
| net of current portion | - | 125,575 | ||||
| Total Liabilities | 5,964,930 | 5,342,206 | ||||
| Commitments and Contingencies | ||||||
| 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; | ||||||
| 8,282,028 shares issued and outstanding | 382,820 | 382,820 | ||||
| Additional paid-in capital | 19,635,341 | 19,624,063 | ||||
| Accumulated deficit | (13,235,254 | ) | (12,201,103 | ) | ||
| Total Shareholders' Equity | 6,782,907 | 7,805,780 | ||||
| Total Liabilities and Shareholders' Equity | $ | 12,747,837 | $ | 13,147,986 | ||
| See notes to the condensed consolidated financial statements | ||||||
| The Singing Machine Company, Inc. and Subsidiaries | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
| (Unaudited) | |||||||
| For the Three Months Ended | |||||||
| June 30, 2018 | June 30, 2017 | ||||||
| Net Sales | $ | 1,836,511 | $ | 3,939,733 | |||
| Cost of Goods Sold | 1,445,028 | 2,860,584 | |||||
| Gross Profit | 391,483 | 1,079,149 | |||||
| Operating Expenses | |||||||
| Selling expenses | 446,700 | 463,747 | |||||
| General and administrative expenses | 1,208,644 | 1,359,231 | |||||
| Depreciation | 67,571 | 43,213 | |||||
| Total Operating Expenses | 1,722,915 | 1,866,191 | |||||
| Loss from Operations | (1,331,432 | ) | (787,042 | ) | |||
| Other Expenses | |||||||
| Interest expense | (23,385 | ) | (283 | ) | |||
| Finance costs | (3,334 | ) | (21,606 | ) | |||
| Total Other Expenses | (26,719 | ) | (21,889 | ) | |||
| Loss Before Income Tax Benefit | (1,358,151 | ) | (808,931 | ) | |||
| Income Tax Benefit | 324,000 | 281,921 | |||||
| Net Loss | $ | (1,034,151 | ) | $ | (527,010 | ) | |
| Loss per Common Share | |||||||
| Basic and Diluted | $ | (0.03 | ) | $ | (0.01 | ) | |
| Weighted Average Common and Common | |||||||
| Equivalent Shares: | |||||||
| Basic and Diluted | 38,282,028 | 38,259,303 | |||||
| See notes to the condensed consolidated financial statements | |||||||
| The Singing Machine Company, Inc. and Subsidiaries | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | |||||||
| For the Three Months Ended | |||||||
| June 30, 2018 | June 30, 2017 | ||||||
| Cash flows from operating activities | |||||||
| Net Loss | $ | (1,034,151 | ) | $ | (527,010 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation | 67,571 | 43,213 | |||||
| Amortization of deferred financing costs | 3,334 | 21,606 | |||||
| Change in inventory reserve | (81,780 | ) | (375,000 | ) | |||
| Change in allowance for bad debts | (18,629 | ) | (6,028 | ) | |||
| Stock based compensation | 11,278 | 55,237 | |||||
| Change in net deferred tax assets | (323,999 | ) | (283,126 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | (127,637 | ) | (1,100,703 | ) | |||
| Due from PNC Bank | 6,212 | 242,859 | |||||
| Accounts receivable - related parties | 856,453 | (557,647 | ) | ||||
| Inventories | (216,216 | ) | (2,651,450 | ) | |||
| Prepaid expenses and other current assets | (135,019 | ) | (316,343 | ) | |||
| Other non-current assets | (516 | ) | - | ||||
| Accounts payable | 72,907 | 3,140,580 | |||||
| Accrued expenses | 63,103 | 99,956 | |||||
| Due to related parties | 133,454 | 149,787 | |||||
| Refunds due to customers | (189,330 | ) | 69,715 | ||||
| Reserve for sales returns | (588,464 | ) | (338,791 | ) | |||
| Net cash used in operating activities | (1,501,429 | ) | (2,333,145 | ) | |||
| Cash flows from investing activities | |||||||
| Purchase of property and equipment | (282,240 | ) | (185,336 | ) | |||
| Net cash used in investing activities | (282,240 | ) | (185,336 | ) | |||
| Cash flows from financing activities | |||||||
| Net proceeds from revolving line of credit | 1,089,822 | 683,986 | |||||
| Net proceeds from bank term note | - | 1,000,000 | |||||
| Payment of deferred financing costs | - | (40,000 | ) | ||||
| Payment on subordinated debt - related party | - | (1,000,000 | ) | ||||
| Payments on capital leases | (2,294 | ) | - | ||||
| Net cash provided by financing activities | 1,087,528 | 643,986 | |||||
| Net change in cash | (696,141 | ) | (1,874,495 | ) | |||
| Cash at beginning of period | 813,908 | 2,305,439 | |||||
| Cash at end of period | $ | 117,767 | $ | 430,944 | |||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid for interest | $ | 9,995 | $ | 283 | |||
| Cash paid for income taxes | $ | - | $ | 30,000 | |||
| Equipment purchased under capital lease | $ | 43,526 | $ | - | |||
| See notes to the condensed consolidated financial statements | |||||||