SOURCE: The Singing Machine Company, Inc.

The Singing Machine Company, Inc.

August 15, 2016 07:00 ET

Singing Machine Announces 40% Increase in Sales in First Quarter Earnings Report

FORT LAUDERDALE, FL--(Marketwired - Aug 15, 2016) - 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, 2016.

First Quarter Highlights:

  • Net sales for the June 30, 2016 quarter increased by 40% from $3.5 million to $4.9 million, compared to the same period from last year.
  • EBITDA for the period improved by approximately $0.2 million compared to the same period last year.
  • Related party debt paid down by $1.3 million compared to the same period last year.

Singing Machine reports net sales of approximately $4.9 million for the quarter-ended June 30, 2016 period, an increase of 40% from the prior year ($3.5 million). The increase in net sales is attributable to an increase in sales to one major retailer for a new holiday program.

Gross profit increased by approximately $0.3 million to $1.1 million, or 23.5% of net sales compared to approximately $0.85 million or 24.8% of net sales reported in the prior year. The decrease in gross profit margin is due to one retailer taking delivery of their holiday promotional goods earlier than usual. 

Total operating expenses increased to $1.7 million compared to $1.6 million in the prior year. 

As a result, the Company reported a decrease of $167,000 in loss from operations to $571,000 compared to a loss from operations of approximately $739,000 in the same period in the prior year. Loss before income taxes improved by approximately $200,000 compared to the prior year due to the increase in sales and the aforementioned reasons. Net loss for the period decreased to $437,000 compared to $495,000 in the prior year representing a loss of $0.01 per share on a fully diluted basis.

Management Commentary:

Gary Atkinson, Singing Machine CEO commented, "The Company continues to see strong growth in in our first quarter -- which is historically one of our slowest quarters. We grew sales 40% year over year in our first quarter and reduced our loss before taxes by approximately $200,000. Last year, first quarter sales represented approximately 7% of overall sales for the fiscal year ended March 31, 2016."
Atkinson added, "As we look toward our upcoming holiday season, we continue to have the best and biggest names of retail partners and the largest market share for consumer karaoke products in North America. We also anticipate to ship 500% more digital download machines than we did in the prior year with 99% of our total product fleet to include Bluetooth® access to our mobile karaoke app. Additionally, our backlog of purchase indications from our customers exceeds those held at this same time last year."

Earnings Call Information:

The Company will host a conference call today, Monday, August 15, 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 877-876-9175 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 12,000 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, 2016. 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, 2016     March 31, 2016  
  (Unaudited)        
Assets  
Current Assets              
  Cash $ 444,515     $ 2,116,490  
  Accounts receivable, net of allowances of $74,498 and $51,179, respectively   3,451,300       1,381,789  
  Due from PNC Bank   861       184,392  
  Accounts receivable related party - Cosmo Communications Canada, Ltd   154,247       19,077  
  Accounts receivable related party - Winglight Pacific, Ltd   192,976       -  
  Accounts receivable related parties - other   4,262       7,075  
  Inventories, net   8,367,957       3,690,975  
  Prepaid expenses and other current assets   148,806       115,601  
  Deferred financing costs   74,077       74,077  
    Total Current Assets   12,839,001       7,589,476  
               
Property and equipment, net   452,338       430,602  
Other non-current assets   11,523       11,394  
Deferred financing costs   3,087       21,606  
Deferred tax asset   2,607,119       2,408,531  
    Total Assets $ 15,913,068     $ 10,461,609  
               
Liabilities and Shareholders' Equity  
Current Liabilities              
  Accounts payable $ 6,326,737     $ 722,213  
  Note payable related party - Ram Light Management, Ltd.   558,075       696,612  
  Due to related party - Ram Light Management, Ltd   201,000       400,000  
  Due to related party - Starlight Electronics Co., Ltd   707,819       -  
  Due to related party - Merrygain Holding Co., Ltd   12,829       -  
  Accrued expenses   734,276       650,115  
  Current portion of capital lease   -       1,078  
  Obligations to customers for returns and allowances   22,414       121,092  
  Warranty provisions   193,263       292,500  
    Total Current Liabilities   8,756,413       2,883,610  
               
Subordinated related party debt - Starlight Marketing Development, Ltd.   1,924,431       1,924,431  
    Total Liabilities   10,680,844       4,808,041  
               
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; 38,181,635 and 38,161,635 shares issued and outstanding, respectively   381,816       381,816  
  Additional paid-in capital   19,347,268       19,337,939  
  Subscriptions receivable   -       (6,400 )
  Accumulated deficit   (14,496,860 )     (14,059,787 )
    Total Shareholders' Equity   5,232,224       5,653,568  
    Total Liabilities and Shareholders' Equity $ 15,913,068     $ 10,461,609  
 
See notes to the condensed consolidated financial statements.
 
 
 
The Singing Machine Company, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
           
           
  For Three Months Ended  
  June 30, 2016     June 30, 2015  
               
               
Net Sales $ 4,859,392     $ 3,466,874  
               
Cost of Goods Sold   3,715,709       2,608,453  
               
Gross Profit   1,143,683       858,421  
               
Operating Expenses              
  Selling expenses   424,878       457,727  
  General and administrative expenses   1,246,851       1,101,981  
  Depreciation   43,795       37,333  
Total Operating Expenses   1,715,524       1,597,041  
               
Loss from Operations   (571,841 )     (738,620 )
               
Other Expenses              
  Interest expense   (16,027 )     (50,112 )
  Financing costs   (18,519 )     (18,519 )
Total Other Expenses   (34,546 )     (68,631 )
               
Loss Before Income Tax Benefit   (606,387 )     (807,251 )
               
Income Tax Benefit   169,314       312,325  
               
Net Loss $ (437,073 )   $ (494,926 )
               
Loss per Common Share              
  Basic and Diluted $ (0.01 )   $ (0.01 )
               
Weighted Average Common and Common Equivalent Shares:              
  Basic and Diluted   38,181,635       38,117,517  
               
See notes to the condensed consolidated financial statements.  
   
   
   
The Singing Machine Company, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
  For Three Months Ended  
  June 30, 2016     June 30, 2015  
               
               
Cash flows from operating activities:              
  Net Loss $ (437,073 )   $ (494,926 )
  Adjustments to reconcile net loss to net cash used in operating activities:              
      Depreciation   43,795       37,333  
      Amortization of deferred financing costs   18,519       18,519  
      Change in inventory reserve   66,000       (37,560 )
      Change in allowance for bad debts   23,319       (127,433 )
      Stock based compensation   9,329       2,001  
      Change in net deferred tax asset   (198,588 )     (312,325 )
  Changes in operating assets and liabilities:              
    (Increase) decrease in:              
      Accounts receivable   (2,092,830 )     (80,027 )
      Due from PNC Bank   183,531       137,415  
      Accounts receivable related parties   (325,333 )     (94,252 )
      Inventories   (4,742,982 )     (624,621 )
      Prepaid expenses and other current assets   (33,205 )     1,914  
      Other non-current assets   (129 )     -  
    Increase (decrease) in:              
      Accounts payable   5,604,524       258,092  
      Due to related parties   521,648       35,456  
      Accrued expenses   84,161       182,533  
      Customer deposits   -       287,110  
      Obligations to clients for returns and allowances   (98,678 )     (389,058 )
      Warranty provisions   (99,237 )     (44,799 )
        Net cash used in operating activities   (1,473,229 )     (1,244,628 )
Cash flows from investing activities:              
  Purchase of property and equipment   (65,531 )     (42,157 )
        Net cash used in investing activities   (65,531 )     (42,157 )
Cash flows from financing activities:              
  Net proceeds from revolving line of credit   -       1,537,014  
  Net proceeds from subscription receivable   6,400       -  
  Payment on note payable related party - Ram Light Management, Ltd.   (138,537 )     -  
  Payments on capital lease   (1,078 )     (3,105 )
        Net cash (used in) provided by financing activities   (133,215 )     1,533,909  
Net change in cash   (1,671,975 )     247,124  
               
Cash at beginning of period   2,116,490       116,286  
Cash at end of period $ 444,515     $ 363,410  
               
Supplemental disclosures of cash flow information:              
  Cash paid for interest $ 15,027     $ 9,665  
               
See notes to the condensed consolidated financial statements.  
   

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