SOURCE: The Singing Machine Company, Inc.

The Singing Machine Company, Inc.

November 12, 2015 06:00 ET

Singing Machine Company Announces Record Sales, Record Profit in 2nd Quarter Ended September 30 Earnings Release

FORT LAUDERDALE, FL--(Marketwired - Nov 12, 2015) -  The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) announces the financial results for its second fiscal quarter ended September 30, 2015.

Singing Machine reports net sales of approximately $21.1 million in its second fiscal quarter ended September 30, 2015, up from approximately $16.0 million reported for the same period last year (an increase of 32%). The increase in net sales was attributable to increase in sales to its international distributors as well as an increase in sales to the Company's top three retailers. Gross margin increased to 23.5% compared to 19.8% in the same quarter in 2014 as a result of more favorable pricing and sales volume, reflected in gross profits of approximately 5.0 million up from $3.2 million in the prior year (a 56% increase in gross profits). 

Operating expenses in the quarter ended September 30 were $3.1 million compared to $2.6 million in the same quarter of 2014. This increase was the result of an increase in selling expenses due to the increased sales volume. General and administrative expenses remained relatively flat at approximately $1.2 million, similar to the same quarter last year.

As a result the Company reports income from operations of approximately $1.9 million in the September 2015 quarter, compared to approximately $0.6 million in the prior year. The Company reports September 2015 quarter net income of approximately $1.1 million (or $0.03 cents per share), compared to approximately $0.3 million (or $0.01 per share) in the same quarter last year.

Through the first six months of its fiscal year, the Company also reports net sales of approximately $24.5 million and income from operations of approximately $1.1 million, compared to net sales and a loss from operations in the same six-month period last year of approximately $18.5 million and $0.2 million, respectively.

Gary Atkinson, CEO, commented, "Our results continue to reflect Singing Machine's dominance in the North American consumer karaoke machine market and the rising popularity of karaoke. We attribute several factors to our double digit sales growth rate -- the entertainment and educational value of karaoke; the breadth and quality of our product offering over a wide range of price points; the ease afforded by our machines for set up, use, recording and sharing of performances; and the ability and affordability of downloading and streaming music inexpensively using our karaoke store. We also have the industry's best roster of retailers carrying our products, now numbering over 25,000 brick and mortar storefronts as well as leading on-line venues for this holiday season. With the current order visibility we have for the quarter ending December, we anticipate continued sales growth 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
 
      September 30, 2015     March 31, 2015
      (Unaudited)      
Assets              
Current Assets            
  Cash   $ 445,312   $ 116,286
  Accounts receivable, net of allowances of $125,390 and $174,131, respectively     16,972,702     1,466,168
  Due from PNC Bank     -     137,415
  Due from related party - Cosmo Communications Canada, Ltd     420,088     -
  Due from related party - Winglight Pacific, Ltd     1,171,169     -
  Inventories, net     9,549,247     7,448,167
  Prepaid expenses and other current assets     188,324     92,609
  Deferred financing costs     74,077     74,077
  Deferred tax asset, net     347,458     449,274
    Total Current Assets     29,168,377     9,783,996
             
Property and equipment, net     521,423     466,571
Other non-current assets     11,394     11,394
Deferred financing costs, net of current portion     58,644     95,683
Deferred tax asset, net of current portion     1,583,403     1,856,281
    Total Assets   $ 31,343,241   $ 12,213,925
             
Liabilities and Shareholders' Equity              
Current Liabilities            
  Accounts payable   $ 9,262,726   $ 2,767,180
  Note payable related party - Ram Light Management, Ltd.     967,544     496,496
  Due to related party - Ram Light Management, Ltd     583,247     583,247
  Due to related party - Starlight Electronics Co., Ltd     2,721,293     -
  Due to related party - Starlight R&D, Ltd.     393,886     554,031
  Due to related party - Cosmo Communications Canada, Inc.     -     40,256
  Due to related party - Starlight Consumer Electronics Co., Ltd.     23,951     208,672
  Accrued expenses     1,679,010     452,651
  Revolving line of credit     8,540,889     -
  Current portion of capital lease     7,462     12,628
  Customer deposits     91,157     -
  Obligations to customers for returns and allowances     5,410     399,419
  Warranty provisions     627,531     197,873
    Total Current Liabilities     24,904,106     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     -     603,504
Accrued expenses, net of current portion     -     46,495
Subordinated related party debt - Starlight Marketing Development, Ltd.     1,924,431     1,924,431
    Total Liabilities     26,828,537     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; 38,161,635 and 38,117,517 shares issued and outstanding, respectively     381,616     381,175
               
               
               
The Singing Machine Company, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
                 
                 
  For Three Months Ended   For Six Months Ended  
  September 30, 2015   September 30, 2014   September 30, 2015   September 30, 2014  
                         
                         
Net Sales $ 21,060,584   $ 15,952,059   $ 24,527,458   $ 18,497,018  
                         
Cost of Goods Sold   16,109,943     12,790,291     18,718,396     14,819,359  
                         
Gross Profit   4,950,641     3,161,768     5,809,062     3,677,659  
                         
Operating Expenses                        
  Selling expenses   1,831,235     1,266,767     2,288,962     1,612,034  
  General and administrative expenses   1,202,256     1,267,246     2,304,237     2,196,118  
  Depreciation   37,332     32,873     74,665     62,204  
Total Operating Expenses   3,070,823     2,566,886     4,667,864     3,870,356  
                         
Income (Loss) from Operations   1,879,818     594,882     1,141,198     (192,697 )
                         
Other Expenses                        
  Interest expense   (102,806 )   (79,644 )   (152,918 )   (81,485 )
  Financing costs   (18,520 )   (15,433 )   (37,039 )   (15,433 )
Total Other Expenses   (121,326 )   (95,077 )   (189,957 )   (96,918 )
                         
Income (Loss) Before Income Tax (Provision) Benefit   1,758,492     499,805     951,241     (289,615 )
                         
Income Tax (Provision) Benefit   (687,019 )   (178,634 )   (374,694 )   111,257  
                         
Net Income (Loss) $ 1,071,473   $ 321,171   $ 576,547   $ (178,358 )
                         
Income (Loss) per Common Share                        
  Basic $ 0.03   $ 0.01     0.02   $ 0.00  
  Diluted $ 0.03   $ 0.01     0.01   $ 0.00  
                         
Weighted Average Common and Common                        
Equivalent Shares:                        
  Basic   38,141,974     38,083,663     38,129,812     38,077,116  
  Diluted   38,629,328     38,538,510     38,613,732     38,077,116  
                         
See notes to the condensed consolidated financial statements.  
   
   
   
The Singing Machine Company, Inc. and Subsidiaries  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
      For Six Months Ended  
      September 30, 2015       September 30, 2014  
                 
                 
Cash flows from operating activities:                
  Net Income (Loss)   $ 576,547     $ (178,358 )
  Adjustments to reconcile net income (loss) to net cash used in operating activities:                
      Depreciation     74,665       62,204  
      Amortization of deferred financing costs     37,039       15,433  
      Change in inventory reserve     112,440       50,000  
      Change in allowance for bad debts     (48,741 )     63,156  
      Stock based compensation     12,193       42,103  
      Warranty provisions     429,658       292,859  
      Change in net deferred tax assets     374,694       (111,257 )
  Changes in operating assets and liabilities:                
    (Increase) decrease in:                
      Accounts receivable     (15,457,793 )     (8,059,910 )
      Inventories     (2,213,520 )     (9,280,282 )
      Prepaid expenses and other current assets     (95,715 )     (67,778 )
      Other non-current assets     -       6,236  
    Increase (decrease) in:                
      Accounts payable     6,495,546       9,439,129  
      Net due to related parties     744,914       726,052  
      Accrued expenses     1,179,864       712,285  
      Customer deposits     91,157       -  
      Obligations to customers for returns and allowances     (394,009 )     (960 )
        Net cash used in operating activities     (8,081,061 )     (6,289,088 )
Cash flows from investing activities:                
  Purchase of property and equipment     (129,517 )     (33,013 )
        Net cash used in investing activities     (129,517 )     (33,013 )
Cash flows from financing activities:                
  Net proceeds from revolving line of credit     8,678,304       5,370,519  
  Payment on note payable related party - Ram Light Management, Ltd. (132,456 )     -  
  Payment of deferred financing costs     -       (222,232 )
  Payments on long-term capital lease     (6,244 )     (5,971 )
        Net cash provided by financing activities     8,539,604       5,142,316  
Net change in cash     329,026       (1,179,785 )
                 
Cash at beginning of period     116,286       1,354,099  
Cash at end of period   $ 445,312     $ 174,314  
                 
Supplemental disclosures of cash flow information:                
  Cash paid for interest   $ 58,808     $ 63,205  
                 
See notes to the condensed consolidated financial statements.  
                 

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