Singing Machine Announces 47% Increase in Net Sales to $15.9 Million in Second Quarter Earnings Release.

Singing Machine Announces 47% Increase in Net Sales to $15.9 Million in Second Quarter Earnings Release.

FORT LAUDERDALE, Fla., Nov. 14, 2014 /PRNewswire/ -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) announces the results for its second fiscal quarter ended September 30, 2014 ("September Quarter").

For the September Quarter, the Company reported net sales of approximately $16.0 million compared to $10.8 million in the same quarter last year, an increase of approximately $5.1 million or 47%. The increase in net sales was primarily attributable to new distribution with Wal-Mart retail stores nationwide and the expanded product assortment with two major wholesale club retailers. Gross margins decreased for the quarter from 22.2% to 19.8% as compared to the same quarter last year. The reduced gross margin for the quarter was primarily a result of shipping a higher mix of product for special November Black Friday programs. Total operating expenses increased to approximately $2.6 million, compared to approximately $1.8 million in the same quarter last year. The increase in operating expenses of $0.3 million was a result of higher variable selling expenses due to the increase in net sales and also an investment into promotional fixture displays. There was also an increase of approximately $0.3 million in the Company's general and administrative expenses. The increase in G&A expenses was due to increase in payroll expenses and increase in warehouse supplies and temporary labor for building special December pallet displays for the holiday season.

Income from operations for the September Quarter was $579,449 up from $519,839 in the same quarter last year. Interest expense increased in the September Quarter compared to the prior year due to greater borrowings to finance inventory and receivables growth. Net income for the September Quarter was $321,171 compared to $323,951 in the prior year.

Gary Atkinson, Company CEO, commented, "These financial results reflect Management's decision to invest in the future for long term growth. With this fiscal second quarter, Singing Machine is beginning to show the sales growth we anticipated from expanding our product assortment carried by major customers and our new relationship with Wal-Mart Stores. With Wal-Mart, the Company gains exposure to almost 3,700 Wal-Mart store-fronts and expanded Singing Machine brand awareness among their consumer base. We believe in the long-term benefit of Wal-Mart carrying our product and are optimistic that this year's marketing program will be a hit among Wal-Mart's consumers and that we can build and develop the relationship for the coming years."

Atkinson added, "During this second quarter, Management also made a decision to invest in prime end-cap space display fixtures with working demos of our products on display at almost 800 Toys 'R' Us stores nationwide for the fall and holiday selling season. We are confident that this investment decision, which was expensed in the second quarter, will help make our karaoke products more of a top-of-mind buying decision for consumers that are looking for musically educational products that are fun, entertaining, and involve social activities for the holiday season. Finally, our investors should note that we are experiencing continued sales growth into our current third quarter as the Company continues to fulfill demand for the holiday season. We look forward to reporting our Q3 results in February."

About The Singing Machine
Based in the US, Singing Machine® is the North American leader in consumer karaoke products. 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 has over 32 years of history offering quality products that incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine sells its products through major retailers in North America and also internationally. For more information on Singing Machine, visit www.singingmachine.com.

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, 2013. 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.

(Financial statements attached)




The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS


September 30, March 31,
2014 2014
---- ----

(Unaudited) (Audited)

Assets
------

Current Assets

Cash $174,314 $1,354,099

Restricted cash 138,042 138,042

Accounts receivable, net of allowances of $235,621 and

$172,465, respectively 8,952,305 955,551

Due from Crestmark Bank - 19,638

Due from related party - Starlight Consumer Electronics USA, Inc. - 233,004

Due from related party - Starlight Electronics USA, Inc. - 51,196

Due from related party - Starlight Electronics Co., Ltd 43,320 83,320

Due from related party - Cosmo Communications Canada, Inc. 197,547 -

Due from related party - Winglight Pacific, Ltd 973,172 -

Inventories, net 15,057,895 5,827,613

Prepaid expenses and other current assets 158,866 91,088

Deferred financing costs 74,078 -

Deferred tax asset, net 715,541 604,284

Total Current Assets 26,485,080 9,357,835


Property and equipment, net 532,034 561,225

Other non-current assets 11,394 17,630

Deferred financing costs, net current portion 132,721 -

Deferred tax asset, net current portion 1,793,972 1,793,972
--------- ---------

Total Assets $28,955,201 $11,730,662



Liabilities and Shareholders' Equity
------------------------------------

Current Liabilities

Accounts payable $11,357,205 $1,918,076

Due to related party - Starlight Marketing Development, Ltd. - 1,107,678

Subordinated related party debt - Starlight Marketing Development, Ltd. - 816,753

Note payable related party - Ram Light Management, Ltd. 393,039 -

Subordinated related party debt - Ram Light Management, Ltd. - 1,683,247

Due to related party - Ram Light Management, Ltd 583,247 -

Due to related party - Starfair Electronics Company, Ltd. - 17,738

Due to related party - Starlight R&D, Ltd. 2,489,234 194,678

Due to related party - Cosmo Communications Canada, Inc. - 50,441

Due to related party - Starlight Consumer Electronics Co., Ltd. 399,063 1,051,913

Due to related parties - Other Starlight Group Companies 2,579 3,534

Accrued expenses 1,158,599 446,314

Revolving Line of Credit 5,350,881 -

Current portion of capital lease 12,349 12,076

Obligations to clients for returns and allowances 468,878 469,838

Warranty provisions 528,031 235,172


Total Current Liabilities 22,743,105 8,007,458


Long-term capital lease, net of current portion 7,462 13,706

Note payable related party debt - Ram Light Management, Ltd.

net of current portion 706,961 -

Subordinated related party debt - Starlight Marketing Development, Ltd. 1,924,431 -

Total Liabilities 25,381,959 8,021,164



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 38,070,642 shares issued and outstanding, respectively 381,175 380,706

Additional paid-in capital 19,303,760 19,262,127

Accumulated deficit (16,111,693) (15,933,335)


Total Shareholders' Equity 3,573,242 3,709,498

Total Liabilities and Shareholders' Equity $28,955,201 $11,730,662



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 For Six Months Ended
---------------------- --------------------

September 30, September 30, September 30, September 30,
2014 2013 2014 2013
---- ---- ---- ----



Net Sales $15,952,059 $10,834,570 $18,497,018 $12,248,137


Cost of Goods Sold 12,790,291 8,431,835 14,819,359 9,543,978
---------- --------- ---------- ---------


Gross Profit 3,161,768 2,402,735 3,677,659 2,704,159


Operating Expenses

Selling
expenses 1,266,767 902,066 1,612,034 1,182,840

General and
administrative
expenses 1,267,246 950,171 2,196,118 1,809,942

Depreciation
and
amortization 48,306 30,659 77,637 57,977

Total Operating Expenses 2,582,319 1,882,896 3,885,789 3,050,759
--------- --------- --------- ---------


Income (Loss) from
Operations 579,449 519,839 (208,130) (346,600)


Other Expenses

Interest
expense (79,644) (8,741) (81,485) (9,709)
---------


Income (Loss) before income
tax (provision) benefit 499,805 511,098 (289,615) (356,309)


Income tax (provision)
benefit (178,634) (187,147) 111,257 139,194
-------- -------- ------- -------


Net Income (Loss) $321,171 $323,951 $(178,358) $(217,115)
======== ======== ========= =========


Income (Loss) per Common Share

Basic $0.01 $0.01 $ - $(0.01)

Diluted $0.01 $0.01 $ - $(0.01)


Weighted Average Common and Common

Equivalent
Shares:

Basic 38,083,663 38,060,569 38,077,116 38,044,772

Diluted 38,538,510 38,590,502 38,077,116 38,044,772


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, 2014 September 30, 2013
------------------ ------------------



Cash flows from operating activities:

Net Loss $(178,358) $(217,115)

Adjustments to
reconcile net
loss to net cash
used in
operating
activities:

Depreciation 62,204 57,977

Amortization
of deferred
financing
costs 15,433 -

Change in
inventory
reserve 50,000 150,000

Change in
allowance
for bad
debts 63,156 42,552

Loss from
disposal of
property and
equipment - 4,479

Stock based
compensation 42,103 22,275

Warranty
provisions 292,859 149,996

Change in net
deferred tax
assets (111,257) (139,194)

Changes in
operating assets
and liabilities:

(Increase)
Decrease in:

Accounts
receivable (8,059,910) (6,855,720)

Inventories (9,280,282) (5,498,065)

Prepaid
expenses and
other
current
assets (67,778) (103,143)

Other non-
current
assets 6,236 142,326

Increase
(Decrease) in:

Accounts
payable 9,439,129 6,238,600

Net due to
related
parties 726,052 3,608,279

Accrued
expenses 712,285 471,094

Obligations
to clients
for returns
and
allowances (960) 12,178

Net cash used in operating
activities (6,289,088) (1,913,481)
---------- ----------

Cash flows from investing activities:

Purchase of
property and
equipment (33,013) (154,179)

Deposit of
restricted cash - (137,967)

Net cash used in investing
activities (33,013) (292,146)
------- --------

Cash flows from financing activities:

Net proceeds from
revolving line
of credit 5,350,881 -

Net proceeds from
Crestmark Bank
credit facility 19,638 1,566,278

Payment of
deferred
financing costs (222,232) -

Payments on long-
term capital
lease (5,971) (4,767)

Net cash provided by
financing activities 5,142,316 1,561,511
--------- ---------

Net decrease in cash (1,179,785) (644,116)


Cash at beginning of year 1,354,099 1,652,996
--------- ---------

Cash at end of period $174,314 $1,008,880



Supplemental Disclosures of Cash Flow
Information:

Cash paid for
interest $63,205 $9,709


Supplemental Disclosures of Non-cash
Investing Activities:

Property and
equipment
purchased under
capital lease $ - $36,388
===


See notes to the condensed consolidated financial statements.


SOURCE The Singing Machine Company, Inc.

The Singing Machine Company, Inc.

CONTACT: Company, Gary Atkinson, (954) 596 - 1000, GaryAtkinson at singingmachine.com

Web Site: http://www.singingmachine.com


-------
Profile: intent