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SOURCE: The Singing Machine Company, Inc.
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SOURCE: The Singing Machine Company, Inc.
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August 14, 2017 07:00 ET
FORT LAUDERDALE, FL--(Marketwired - Aug 14, 2017) - The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (
First Quarter Highlights:
Singing Machine reports net sales of approximately $3.9 million for the quarter-ended June 30, 2017 period, a decrease of 19% from the prior year ($4.9 million). The decrease in net sales was primarily a timing issue of special promotional product that shipped early last year in the first quarter but was moved to second quarter of the current fiscal year.
Gross profit margin increased by approximately 3.9% to 27.4% net sales compared to approximately 23.5% of net sales reported in the prior year. The increase in gross profit margin is due to the mix of shipments containing less promotional product compared to last year.
Total operating expenses increased to $1.9 million compared to $1.7 million in the prior year.
As a result, the Company reported an increase of approximately $220,000 in loss from operations to $790,000 compared to a loss from operations of approximately $570,000 in the same period in the prior year. Net loss for the period increased to $527,000 compared to $437,000 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, "Despite a drop in Q1 net sales, we're still very happy with our progress this fiscal year. We managed to increase gross margin by almost 4% and remain confident about our growth plans for the balance of the fiscal year. Our decline in sales this quarter was the result of retailers requesting more "just-in-time" delivery of promotional product which shifted the bulk of these sales to our second quarter."
Atkinson added, "With the recent addition of Best Buy brick and mortar stores, we move into our peak season with the best and biggest names of retail partners and the largest market share for consumer karaoke products in North America. We also enter our second quarter with a backlog of orders for our new line of SMC Kids toy products, which are being well received by our customers and retailers."
Earnings Call Information:
The Company will host a conference call today, Monday, 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.
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, 2017. 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, 2017 | March 31, 2017 | |||||||||
| (Unaudited) | ||||||||||
| Assets | ||||||||||
| Current Assets | ||||||||||
| Cash | $ | 430,944 | $ | 2,305,439 | ||||||
| Accounts receivable, net of allowances of $126,555 and $132,853, respectively | 2,762,249 | 1,655,518 | ||||||||
| Due from PNC Bank | - | 242,859 | ||||||||
| Accounts receivable related party - Cosmo Communications Canada, Ltd | 241,128 | - | ||||||||
| Accounts receivable related party - Winglight Pacific, Ltd | 310,772 | - | ||||||||
| Accounts receivable related party - other | 5,747 | - | ||||||||
| Inventories, net | 8,661,876 | 5,426,346 | ||||||||
| Prepaid expenses and other current assets | 397,621 | 81,278 | ||||||||
| Deferred financing costs | 13,333 | 21,606 | ||||||||
| Total Current Assets | 12,823,670 | 9,733,046 | ||||||||
| Property and equipment, net | 554,928 | 412,805 | ||||||||
| Other non-current assets | 11,523 | 11,523 | ||||||||
| Deferred financing costs, net of current portion | 26,667 | - | ||||||||
| Deferred tax asset | 1,762,335 | 1,479,209 | ||||||||
| Total Assets | $ | 15,179,123 | $ | 11,636,583 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable | $ | 4,522,451 | $ | 1,381,870 | ||||||
| Current portion of bank term note payable | 500,000 | - | ||||||||
| Due to related party - Starlight Electronics Co., Ltd | 79,824 | - | ||||||||
| Due to related party - Merrygain Holding Co., Ltd | 38,487 | - | ||||||||
| Due to related party - Starlight Consumer Electronics Co., Ltd. | 31,476 | - | ||||||||
| Accrued expenses | 726,287 | 626,331 | ||||||||
| Revolving line of credit | 683,986 | - | ||||||||
| Obligations to customers for returns and allowances | 108,175 | 38,460 | ||||||||
| Warranty provisions | 93,989 | 223,700 | ||||||||
| Current portion of subordinated related party debt - Starlight Marketing Development, Ltd. | 446,406 | 1,924,431 | ||||||||
| Total Current Liabilities | 7,231,081 | 4,194,792 | ||||||||
| Bank term note payable, net of current portion | 500,000 | - | ||||||||
| Subordinated related party debt - Starlight Marketing Development, Ltd., net of current portion | 478,025 | - | ||||||||
| Total Liabilities | 8,209,106 | 4,194,792 | ||||||||
| 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; 38,259,303 and 38,259,303 shares issued and outstanding, respectively | 382,593 | 382,593 | ||||||||
| Additional paid-in capital | 19,468,024 | 19,412,787 | ||||||||
| Accumulated deficit | (12,880,600 | ) | (12,353,589 | ) | ||||||
| Total Shareholders' Equity | 6,970,017 | 7,441,791 | ||||||||
| Total Liabilities and Shareholders' Equity | $ | 15,179,123 | $ | 11,636,583 | ||||||
| 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, 2017 | June 30, 2016 | |||||||
| Net Sales | $ | 3,939,733 | $ | 4,859,392 | ||||
| Cost of Goods Sold | 2,860,584 | 3,715,709 | ||||||
| Gross Profit | 1,079,149 | 1,143,683 | ||||||
| Operating Expenses | ||||||||
| Selling expenses | 463,747 | 424,878 | ||||||
| General and administrative expenses | 1,359,231 | 1,246,851 | ||||||
| Depreciation | 43,213 | 43,795 | ||||||
| Total Operating Expenses | 1,866,191 | 1,715,524 | ||||||
| Loss from Operations | (787,042 | ) | (571,841 | ) | ||||
| Other Expenses | ||||||||
| Interest expense | (283 | ) | (16,027 | ) | ||||
| Financing costs | (21,606 | ) | (18,519 | ) | ||||
| Total Other Expenses | (21,889 | ) | (34,546 | ) | ||||
| Loss Before Income Tax Benefit | (808,931 | ) | (606,387 | ) | ||||
| Income Tax Benefit | 281,921 | 169,314 | ||||||
| Net Loss | (527,010 | ) | $ | (437,073 | ) | |||
| Loss per Common Share | ||||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
| Weighted Average Common and Common | ||||||||
| Equivalent Shares: | ||||||||
| Basic and Diluted | 38,259,303 | 38,181,635 | ||||||
| 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, 2017 | June 30, 2016 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net Loss | $ | (527,010 | ) | $ | (437,073 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Depreciation | 43,213 | 43,795 | ||||||||
| Amortization of deferred financing costs | 21,606 | 18,519 | ||||||||
| Change in inventory reserve | (375,000 | ) | 66,000 | |||||||
| Change in allowance for bad debts | (6,028 | ) | 23,319 | |||||||
| Stock based compensation | 55,237 | 9,329 | ||||||||
| Change in net deferred tax asset | (283,126 | ) | (198,588 | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||
| (Increase) decrease in: | ||||||||||
| Accounts receivable | (1,100,703 | ) | (2,092,830 | ) | ||||||
| Due from PNC Bank | 242,859 | 183,531 | ||||||||
| Accounts receivable - related parties | (557,647 | ) | (325,333 | ) | ||||||
| Inventories | (2,860,530 | ) | (4,742,982 | ) | ||||||
| Prepaid expenses and other current assets | (316,343 | ) | (33,205 | ) | ||||||
| Other non-current assets | - | (129 | ) | |||||||
| Increase (decrease) in: | ||||||||||
| Accounts payable | 3,140,580 | 5,604,524 | ||||||||
| Due to related parties | 149,787 | 521,648 | ||||||||
| Accrued expenses | 99,956 | 84,161 | ||||||||
| Obligations to clients for returns and allowances | 69,715 | (98,678 | ) | |||||||
| Warranty provisions | (129,711 | ) | (99,237 | ) | ||||||
| Net cash used in operating activities | (2,333,145 | ) | (1,473,229 | ) | ||||||
| Cash flows from investing activities: | ||||||||||
| Purchase of property and equipment | (185,336 | ) | (65,531 | ) | ||||||
| Net cash used in investing activities | (185,336 | ) | (65,531 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Net proceeds from revolving line of credit | 683,986 | - | ||||||||
| Proceeds from bank term note | 1,000,000 | - | ||||||||
| Proceeds from exercise of stock options | - | 6,400 | ||||||||
| Payment of deferred financing costs | (40,000 | ) | - | |||||||
| Payment on note payable related party - Ram Light Management, Ltd. | - | (138,537 | ) | |||||||
| Payment on subordinated debt - related party | (1,000,000 | ) | - | |||||||
| Payments on capital lease | - | (1,078 | ) | |||||||
| Net cash provided by (used in) financing activities | 643,986 | (133,215 | ) | |||||||
| Net change in cash | (1,874,495 | ) | (1,671,975 | ) | ||||||
| Cash at beginning of period | 2,305,439 | 2,116,490 | ||||||||
| Cash at end of period | $ | 430,944 | $ | 444,515 | ||||||
| Supplemental disclosures of cash flow information: | ||||||||||
| Cash paid for interest | $ | 283 | $ | 15,027 | ||||||
| Cash paid for income taxes | $ | 30,000 | $ | - | ||||||
| See notes to the condensed consolidated financial statements. | ||||||||||
