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Singing Machine Announces $16.8 million in Net Sales in 3rd Quarter Earnings Report.

FORT LAUDERDALE, Fla., Feb. 14, 2014 /PRNewswire/ -- The Singing Machine Company, Inc.  ("Singing Machine" or the "Company") (OTCBB: SMDM) today announced the results for its third fiscal quarter ended December 31, 2013.

The Company reported third-quarter net sales of approximately $16.8 million, as compared to net sales of approximately $16.6 million in the same quarter last year. The Company also posted quarterly pre-tax income of approximately $1.4 million for the quarter and maintained gross margin of 24.4%. For the nine months ended, the Company reported net sales of approximately $29 million as compared with $32.7 million in the same period last year. The decrease in net sales is primarily attributed to a major customer switching from a seasonal program to a year-round program in 2012 and therefore having existing inventory to start the recent holiday season.  Consequently, this customer did not need to order as much new inventory.

Bernardo Melo, VP of Sales, commented, "Due to softer sell through trends in 2012 and a slow start to the holiday season this year, a few retailers were more conservative and bought less inventory for the 2013 holiday season since they had left over inventory from the prior season. Despite that, our overall retail sales exceeded last years figures with higher sell-through reported across the board.  A couple highlights of the recent holidays season worth mentioning are: A major retailer sold 70,000 more units year-over-year on core models. A key online retailer experienced 25% growth in sales volume and increased sales dollar by 50% compared to the prior year. This success is attributed to an inventory mix that included higher price point merchandise that sold through extremely well. As higher price point goods were well received by consumer electronics enthusiasts, we are confident that we are on the right path to continued success with the market expansion of the Singing Machine Home." Melo added, "We are already off to a solid start in 2014 and have received some early commitments from existing and new customers."

Gary Atkinson, CEO, commented, "We were also pleased with the reception of our new Singing Machine Home. We saw immediate buzz by the media and demand from our early adopting fans. Sales during the pilot test of the Home exceeded the expectations of our major retail customer. We believe there is strong market demand and proof of concept to continue development and plans are already under way to expand distribution of the Home in 2014."

About The Singing Machine
Incorporated in 1982, The Singing Machine Company develops and distributes a full line of consumer-oriented karaoke machines and music under The Singing Machine™, SMDigital™, SoundX™, and Sound X Kids™ and other brand names.  The first to provide karaoke systems for home entertainment in the United States, The Singing Machine sells its products in North America, Europe and Australia. The Singing Machine is also the first to offer digital music downloads for play on home karaoke machines. 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, 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 






December 31,
2013


 March 31,
2013 




(Unaudited)


(Audited)

Assets

Current Assets






Cash 

$

2,356,028

$

1,652,996


Restricted cash


137,967


-


Accounts receivable, net of allowances of $296,732 and $180,306, respectively


6,069,648


1,100,475


Due from Crestmark Bank


212,505


-


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


284,182


291,343


Due from related party - Starlight Electronics USA, Inc.


51,196


50,501


Due from related party - Cosmo Communications Canada, Ltd


235,439


61,310


Inventories, net


5,723,801


4,123,407


Prepaid expenses and other current assets


86,318


84,441


Deferred tax asset, net


294,427


421,340


           Total Current Assets


15,451,511


7,785,813







Property and equipment, net


609,381


482,777

Other non-current assets


17,630


159,956

Deferred tax asset, net non-current portion


836,948


1,198,119


          Total Assets

$

16,915,470

$

9,626,665







Liabilities and Shareholders' Equity 

Current Liabilities






Accounts payable

$

4,214,078

$

1,135,125


Due to related party - Starlight Marketing Development, Ltd.


1,111,212


1,107,678


Subordinated related party debt - Starlight Marketing Development, Ltd.


816,753




Due to related party - Starfair Electronics Company, Ltd.


166,228


-


Subordinated related party debt - Ram Light Management, Ltd.


1,683,247


-


Due to related party - Starlight R&D, Ltd.


238,429


419,600


Due to related party - Starlight Consumer Electronics Co., Ltd.


2,927,285


585,125


Due to related parties - Other Starlight Group Companies


13,260


3,534


Accrued expenses


1,310,234


686,012


Current portion of capital lease


11,942


-


Obligations to clients for returns and allowances


355,717


376,289


Warranty provisions


773,966


215,471


        Total Current Liabilities


13,622,351


4,528,834







Long-term capital lease, net of current portion


16,776


-

Subordinated related party debt - Starlight Marketing Development, Ltd., net of current portion

-


816,753

Subordinated related party debt - Ram Light Management, Ltd.


-


1,683,247


          Total Liabilities


13,639,127


7,028,834







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, $0.01 par value;  100,000,000 shares authorized; 38,070,642 and 38,028,975 shares issued and outstanding, respectively


380,706


380,289


Additional paid-in capital


19,229,729


19,155,193


Accumulated deficit


(16,334,092)


(16,937,651)


        Total Shareholders' Equity 


3,276,343


2,597,831


        Total Liabilities and Shareholders' Equity 

$

16,915,470

$

9,626,665







The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited)



























For Three Months Ended


For Nine Months Ended





December 31,
2013


December 31,
2012


December 31,
2013


December 31,
2012























Net Sales


$  16,814,794


$  16,617,000


$  29,062,931


$  32,755,791












Cost of Goods Sold

12,707,912


12,594,626


22,251,890


24,818,560












Gross Profit

4,106,882


4,022,374


6,811,041


7,937,231












Operating Expenses









Selling expenses

1,218,688


1,445,728


2,401,528


2,945,018


General and administrative expenses

1,344,634


1,123,998


3,154,577


2,509,824


Depreciation 

54,506


24,145


112,483


90,996

Total Operating Expenses

2,617,828


2,593,871


5,668,588


5,545,838












Income from Operations

1,489,054


1,428,503


1,142,453


2,391,393












Other Expenses









Interest expense

(41,102)


(31,433)


(50,810)


(39,875)












Income before provision for income taxes

1,447,952


1,397,070


1,091,643


2,351,518












Provision for income taxes

(627,278)


-


(488,084)


-












Net Income 

$       820,674


$     1,397,070


$        603,559


$    2,351,518












Income per Common Share









Basic 

$             0.02


$              0.04


$             0.02


$             0.06


Diluted

$             0.02


$              0.04


$             0.02


$             0.06












Weighted Average Common and Common 









Equivalent Shares:









Basic and Diluted

38,070,642


37,960,794


38,053,458


37,960,794


Diluted

38,650,355


38,286,865


38,633,171


38,286,865












The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

The Singing Machine Company, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






For Nine Months Ended






December 31, 2013


December 31, 2012

















Cash flows from operating activities






Net Income 

$

603,559

$

2,351,518


Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation


112,483


90,996



Change in inventory reserve 


25,000


(110,000)



Change in allowance for bad debts


116,426


84,067



Loss from disposal of property and equipment


4,479


-



Stock based compensation


74,953


4,921



Warranty provisions


558,495


650,106



Change in net deferred tax assets


488,084


-


   Changes in operating assets and liabilities:






     (Increase) Decrease in:







Accounts receivable


(5,085,599)


(4,518,889)



Due from Crestmark Bank


(212,505)


(477,577)



Inventories


(1,625,394)


(676,495)



Prepaid expenses and other current assets


(1,877)


803



Other non-current assets


142,326


(282)


      Increase (Decrease) in:







Accounts payable 


3,078,953


2,214,862



Net due to related parties


2,172,814


2,264,154



Accrued expenses


624,222


1,678,542



Obligations to clients for returns and allowances


(20,572)


(128,069)




Net cash provided by operating activities


1,055,847


3,428,657

Cash flows from investing activities






Purchase of property and equipment


(207,178)


(148,262)


Deposit of restricted cash


(137,967)


-




Net cash used in investing activities


(345,145)


(148,262)

Cash flows from financing activities






Payments on long-term capital lease


(7,670)


-




Net cash used in financing activities


(7,670)


-

Change in cash 


703,032


3,280,395









Cash at beginning of period


1,652,996


267,465

Cash at end of period

$

2,356,028

$

3,547,860









Supplemental Disclosures of Cash Flow Information:






Cash paid for interest

$

50,810

$

39,875

 Supplemental Disclosures of Non-cash Investing Activities: 






 Property and equipment purchased under capital lease 

$

36,388

$

-









The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

SOURCE The Singing Machine Company, Inc.

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