Singing Machine Announces Financial Results for Full Fiscal Year Ended 2023

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Fort Lauderdale, FL, July 14, 2023 (GLOBE NEWSWIRE) — The Singing Machine Company, Inc. (the “Singing Machine” or the “Company”) (NASDAQ: MICS) — the worldwide leader in consumer karaoke products — today released its results of operations for the fiscal year ended March 31, 2023. Financial highlights were as follows:

  • Revenues for the 12 months ended March 31, 2023 were $39.3 million, as compared to $47.5 million for the same period in the prior year. The 17.3% decrease was largely due to a comparatively slower holiday retail season in North America as inflation, higher interest rates and overall economic conditions led to slower retail sales;
  • Gross margins improved to 23.4% for fiscal 2023, as compared to 22.8% for the prior fiscal year. The improvement was largely the result of cost rationalizations and lower logistics costs post COVID. These improvements were partially offset by higher labor costs and fuel costs;
  • Operating expenses were $12.9 million for the 12 months ended March 31, 2023, as compared to $10.7 million for the same period in the prior year, an increase of 20.6%. Half of the $2.2 million increase represented expenses due to non-recurring transactions during the fiscal year, resulting in higher overall general and administrative expenses. The Company completed two capital raises and a successful uplisting to Nasdaq during fiscal 2023, resulting in approximately $1.1 million in one-time expenses. Excluding these items, operating expenses were $11.8 million, a 10.3% increase, as the Company added additional staffing resources to support new marketing and growth initiatives; and
  • The overall balance sheet improved significantly during the fiscal year 2023. Cash on hand improved to $2.8 million at March 31, 2023. The Company reduced its overall working capital investments by approximately $5.2 million during the year as the management team focused heavily on inventory management and building a more liquid short-term capital position.
  • The Company also heavily reduced its short-term liabilities. Current liabilities at March 31, 2023 decreased 49%, from $12.0 million at March 31, 2022 to $6.1 million at fiscal 2023 year-end. As a result, the Company had no short-term debt and 67% less trade payables at fiscal year-end.

“Fiscal 2023 includes a number of major milestones for our team and the Company,” commented Gary Atkinson, CEO of the Singing Machine. “Our public offering and uplisting onto the Nasdaq in May 2022 was a major accomplishment, and it has enabled us to significantly upgrade our access to growth capital since. This flexibility has already proved very useful as we executed a cost-effective at-the-market offering that was concluded in May of 2023. This has enabled our team to begin investing in several promising growth initiatives for fiscal 2024 and beyond, which we look forward to sharing with stockholders over the coming months.”

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“While we executed very well on virtually all fronts that were within our control, we were confronted by a backlog of inventory at the retail level during calendar 2022 caused by the supply chain bottleneck,” stated Atkinson. “This over-supply of inventory, together with lower overall economic demand during the holiday season, caused many of our retail customers to take a more conservative approach to stocking inventory last year. As these developments unfolded, we aggressively sought to control costs, invest carefully, and leverage our growth initiatives during the second half of the fiscal year as we began to turn our attention to the 2024 fiscal period.”

“As the premier in-home karaoke device manufacturer in North America, we are fortunate to hold a majority market share. However, there are additional areas of growth internationally, as well as new segments of the domestic karaoke industry that we are eager to penetrate. Please join us on our earnings call to hear more on what we feel are some exciting new opportunities for our Company,” concluded Mr. Atkinson.

About The Singing Machine

Singing Machine is the worldwide leader in consumer karaoke products. Based in Fort Lauderdale, Florida, and founded over forty years ago, the Company designs and distributes the industry’s widest assortment of at-home and in-car karaoke entertainment products. Their portfolio is marketed under both proprietary brands and popular licenses, including Carpool Karaoke and Sesame Street. Singing Machine products incorporate the latest technology and provide access to over 100,000 songs for streaming through its mobile app and select WiFi-capable products. Singing Machine is also developing the world’s first fully integrated in-car karaoke system. The Company also has a new philanthropic initiative, CARE-eoke by Singing Machine, to focus on the social impact of karaoke for children and adults of all ages who would benefit from singing. Their products are sold in over 25,000 locations worldwide, including Amazon, Costco, Sam’s Club, Target, and Walmart. To learn more, go to www.singingmachine.com.

Investor Relations Contact:
[email protected]
www.singingmachine.com
www.singingmachine.com/investors

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “may”, “could”, “expects”, “projects,” “intends”, “plans”, “believes”, “predicts”, “anticipates”, “hopes”, “estimates” and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon several assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the Company’s control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described in the Company’s filings with the Securities and Exchange Commission. The forward-looking statements are applicable only as of the date on which they are made, and the Company does not assume any obligation to update any forward-looking statements.

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS

    March 31, 2023     March 31, 2022  
             
Assets                
Current Assets                
Cash   $ 2,894,574     $ 2,290,483  
Accounts receivable, net of allowances of $165,986 and $122,550, respectively     2,075,086       2,785,038  
Due from Crestmark Bank           100,822  
Accounts receivable related party – Stingray Group, Inc.     218,328       152,212  
Accounts receivable related party – Ault Alliance, Inc.     20,750        
Inventories, net     9,639,992       14,161,636  
Prepaid expenses and other current assets     266,068       344,409  
Deferred financing costs     84,667       7,813  
Total Current Assets     15,199,465       19,842,413  
                 
Property and equipment, net     633,207       565,094  
Deferred financing costs, net of current portion     130,528        
Deferred tax assets           892,559  
Operating Leases – right of use assets     561,185       1,279,347  
Other non-current assets     124,212       86,441  
Total Assets   $ 16,648,597     $ 22,665,854  
                 
Liabilities and Shareholders’ Equity                
Current Liabilities                
Accounts payable   $ 1,769,348     $ 5,328,215  
Accrued expenses     2,265,424       1,732,355  
Due to related party – Starlight Consumer Electronics Co., Ltd.           14,400  
Due to related party – Starlight R&D, Ltd.           48,650  
Revolving lines of credit           2,500,000  
Refunds due to customers     583,323       97,968  
Reserve for sales returns     900,000       990,000  
Current portion of finance leases     18,162       7,605  
Current portion of installment notes     80,795       74,300  
Current portion of operating lease liabilities     508,515       876,259  
Subordinated note payable – Starlight Marketing Development, Ltd.           352,659  
Total Current Liabilities     6,125,567       12,022,411  
                 
Finance leases, net of current portion     46,142       10,620  
Installment notes, net of current portion     57,855       138,649  
Operating lease liabilities, net of current portion     87,988       457,750  
Total Liabilities     6,317,552       12,629,430  
                 
Commitments and Contingencies                
                 
Shareholders’ Equity                
Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding            
Common stock $0.01 par value; 100,000,000 shares authorized; 3,184,439 shares issued, 3,167,489 shares outstanding and 1,221,209 shares issued and outstanding, respectively     31,675       12,212  
Additional paid-in capital     29,822,205       24,902,694  
Subscriptions receivable     (5,891 )      
Accumulated deficit     (19,516,944 )     (14,878,482 )
Total Shareholders’ Equity     10,331,045       10,036,424  
Total Liabilities and Shareholders’ Equity   $ 16,648,597     $ 22,665,854  


See notes to the consolidated financial statements

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS

    For the Twelve Months Ended  
    March 31, 2023     March 31, 2022  
             
Net Sales   $ 39,299,280     $ 47,512,161  
                 
Cost of Goods Sold     30,090,686       36,697,383  
                 
Gross Profit     9,208,594       10,814,778  
                 
Operating Expenses                
Selling expenses     3,441,975       3,588,276  
General and administrative expenses     9,236,899       6,911,377  
Depreciation     228,004       245,890  
Total Operating Expenses     12,906,878       10,745,543  
                 
(Loss) Income from Operations     (3,698,284 )     69,235  
                 
Other Income (Expense), net                
Gain from Paycheck Protection Plan loan forgiveness           448,242  
Gain – related party           11,236  
Gain from Employee Retension Credit Program refund     704,297        
Gain from settlement of accounts payable     48,650       339,311  
Loss from extinguishment of debt     (183,333 )      
Interest expense     (432,700 )     (535,202 )
Finance costs     (46,618 )     (45,047 )
Total Other Income (Expense), net     90,296       218,540  
                 
(Loss) Income Before Income Tax (Provision)     (3,607,988 )     287,775  
                 
Income Tax (Provision)     (1,030,474 )     (57,304 )
                 
Net (Loss) Income   $ (4,638,462 )   $ 230,471  
                 
Net (Loss) Income per Common Share                
Basic   $ (1.65 )   $ 0.14  
Diluted   $ (1.65 )   $ 0.14  
                 
Weighted Average Common and Common Equivalent Shares:                
Basic     2,811,872       1,614,506  
Diluted     2,811,872       1,623,397  


See notes to the consolidated financial statements

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the Twelve Months Ended  
    March 31, 2023     March 31, 2022  
             
Cash flows from operating activities                
Net (Loss) Income   $ (4,638,462 )   $ 230,471  
Adjustments to reconcile net (loss) income to net cash used in operating activities:                
Depreciation     228,004       245,890  
Amortization of deferred financing costs     46,618       45,047  
Change in inventory reserve     535,553       (271,892 )
Change in allowance for bad debts     43,436       (16,030 )
Loss from disposal of property and equipment     2,565       4,394  
Stock based compensation     381,826       44,287  
Change in net deferred tax assets     892,559       (5,395 )
Loss on debt extinguishment     183,333        
Paycheck Protection Plan loan forgiveness           (448,242 )
Gain – related party           (11,236 )
Gain from extinguishment of accounts payable     (48,650 )     (339,311 )
Changes in operating assets and liabilities:                
Accounts receivable     666,516       (558,127 )
Due from banks     100,822       4,456,298  
Accounts receivable – related parties     (86,866 )     (64,171 )
Inventories     3,986,091       (8,399,489 )
Prepaid expenses and other current assets     78,341       (123,338 )
Other non-current assets     (37,771 )     60,732  
Accounts payable     (3,510,217 )     3,217,659  
Accrued expenses     533,069       77,198  
Due to related parties     (63,050 )      
Customer deposits           (139,064 )
Refunds due to customers     485,355       (47,440 )
Reserve for sales returns     (90,000 )     30,000  
Operating lease liabilities, net of operating leases – right of use assets     (19,344 )     (171 )
Net cash used in operating activities     (330,272 )     (2,011,930 )
Cash flows from investing activities                
Purchase of property and equipment     (243,729 )     (117,573 )
Net cash used in investing activities     (243,729 )     (117,573 )
Cash flows from financing activities                
Proceeds from Issuance of stock – net of transaction expenses     3,362,750       9,000,579  
Proceeds from Issuance of stock – at the market offering     30,522        
Payment of redemption and retirement of treasury stock           (7,162,451 )
Net (payment) proceeds from revolving lines of credit     (2,500,000 )     2,435,085  
Payment of deferred financing charges     (254,000 )     (37,501 )
Payment of early termination fees on revolving lines of credit     (183,333 )      
Payments on installment notes     (74,299 )     (68,332 )
Proceeds from exercise of stock options           14,000  
Proceeds from exercise of pre-funded warrants     168,334        
Proceeds from exercise of common warrants     989,651        
Payment on subordinated note payable     (352,659 )     (150,000 )
Payments on finance leases     (8,874 )     (7,973 )
Net cash provided by financing activities     1,178,092       4,023,407  
Net change in cash     604,091       1,893,904  
                 
Cash at beginning of year     2,290,483       396,579  
Cash at end of period   $ 2,894,574     $ 2,290,483  
                 
Supplemental disclosures of cash flow information:                
Cash paid for interest   $ 481,425     $ 546,545  
Cash paid for income taxes – SMC (Comercial Offshore de Macau) Limitada   $ 34,390     $  
Equipment purchased under capital lease   $ 54,953     $ 23,651  
Issuance of common stock and warrants for stock issuance expenses   $ 243,901     $ 547,838  
Operating leases – right of use assets and lease liabilities at inception of lease   $ 191,951     $ 16,364  


See notes to the consolidated financial statements

The Singing Machine Company, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
For the twelve months ended March 31, 2023 and 2022

    Common Stock     Additional Paid in     Subscriptions     Accumulated        
    Shares     Amount     Capital     Receivable     Deficit     Total  
Balance at March 31, 2021     1,301,358     $ 13,014     $ 20,150,715     $     $ (12,254,191 )   $ 7,909,538  
                                                 
Net Income                             230,471       230,471  
Issuance of stock     550,000       5,500       4,944,500                   4,950,000  
Issuance of pre-funded warrants                 4,881,667                   4,881,667  
Payment of stock issuance expenses                 (831,088 )                 (831,088 )
Issuance of stock for stock issuance expenses     19,047       190       (190 )                    
Redemption and retirement of treasury shares     (654,105 )     (6,542 )     (4,301,147 )           (2,854,762 )     (7,162,451 )
Issuance of common stock – directors     575       6       4,994                   5,000  
Issuance of common stock – non-employee     1,667       17       16,983                   17,000  
Employee compensation-stock option                 22,287                   22,287  
Exercise of stock options     2,667       27       13,973                   14,000  
                                                 
Balance at March 31, 2022     1,221,209       12,212       24,902,694             (14,878,482 )     10,036,424  
                                                 
Net Loss                             (4,638,462 )     (4,638,462 )
                                                 
Issuance of common stock     1,000,000       10,000       3,990,000                   4,000,000  
Payment of stock issuance expenses                 (637,250 )                 (637,250 )
Issuance of common stock – at the market offering     14,230       143       36,270       (5,891 )           30,522  
Exercise of pre-funded warrants     561,113       5,611       162,723                   168,334  
Exercise of common stock warrants     353,445       3,534       986,117                   989,651  
Issuance of common stock – directors     2,468       25       19,991                   20,016  
Issuance of common stock – officers     3,335       33       31,216                   31,249  
Issuance of common stock – non-employee     10,000       100       93,600                   93,700  
Employee compensation-stock option                 236,861                   236,861  
Rounding of common stock issued due to reverse split     1,688       17       (17 )                  
                                                 
Balance at March 31, 2023     3,167,488     $ 31,675     $ 29,822,205     $ (5,891 )   $ (19,516,944 )   $ 10,331,045  


See notes to the consolidated financial statements.

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