Singing Machine Announces Results of Operations for First Quarter of Fiscal 2024

Aug 18, 2023

Fort Lauderdale, FL, Aug. 18, 2023 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) ( MICS) -- the worldwide leader in consumer karaoke products -- today released its results of operations for the three months ended June 30, 2023. Financial highlights are as follows:

Revenues for the three months ended June 30, 2023 were $2.6 million, as compared to $11.7 million for the same period in the prior year. The $9.1 million decrease was largely due to the distortive effects of $6.7 million in purchase orders from Walmart and Sam’s Club in the first quarter of the prior year.
These orders were in part due to the launch of Singing Machine products in the Walmart Consumer Electronics department in mid-2022, and a direct import shipment that accelerated revenues normally booked in the second quarter into the tail end of our first quarter of fiscal 2022. Overall, first quarter of fiscal 2024 sales were consistent with the Company’s historical record for customer purchases.
Gross margins improved to 32.3% for the first quarter of fiscal 2024, as compared to 27.2% for the same period in the prior year. The improvement was largely the result of more sales of higher margin products and efficiencies in shipping that resulted in slightly lower overall shipping expenses.
Operating expenses were $3.3 million for the three months ended June 30, 2023, as compared to $3.0 million for the same period in the prior year. The increase was almost entirely due to a $0.3 million one-time expense relating to the closure of the Company’s logistics facility in Ontario, CA. The Company has migrated to an outsourced third-party logistics warehouse that is expected to covert fixed annual overhead expenses to variable expenses and help insulate the Company from rising occupancy and labor costs in the southern California market.
The Company maintained a strong balance sheet with $8.6 million in working capital as of June 30, 2023. Cash on hand was $1.9 million, and additional $2.0 million was available under a revolving credit agreement as of June 30, 2023.

Management Commentary:

Gary Atkinson, Singing Machine’s Chief Executive Officer, commented, “During this first quarter we saw our supply-chain normalizing back to pre-pandemic levels. Due to the improvement in production and transportation lead-times we are seeing a timing shift from our retail partners back to just-in-time ordering. We believe this will produce more accurate buying commitments from our retail partners which we anticipate will lower the need to provide markdown incentives or other frictional costs that detract from sales and gross margins.”

“In contrast, during the same period last year, supply chain interruptions resulted in extended lead-times, forcing retailers to accelerate their order timing to ship earlier during our first quarter. Additionally, during the same quarter last year, we celebrated opening a new major department within Walmart stores which resulted in a heavy front loading of inventory to set all of the stores.”

Atkinson continued, “Despite the timing of shipments returning to the traditional second fiscal quarter, our view on the upcoming holiday retail season remains optimistic. All of our existing retail customers have committed to karaoke programs for this holiday season and we will be launching at least five new, innovative karaoke products this fall. We are generally pleased with the purchase orders received and the timing and schedule of delivery for product shipments.”

Earnings Call Information:

The Company will host a conference call today, Friday, August 18, 2023, beginning at 5:00 PM Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial (800) 225-9448 and use conference ID: MICS.

About The Singing Machine

The Singing Machine Company, Inc. ( MICS) 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 and is also developing the world’s first globally available, 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
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2023March 31, 2023(unaudited) AssetsCurrent Assets Cash $1,890,014 $2,894,574 Accounts receivable, net of allowances of $146,315 and $165,986, respectively 713,152 2,075,086 Accounts receivable related party - Stingray Group, Inc. 174,853 218,328 Accounts receivable related party - Ault Alliance, Inc. 20,750 20,750 Inventories, net 10,607,610 9,639,992 Prepaid expenses and other current assets 473,277 266,068 Deferred financing costs 84,667 84,667 Total Current Assets 13,964,323 15,199,465 Property and equipment, net 492,253 633,207 Deferred financing costs, net of current portion 109,361 130,528 Operating leases - right of use assets 331,878 561,185 Other non-current assets 124,201 124,212 Total Assets $15,022,016 $16,648,597 Liabilities and Shareholders’ EquityCurrent Liabilities Accounts payable $2,644,691 $1,769,348 Accrued expenses 1,294,794 2,265,424 Refunds due to customers 670,699 583,323 Reserve for sales returns 331,754 900,000 Current portion of finance leases 18,531 18,162 Current portion of installment notes 82,506 80,795 Current portion of operating lease liabilities 277,733 508,515 Total Current Liabilities 5,320,708 6,125,567 Finance leases, net of current portion 41,369 46,142 Installment notes, net of current portion 36,575 57,855 Operating lease liabilities, net of current portion 78,809 87,988 Total Liabilities 5,477,461 6,317,552 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; 4,220,259 and 3,184,439 shares issued, 4,220,259 and 3,167,489 shares outstanding, respectively 42,203 31,675 Additional paid-in capital 31,478,977 29,822,205 Subscriptions receivable - (5,891)Accumulated deficit (21,976,625) (19,516,944)Total Shareholders’ Equity 9,544,555 10,331,045 Total Liabilities and Shareholders’ Equity $15,022,016 $16,648,597

See notes to the condensed consolidated financial statements

The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Months Ended June 30, 2023June 30, 2022 Net Sales $2,625,003 $11,692,054 Cost of Goods Sold 1,776,153 8,511,524 Gross Profit 848,850 3,180,530 Operating Expenses Selling expenses 445,274 605,197 General and administrative expenses 2,650,858 2,370,424 Depreciation 183,454 58,067 Total Operating Expenses 3,279,586 3,033,688 (Loss) Income from Operations (2,430,736) 146,842 Other Expenses Interest expense (7,778) (160,113)Finance costs (21,167) (7,813)Total Other Expenses (28,945) (167,926) Loss Before Income Tax Benefit (2,459,681) (21,084) Income Tax Benefit - 5,081 Net Loss $(2,459,681) $(16,003) Net Loss per Common Share Basic and Diluted $(0.64) $(0.01) Weighted Average Common and Common Equivalent Shares: Basic and Diluted 3,872,447 1,911,485

See notes to the condensed consolidated financial statements

The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

For the Three Months Ended June 30, 2023June 30, 2022 Cash flows from operating activities Net Loss $(2,459,681) $(16,003) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 183,454 58,067 Amortization of deferred financing costs 21,167 7,813 Change in inventory reserve 132,386 - Change in allowance for bad debts (19,671) 138,237 Stock based compensation 63,406 35,565 Change in net deferred tax assets - (5,081)Changes in operating assets and liabilities: Accounts receivable 1,381,605 (7,001,987)Due from banks - (340,810)Accounts receivable - related parties 43,475 (90,043)Inventories (1,100,004) 1,205,145 Prepaid expenses and other current assets (207,209) 113,473 Other non-current assets 11 3,032 Accounts payable 875,343 1,390,942 Accrued expenses (970,630) 447,566 Refunds due to customers 87,376 16,034 Reserve for sales returns (568,246) (108,341)Operating lease liabilities, net of operating leases - right of use assets (10,654) (2,913)Net cash used in operating activities (2,547,872) (4,149,304)Cash flows from investing activities Purchase of property and equipment (42,500) (21,801)Net cash used in investing activities (42,500) (21,801)Cash flows from financing activities Proceeds from issuance of stock - net of transaction expenses 1,603,894 3,362,750 Collection of subscriptions receivable 5,891 - Payments on installment notes (19,569) (17,995)Proceeds from exercise of common stock warrants - 647,422 Proceeds from exercise of pre-funded warrants - 168,334 Payments on finance leases (4,404) (1,832)Net cash provided by financing activities 1,585,812 4,158,679 Net change in cash (1,004,560) (12,426) Cash at beginning of period 2,894,574 2,290,483 Cash at end of period $1,890,014 $2,278,057 Supplemental disclosures of cash flow information: Cash paid for interest $6,280 $158,490

See notes to the condensed consolidated financial statements

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