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Singing Machine Announces Financial Results for Full Fiscal Year Ended 2023
Source: Nasdaq GlobeNewswire / 14 Jul 2023 16:05:00 America/New_York
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.”
“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:
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investorsForward-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 SHEETSMarch 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 OPERATIONSFor 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 FLOWSFor 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 2022Common 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.
- 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;