MICS - Singing Machine Reports Third Quarter Earnings Report
Fort Lauderdale, FL, Feb. 21, 2023 (GLOBE NEWSWIRE) -- The Singing Machine Compa ny, Inc. (“Singing Machine” or the “Company”) (NASDAQ: MICS ) – the worldwide leader in consumer karaoke products – today announced its third quarter financial results for the three months ended December 31, 2022.
Third Quarter Highlights :
- Net sales for the quarter of $7.1 million; fiscal year-to-date revenue of $35.9 million.
- Gross profit for the quarter of $1.3 million.
- Income from Operations of approximately ($2.3) million.
- Total assets of $24.1 million as of December 31, 2022.
- Cash on hand of $2.8 million as of December 31, 2022.
- Net loss for the quarter of $(1.9) million; fiscal year-to-date net loss of approximately ($1.6) million.
Management Commentary:
Gary Atkinson, Singing Machine CEO, commented, “Despite our wholesale sell-in numbers for this quarter, consumer demand for consumer karaoke remained very strong. The real challenge to this quarter was timing and getting our products into retail. Last calendar year, our traditional sales cycle was disrupted by the lingering effects of supply chain disruptions. There was a build-up of retail inventory on the shelves at the end of the first quarter of calendar 2021, which slowly started to make the major retailers gradually more cautious about inventory throughout the rest of the year.”
Atkinson continued, “As a result, we did not get the opportunity to sell-in to many of our retail customers with our typical holiday bulk replenishment. Simply put, our retail customers were backfilling the demand with the lingering inventory from last year, or in many cases, opting to lose sales with empty shelves. Despite our customers decisions to lower exposure to inventory due to elevated risk factors associated with the overall economy in the back of the year, we saw steady demand for our products, and we believe that reflects well on our brand and our technology. Moving forward, we expect more of a return to normal for this coming season.”
Earnings Call Information:
The Company will host a conference call today, Tuesday, February 21, 2023, 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 (800) 225-9448 and use conference ID: MICS.
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
Singing Machine ® is the leading provider of karaoke products to consumers across the world. The Company offers the industry's widest line of at-home and in-car karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. The Company’s products are sold in over 25,000 locations worldwide, including at well-known retailers such as Amazon, Costco, Sam’s Club, Target, and Walmart. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology and provide access to over 70,000 songs for streaming through its mobile app and select WiFi-capable products. To learn more, go to www.singingmachine.com .
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
investors@singingmachine.com
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
| December 31, 2022 |
| March 31, 2022 |
| (unaudited) |
| Assets |
| Current Assets |
| Cash |
| $ |
| 2,795,171 |
| $ |
| 2,290,483 |
| Accounts receivable, net of allowances of $139,182 and $122,550, respectively |
| 7,023,603 |
| 2,785,038 |
| Due from Crestmark Bank |
| - |
| 100,822 |
| Accounts receivable related party - Stingray Group, Inc. |
| 282,317 |
| 152,212 |
| Inventories, net |
| 10,984,742 |
| 14,161,636 |
| Prepaid expenses and other current assets |
| 154,329 |
| 344,409 |
| Deferred financing costs |
| 84,668 |
| 7,813 |
| Total Current Assets |
| 21,324,830 |
| 19,842,413 |
| Property and equipment, net |
| 540,867 |
| 565,094 |
| Deferred financing costs, net of current portion |
| 151,694 |
| - |
| Deferred tax assets |
| 1,399,016 |
| 892,559 |
| Operating Leases - right of use assets |
| 648,323 |
| 1,279,347 |
| Other non-current assets |
| 98,724 |
| 86,441 |
| Total Assets |
| $ |
| 24,163,454 |
| $ |
| 22,665,854 |
| Liabilities and Shareholders’ Equity |
| Current Liabilities |
| Accounts payable |
| $ |
| 2,084,756 |
| $ |
| 5,391,265 |
| Accrued expenses |
| 3,234,714 |
| 1,732,355 |
| Revolving lines of credit |
| 1,761,495 |
| 2,500,000 |
| Refunds due to customers |
| 93,520 |
| 97,968 |
| Reserve for sales returns |
| 2,935,465 |
| 990,000 |
| Current portion of finance leases |
| 8,187 |
| 7,605 |
| Current portion of installment notes |
| 79,119 |
| 74,300 |
| Current portion of operating lease liabilities |
| 654,883 |
| 876,259 |
| Subordinated note payable - Starlight Marketing Development, Ltd. |
| - |
| 352,659 |
| Total Current Liabilities |
| 10,852,139 |
| 12,022,411 |
| Finance leases, net of current portion |
| 4,405 |
| 10,620 |
| Installment notes, net of current portion |
| 78,693 |
| 138,649 |
| Operating lease liabilities, net of current portion |
| 30,422 |
| 457,750 |
| Total Liabilities |
| 10,965,659 |
| 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; 3,148,219 and 1,221,209 shares issued and outstanding, respectively |
| 31,482 |
| 12,212 |
| Additional paid-in capital |
| 29,697,697 |
| 24,902,694 |
| Accumulated deficit |
| (16,531,384 |
| ) |
| (14,878,482 |
| ) |
| Total Shareholders’ Equity |
| 13,197,795 |
| 10,036,424 |
| Total Liabilities and Shareholders’ Equity |
| $ |
| 24,163,454 |
| $ |
| 22,665,854 |
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended |
| For the Nine Months Ended |
| December 31, 2022 |
| December 31, 2021 |
| December 31, 2022 |
| December 31, 2021 |
| Net Sales |
| $ |
| 7,110,520 |
| $ |
| 21,244,306 |
| $ |
| 35,916,210 |
| $ |
| 44,678,929 |
| Cost of Goods Sold |
| 5,819,991 |
| 15,934,842 |
| 27,481,182 |
| 34,464,291 |
| Gross Profit |
| 1,290,529 |
| 5,309,464 |
| 8,435,028 |
| 10,214,638 |
| Operating Expenses |
| Selling expenses |
| 1,124,780 |
| 1,406,175 |
| 2,629,567 |
| 2,717,642 |
| General and administrative expenses |
| 2,395,430 |
| 2,154,553 |
| 7,183,259 |
| 5,352,902 |
| Depreciation |
| 52,816 |
| 55,007 |
| 173,206 |
| 190,087 |
| Total Operating Expenses |
| 3,573,026 |
| 3,615,735 |
| 9,986,032 |
| 8,260,631 |
| (Loss) Income from Operations |
| (2,282,497 |
| ) |
| 1,693,729 |
| (1,551,004 |
| ) |
| 1,954,007 |
| Other (Expenses) Income, net |
| Gain - related party |
| - |
| - |
| - |
| 11,236 |
| Gain from Payroll Protection Plan loan forgiveness |
| - |
| - |
| - |
| 448,242 |
| Gain from settlement of accounts payable |
| 48,650 |
| - |
| 48,650 |
| 236,472 |
| Loss from extinguishment of debt |
| (183,333 |
| ) |
| - |
| (183,333 |
| ) |
| - |
| Interest expense |
| (67,891 |
| ) |
| (155,573 |
| ) |
| (413,831 |
| ) |
| (365,966 |
| ) |
| Finance costs |
| (17,638 |
| ) |
| (9,375 |
| ) |
| (25,451 |
| ) |
| (35,672 |
| ) |
| Total Other (Expenses) Income, net |
| (220,212 |
| ) |
| (164,948 |
| ) |
| (573,965 |
| ) |
| 294,312 |
| (Loss) Income Before Income Tax Benefit (Provision) |
| (2,502,709 |
| ) |
| 1,528,781 |
| (2,124,969 |
| ) |
| 2,248,319 |
| Income Tax Benefit (Provision) |
| 569,343 |
| (102,886 |
| ) |
| 472,067 |
| (248,664 |
| ) |
| Net (loss) Income |
| $ |
| (1,933,366 |
| ) |
| $ |
| 1,425,895 |
| $ |
| (1,652,902 |
| ) |
| $ |
| 1,999,655 |
| Net (loss) Income per Common Share |
| Basic |
| $ |
| (0.62 |
| ) |
| $ |
| 0.80 |
| $ |
| (0.61 |
| ) |
| $ |
| 1.28 |
| Diluted |
| $ |
| (0.62 |
| ) |
| $ |
| 0.80 |
| $ |
| (0.61 |
| ) |
| $ |
| 1.27 |
| Weighted Average Common and Common |
| Equivalent Shares: |
| Basic |
| 3,125,979 |
| 1,780,342 |
| 2,699,210 |
| 1,559,585 |
| Diluted |
| 3,125,979 |
| 1,787,846 |
| 2,699,210 |
| 1,570,329 |
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended |
| December 31, 2022 |
| December 31, 2021 |
| Cash flows from operating activities |
| Net (Loss) Income |
| $ |
| (1,652,902 |
| ) |
| $ |
| 1,999,655 |
| Adjustments to reconcile net (loss) income to net cash used in operating activities: |
| Depreciation |
| 173,206 |
| 190,087 |
| Amortization of deferred financing costs |
| 25,451 |
| 35,672 |
| Change in inventory reserve |
| 396,553 |
| 297,661 |
| Change in allowance for bad debts |
| 16,632 |
| 168,395 |
| Loss from disposal of property and equipment |
| - |
| 4,394 |
| Stock based compensation |
| 307,651 |
| 38,376 |
| Change in net deferred tax assets |
| (506,457 |
| ) |
| 248,773 |
| 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 |
| ) |
| (236,472 |
| ) |
| Changes in operating assets and liabilities: |
| Accounts receivable |
| (4,255,197 |
| ) |
| (10,123,571 |
| ) |
| Due from Crestmark Bank |
| 100,822 |
| 4,557,120 |
| Accounts receivable - related parties |
| (130,105 |
| ) |
| (159,125 |
| ) |
| Inventories |
| 2,780,341 |
| (5,933,704 |
| ) |
| Prepaid expenses and other current assets |
| 190,080 |
| (63,135 |
| ) |
| Other non-current assets |
| (12,283 |
| ) |
| 10,288 |
| Accounts payable |
| (3,257,859 |
| ) |
| 3,769,157 |
| Accrued expenses |
| 1,502,359 |
| 762,252 |
| Customer deposits |
| - |
| (129,544 |
| ) |
| Refunds due to customers |
| (4,448 |
| ) |
| (55,333 |
| ) |
| Reserve for sales returns |
| 1,945,465 |
| 1,962,457 |
| Operating lease liabilities, net of operating leases - right of use assets |
| (17,680 |
| ) |
| 2,741 |
| Net cash used in operating activities |
| (2,263,688 |
| ) |
| (3,113,334 |
| ) |
| Cash flows from investing activities |
| Purchase of property and equipment |
| (148,979 |
| ) |
| (77,599 |
| ) |
| Net cash used in investing activities |
| (148,979 |
| ) |
| (77,599 |
| ) |
| Cash flows from financing activities |
| Proceeds from Issuance of stock - net of transaction expenses |
| 3,362,750 |
| 9,000,580 |
| Payment of redemption and retirement of treasury stock |
| - |
| (7,162,452 |
| ) |
| Net (payment) proceeds from revolving lines of credit |
| (738,505 |
| ) |
| 8,561,925 |
| Payment of subordinated note payable - Starlight Marketing Development, Ltd. |
| (352,659 |
| ) |
| (150,000 |
| ) |
| 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 |
| (55,137 |
| ) |
| (50,709 |
| ) |
| Proceeds from exercise of stock options |
| - |
| 14,000 |
| Proceeds from exercise of pre-funded warrants |
| 168,334 |
| - |
| Proceeds from exercise of common warrants |
| 975,538 |
| - |
| Payments on finance leases |
| (5,633 |
| ) |
| (6,184 |
| ) |
| Net cash provided by financing activities |
| 2,917,355 |
| 10,169,659 |
| Net change in cash |
| 504,688 |
| 6,978,726 |
| Cash at beginning of year |
| 2,290,483 |
| 396,579 |
| Cash at end of period |
| $ |
| 2,795,171 |
| $ |
| 7,375,305 |
| Supplemental disclosures of cash flow information: |
| Cash paid for interest |
| $ |
| 456,978 |
| $ |
| 378,076 |
| Equipment purchased under capital lease |
| $ |
| - |
| $ |
| 23,651 |
| Issuance of common stock and warrants for stock issuance expenses |
| $ |
| - |
| $ |
| 547,838 |
| Operating leases - right of use assets and lease liabilities at inception of lease |
| $ |
| - |
| $ |
| 16,364 |