Singing Machine Announces Financial Results for Full Fiscal Year Ended 2023

Rhea-AI Summary

The Singing Machine Company, Inc. released its fiscal year 2023 results, reporting a decrease in revenues compared to the previous year. Gross margins improved due to cost rationalizations and lower logistics costs, but were partially offset by higher labor and fuel costs. Operating expenses increased, mainly due to non-recurring transactions. The overall balance sheet improved, with increased cash on hand and reduced short-term liabilities. The company's CEO highlighted major milestones and growth initiatives for fiscal 2024.

Positive

• Gross margins improved to 23.4% for fiscal 2023
• The overall balance sheet improved significantly
• Cash on hand improved to $2.8 million at March 31, 2023
• Reduced short-term liabilities

Negative

• Revenues for the fiscal year 2023 decreased by 17.3% compared to the previous year
• Operating expenses increased by 20.6%
• Higher labor and fuel costs offset some of the improvements in gross margins

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/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.

FAQ

What were the financial highlights for The Singing Machine Company in fiscal year 2023?

Revenues for the fiscal year 2023 were $39.3 million, a decrease of 17.3% compared to the previous year. Gross margins improved to 23.4%. Operating expenses increased by 20.6%. Cash on hand improved to $2.8 million. Short-term liabilities decreased by 49%.

What were the factors that contributed to the decrease in revenues?

The decrease in revenues was largely due to a slower holiday retail season in North America, influenced by inflation, higher interest rates, and overall economic conditions.

What led to the improvement in gross margins?

Gross margins improved due to cost rationalizations and lower logistics costs, although this was partially offset by higher labor and fuel costs.

What were the major accomplishments for the company in fiscal year 2023?

The company completed two capital raises and a successful uplisting to Nasdaq. They also reduced short-term liabilities and improved the overall balance sheet.

What growth initiatives does the company have for fiscal 2024?

The CEO mentioned exciting new opportunities for the company, including international growth and penetration into new segments of the domestic karaoke industry.