Singing Machine Reports Third Quarter Earnings Report

Rhea-AI Summary

Singing Machine Company (NASDAQ: MICS) announced its third quarter financial results for the period ending December 31, 2022. The company reported net sales of $7.1 million and fiscal year-to-date revenue of $35.9 million. However, it experienced a net loss of $(1.9 million) for the quarter and approximately $(1.6 million) year-to-date. The gross profit for the quarter was $1.3 million, with an income from operations of approximately $(2.3 million). As of December 31, 2022, total assets were reported at $24.1 million with cash on hand of $2.8 million.

Positive

• Strong consumer demand for karaoke products noted despite supply chain challenges.
• Management expects a return to normal sales cycles in the upcoming season.

Negative

• Net loss of $(1.9 million) for the quarter, $(1.6 million) year-to-date.
• Disrupted sales cycle due to excess inventory at retail customers.
• Income from operations showed a loss of approximately $(2.3 million).

Fort Lauderdale, FL, Feb. 21, 2023 (GLOBE NEWSWIRE) -- The Singing Machine Company, 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

FAQ

What were Singing Machine's Q3 2022 net sales?

Singing Machine reported net sales of $7.1 million for Q3 2022.

What was the net loss for Singing Machine in Q3 2022?

The net loss for Singing Machine in Q3 2022 was $(1.9 million).

What is the future outlook for Singing Machine following Q3 2022 results?

Management expects a return to normal sales cycles in the upcoming season.

What were Singing Machine's total assets as of December 31, 2022?

Total assets for Singing Machine were reported at $24.1 million as of December 31, 2022.

When will Singing Machine host its earnings call for Q3 2022 results?

Singing Machine will host its earnings call on February 21, 2023, at 10:00 AM Eastern time.