Company delivers over $11 million of karaoke products in first quarter despite challenging retail environment
Fort Lauderdale, FL, Aug. 22, 2022 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (NASDAQ: MICS) – the worldwide leader in consumer karaoke products – today announced its financial results for its first quarter ended June 30, 2022.
First Quarter Highlights:
- Net sales increased 92% to $11.6 million in the first quarter of fiscal year 2023, as compared to $6.1 million for the same period in the prior year. The sharp increase was largely due fulfilling its opening commitments to Walmart’s Consumer Electronics department.
- Gross profit for the quarter increased by 100% from $1.6 million to $3.2 million primarily due to the overall increase in net sales and improved gross profit margin. Gross profit margins increased by 120 basis points largely due to a higher mix of regular sales and less mix of promotional sales.
- Income from operations improved by $0.64 million to $0.15 million for the quarter compared to a loss from operations of $0.49 million in the same quarter of the prior year.
- Net loss of $0.02 million for the quarter compared to a net loss of $0.12 million in the same period of the prior year.
Singing Machine reported net sales of approximately $11.6 million for the quarter-ended June 30, 2022 period compared to $6.1 million in the same quarter of the prior year. The increase in net sales was primarily due to the Company fulfilling its opening orders for its new Walmart Consumer Electronics program. Gross profit increased to $3.2 million for the quarter due to the increase in net sales and gross profit margin increased by 120 basis points due to the higher mix of non-promotional sales shipped during the first quarter.
Total operating expenses for the quarter increased by $0.96 million to $3.0 million. The majority of the increase is attributable to general and administrative expenses due to supply chain inflation, labor costs and compensation expenses, and legal and professional fees related to the public offering and Nasdaq uplist completed during the first quarter. As a result, the Company reported a net loss of $0.02 million compared to a net loss of $0.12 million in the same quarter of the prior year.
Management Commentary:
Gary Atkinson, the Company’s CEO, commented, “We’re thrilled with the results of the first quarter. Our belief is that karaoke is an entertainment activity for all times of the year – not just holidays – and we’re delighted that our retail customers believe strongly in this category and the year-round play-factor of karaoke. Sell-through within the Walmart Electronics department has been strong out of the gate which is proving the case that karaoke is not limited to a holiday activity.”
Atkinson added, “This first quarter also represents a large milestone in Company history. This is the first 1st quarter in Company history where we achieved positive income from operations. All other key metrics of the business improved including growing sales 90+% year-over-year, expanding gross margin by 120 basis points, and maintaining a strong balance sheet.”
“We’ve fortunately seen an easing in global supply chain challenges. Cost of inbound freight from China has continued to come down significantly as global demand normalizes after COVID. However, inflation concerns still persist and we do continue to see broader inventory overhang at the retail level which is weighing on purchase orders,” concluded Atkinson.
Earnings Call Information:
The Company will host a conference call tomorrow, on Tuesday, August 23, 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 worldwide leader in consumer karaoke products. The first to provide karaoke systems for home entertainment in the United States, the Company sells its products world-wide through major mass merchandisers and on-line retailers. We offer the industry's widest line of at-home karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine provides consumers the best warranties in the industry and access to over 100,000 songs for streaming and download. Singing Machine products are sold through most major retailers in North America such as Amazon.com, Costco, Sam’s Club, Target, and Wal-Mart and also internationally. See www.singingmachine.com for more details.
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
| June 30, 2022 | March 31, 2022 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 2,278,057 | $ | 2,290,483 | ||||
| Accounts receivable, net of allowances of $260,787 and $122,550, respectively | 9,648,788 | 2,785,038 | ||||||
| Due from Crestmark Bank | 441,632 | 100,822 | ||||||
| Accounts receivable related party - Stingray Group, Inc. | 242,255 | 152,212 | ||||||
| Inventories, net | 12,956,491 | 14,161,636 | ||||||
| Prepaid expenses and other current assets | 230,936 | 344,409 | ||||||
| Deferred financing costs | - | 7,813 | ||||||
| Total Current Assets | 25,798,159 | 19,842,413 | ||||||
| Property and equipment, net | 528,828 | 565,094 | ||||||
| Deferred tax assets | 897,640 | 892,559 | ||||||
| Operating Leases - right of use assets | 1,072,576 | 1,279,347 | ||||||
| Other non-current assets | 83,409 | 86,441 | ||||||
| Total Assets | $ | 28,380,612 | $ | 22,665,854 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 6,782,207 | $ | 5,391,265 | ||||
| Accrued expenses | 2,179,921 | 1,732,355 | ||||||
| Revolving line of credit - Iron Horse Credit | 2,500,000 | 2,500,000 | ||||||
| Refunds due to customers | 114,002 | 97,968 | ||||||
| Reserve for sales returns | 881,659 | 990,000 | ||||||
| Current portion of finance leases | 7,794 | 7,605 | ||||||
| Current portion of installment notes | 75,873 | 74,300 | ||||||
| Current portion of operating lease liabilities | 897,956 | 876,259 | ||||||
| Subordinated note payable - Starlight Marketing Development, Ltd. | 352,659 | 352,659 | ||||||
| Total Current Liabilities | 13,792,071 | 12,022,411 | ||||||
| Finance leases, net of current portion | 8,599 | 10,620 | ||||||
| Installment notes, net of current portion | 119,081 | 138,649 | ||||||
| Operating lease liabilities, net of current portion | 226,369 | 457,750 | ||||||
| Total Liabilities | 14,146,120 | 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; 3,017,700 and 1,221,209 shares issued and outstanding, respectively | 30,177 | 12,212 | ||||||
| Additional paid-in capital | 29,098,800 | 24,902,694 | ||||||
| Accumulated deficit | (14,894,485 | ) | (14,878,482 | ) | ||||
| Total Shareholders’ Equity | 14,234,492 | 10,036,424 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 28,380,612 | $ | 22,665,854 | ||||
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Net Sales | $ | 11,692,054 | $ | 6,065,650 | ||||
| Cost of Goods Sold | 8,511,524 | 4,487,780 | ||||||
| Gross Profit | 3,180,530 | 1,577,870 | ||||||
| Operating Expenses | ||||||||
| Selling expenses | 605,197 | 577,982 | ||||||
| General and administrative expenses | 2,370,424 | 1,421,352 | ||||||
| Depreciation | 58,067 | 68,271 | ||||||
| Total Operating Expenses | 3,033,688 | 2,067,605 | ||||||
| Income (Loss) from Operations | 146,842 | (489,735 | ) | |||||
| Other (Expenses) Income | ||||||||
| Gain from Payroll Protection Plan loan forgiveness | - | 448,242 | ||||||
| Gain - related party | - | 11,236 | ||||||
| Interest expense | (160,113 | ) | (99,529 | ) | ||||
| Finance costs | (7,813 | ) | (16,922 | ) | ||||
| Total Other (Expenses) Income , net | (167,926 | ) | 343,027 | |||||
| Loss Before Income Tax Benefit | (21,084 | ) | (146,708 | ) | ||||
| Income Tax Benefit | 5,081 | 28,095 | ||||||
| Net Loss | $ | (16,003 | ) | $ | (118,613 | ) | ||
| Net Loss per Common Share | ||||||||
| Basic and Diluted | $ | (0.01 | ) | $ | (0.09 | ) | ||
| Weighted Average Common and Common Equivalent Shares: | ||||||||
| Basic and Diluted | 1,911,485 | 1,301,688 | ||||||
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Cash flows from operating activities | ||||||||
| Net Loss | $ | (16,003 | ) | $ | (118,613 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | 58,067 | 68,271 | ||||||
| Amortization of deferred financing costs | 7,813 | 16,922 | ||||||
| Change in allowance for bad debts | 138,237 | (12,424 | ) | |||||
| Stock based compensation | 35,565 | 5,104 | ||||||
| Change in net deferred tax assets | (5,081 | ) | (28,095 | ) | ||||
| Paycheck Protection Plan loan forgiveness | - | (448,242 | ) | |||||
| Gain - related party | - | (11,236 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (7,001,987 | ) | (3,251,488 | ) | ||||
| Due from Crestmark Bank | (340,810 | ) | 4,214,414 | |||||
| Accounts receivable - related parties | (90,043 | ) | - | |||||
| Inventories | 1,205,145 | (2,879,846 | ) | |||||
| Prepaid expenses and other current assets | 113,473 | 30,363 | ||||||
| Other non-current assets | 3,032 | 52,221 | ||||||
| Accounts payable | 1,390,942 | 3,812,788 | ||||||
| Accrued expenses | 447,566 | (278,096 | ) | |||||
| Customer deposits | - | (119,736 | ) | |||||
| Refunds due to customers | 16,034 | (51,823 | ) | |||||
| Reserve for sales returns | (108,341 | ) | (210,309 | ) | ||||
| Operating lease liabilities, net of operating leases - right of use assets | (2,913 | ) | 3,807 | |||||
| Net cash (used in) provided by operating activities | (4,149,304 | ) | 793,982 | |||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (21,801 | ) | (55,534 | ) | ||||
| Net cash used in investing activities | (21,801 | ) | (55,534 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from Issuance of stock - net of transaction expenses | 3,362,750 | - | ||||||
| Net Proceeds from revolving lines of credit | - | 300,000 | ||||||
| Payment of deferred financing charges | - | (37,501 | ) | |||||
| Payments on installment notes | (17,995 | ) | (16,550 | ) | ||||
| Proceeds from exercise of stock options | - | 4,800 | ||||||
| Proceeds from exercise of pre-funded warrants | 168,334 | - | ||||||
| Proceeds from exercise of common stock warrants | 647,422 | - | ||||||
| Payments on finance leases | (1,832 | ) | (2,546 | ) | ||||
| Net cash provided by financing activities | 4,158,679 | 248,203 | ||||||
| Net change in cash | (12,426 | ) | 986,651 | |||||
| Cash at beginning of year | 2,290,483 | 396,579 | ||||||
| Cash at end of period | $ | 2,278,057 | $ | 1,383,230 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 158,490 | $ | 125,456 | ||||
| Operating leases - right of use assets and lease liabilities at inception of lease | $ | - | $ | 16,364 | ||||
