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Singing Machine Reports $17.1 Million in Second Quarter Revenue; 23% Increase in Year-to-Date Sales

The Singing Machine Company, Inc.
The Singing Machine Company, Inc.

Fort Lauderdale, FL, Nov. 14, 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 second quarter financial results for the three months ended September 30, 2022.

Second Quarter Highlights:

  • Net sales for the quarter of $17.1 million; fiscal year-to-date revenue of $28.8 million (an increase of 23% over the same period in the prior year).

  • Gross profit increased by approximately $0.6 million to $3.9 million (representing a 23% gross margin) compared to $3.3 million (or 19% gross margin) in the prior year (an overall increase of 4% compared to the prior year same period). The improvement was in part due to lower inbound logistics and transportation expenses.

  • Income from Operations of approximately $0.6 million for the quarter; the Company continues to demonstrate ability to produce profitable quarters.

  • Strengthened balance sheet with a successful $15 million senior secured line of credit refinancing with Fifth Third Bank on October 14, 2022.

  • Fully diluted EPS of $0.08 for the quarter and $0.11 for the year-to-date period.

Management Commentary:

Gary Atkinson, Singing Machine CEO, commented, “This was a very strong quarter for our Company. We are very pleased to share our results of operations, particularly in a challenging overall economic environment.”

“We have aggressively sought to sell product into our best retail partners throughout the year, and that was a key factor for our $17 million in top line sales for the quarter which helped contribute to the 23% growth in year-to-date net sales and almost $29 million in net sales for the fiscal-year-to-date period. We’re proud of these results and our ability to continue to perform and deliver despite some of the overall headwinds facing the retail industry today.”

“More importantly, we were able to accomplish our goal at the beginning of the year which was to improve gross margins by over 400-basis point compared to the same quarter last year. To overcome last year’s supply chain challenges, our team worked hard this year to shift a majority of our business to FOB-China thereby improving the timing and efficiency of shipments to avoid any potential supply-chain disruptions and to ensure our retail customers remained in-stock on key karaoke products.”

“As we enter our holiday quarter, the market remains volatile and challenging with generally elevated levels of inventory present throughout the entire consumer products market. However, through our long-standing partnerships at retail and our commitment to innovation, we firmly believe we are well-positioned to remain the market leader today and well into the future.”

“We continue to look for and invest into new serviceable markets and business verticals within the karaoke category that are currently untapped in the U.S. market. We believe there are a number of significant growth opportunities where we can be very competitive while driving new sales growth at compelling margins,” concluded Mr. Atkinson.

Earnings Call Information:

The Company will host a conference call today, Monday, November 14, 2021, beginning at 5:00 PM Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial (800) 343-4849 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

 

 

September 30, 2022

 

 

March 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash

 

$

2,978,683

 

 

$

2,290,483

 

Accounts receivable, net of allowances of $277,953 and $122,550, respectively

 

 

10,640,685

 

 

 

2,785,038

 

Due from Crestmark Bank

 

 

1,076,988

 

 

 

100,822

 

Accounts receivable related party - Stingray Group, Inc.

 

 

81,665

 

 

 

152,212

 

Inventories, net

 

 

16,022,436

 

 

 

14,161,636

 

Prepaid expenses and other current assets

 

 

158,238

 

 

 

344,409

 

Deferred financing costs

 

 

-

 

 

 

7,813

 

Total Current Assets

 

 

30,958,695

 

 

 

19,842,413

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

532,505

 

 

 

565,094

 

Deferred tax assets

 

 

812,478

 

 

 

892,559

 

Operating Leases - right of use assets

 

 

862,279

 

 

 

1,279,347

 

Other non-current assets

 

 

193,841

 

 

 

86,441

 

Total Assets

 

$

33,359,798

 

 

$

22,665,854

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,133,744

 

 

$

5,391,265

 

Accrued expenses

 

 

2,544,287

 

 

 

1,732,355

 

Revolving line of credit - Iron Horse Credit

 

 

2,500,000

 

 

 

2,500,000

 

Refunds due to customers

 

 

93,925

 

 

 

97,968

 

Reserve for sales returns

 

 

1,690,606

 

 

 

990,000

 

Current portion of finance leases

 

 

7,988

 

 

 

7,605

 

Current portion of installment notes

 

 

77,479

 

 

 

74,300

 

Current portion of operating lease liabilities

 

 

848,723

 

 

 

876,259

 

Subordinated note payable - Starlight Marketing Development, Ltd.

 

 

352,659

 

 

 

352,659

 

Total Current Liabilities

 

 

18,249,411

 

 

 

12,022,411

 

 

 

 

 

 

 

 

 

 

Finance leases, net of current portion

 

 

6,528

 

 

 

10,620

 

Installment notes, net of current portion

 

 

99,098

 

 

 

138,649

 

Operating lease liabilities, net of current portion

 

 

60,374

 

 

 

457,750

 

Total Liabilities

 

 

18,415,411

 

 

 

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; 3,108,814 and 1,221,209 shares issued and outstanding, respectively

 

 

31,088

 

 

 

12,212

 

Additional paid-in capital

 

 

29,511,317

 

 

 

24,902,694

 

Accumulated deficit

 

 

(14,598,018

)

 

 

(14,878,482

)

Total Shareholders’ Equity

 

 

14,944,387

 

 

 

10,036,424

 

Total Liabilities and Shareholders’ Equity

 

$

33,359,798

 

 

$

22,665,854

 


The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

September 30,
2022

 

 

September 30,
2021

 

 

September 30,
2022

 

 

September 30,
2021

 

Net Sales

 

$

17,113,636

 

 

$

17,368,973

 

 

$

28,805,690

 

 

$

23,434,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

 

13,149,667

 

 

 

14,041,669

 

 

 

21,661,191

 

 

 

18,529,449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

3,963,969

 

 

 

3,327,304

 

 

 

7,144,499

 

 

 

4,905,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

899,590

 

 

 

733,485

 

 

 

1,504,787

 

 

 

1,311,467

 

General and administrative expenses

 

 

2,417,405

 

 

 

1,776,997

 

 

 

4,787,829

 

 

 

3,198,349

 

Depreciation

 

 

62,323

 

 

 

66,809

 

 

 

120,390

 

 

 

135,080

 

Total Operating Expenses

 

 

3,379,318

 

 

 

2,577,291

 

 

 

6,413,006

 

 

 

4,644,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

 

584,651

 

 

 

750,013

 

 

 

731,493

 

 

 

260,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (Expenses) Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain - related party

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,236

 

Gain from Payroll Protection Plan loan forgiveness

 

 

-

 

 

 

-

 

 

 

-

 

 

 

448,242

 

Gain from settlement of accounts payable

 

 

-

 

 

 

236,472

 

 

 

-

 

 

 

236,472

 

Interest expense

 

 

(185,827

)

 

 

(110,864

)

 

 

(345,940

)

 

 

(210,393

)

Finance costs

 

 

-

 

 

 

(9,375

)

 

 

(7,813

)

 

 

(26,297

)

Total Other (Expenses) Income, net

 

 

(185,827

)

 

 

116,233

 

 

 

(353,753

)

 

 

459,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Income Tax Provision

 

 

398,824

 

 

 

866,246

 

 

 

377,740

 

 

 

719,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Provision

 

 

(102,357

)

 

 

(173,873

)

 

 

(97,276

)

 

 

(145,778

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

296,467

 

 

$

692,373

 

 

$

280,464

 

 

$

573,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.43

 

 

$

0.11

 

 

$

0.40

 

Diluted

 

$

0.08

 

 

$

0.43

 

 

$

0.09

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common and Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equivalent Shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,071,131

 

 

 

1,593,929

 

 

 

2,484,660

 

 

 

1,448,603

 

Diluted

 

 

3,610,188

 

 

 

1,605,134

 

 

 

2,961,631

 

 

 

1,460,967

 


The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

 

For the Six Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net Income

 

$

280,464

 

 

$

573,760

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

120,390

 

 

 

135,080

 

Amortization of deferred financing costs

 

 

7,813

 

 

 

26,297

 

Change in inventory reserve

 

 

(93,447

)

 

 

53,890

 

Change in allowance for bad debts

 

 

155,403

 

 

 

118,321

 

Loss from disposal of property and equipment

 

 

-

 

 

 

4,394

 

Stock based compensation

 

 

231,213

 

 

 

34,727

 

Change in net deferred tax assets

 

 

80,081

 

 

 

145,778

 

Paycheck Protection Plan loan forgiveness

 

 

-

 

 

 

(448,242

)

Gain - related party

 

 

-

 

 

 

(11,236

)

Gain from extinguishment of accounts payable

 

 

-

 

 

 

(236,472

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(8,011,050

)

 

 

(9,409,973

)

Due from Crestmark Bank

 

 

(976,166

)

 

 

4,557,120

 

Accounts receivable - related parties

 

 

70,547

 

 

 

(70,880

)

Inventories

 

 

(1,767,353

)

 

 

(13,721,821

)

Prepaid expenses and other current assets

 

 

186,171

 

 

 

23,155

 

Other non-current assets

 

 

(107,400

)

 

 

50,262

 

Accounts payable

 

 

4,742,479

 

 

 

16,409,171

 

Accrued expenses

 

 

811,932

 

 

 

381,213

 

Customer deposits

 

 

-

 

 

 

(53,249

)

Refunds due to customers

 

 

(4,043

)

 

 

(46,686

)

Reserve for sales returns

 

 

700,606

 

 

 

903,731

 

Operating lease liabilities, net of operating leases - right of use assets

 

 

(7,844

)

 

 

5,655

 

Net cash used in operating activities

 

 

(3,580,204

)

 

 

(576,005

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(87,801

)

 

 

(77,599

)

Net cash used in investing activities

 

 

(87,801

)

 

 

(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 proceeds from revolving lines of credit

 

 

-

 

 

 

1,977,006

 

Payment of deferred financing charges

 

 

-

 

 

 

(37,501

)

Payments on installment notes

 

 

(36,372

)

 

 

(33,451

)

Proceeds from exercise of stock options

 

 

-

 

 

 

4,800

 

Proceeds from exercise of pre-funded warrants

 

 

168,334

 

 

 

-

 

Proceeds from exercise of common warrants

 

 

865,202

 

 

 

-

 

Payment on subordinated note payable

 

 

 

 

 

 

(150,000

)

Payments on finance leases

 

 

(3,709

)

 

 

(4,440

)

Net cash provided by financing activities

 

 

4,356,205

 

 

 

3,594,542

 

Net change in cash

 

 

688,200

 

 

 

2,940,938

 

 

 

 

 

 

 

 

 

 

Cash at beginning of year

 

 

2,290,483

 

 

 

396,579

 

Cash at end of period

 

$

2,978,683

 

 

$

3,337,517

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

331,225

 

 

$

249,734

 

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