MICS Singing Machine Company Inc

The Singing Machine Company, Inc. ("Singing Machine") (NASDAQ: MICS) – the worldwide leader in consumer karaoke products, today announced its results of operations for the three-months ended March 31, 2024.

"We are pleased to report our first quarter results of operations," commented Gary Atkinson, CEO of the Singing Machine. "We have focused on three core areas of operations, which we believe will lead to overall improved profitability in the coming quarters:

1) Improved product sales mix. We are focused on selling more of our higher price-point, best-in-class karaoke products that support our music subscription model. This is expected to improve sell-through rates, reduce marketing expenses, and improve gross margins going forward.

2) Reduce fixed overhead. With the closure of our California warehouse lease and our shift to a fully outsourced 3PL model, we were able to reduce headcount, eliminate our occupancy costs in California, and switch to a more variable operating structure.

3) Strict Cost Control. We have aggressively worked to identify areas where we can reduce recurring operating expenses, particularly in the areas of IT infrastructure, headcount, and occupancy.

"With three aggressive financial initiatives, we are actively looking to optimize our immediate financial profile. We have sought to eliminate virtually all non-working capital liabilities. We have streamlined our operations. At this point, our Board of Directors is asking us to consider all strategic options and we are open to this path as a management team. We anticipate providing meaningful updates on this development in the near term," concluded Mr. Atkinson.

Results of operations for the first quarter are summarized as follows:

• Revenues: Net sales of approximately $2.43 million for the three-months ended March 31, 2024. This represents a $1.0 million (29%) decrease from approximately $3.38 million in sales for the same period in 2023. Primary factors for the decline are as follows:
  • Holiday sell through results at our largest customer were lower in Q4 2023 than in the same period in 2022. As a result, restocking demand in Q1 2024 was negatively impacted.
  • The Company has also shifted its sales focus to dedicate more resources to its higher margin top-tier product lines. This is expected to lower overall unit sales but improve gross margins and operating margins over the next year.
• Gross Profits: Gross profits were approximately $0.50 million for the first quarter of 2024, as compared to approximately $0.82 million for the same period in 2023. This represents a decrease of $0.3 million, or 39% for the three months ended March 31, 2024 as compared to March 31, 2023.
  • Gross margins were 20.7% for Q1 2024, as compared to 24.2% for Q1 2023.
  • Margins in Q1 2024 were negatively impacted by approximately $0.7 million in allowances for repairs under the Companies new outsourced logistics model. In prior years, repairs were handled in house at the Company’s in-house logistics hub in Ontario, CA. Since September of 2023, all repairs are now the responsibility of our contract manufacturers in China.
• Operating Expenses: Total operating expenses were approximately $2.79 million for the three months ended March 31, 2024, as compared to approximately $2.97 million for the same period in 2023.
  • Selling expenses were approximately $0.63 million in Q1 2024, as compared to approximately $0.81 million in Q1 2023.
  • General and administrative expenses were approximately $2.2 million for Q1 2024, which was flat compared to the same period in 2023.
  • General and administrative expenses are expected to decrease modestly going forward. The Company has taken steps to reduce payroll, reduce IT expenses, and reduce certain aspects of occupancy costs.
• Net Income: The Company reported a net loss of approximately $2.37 million, which represents approximately a $0.62 million improvement year over year.

About The Singing Machine

The Singing Machine Company, Inc. (NASDAQ: MICS) 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 and is also developing the world's first globally available, 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.comwww.singingmachine.comwww.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.CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31, 2024				December 31, 2023
		(Unaudited)
Assets
Current Assets
Cash		$	4,125,000			$	6,703,000
Accounts receivable, net of allowances of $275,000 and $174,000, respectively			3,305,000				7,308,000
Accounts receivable related parties			133,000				269,000
Inventory			6,493,000				6,871,000
Returns asset			1,262,000				1,919,000
Prepaid expenses and other current assets			214,000				136,000
Total Current Assets			15,532,000				23,206,000
Property and equipment, net			352,000				404,000
Operating leases - right of use assets			3,841,000				3,926,000
Other non-current assets			179,000				179,000
Total Assets		$	19,904,000			$	27,715,000
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable		$	3,947,000			$	7,616,000
Accrued expenses			2,315,000				2,614,000
Refund due to customer			1,443,000				1,743,000
Customer prepayments			408,000				687,000
Reserve for sales returns			2,419,000				3,390,000
Other current liabilities			58,000				75,000
Current portion of operating lease liabilities			55,000				84,000
Total Current Liabilities			10,645,000				16,209,000
Other liabilities, net of current portion			-				3,000
Operating lease liabilities, net of current portion			4,029,000				3,925,000
Total Liabilities			14,674,000				20,137,000
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; 6,418,061 issued and outstanding at March 31, 2024 and December 31, 2023, respectively			64,000				64,000
Additional paid-in capital			33,448,000				33,429,000
Accumulated deficit			(28,282,000	)			(25,915,000	)
Total Shareholders’ Equity			5,230,000				7,578,000
Total Liabilities and Shareholders’ Equity		$	19,904,000			$	27,715,000

See notes to the condensed consolidated financial statements 

The Singing Machine Company, Inc.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

		Three Months Ended
		March 31, 2024				March 31, 2023
Net Sales		$	2,426,000			$	3,383,000
Cost of Goods Sold			1,924,000				2,564,000
Gross Profit			502,000				819,000
Operating Expenses
Selling expenses			630,000				812,000
General and administrative expenses			2,159,000				2,153,000
Total Operating Expenses			2,789,000				2,965,000
Loss from Operations			(2,287,000	)			(2,146,000	)
Other (Expenses) Income
Gain from Employee Retention Credit Program refund			-				704,000
Other Expense			-				(1,000	)
Interest expense			(28,000	)			(40,000	)
Total Other (Expenses) Income, net			(28,000	)			663,000
Loss Before Income Tax Provision			(2,315,000	)			(1,483,000	)
Income Tax Provision			(52,000	)			(1,502,000	)
Net Loss		$	(2,367,000	)		$	(2,985,000	)
Loss per Common Share
Basic and Diluted		$	(0.37	)		$	(0.96	)
Weighted Average Common and Common Equivalent Shares:
Basic and Diluted			6,418,061				3,114,397

See notes to the condensed consolidated financial statements 

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

		For the Three Months Ended				For the Three Months Ended
		March 31, 2024				March 31, 2023
Cash flows from operating activities
Net loss		$	(2,367,000	)		$	(2,985,000	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation			52,000				55,000
Provision for estimated cost of returns			658,000				1,380,000
Provision for inventory obsolescence			-				139,000
Credit losses			101,000				27,000
Loss from disposal of property and equipment			-				3,000
Stock based compensation			19,000				74,000
Amortization of right of use assets			84,000				87,000
Change in net deferred tax assets			-				1,399,000
Changes in operating assets and liabilities:
Accounts receivable			3,902,000				4,922,000
Accounts receivable - related parties			136,000				43,000
Inventories			379,000				(175,000	)
Prepaid expenses and other current assets			(78,000	)			40,000
Other non-current assets			-				(156,000	)
Accounts payable			(3,669,000	)			(315,000	)
Accrued expenses			(299,000	)			(970,000	)
Refunds due to customer			(300,000	)			490,000
Prepaids from customers			(279,000	)			-
Reserve for sales returns			(971,000	)			(2,035,000	)
Operating lease liabilities			75,000				(89,000	)
Net cash (used in) provided by operating activities			(2,557,000	)			1,934,000
Cash flows from investing activities
Purchase of property and equipment			-				(95,000	)
Net cash used in investing activities			-				(95,000	)
Cash flows from financing activities
Proceeds from issuance of stock, net of offering costs			-				36,000
Subscriptions receivable			-				(6,000	)
Net payment on revolving lines of credit			-				(1,761,000	)
Payments on installment notes			(21,000	)			(19,000	)
Proceeds from exercise of common stock warrants			-				14,000
Payments on finance leases			-				(3,000	)
Net cash used in financing activities			(21,000	)			(1,739,000	)
Net change in cash			(2,578,000	)			100,000
Cash at beginning of year			6,703,000				2,795,000
Cash at end of period		$	4,125,000			$	2,895,000
Supplemental disclosures of cash flow information:
Cash paid for interest		$	27,000			$	24,000
Non-Cash investing and financing cash flow information:
Equipment purchased under capital lease		$	-			$	55,000

See notes to the condensed consolidated financial statements