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 June 30,2024.
“We are pleased to report our second quarter
results of operations,” commented Gary Atkinson, CEO of the Singing
Machine. “We spent much of the second quarter focused on the
necessary due diligence, legal and audit work to close the SemiCab
acquisition. Despite these added expenses, we were successful in
controlling overall costs, maintain a strong balance sheet, and
preparing for a business holiday retail season for our legacy
consumer electronics business.”
Second quarter operational highlights were as
follows:
1) Stable
Existing Customer Revenues: Sales were largely flat at
$2.4 million for the three months ended June 30, 2024 as compared
to $2.6 million for the same period in 2023. The $0.2 million
(7.6%) decreased was reflective of very limited changes in
maintenance inventory restocking requirements among existing
clients.
2) Strict
Cost Control Across Legacy Operations: Operating expenses
for the second quarter were $2.6 million, as compared to $2.9
million during the second quarter of 2023. The Company has
aggressively reduced recurring operating expenses, particularly in
the areas of logistics, headcount, and occupancy within the legacy
retail-centric consumer electronics business. Excluding a $3.9
million non-cash impairment, the Company generated an operating
loss of $2.3 million, as compared to a loss of $2.4 million in the
prior year.
3)
Deleveraged Balance Sheet: The Company focused
heavily on contracting its balance sheet, converting short term
assets to cash, and significantly reducing its short-term
liabilities. In total, short-term liabilities decreased $7.1
million (43.8%) to $9.1 million as of June 30, 2024. Other than a
disputed operating lease that the Company asserts has been
terminated, the Company had no debt other than trade payables at
the end of the second quarter.
4) Strategic
Shift in the Legacy Business Model: For the legacy
consumer electronics business, the strategic shift has accelerated.
The Company made significant headway into expanding its karaoke
product assortment into non-retail channels. The Company also
continues to see growth in its music subscription model tied to its
WiFi enabled karaoke devices.
5)
Prioritization of SemiCab: Much of the second
quarter corporate activities focused on the legal, audit, and due
diligence process for the completion of the SemiCab acquisition,
which was completed on July 3, 2024. With that transaction now
complete, the executive team of the Company is now focused on
integration, client expansion, revenue growth and critical vendor
relationships.
“As we will expand on in our earnings call, we
are now focused on getting back to growth. First, as we begin to
enter the Fall season, our production, sales and operations teams
are ramping up to execute a successful holiday season. Our
manufacturing suppliers are producing inventory and shipping
products in coordination with the coming holiday season and retail
and consumer demand. The Singing Machine brand remains the #1 brand
in consumer karaoke and continues to occupy the bulk of retail
shelf space for this coming season. Separately, we are integrating
with our new team at SemiCab and aligning them for growth as we
collectively push to rapidly expand our customer base, drive
revenues and unlock the potential of this exciting,
highly-scalable, AI-technology across multiple geographies in the
global logistics space.”
Results of operations for the first quarter are
summarized as follows:
- Net Sales- Net sales for the three
months ended June 30, 2024, decreased to approximately $2,440,000
from approximately $2,625,000 representing a decrease of
approximately $185,000 (7.0 %) as compared to the three months
ended June 30, 2023. The decrease was primarily due to lower
overall sell-through results during the past holiday season, mostly
with our largest customer, Walmart, which in turn diminished
inventory restocking requirements during the first six months of
the calendar year which is historically off-peak shipping
season.
- Gross Profit- Gross profit for the
three months ended June 30, 2024 decreased to approximately
$324,000 from approximately $529,000 representing a decrease of
approximately $205,000 (38.8%) as compared to the three months
ended June 30, 2023. Gross margins for the three months ended June
30, 2024 were 13.3% as compared to 20.2% for the three months ended
June 30, 2023. Approximately $260,000 of the decrease in gross
profit was primarily due the increased sales in excess inventory
which yielded significantly lower margin than current models sold
and was offset by a decrease in expenses of approximately $57,000
associated with the miscellaneous logistics costs relate to the
timing of receipt of new goods.
- Operating Expenses- During the
three months ended June 30, 2024, total operating expenses
increased to approximately $6,478,000, compared to approximately
$2,960,000 during the three months ended June 30, 2023. This
represents an increase in total operating expenses of approximately
$3,518,000 from the three months ended June 30, 2023. The increase
in operating expenses was primarily due to the write-off of
impaired operating lease assets of approximately $3,878,000 related
to the hospitality lease. This increase in operating expenses was
offset by a decrease in seasonal debt reserves of approximately
$156,000, a decrease in logistics costs of approximately $124,000
associated with the closing of the warehouse operation and
outsourcing of logistics to a third-party logistics company,
acceleration of depreciation expense of approximately $130,000
recognized in the prior year on impaired fixed assets associated
with the closing of the warehouse.
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
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,245,000 |
|
|
$ |
6,703,000 |
|
Accounts receivable, net of allowances of $86,919 and $174,000,
respectively |
|
|
2,349,000 |
|
|
|
7,308,000 |
|
Due from Oxford Bank |
|
|
187,000 |
|
|
|
- |
|
Accounts receivable related parties |
|
|
414,000 |
|
|
|
269,000 |
|
Inventory |
|
|
6,910,000 |
|
|
|
6,871,000 |
|
Returns asset |
|
|
619,000 |
|
|
|
1,919,000 |
|
Prepaid expenses and other current assets |
|
|
67,000 |
|
|
|
136,000 |
|
Total Current Assets |
|
|
11,791,000 |
|
|
|
23,206,000 |
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net |
|
|
305,000 |
|
|
|
404,000 |
|
Operating leases -
right of use assets |
|
|
178,000 |
|
|
|
3,926,000 |
|
Other non-current
assets |
|
|
93,000 |
|
|
|
179,000 |
|
Total Assets |
|
$ |
12,367,000 |
|
|
$ |
27,715,000 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,676,000 |
|
|
$ |
7,616,000 |
|
Accrued expenses |
|
|
1,842,000 |
|
|
|
2,614,000 |
|
Refund due to customer |
|
|
1,171,000 |
|
|
|
1,743,000 |
|
Customer prepayments |
|
|
38,000 |
|
|
|
687,000 |
|
Reserve for sales returns |
|
|
2,174,000 |
|
|
|
3,390,000 |
|
Other current liabilities |
|
|
37,000 |
|
|
|
75,000 |
|
Current portion of operating lease liabilities |
|
|
165,000 |
|
|
|
84,000 |
|
Total Current Liabilities |
|
|
9,103,000 |
|
|
|
16,209,000 |
|
|
|
|
|
|
|
|
|
|
Other liabilities, net
of current portion |
|
|
- |
|
|
|
3,000 |
|
Operating lease
liabilities, net of current portion |
|
|
4,136,000 |
|
|
|
3,925,000 |
|
Total Liabilities |
|
|
13,239,000 |
|
|
|
20,137,000 |
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
(Deficit) 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;
7,418,061 issued and 6,418,061 shares outstanding at June 30, 2024
and 6,418,061 issued and outstanding at December 31, 2023. |
|
|
64,000 |
|
|
|
64,000 |
|
Additional paid-in capital |
|
|
33,465,000 |
|
|
|
33,429,000 |
|
Accumulated deficit |
|
|
(34,401,000 |
) |
|
|
(25,915,000 |
) |
Total Shareholders’ (Deficit) Equity |
|
|
(872,000 |
) |
|
|
7,578,000 |
|
Total Liabilities and Shareholders’ (Deficit)
Equity |
|
$ |
12,367,000 |
|
|
$ |
27,715,000 |
|
See notes to the condensed consolidated
financial statements
The Singing Machine Company,
Inc.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales |
|
$ |
2,440,000 |
|
|
$ |
2,625,000 |
|
|
$ |
4,866,000 |
|
|
$ |
6,008,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods
Sold |
|
|
2,116,000 |
|
|
|
2,096,000 |
|
|
|
4,040,000 |
|
|
|
4,659,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit |
|
|
324,000 |
|
|
|
529,000 |
|
|
|
826,000 |
|
|
|
1,349,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses |
|
|
547,000 |
|
|
|
445,000 |
|
|
|
1,177,000 |
|
|
|
1,257,000 |
|
General and administrative expenses |
|
|
2,053,000 |
|
|
|
2,515,000 |
|
|
|
4,212,000 |
|
|
|
4,670,000 |
|
Operating lease impairment expense |
|
|
3,878,000 |
|
|
|
- |
|
|
|
3,878,000 |
|
|
|
- |
|
Total Operating
Expenses |
|
|
6,478,000 |
|
|
|
2,960,000 |
|
|
|
9,267,000 |
|
|
|
5,927,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Operations |
|
|
(6,154,000 |
) |
|
|
(2,431,000 |
) |
|
|
(8,441,000 |
) |
|
|
(4,578,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Expenses)
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain from Employee Retention Credit Program refund |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
704,000 |
|
Interest expense |
|
|
(17,000 |
) |
|
|
(29,000 |
) |
|
|
(45,000 |
) |
|
|
(69,000 |
) |
Total Other (Expenses)
Income, net |
|
|
(17,000 |
) |
|
|
(29,000 |
) |
|
|
(45,000 |
) |
|
|
635,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Income Tax
Benefit (Provision) |
|
|
(6,171,000 |
) |
|
|
(2,460,000 |
) |
|
|
(8,486,000 |
) |
|
|
(3,943,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Benefit
(Provision) |
|
|
52,000 |
|
|
|
- |
|
|
|
- |
|
|
|
(1,502,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(6,119,000 |
) |
|
$ |
(2,460,000 |
) |
|
$ |
(8,486,000 |
) |
|
$ |
(5,445,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.95 |
) |
|
$ |
(0.64 |
) |
|
$ |
(1.32 |
) |
|
$ |
(1.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common and Common Equivalent Shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
6,418,061 |
|
|
|
3,872,447 |
|
|
|
6,418,061 |
|
|
|
3,487,299 |
|
See notes to the condensed consolidated
financial statements
The Singing Machine Company,
Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)
|
|
For the Six Months Ended |
|
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,486,000 |
) |
|
|
(5,445,000 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
105,000 |
|
|
|
238,000 |
|
Provision for estimated cost of returns |
|
|
1,301,000 |
|
|
|
1,820,000 |
|
Provision for inventory obsolescence |
|
|
- |
|
|
|
271,000 |
|
Credit losses |
|
|
14,000 |
|
|
|
7,000 |
|
Operating lease impairment expense |
|
|
3,878,000 |
|
|
|
- |
|
Loss from disposal of property and equipment |
|
|
- |
|
|
|
3,000 |
|
Stock based compensation |
|
|
36,000 |
|
|
|
138,000 |
|
Amortization of right of use assets |
|
|
20,000 |
|
|
|
316,000 |
|
Change in net deferred tax assets |
|
|
- |
|
|
|
1,399,000 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
4,945,000 |
|
|
|
6,303,000 |
|
Due from banks |
|
|
(187,000 |
) |
|
|
- |
|
Accounts receivable - related parties |
|
|
(145,000 |
) |
|
|
87,000 |
|
Inventories |
|
|
(38,000 |
) |
|
|
(1,714,000 |
) |
Prepaid expenses and other current assets |
|
|
69,000 |
|
|
|
(167,000 |
) |
Other non-current assets |
|
|
(64,000 |
) |
|
|
(135,000 |
) |
Accounts payable |
|
|
(3,940,000 |
) |
|
|
560,000 |
|
Accrued expenses |
|
|
(771,000 |
) |
|
|
(1,939,000 |
) |
Customer deposits |
|
|
(572,000 |
) |
|
|
- |
|
Refunds due to customers |
|
|
(649,000 |
) |
|
|
577,000 |
|
Reserve for sales returns |
|
|
(1,217,000 |
) |
|
|
(2,604,000 |
) |
Operating lease liabilities |
|
|
291,000 |
|
|
|
(329,000 |
) |
Net cash used in operating activities |
|
|
(5,410,000 |
) |
|
|
(614,000 |
) |
Cash flows from
investing activities |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(6,000 |
) |
|
|
(137,000 |
) |
Net cash used in investing activities |
|
|
(6,000 |
) |
|
|
(137,000 |
) |
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Proceeds from sale of stock, net of offering costs |
|
|
- |
|
|
|
1,640,000 |
|
Net payments on revolving lines of credit |
|
|
- |
|
|
|
(1,761,000 |
) |
Other |
|
|
(42,000 |
) |
|
|
(33,000 |
) |
Net cash used in financing activities |
|
|
(42,000 |
) |
|
|
(154,000 |
) |
Net change in
cash |
|
|
(5,458,000 |
) |
|
|
(905,000 |
) |
|
|
|
|
|
|
|
|
|
Cash at beginning of
year |
|
|
6,703,000 |
|
|
|
2,795,000 |
|
Cash at end of
period |
|
|
1,245,000 |
|
|
|
1,890,000 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
40,000 |
|
|
|
24,000 |
|
Equipment purchased under capital lease |
|
|
- |
|
|
|
55,000 |
|
See notes to the condensed consolidated
financial statements
Singing Machine (NASDAQ:MICS)
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