Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Mar. 31, 2019 | Jun. 28, 2019 | Sep. 30, 2018 | |
Document And Entity Information [Abstract] | |||
Entity Registrant Name | SINGING MACHINE CO INC | ||
Entity Central Index Key | 0000923601 | ||
Document Type | 10-K | ||
Document Period End Date | Mar. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --03-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 4,621,000 | ||
Entity Common Stock, Shares Outstanding | 38,464,753 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2019 | Mar. 31, 2018 |
Current Assets | ||
Cash | $ 211,408 | $ 813,908 |
Accounts receivable, net of allowances of $51,096 and $82,102, respectively | 1,769,404 | 1,066,839 |
Due from PNC Bank | 2,236,779 | 6,212 |
Inventories, net | 6,024,311 | 8,536,934 |
Prepaid expenses and other current assets | 274,278 | 137,970 |
Deferred financing costs | 13,333 | 13,333 |
Total Current Assets | 10,818,454 | 11,732,354 |
Property and equipment, net | 522,910 | 450,305 |
Deferred financing costs, net of current portion | 3,333 | 16,667 |
Deferred tax assets | 758,366 | 937,137 |
Other non-current assets | 90,082 | 11,523 |
Total Assets | 12,193,145 | 13,147,986 |
Current Liabilities | ||
Accounts payable | 842,708 | 1,614,748 |
Accrued expenses | 950,773 | 701,932 |
Current portion of bank term note payable | 125,000 | 500,000 |
Refunds due to customers | 31,075 | 445,484 |
Reserve for sales returns | 896,154 | 726,000 |
Current portion of capital leases | 14,414 | |
Total Current Liabilities | 3,675,491 | 5,091,631 |
Bank term note payable, net of current portion | 125,000 | |
Capital leases, net of current portion | 17,499 | |
Total Liabilities | 3,692,990 | 5,342,206 |
Commitments and Contingencies | ||
Shareholders' Equity | ||
Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding | ||
Additional paid-in capital | 19,687,263 | 19,624,063 |
Subscriptions receivable - related party | (2,200) | |
Accumulated deficit | (11,569,556) | (12,201,103) |
Total Shareholders' Equity | 8,500,155 | 7,805,780 |
Total Liabilities and Shareholders' Equity | 12,193,145 | 13,147,986 |
Common Class A [Member] | ||
Shareholders' Equity | ||
Common stock | ||
Common Class B [Member] | ||
Shareholders' Equity | ||
Common stock | 384,648 | 382,820 |
Starlight Consumer Electronics USA, Inc. [Member] | ||
Current Assets | ||
Accounts receivable related party | 7,054 | |
Winglight Pacific Ltd [Member] | ||
Current Assets | ||
Accounts receivable related party | 288,941 | 1,150,104 |
Starlight Electronics Co., Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 210,756 | |
Starlight R&D, Ltd. [Member] | ||
Current Liabilities | ||
Due to related party | 113,116 | |
Merrygain Holding Co., Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 89,803 | |
Subordinated Debt [Member] | Starlight Marketing Development, Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 815,367 | 689,792 |
Subordinated related party debt - net of current portion | $ 125,575 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2019 | Mar. 31, 2018 |
Allowance for doubtful accounts receivable, net | $ 51,096 | $ 82,102 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common Class A [Member] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | ||
Common stock, shares outstanding | ||
Common Class B [Member] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 38,464,753 | 38,282,028 |
Common stock, shares outstanding | 38,464,753 | 38,282,028 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Net Sales | $ 46,482,998 | $ 60,808,050 |
Cost of Goods Sold | 34,709,799 | 45,135,272 |
Gross Profit | 11,773,199 | 15,672,778 |
Operating Expenses | ||
Selling expenses | 5,117,235 | 4,875,238 |
General and administrative expenses | 5,790,019 | 6,371,541 |
Bad debt (recovery) expense | (442,671) | 3,203,677 |
Depreciation | 259,662 | 219,968 |
Total Operating Expenses | 10,724,245 | 14,670,424 |
Income from Operations | 1,048,954 | 1,002,354 |
Other Expenses | ||
Interest expense | (244,593) | (273,385) |
Finance costs | (13,334) | (31,606) |
Total Other Expenses | (257,927) | (304,991) |
Income Before Income Tax Provision | 791,027 | 697,363 |
Income Tax Provision | (159,480) | (544,877) |
Net Income | $ 631,547 | $ 152,486 |
Net Income per Common Share | ||
Basic | $ 0.02 | $ 0 |
Diluted | $ 0.02 | $ 0 |
Weighted Average Common and Common Equivalent Shares: | ||
Basic | 38,360,883 | 38,274,432 |
Diluted | 39,244,250 | 39,553,649 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities | ||
Net Income | $ 631,547 | $ 152,486 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation | 259,662 | 219,968 |
Amortization of deferred financing costs | 13,334 | 31,606 |
Change in inventory reserve | (26,000) | (420,000) |
Change in allowance for bad debts | (31,006) | (50,481) |
Stock based compensation | 52,428 | 211,503 |
Change in net deferred tax assets | 178,771 | 542,072 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (671,559) | 639,160 |
Due from PNC Bank | (2,230,567) | 236,647 |
Accounts receivable - related parties | 868,217 | (1,157,158) |
Inventories | 2,538,623 | (2,314,288) |
Prepaid expenses and other current assets | (136,308) | (56,692) |
Other non-current assets | (78,559) | |
Accounts payable | (772,040) | 232,878 |
Accrued expenses | 248,841 | 75,601 |
Due to related parties | (413,675) | 413,675 |
Refunds due to customers | (414,409) | 407,024 |
Reserve for sales returns | 170,154 | 126,000 |
Net cash provided by (used in) operating activities | 187,454 | (709,999) |
Cash flows from investing activities | ||
Purchase of property and equipment | (288,741) | (257,468) |
Net cash used in investing activities | (288,741) | (257,468) |
Cash flows from financing activities | ||
Proceeds from bank term note | 1,000,000 | |
Payment of bank term note | (500,000) | (375,000) |
Proceeds from exercise of stock options | 10,400 | |
Payment of deferred financing costs | (40,000) | |
Payment on subordinated debt - related party | (1,109,064) | |
Payments on capital leases | (11,613) | |
Net cash used in financing activities | (501,213) | (524,064) |
Net change in cash | (602,500) | (1,491,531) |
Cash at beginning of year | 813,908 | 2,305,439 |
Cash at end of year | 211,408 | 813,908 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 230,342 | 301,748 |
Cash paid for income taxes | 30,000 | |
Equipment purchased under capital lease | $ 43,526 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid in Capital [Member] | Subscriptions Receivable [Member] | Accumulated Deficit [Member] | Total |
Balance at Mar. 31, 2017 | $ 382,593 | $ 19,412,787 | $ (12,353,589) | $ 7,441,791 | ||
Balance, shares at Mar. 31, 2017 | 38,259,303 | |||||
Net Income | 152,486 | 152,486 | ||||
Employee compensation-stock option | 199,003 | $ 199,003 | ||||
Exercise of stock options, shares | ||||||
Director Fees | $ 227 | 12,273 | $ 12,500 | |||
Director Fees, shares | 22,725 | |||||
Balance at Mar. 31, 2018 | $ 382,820 | 19,624,063 | (12,201,103) | 7,805,780 | ||
Balance, shares at Mar. 31, 2018 | 38,282,028 | |||||
Net Income | 631,547 | 631,547 | ||||
Employee compensation-stock option | 39,928 | 39,928 | ||||
Exercise of stock options | $ 1,600 | 11,000 | (2,200) | $ 10,400 | ||
Exercise of stock options, shares | 160,000 | 80,000 | ||||
Director Fees | $ 228 | 12,272 | $ 12,500 | |||
Director Fees, shares | 22,725 | |||||
Balance at Mar. 31, 2019 | $ 384,648 | $ 19,687,263 | $ (2,200) | $ (11,569,556) | $ 8,500,155 | |
Balance, shares at Mar. 31, 2019 | 38,464,753 |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | NOTE 1 - BASIS OF PRESENTATION OVERVIEW The Singing Machine Company, Inc., a Delaware corporation (the “Company,” “SMC”, “The Singing Machine”), and wholly-owned subsidiaries SMC (Comercial Offshore De Macau) Limitada (“Macau Subsidiary”), SMC Logistics, Inc. (“SMC-L”) and SMC-Music, Inc. (“SMC-M”), are primarily engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories and musical recordings. The products are sold directly to distributors and retail customers. China Sinostar Group Company Limited (“Sinostar”), through its wholly owned subsidiary koncepts International Limited (“koncepts”), is a major shareholder of the Company, owning approximately 49% of our shares of common stock outstanding on a fully diluted basis as of March 31, 2019. Sinostar is a company whose principal activities include designing, manufacturing and selling electronic products through its various subsidiaries. Sinostar’s products include television sets, consumer karaoke audio equipment and DVD products. We do business with a number of entities that are indirectly wholly-owned or majority owned subsidiaries of Sinostar, including Starlight R&D Ltd (“Starlight R&D”), Starlight Consumer Electronics USA, Inc., (“SCE”), Cosmo Communications Corporation of Canada, Inc. (“Cosmo”) and Star Light Electronics Company Ltd (Starlite), among others (Sinostar and its subsidiaries collectively referred to herein as the “Sinostar Group” or “Sinostar”). The Company is also partly held by Treasure Green Holdings Ltd. (“Treasure Green”), a wholly owned subsidiary of Sinostar, owning approximately 2% of our common stock. In total, the Sinostar Group owns approximately 51% of the Company’s shares of common stock. In July 2014, under a restructuring arrangement, Star Light Electronics Company Ltd was separated from the Sinostar Group and is partly and indirectly held by our Chairman, Philip Lau. |
Liquidity
Liquidity | 12 Months Ended |
Mar. 31, 2019 | |
Liquidity | |
Liquidity | NOTE 2 - LIQUIDITY The Company reported net income of approximately $0.6 million for the fiscal year ended March 31, 2019 as compared to net income of approximately $0.2 million for the fiscal year ended March 31, 2018. During Fiscal 2019 we were able to sell excess inventory on hand of approximately $2.5 million at the end of last fiscal year purchased for two major customers, one of whom was Toys R Us where we could not ship inventory due to bankruptcy and the other was another major customer that did not order all of the inventory it previously committed to. In addition, we recovered approximately $0.5 million from Toys R Us administrative claims as well as the writeoff of credits prioviously issued for returned goods. The Company has adequate cash on hand and cash available on its revolving credit facility to meet all obligations during this off-peak season. Management is confident that the availability of cash from our revolving credit facility and significant efforts to maintain current inventory levels during the next year will be adequate to meet the company’s liquidity requirements for the next twelve months. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company, its Macau Subsidiary, SMC-L, and SMC-M. All inter-company accounts and transactions have been eliminated in consolidation for all periods presented. USE OF ESTIMATES The Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Historically, past changes to these estimates have not had a material impact on the Company’s financial statements. However, circumstances could change which may alter future expectations. COLLECTIBILITY OF ACCOUNTS RECEIVABLE The Singing Machine’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient to respond to normal business conditions. Management sets 100% reserves for customers in bankruptcy and other allowances based upon historical collection experience. The Company is subject to chargebacks from customers for cooperative marketing programs, defective returns, return freight and handling charges that are deducted from open invoices and reduce collectability of open invoices. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact on operations. FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiaries are translated to U.S. dollars using year-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions and translations were not material during the periods presented. Concentration of Credit Risk At times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured amounts. The Company maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at March 31, 2019 and March 31, 2018 are approximately $0.2 million and $0.1 million, respectively. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable. INVENTORY Inventories are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or net realizable value, as determined using the first in, first out method. Inventories also include an estimate for the net realizable value of expected future inventory returns due to warranty and allowance programs (See ADOPTION OF NEW ACCOUNTING STANDARDS). As of March 31, 2019 and March 31, 2018 the estimated amounts for these future inventory returns were approximately $0.6 million and $0.4 million, respectively. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s investment in inventories for such declines in value. As of March 31, 2019 and March 31, 2018 the Company had inventory reserves of approximately $0.3 million for estimated excess and obsolete inventory. LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated and straight-line methods. FAIR VALUE OF FINANCIAL INSTRUMENTS We follow FASB ASC 825, Financial Instruments, which requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, accrued expenses, refunds due to customers, and due to/from related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the bank term note payable, the subordinated debt to Starlight Marketing Development, Ltd. (related party) and capital leases approximate fair value due to the relatively short period to maturity and related interest accrued at a rate similar to market rates. The carrying amounts on the revolving line of credit approximates fair value due the relatively short period to maturity and related interest accrued at market rates. REVENUE RECOGNITION AND RESERVE FOR SALES RETURNS The Company recognizes revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers” (See ADOPTION OF NEW ACCOUNTING STANDARDS). The Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products). Revenue is recognized when the goods are delivered and control of the goods sold is transferred to the customer. The Company’s contracts have no financing elements, payment terms are less than 120 days and have no further contract asset or liability obligations once control of goods is transferred to the customer. Revenue is recorded in the amount of consideration the Company expects to receive for the sale of these goods. Costs incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods which are included in general and administrative expenses, in-bound freight costs which are included in the cost of goods sold and accrued sales representative commissions which are included in selling expenses in the accompanying consolidated statements of income. The Company disaggregates revenues by major geographic region as most of its revenue is generated by the sales of karaoke hardware and the Company has no other material business segments (See NOTE 11). The Company generally does not allow products to be returned other than return allowance programs for goods returned to the customer for various reasons and accordingly records a sales return reserve based on historic return amounts, specific events as identified and management estimates. The Company’s reserve for sales returns were approximately $0.9 million and $0.7 million as of March 31, 2019 and March 31, 2018, respectively. During fiscal 2019 and 2018 revenue was derived from four different major product lines which consisted in total of over 35 different models. Disaggregated approximate revenue from these product lines consisted of the following: Revenue by Product Line Fiscal Years Ended Product Line March 31, 2019 March 31, 2018 Classic Karaoke Machines $ 25,100,000 $ 38,800,000 Download Karaoke Machines 13,000,000 14,100,000 SMC Kids Toys 4,200,000 4,600,000 Music and Accessories 4,200,000 3,300,000 Total Net Sales $ 46,500,000 $ 60,800,000 SHIPPING AND HANDLING COSTS Shipping and handling costs are performed by both the Company and third party logistics companies. Shipping and handling activities are performed before the customer obtains control of the goods sold to them and are considered activities to fulfill the Company’s promise to transfer the goods. These expenses are classified as a component of selling expenses in the accompanying consolidated statements of income. STOCK-BASED COMPENSATION The Company follows the provisions of the FASB ASC 718-20, “Compensation – Stock Compensation Awards Classified as Equity”. ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed in the consolidated statement of income over the service period (generally the vesting period). The Company uses the Black-Scholes option valuation model to value stock options. Employee stock option compensation expense in fiscal years 2019 and 2018 includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award. For the years ended March 31, 2019 and 2018, the stock option expense was approximately $0.1 million and $0.2 million, respectively. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions outlined below. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. ● For the year ended March 31, 2019: expected dividend yield 0%, risk-free interest rate of 2.08%, volatility of 216.33% and expected term of three years. ● For the year ended March 31, 2018: expected dividend yield 0%, risk-free interest rate of between 1.08% and 1.24%, volatility between 112.26% and 121.79% and expected term of three years. The Company’s directors were issued shares of stock as compensation for their service. For the years ended March 31, 2019 and 2018, the stock compensation expense to directors was $12,500. ADVERTISING Costs incurred for producing and publishing advertising of the Company are charged to operations the first time the advertising takes place. The Company has entered into cooperative advertising agreements with its major customers that specifically indicated that the customer must spend the cooperative advertising fund upon the occurrence of mutually agreed events. The percentage of the cooperative advertising allowance ranges from 1% to 13% of the purchase. The customers must advertise the Company’s products in the customer’s catalog, local newspaper and other advertising media. The customer must submit the proof of the performance (such as a copy of the advertising showing the Company’s products) to the Company to request for the allowance. The customer does not have the ability to spend the allowance at their discretion. The Company believes that the identifiable benefit from the cooperative advertising program and the fair value of the advertising benefit is equal or greater than the cooperative advertising expense. Advertising expense for the fiscal years ended March 31, 2019 and 2018 was approximately $3.0 million and $2.3 million, respectively. As of March 31, 2019 and March 31, 2018, there was an accrual for cooperative advertising allowances of approximately $0.6 million and $0.1 million, respectively. These amounts were a component of accrued expenses in the consolidated balance sheets. RESEARCH AND DEVELOPMENT COSTS All research and development costs are charged to results of operations as incurred. These expenses are shown as a component of general and administrative expenses in the consolidated statements of income. For the years ended March 31, 2019 and 2018, these amounts totaled approximately $0.1 million and $0.2 million, respectively. INCOME TAXES The Company follows the provisions of FASB ASC 740 “Accounting for Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company recognizes liabilities for uncertain tax positions in accordance with ASC 740. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of March 31, 2019, there were no uncertain tax positions that resulted in any adjustment to the Company’s provision for income taxes. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions. ADOPTION OF NEW ACCOUNTING STANDARDS In May 2014, the FASB issued ASU 2014-09, Topic 606, “Revenue from Contracts with Customers”, (“ASC 606”) which outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. The core principle of the revenue recognition model is that an entity recognizes revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 on April 1, 2018 using the full retrospective approach with the application of the standard reflected in the prior year reporting period. After examining the Company’s performance obligations in its contracts, it was determined that there was no effect to the company’s retained earnings or net income during the periods reported. Management determined that most of the Company’s customers (other than distributors) have “customer acceptance rights” in that customers are allowed to return defective goods within a specified period after shipment (generally between 6 and 9 months) after goods have been shipped. Prior to adoption of ASC 606, the Company recognized a liability for the estimated net amount of sales less the estimated net realizable value of expected returned goods at the time of sale. The liability for estimated return goods was approximately $0.2 million at March 31, 2018 and was reported in warranty provisions on the consolidated balance sheet. The adoption of ASC 606 required that the net realizable value of estimated return goods be disaggregated from estimated sales return reserves and reported as a current asset and the amount of estimated sales amount to be credited to customers be recognized in current liabilities on the consolidated balance sheet. As a result of the adoption of ASC 606 the net realizable value of estimated returned goods of approximately $0.5 million was reclassified to inventory on April 1, 2018 on the condensed consolidated balance sheet. Estimated sales amounts to be credited to customers due to inventory warranty and allowance programs of approximately $0.7 million was reported in reserve for sales returns on the consolidated balance sheet on April 1, 2018. (Refer to Note 5 - INVENTORY and Note 15 - RESERVE FOR SALES RETURNS) The Singing Machine Company, Inc. and Subsidiaries As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED BALANCE SHEET - MARCH 31, 2018 Assets Current Assets Inventories, net $ 8,057,774 $ 479,160 $ 8,536,934 Liabilities Current Liabilities Reserve for sales returns $ - $ 726,000 $ 726,000 Warranty provisions $ 246,840 $ (246,840 ) $ - As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED STATEMENT OF CASH FLOWS - March 31, 2018 Cash flows from operating activities: Inventories $ (2,211,428 ) $ (102,860 ) $ (2,314,288 ) Reserve for sales returns $ - $ 126,000 $ 126,000 Warranty provisions $ 23,140 $ (23,140 ) $ - RECENT ACCOUNTING PRONOUNCEMENTS: In February 2016, the FASB issued ASU 2016-02, Topic 842, as amended, “Leases” . The new standard is effective for us on April 1, 2019. A modified retrospective approach is required, applying the new standard to all leases existing at the date of initial application. We chose the effective date as the date of initial application. Upon adoption of this leasing standard we anticipate recognizing an ROU asset and lease liability of approximately $1.2 million with an immaterial impact on our consolidated statement of income. We also anticipate providing significant new disclosures about our leasing activities upon adoption. |
Significant Agreement
Significant Agreement | 12 Months Ended |
Mar. 31, 2019 | |
Significant Agreement | |
Significant Agreement | NOTE 4 – SIGNIFICANT AGREEMENT On January 29, 2019, the Company signed a three-year worldwide licensing agreement with CBS (NYSE: CBS) for the CARPOOL KARAOKE program series which was amendend on March 18, 2019. Under the terms of the Agreement, Singing Machine will be launching a range of consumer products worldwide designed for use within vehicles under the CARPOOL KARAOKE license. The license agreement began December 1, 2018 and continues through September 30, 2022. The license requires a minimum royalty guaranty of $650,000 over the life of the contract. In the first year there is a $250,000 minimum royalty guarantee paid in advance with a $50,000 payment made at the execution of the contract, and a second payment of $200,000 paid on June 1, 2019. In the second and third years of the agreement, minimum royalty payments of $200,000 for each year are to be paid in advance on or before June 1, 2021 and June 1, 2022. Royalty payments will be calculated at 9% of net sales up to the first 150,000 units; and 10% of net sales 150,001 units thereafter and are payable on a quarterly basis beginning September 30, 2019. The initial payment of $50,000 paid in March, 2019 was recorded in prepaid and other current assets in the accompanying consolidated balance sheets. |
Inventories, Net
Inventories, Net | 12 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | NOTE 5 – INVENTORIES, NET Inventories are comprised of the following components: March 31, 2019 March 31, 2018 Finished Goods $ 5,679,245 $ 8,238,227 Inventory in Transit - 99,547 Estimated Cost of Future Returns 599,066 479,160 Subtotal 6,278,311 8,816,934 Less: Inventory Reserve 254,000 280,000 Total Inventories $ 6,024,311 $ 8,536,934 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 6 - PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: USEFUL LIFE MARCH 31, 2019 MARCH 31, 2018 Computer and office equipment 5 years $ 140,575 $ 286,928 Furniture and fixtures 7 years 98,410 98,410 Warehouse equipment 7 years 209,419 238,471 Molds and tooling 3-5 years 1,466,837 2,788,905 1,915,241 3,412,714 Less: Accumulated depreciation 1,392,331 2,962,409 $ 522,910 $ 450,305 Depreciation expense for fiscal years ended 2019 and 2018 was approximately $0.3 million and $0.2 million, respectively. During fiscal 2019 we disposed of approximately $1.8 million of fully depreciated assets consisting primarily of molds and tooling for obsolete products no longer in production. |
Bank Financing
Bank Financing | 12 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Bank Financing | NOTE 7 – BANK FINANCING Revolving Credit Facility On June 22, 2017, the Company renewed the existing revolving credit facility (the “Revolving Credit Facility”) with PNC Bank, National Association (“PNC”) for an additional three years expiring on July 15, 2020. The outstanding loan balance cannot exceed $15.0 million during peak selling season between August 1 and December 31 (with the ability of the Company to request an additional $5.0 million of availability during peak selling season if required) and is reduced to a maximum of $7.5 million between January 1 and July 31. At March 31, 2019 and March 31, 2018, there was no amounts due on the Revolving Credit Facility. Usage under the Revolving Credit Facility shall not exceed the sum of the following (the “Borrowing Base”): ● Up to 85% of the company’s eligible domestic and Canadian accounts receivable and up to 90% of eligible foreign credit insured accounts aged less than 60 days past due (not to exceed 90 days from invoice date, cross aged on the basis of 50% or more past due with certain specific accounts qualifying for up to 120 days from invoice date not to exceed 30 days from the due date; plus ● Up to the lesser of (a) 60% of the cost of eligible inventory or (b) 85% of net orderly liquidation value percentage of eligible inventory (annual inventory appraisals required); minus ● Applicable reserves including a dilution reserve equal to 100% of the Company’s advertising and return accrual reserves. Dilution reserve not to exceed availability generated from eligible accounts receivable. The Revolving Credit Facility includes the following sub-limits: ● Letters of Credit to be issued limited to $3.0 million. ● Inventory availability limited to $5.0 million. ● $0.5 million eligible in-transit inventory sublimit within the $5.0 million total inventory. ● Mandatory pay-down to $1.0 million (excluding letters of credit) for any 30 consecutive days between February 1 and April 30. The Revolving Credit Facility must comply with the following quarterly financial covenants to avoid default: ● Fixed charge coverage ratio test of 1.1:1 times measured on a rolling four quarter basis, defined as EBITDA less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness. ● Capital expenditures limited to approximately $0.4 million per year. On August 2, 2018, PNC issued a third amendment and waiver (“third amendment”) to the Revolving Credit Facility, the Security Agreement in effect for fiscal 2019. The third amendment waived existing violations of the fixed charge coverage ratio of 1.1:1 and increased maximum capital expenditures from $300,000 to $375,000 per fiscal year. The Company incurred an amendment fee of $10,000 upon execution of the agreement. As of March 31, 2019 the Company was in compliance with all covenants. Interest on the Revolving Line of Credit is accrued at .75% per annum over PNC’s announced prime rate with an option for the Company to elect the 1, 2 or 3 month fully absorbed PNC LIBOR Rate plus 2.75% per annum with a default rate of 2% over the applicable rate. There is an unused facility fee equal to .375% per annum on the unused portion of the Revolving Credit Facility which will be calculated on the basis of a 360 day year for the actual number of days elapsed and will be payable quarterly in arrears. During both fiscal years ended March 31, 2019 and 2018 the Company incurred interest expense of approximately $0.2 million on amounts borrowed against the Revolving Credit Facility. The Revolving Line of Credit is secured by first priority security interests in all of the named borrowers’ tangible and intangible assets as well as first priority security interests of 100% of member or ownership interests of any of its domestic existing or newly formed subsidiaries and first priority lien on up to 65% of the borrowers’ domestic subsidiary’s existing or subsequently formed or acquired foreign subsidiaries. The Revolving Credit Facility is also secured by a related-party debt subordination agreement with Starlight Marketing Development, Ltd. in the amount of approximately $0.8 million. Term Note Payable In connection with the amendments above and in addition to the maximum availability limits on the Revolving Line of Credit, the agreement also includes a two-year term note (“Term Note”) in the amount of $1.0 million the proceeds of which were used to pay down a portion of the subordinated related party debt of approximately $1.9 million in June 2017. The Term Note bears interest at 1.75% per annum over PNC’s announced prime rate or 1, 2, or 3 month PNC LIBOR Rate plus 3.75%. The Term Note is payable in quarterly installments of $125,000 plus accrued interest with the first installment paid on August 1, 2017. At March 31, 2019 and March 31, 2018, the outstanding balance on the Term Note was approximately $0.1 million and $0.6 million, respectively. During the years ended March 31, 2019 and 2018 the Company incurred interest expense of approximately $22,000 and $23,000, respectively. Subordinated Debt The subordination agreement has been amended reducing the amount of related party subordinated debt to the remaining amount due of approximately $815,000. Provision has also been made to allow repayment of the remaining $815,000 in quarterly installments of $123,000 including interest accrued at 6% per annum which commenced September 30, 2017. Payments of $123,000 are only permitted upon receipt of the Company’s quarterly compliance certificate; the Company having met the mandatory pay-down of the Revolving Credit Facility to $1,000,000 and average excess availability for the prior 30 days (after subtraction of third party trade payables 30 days or more past due) of no less than $1,000,000 after giving effect to the payment. As part of the Conditions to Installment Payment of the subordinated debt, payments not made under this note that cannot be made as a result of the foregoing prohibition shall not be deemed an Event of Default and can be made as soon as the Company is able to demonstrate that it meets the liquidity requirements defined above. The installment payment of $123,000 due on December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019 were not made due to the Company’s inability to meet the Conditions to the Installment Payment. During the years ended March 31, 2019 and 2018 the Company accrued interest expense of approximately $21,000 and $37,000, respectively on the related party subordinated debt. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 8 - COMMITMENTS AND CONTINGENCIES LEGAL MATTERS As of June 28, 2019 management is not aware of any legal proceedings other than matters that arise in the ordinary course of business. OPERATING LEASES The Company has operating lease agreements for office and warehouse facilities in Fort Lauderdale, Florida; Ontario, California; and Macau, China expiring at varying dates. Rent expense for both years ended March 31, 2019 and 2018 was approximately $0.7 million. In addition, the Company maintains various warehouse equipment and office equipment operating leases. Future minimum lease payments under property and equipment leases with terms exceeding one year as of March 31, 2019 are as follows: Operating Leases For fiscal year ending March 31, 2020 $ 651,000 2021 348,000 2022 116,000 2023 118,000 2024 and beyond 121,000 $ 1,354,000 |
Shareholders' Equity
Shareholders' Equity | 12 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Shareholders' Equity | NOTE 9 – SHAREHOLDERS’ EQUITY COMMON STOCK ISSUANCES During the years ended March 31, 2019 and 2018 the Company issued the following common stock shares: Fiscal 2019: On March 31, 2019, the Company accrued a subscription receivable for 20,000 shares of its common stock to a former director who exercised stock options at an exercise price of $0.11 per share. The Company received payment of $2,200 in May 2019. On January 24, 2019, the Company issued 60,000 shares of its common stock to a current director who exercised stock options at an average exercise price of $.07 per share. The Company received payment of $4,000 in January 2019. On August 3, 2018 the Company issued 80,000 shares of its common stock to a former director who exercised stock options at an average exercise price of $.08 per share. The Company received payment of $6,400 in January 2019. On August 1, 2018, the Company issued 22,725 shares of its common stock to our Board of Directors at $0.55 per share, pursuant to our annual director compensation plan for the fiscal year ending March 31, 2019. The value of this issuance was $12,500. Fiscal 2018: On August 1, 2017, the Company issued 22,725 shares of its common stock to our Board of Directors at $0.55 per share, pursuant to our annual director compensation plan for the fiscal year ending March 31, 2018. The value of this issuance was $12,500. EARNINGS PER SHARE In accordance with FASB ASC 210, “Earnings per Share”, basic earnings per share are computed by dividing the net earnings for the year by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing earnings for the year by the weighted average number of common shares outstanding including the effect of common stock equivalents. As of March 31, 2019 there were common stock equivalents to purchase 2,210,000 shares of common stock, 1,630,000 of which were included in the computation of diluted earnings per share. For the fiscal year ended March 31, 2018 there were common stock equivalents to purchase 2,330,000 shares of common stock of which 1,850,000 were included in the computation of diluted earnings per share. STOCK OPTIONS On June 1, 2001, the Board of Directors approved the 2001 Stock Option Plan (“Plan”), as amended. The Plan was developed to provide a means whereby directors and selected employees, officers, consultants, and advisors of the Company may be granted incentive or non-qualified stock options to purchase common stock of the Company. As of March 31, 2018, the Plan had expired and no shares were available to be issued nor were any additional shares issued from the plan in Fiscal 2019 or 2018. A summary of stock option activity for each of the years presented is summarized below. Fiscal 2019 Fiscal 2018 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Stock Options: Balance at beginning of year 2,330,000 $ 0.22 1,970,000 $ 0.16 Granted 100,000 $ 0.55 480,000 $ 0.49 Exercised (160,000 ) $ 0.08 - $ - Forfeited (60,000 ) $ 0.11 (120,000 ) $ 0.45 Balance at end of year * 2,210,000 $ 0.25 2,330,000 $ 0.22 Options exercisable at end of year 2,110,000 $ 0.23 1,850,000 $ 0.15 The following table summarizes information about employee stock options outstanding at March 31, 2019: Range of Exercise Price Number Outstanding at March 31, 2019 Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable at March 31, 2019 Weighted Average Exercise Price $0.03 - $0.33 1,630,000 3.8 $ 0.16 1,630,000 $ 0.16 $0.45 - $0.55 580,000 8.4 $ 0.55 480,000 $ 0.49 * 2,210,000 2,110,000 * Total number of options outstanding as of March 31, 2019 includes 460,000 options issued to five current and two former directors as compensation and 1,150,000 options issue to key employees that were not issued from the Plan. |
Income Taxes
Income Taxes | 12 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 10 - INCOME TAXES The Company files separate tax returns in the United States and in Macau, China. The Macau Subsidiary has received approval from the Macau government to operate its business as a Macau Offshore Company (MOC), and is exempt from the Macau income tax. For the fiscal years ended March 31, 2019 and 2018, the Macau Subsidiary recorded no tax provision. The U.S. Federal net operating loss carryforward is subject to an IRS Section 382 limitation. As of March 31, 2019 and 2018, the Company had net deferred tax assets of approximately $0.8 million and $0.9 million, respectively. For the fiscal year ended March 31, 2019 we determined our effective tax rate to be approximately 20.1% and we recorded a tax provision of approximately $0.2 million On December 22, 2017 the Tax Cut and Jobs Act was enacted which reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result of the Tax Cut and Jobs Act we determined our blended rate for the fiscal year ending March 31, 2018 was approximately 28.4% and we recorded a tax provision of approximately $0.2 million. Upon completion of our analysis for all of the tax effects of the Tax Cut and Jobs Act we recognized an additional tax provision of approximately $0.3 million at March 31, 2018 primarily related to the revaluation of our net deferred tax assets. The income tax provision (benefit) for federal, foreign, and state income taxes in the consolidated statements of income consisted of the following components for 2019 and 2018: 2019 2018 Income tax provision (benefit): Current: Federal $ (19,289 ) $ - State - - Total current Federal and State tax provision (benefit) (19,289 ) - Deferred: Federal 159,881 587,995 State 18,888 (43,118 ) Total Deferred Federal and State provision (benefit) 178,769 544,877 Total income tax provision (benefit) $ 159,480 $ 544,877 The United States and foreign components of income before income taxes are as follows: 2019 2018 United States $ 607,652 $ 469,182 Foreign 183,375 228,181 $ 791,027 $ 697,363 The actual tax provision differs from the “expected” tax expense for the years ended March 31, 2019 and 2018 (computed by applying the U.S. Federal Corporate tax rate of 21 percent to income before taxes) as follows: 2019 2018 Expected tax expense $ 166,506 $ 212,657 State income taxes, net of Federal income tax benefit 13,478 10,341 Permanent differences 8,282 12,716 Deemed Dividend 20,813 70,267 Change in income tax rate - 346,062 Tax rate differential on foreign earnings (20,813 ) (70,267 ) Other (28,786 ) (36,899 ) Actual tax provision $ 159,480 $ 544,877 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows: 2019 2018 Deferred tax assets: Federal net operating loss carryforward $ 236,476 $ 263,231 State net operating loss carryforward 272,758 289,584 AMT credit carryforward 19,289 92,723 Inventory differences 176,967 190,327 Allowance for doubtful accounts 11,599 18,462 Reserve for sales returns 67,439 55,505 Stock option compensation expense 109,464 104,676 Stock warrants 23,018 22,802 Accrued expenses 7,944 7,215 Total deferred tax assets 924,954 1,044,525 Deferred tax liabilities: Depreciation (108,706 ) (76,364 ) Prepaid expenses (57,882 ) (31,024 ) Net deferred tax assets $ 758,366 $ 937,137 The company performed an analysis in accordance with the provisions of ASC 740, which require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. The analysis performed to assess the realizability of the deferred tax assets included an evaluation of the pattern and timing of the reversals of temporary differences and the length of carryback and carryforward periods available under the applicable federal and state laws; and the amount and timing of future taxable income. As of March 31, 2019 the analysis indicated that it is more likely than not that the deferred tax assets recorded will be realized. At March 31, 2019, the Company has federal tax net operating loss carryforwards in the amount of approximately $1.1 million that begin to expire in the year 2025. The net operating loss carryforward is subject to an IRS Section 382 limitation. There is approximately $0.2 million per year available to use beginning in Fiscal 2019. In addition, the Company has state tax net operating loss carryforwards in the amount of approximately $5.2 million that will begin to expire beginning in 2024. The Company is no longer subject to income tax examinations for fiscal years before 2016. |
Segment Information
Segment Information | 12 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | NOTE 11 - SEGMENT INFORMATION The Company operates in one segment. Sales by geographic region for the period presented are as follows: FOR THE FISCAL YEARS ENDED March 31, 2019 March 31, 2018 North America $ 42,419,351 $ 56,537,688 Europe 3,723,913 4,080,249 Asia - 93,500 Australia 286,979 - South Africa 44,201 96,613 Others 8,554 - $ 46,482,998 $ 60,808,050 The geographic area of sales is based primarily on where the product was delivered. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Mar. 31, 2019 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | NOTE 12 - EMPLOYEE BENEFIT PLANS The Company has a 401(k) plan for its employees to which the Company makes contributions at rates dependent on the level of each employee’s contributions. Contributions made by the Company are limited to the maximum allowable for federal income tax purposes. The amounts charged to operations for contributions to this plan and administrative costs during the years ended March 31, 2019 and 2018 totaled approximately $70,000 and $52,000, respectively. The amounts are included as a component of general and administrative expense in the accompanying Consolidated Statements of Income. The Company does not provide any post-employment benefits to retirees. |
Concentrations of Credit Risk,
Concentrations of Credit Risk, Customers, and Suppliers | 12 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations of Credit Risk, Customers, and Suppliers | NOTE 13 - CONCENTRATIONS OF CREDIT RISK, CUSTOMERS, AND SUPPLIERS The Company derives a majority of its revenues from retailers of products in the United States. The Company’s allowance for doubtful accounts is based upon management’s estimates and historical experience and reflects the fact that accounts receivable are concentrated with several large customers. At March 31, 2019, 62% of accounts receivable were due from three customers in North America that individually owed over 10% of total accounts receivable. At March 31, 2018, 75% of accounts receivable were due from two customers in North America. Revenues derived from five largest customers in 2019 and 2018 were 86% and 80% of net sales, respectively. Revenues derived from top three customers in 2019 and 2018 as percentage of the net sales were 39%, 14% and 13% and 34%, 17% and 11%, respectively. The loss of any of these customers could have an adverse impact on the Company. In September, 2017, Toys R US (which accounted for approximately 17.3% of our sales in fiscal 2018) filed for bankruptcy protection and conversion to liquidation in April 2018. While revenue was not significantly impacted during fiscal 2018, cash flow was significantly impacted as we recorded charge to bad debt expense of approximately $3.1 million due to the bankruptcy. Net sales derived from the Macau Subsidiary aggregated approximately $7.6 million in fiscal 2019 and 2018. The Company is dependent upon foreign companies for the manufacture of all of its electronic products. The Company’s arrangements with manufacturers are subject to the risk of doing business abroad, such as import duties, trade restrictions, work stoppages, foreign currency fluctuations, political instability, and other factors, which could have an adverse impact on its business. The Company believes that the loss of any one or more of their suppliers would not have a long-term material adverse effect because other manufacturers with whom the Company does business would be able to increase production to fulfill their requirements. However, the loss of certain suppliers in the short-term could adversely affect business until alternative supply arrangements are secured. During fiscal years 2019 and 2018, manufacturers in the People’s Republic of China accounted for 100% of the Company’s total product purchases, including all of the Company’s hardware purchases. In 2018 the U.S. government imposed tariffs of 25% on certain goods imported from China. All of our products are manufactured and imported from China however, our products are currently not subject to the tariffs currently in place. Should the government decide to expand its list of products to include our karaoke products that would subject our products to tariffs in the future, there could be a significant increase in the landed cost of our products. If we are unable to mitigate these increased costs through price increases we could experience reductions in revenues, gross profit margin and results from operations. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 14 – RELATED PARTY TRANSACTIONS DUE TO/FROM RELATED PARTIES On March 31, 2019 and 2018, the Company had approximately $0.3 million and $1.2 million, respectively due from related parties for goods and services sold these companies. In connection with the renewal of the Revolving Credit Facility on June 22, 2017, the amount due of approximately $1.9 million to Starlight Marketing Development, Ltd. (“Starlight Debt”) remained subordinated however, PNC Bank authorized a two-year term note in the amount of $1.0 million the proceeds of which were to be used to pay down a portion of the Starlight Debt leaving a balance due on the Starlight Debt of approximately $0.8 million. The term note bears interest at 1.75% per annum over PNC’s announced prime rate or 1, 2, or 3 month PNC LIBOR Rate plus 3.75%. The term note is payable in quarterly installments of $125,000 plus accrued interest. Provision has also been made to allow repayment of the remaining approximately $0.8 million in quarterly installments of $123,000 including interest accrued at 6% per annum commencing August 1, 2017 provided liquidity tests as defined in the original agreement are met. Due to liquidity issues caused by the bankruptcy of our second largest customer, the company was only able to make one scheduled payment on the Starlight Debt during the prior fiscal year. The remaining Starlight Debt of approximately $0.8 million has been classified as current in the accompanying consolidated balance sheet as the Company intends to pay the remaining balance over the next twelve months. TRADE During Fiscal 2019 and 2018 the Company paid approximately $0.4 million and $0.3 million, respectively to Starlight Electronics Company, Ltd (“SLE”) as reimbursement for engineering quality control and other administrative services performed on our behalf in China. During Fiscal 2019 and 2018 the Company paid non-recurring engineering fees to SLE of approximately $21,000 and $43,000, respectively. These expense reimbursements were included in general and administrative expenses on our consolidated statements of income. During Fiscal 2019 and 2018 the Company sold approximately $1.2 million and $1.5 million, respectively of product to Winglight Pacific, Ltd. (“Winglight”) a related company, for direct shipment to Cosmo Communications of Canada, Ltd (“Cosmo”), another related company, at discounted pricing granted to major direct import customers shipped internationally with freight prepaid. The average gross profit margin on sales to Winglight for Fiscal 2019 and 2018 was 30.1% and 21.8%, respectively. These amounts were included as a component of net sales in the accompanying consolidated statements of income. During Fiscal 2019 and 2018 the Company sold approximately $0.4 million and $0.6 million, respectively of product to Cosmo from our California warehouse facility. These goods were sold at a discounted price, similar to prices granted to major direct import customers shipped internationally with freight prepaid. The average gross profit margin on sales to Cosmo yielded 22.5% and 24.6%, respectively. These amounts were included as a component of net sales in the accompanying consolidated statements of income. In Fiscal 2019 and 2018 the Company paid approximately $0.1 million and $0.2 million, respectively to Merrygain Holding Company, Ltd. (a related party subsidiary) for storage fees and other services provided to the Company by this subsidiary. These amounts were included as a component of general and administrative expenses in the accompanying consolidated statements of income. |
Reserve for Sales Returns
Reserve for Sales Returns | 12 Months Ended |
Mar. 31, 2019 | |
Reserve For Sales Returns | |
Reserve for Sales Returns | NOTE 15 – RESERVE FOR SALES RETURNS A return program for defective goods is negotiated with each of our wholesale customers on a year-to-year basis. Customers are either allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months) or granted a “defective allowance” consisting of a fixed percentage (between 1% and 5%) off of invoice price in lieu of returning defective products. The Company does make occasional exceptions to this return policy and accordingly records a sales return reserve based on historic return amounts, specific exceptions as identified and management estimates. The Company records a sales reserve for its return goods programs at the time of sale for estimated sales returns that may occur. The liability for defective goods is included in the reserve for sales returns on the consolidated balance sheets. Changes in the Company’s reserve for sales returns are presented in the following table: Fiscal Year Ended March 31, 2019 March 31, 2018 Reserve for sales returns at beginning of the fiscal year $ 726,000 $ 600,000 Provision for estimated sales returns 3,997,946 3,775,846 Sales returns received (3,827,792 ) (3,649,846 ) Reserve for sales returns at end of the year $ 896,154 $ 726,000 |
Reserves
Reserves | 12 Months Ended |
Mar. 31, 2019 | |
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |
Reserves | NOTE 16 – RESERVES Asset reserves and allowances for years ended March 31, 2019 and 2018 are presented in the following table: Balance at Charged to Reduction to Credited to Balance at Beginning of Costs and Allowance for Costs and End of Description Year Expenses Write off Expenses Year Year ended March 31, 2019 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $ 82,102 $ 411,862 $ (31,200 ) $ (411,668 ) $ 51,096 Inventory reserve $ 280,000 $ 100,000 $ (44,220 ) $ (81,780 ) $ 254,000 Year ended March 31, 2018 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $ 132,583 $ 3,224,684 $ (3,254,158 ) $ (21,007 ) $ 82,102 Inventory reserve $ 700,000 $ 150,000 $ (424,688 ) $ (145,312 ) $ 280,000 |
Quarterly Financial Data - Unau
Quarterly Financial Data - Unaudited | 12 Months Ended |
Mar. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Data - Unaudited | NOTE 17 - QUARTERLY FINANCIAL DATA - UNAUDITED The following financial information reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results of the interim periods. The quarterly unaudited results for the years ended March 31, 2019 and 2018 are set forth in the following table: Sales Gross Profit Net Earnings (Loss) Basic Earnings (Loss) Per Share Diluted Earnings (Loss) Per Share (In thousands) (In thousands) (In thousands) 2019 First quarter $ 1,837 $ 391 $ (1,034 ) $ (0.03 ) $ (0.03 ) Second quarter 24,305 5,207 1,217 0.03 0.03 Third quarter 19,452 5,626 1,290 0.03 0.03 Fourth quarter 889 549 (841 ) (0.01 ) 0.00 Fiscal Year 2019 $ 46,483 $ 11,773 $ 632 $ 0.02 $ 0.02 2018 First quarter $ 3,940 $ 1,079 $ (527 ) $ (0.01 ) $ (0.01 ) Second quarter 32,802 7,738 784 0.02 0.02 Third quarter 21,462 5,998 1,151 0.03 0.03 Fourth quarter 2,604 858 (1,256 ) (0.04 ) (0.04 ) Fiscal Year 2018 $ 60,808 $ 15,673 $ 152 $ (0.00 ) $ (0.00 ) |
Subsequent Events
Subsequent Events | 12 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 18 – SUBSEQUENT EVENTS On June 10, 2019, the Company entered into an agreement with Korcomptenz, Inc. to install a new Enterprise Resource Planning software (“ERP System”) that will be utilized companywide. The implementation project will start in July, 2019 with a “go-live” date scheduled for April 1, 2020. The estimated cost of the ERP System project is approximately $0.4 million. On June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC (“Dimension”) to finance the entire ERP System project over a term of 60 months. Upon approval by Company management, Dimension will release progress payments directly to Korcompetenz as specific project milestones are met. Total progress payments will be made to the vendor over a period of approximately nine months and the Company will only be charged financing costs on the amounts released to the vendor. The agreement calls for monthly installment payments of approximately $7,257 (including principal and interest) and bears interest of approximately 6.22%. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company, its Macau Subsidiary, SMC-L, and SMC-M. All inter-company accounts and transactions have been eliminated in consolidation for all periods presented. |
Use of Estimates | USE OF ESTIMATES The Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Historically, past changes to these estimates have not had a material impact on the Company’s financial statements. However, circumstances could change which may alter future expectations. |
Collectibility of Accounts Receivable | COLLECTIBILITY OF ACCOUNTS RECEIVABLE The Singing Machine’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient to respond to normal business conditions. Management sets 100% reserves for customers in bankruptcy and other allowances based upon historical collection experience. The Company is subject to chargebacks from customers for cooperative marketing programs, defective returns, return freight and handling charges that are deducted from open invoices and reduce collectability of open invoices. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact on operations. |
Foreign Currency Translation | FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiaries are translated to U.S. dollars using year-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions and translations were not material during the periods presented. |
Concentration of Credit Risk | CONCENTRATION OF CREDIT RISK At times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured amounts. The Company maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at March 31, 2019 and March 31, 2018 are approximately $0.2 million and $0.1 million, respectively. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable. |
Inventory | INVENTORY Inventories are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or net realizable value, as determined using the first in, first out method. Inventories also include an estimate for the net realizable value of expected future inventory returns due to warranty and allowance programs (See ADOPTION OF NEW ACCOUNTING STANDARDS). As of March 31, 2019 and March 31, 2018 the estimated amounts for these future inventory returns were approximately $0.6 million and $0.4 million, respectively. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s investment in inventories for such declines in value. As of March 31, 2019 and March 31, 2018 the Company had inventory reserves of approximately $0.3 million for estimated excess and obsolete inventory. |
Long-Lived Assets | LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” |
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated and straight-line methods. |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS We follow FASB ASC 825, Financial Instruments, which requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, accrued expenses, refunds due to customers, and due to/from related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the bank term note payable, the subordinated debt to Starlight Marketing Development, Ltd. (related party) and capital leases approximate fair value due to the relatively short period to maturity and related interest accrued at a rate similar to market rates. The carrying amounts on the revolving line of credit approximates fair value due the relatively short period to maturity and related interest accrued at market rates. |
Revenue Recognition and Reserve for Sales Returns | REVENUE RECOGNITION AND RESERVE FOR SALES RETURNS The Company recognizes revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers” (See ADOPTION OF NEW ACCOUNTING STANDARDS). The Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products). Revenue is recognized when the goods are delivered and control of the goods sold is transferred to the customer. The Company’s contracts have no financing elements, payment terms are less than 120 days and have no further contract asset or liability obligations once control of goods is transferred to the customer. Revenue is recorded in the amount of consideration the Company expects to receive for the sale of these goods. Costs incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods which are included in general and administrative expenses, in-bound freight costs which are included in the cost of goods sold and accrued sales representative commissions which are included in selling expenses in the accompanying consolidated statements of income. The Company disaggregates revenues by major geographic region as most of its revenue is generated by the sales of karaoke hardware and the Company has no other material business segments (See NOTE 11). The Company generally does not allow products to be returned other than return allowance programs for goods returned to the customer for various reasons and accordingly records a sales return reserve based on historic return amounts, specific events as identified and management estimates. The Company’s reserve for sales returns were approximately $0.9 million and $0.7 million as of March 31, 2019 and March 31, 2018, respectively. During fiscal 2019 and 2018 revenue was derived from four different major product lines which consisted in total of over 35 different models. Disaggregated approximate revenue from these product lines consisted of the following: Revenue by Product Line Fiscal Years Ended Product Line March 31, 2019 March 31, 2018 Classic Karaoke Machines $ 25,100,000 $ 38,800,000 Download Karaoke Machines 13,000,000 14,100,000 SMC Kids Toys 4,200,000 4,600,000 Music and Accessories 4,200,000 3,300,000 Total Net Sales $ 46,500,000 $ 60,800,000 |
Shipping and Handling Costs | SHIPPING AND HANDLING COSTS Shipping and handling costs are performed by both the Company and third party logistics companies. Shipping and handling activities are performed before the customer obtains control of the goods sold to them and are considered activities to fulfill the Company’s promise to transfer the goods. These expenses are classified as a component of selling expenses in the accompanying consolidated statements of income. |
Stock-Based Compensation | STOCK-BASED COMPENSATION The Company follows the provisions of the FASB ASC 718-20, “Compensation – Stock Compensation Awards Classified as Equity”. ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed in the consolidated statement of income over the service period (generally the vesting period). The Company uses the Black-Scholes option valuation model to value stock options. Employee stock option compensation expense in fiscal years 2019 and 2018 includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award. For the years ended March 31, 2019 and 2018, the stock option expense was approximately $0.1 million and $0.2 million, respectively. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions outlined below. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. ● For the year ended March 31, 2019: expected dividend yield 0%, risk-free interest rate of 2.08%, volatility of 216.33% and expected term of three years. ● For the year ended March 31, 2018: expected dividend yield 0%, risk-free interest rate of between 1.08% and 1.24%, volatility between 112.26% and 121.79% and expected term of three years. The Company’s directors were issued shares of stock as compensation for their service. For the years ended March 31, 2019 and 2018, the stock compensation expense to directors was $12,500. |
Advertising | ADVERTISING Costs incurred for producing and publishing advertising of the Company are charged to operations the first time the advertising takes place. The Company has entered into cooperative advertising agreements with its major customers that specifically indicated that the customer must spend the cooperative advertising fund upon the occurrence of mutually agreed events. The percentage of the cooperative advertising allowance ranges from 1% to 13% of the purchase. The customers must advertise the Company’s products in the customer’s catalog, local newspaper and other advertising media. The customer must submit the proof of the performance (such as a copy of the advertising showing the Company’s products) to the Company to request for the allowance. The customer does not have the ability to spend the allowance at their discretion. The Company believes that the identifiable benefit from the cooperative advertising program and the fair value of the advertising benefit is equal or greater than the cooperative advertising expense. Advertising expense for the fiscal years ended March 31, 2019 and 2018 was approximately $3.0 million and $2.3 million, respectively. As of March 31, 2019 and March 31, 2018, there was an accrual for cooperative advertising allowances of approximately $0.6 million and $0.1 million, respectively. These amounts were a component of accrued expenses in the consolidated balance sheets. |
Research and Development Costs | RESEARCH AND DEVELOPMENT COSTS All research and development costs are charged to results of operations as incurred. These expenses are shown as a component of general and administrative expenses in the consolidated statements of income. For the years ended March 31, 2019 and 2018, these amounts totaled approximately $0.1 million and $0.2 million, respectively. |
Income Taxes | INCOME TAXES The Company follows the provisions of FASB ASC 740 “Accounting for Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company recognizes liabilities for uncertain tax positions in accordance with ASC 740. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of March 31, 2019, there were no uncertain tax positions that resulted in any adjustment to the Company’s provision for income taxes. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions. |
Adoption of New Accounting Standards | ADOPTION OF NEW ACCOUNTING STANDARDS In May 2014, the FASB issued ASU 2014-09, Topic 606, “Revenue from Contracts with Customers”, (“ASC 606”) which outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. The core principle of the revenue recognition model is that an entity recognizes revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606 on April 1, 2018 using the full retrospective approach with the application of the standard reflected in the prior year reporting period. After examining the Company’s performance obligations in its contracts, it was determined that there was no effect to the company’s retained earnings or net income during the periods reported. Management determined that most of the Company’s customers (other than distributors) have “customer acceptance rights” in that customers are allowed to return defective goods within a specified period after shipment (generally between 6 and 9 months) after goods have been shipped. Prior to adoption of ASC 606, the Company recognized a liability for the estimated net amount of sales less the estimated net realizable value of expected returned goods at the time of sale. The liability for estimated return goods was approximately $0.2 million at March 31, 2018 and was reported in warranty provisions on the consolidated balance sheet. The adoption of ASC 606 required that the net realizable value of estimated return goods be disaggregated from estimated sales return reserves and reported as a current asset and the amount of estimated sales amount to be credited to customers be recognized in current liabilities on the consolidated balance sheet. As a result of the adoption of ASC 606 the net realizable value of estimated returned goods of approximately $0.5 million was reclassified to inventory on April 1, 2018 on the condensed consolidated balance sheet. Estimated sales amounts to be credited to customers due to inventory warranty and allowance programs of approximately $0.7 million was reported in reserve for sales returns on the consolidated balance sheet on April 1, 2018. (Refer to Note 5 - INVENTORY and Note 15 - RESERVE FOR SALES RETURNS) The Singing Machine Company, Inc. and Subsidiaries As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED BALANCE SHEET - MARCH 31, 2018 Assets Current Assets Inventories, net $ 8,057,774 $ 479,160 $ 8,536,934 Liabilities Current Liabilities Reserve for sales returns $ - $ 726,000 $ 726,000 Warranty provisions $ 246,840 $ (246,840 ) $ - As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED STATEMENT OF CASH FLOWS - March 31, 2018 Cash flows from operating activities: Inventories $ (2,211,428 ) $ (102,860 ) $ (2,314,288 ) Reserve for sales returns $ - $ 126,000 $ 126,000 Warranty provisions $ 23,140 $ (23,140 ) $ - |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS: In February 2016, the FASB issued ASU 2016-02, Topic 842, as amended, “Leases” . The new standard is effective for us on April 1, 2019. A modified retrospective approach is required, applying the new standard to all leases existing at the date of initial application. We chose the effective date as the date of initial application. Upon adoption of this leasing standard we anticipate recognizing an ROU asset and lease liability of approximately $1.2 million with an immaterial impact on our consolidated statement of income. We also anticipate providing significant new disclosures about our leasing activities upon adoption. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Disaggregation of Revenue | Disaggregated approximate revenue from these product lines consisted of the following: Revenue by Product Line Fiscal Years Ended Product Line March 31, 2019 March 31, 2018 Classic Karaoke Machines $ 25,100,000 $ 38,800,000 Download Karaoke Machines 13,000,000 14,100,000 SMC Kids Toys 4,200,000 4,600,000 Music and Accessories 4,200,000 3,300,000 Total Net Sales $ 46,500,000 $ 60,800,000 |
Schedule of Changes in Consolidated Balance Sheet and Cash Flow Statement for Adoption of New Accounting Standards | The Singing Machine Company, Inc. and Subsidiaries As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED BALANCE SHEET - MARCH 31, 2018 Assets Current Assets Inventories, net $ 8,057,774 $ 479,160 $ 8,536,934 Liabilities Current Liabilities Reserve for sales returns $ - $ 726,000 $ 726,000 Warranty provisions $ 246,840 $ (246,840 ) $ - As reported at ASC 606 Under ASC 606 March 31, 2018 Adjustment March 31, 2018 CONSOLIDATED STATEMENT OF CASH FLOWS - March 31, 2018 Cash flows from operating activities: Inventories $ (2,211,428 ) $ (102,860 ) $ (2,314,288 ) Reserve for sales returns $ - $ 126,000 $ 126,000 Warranty provisions $ 23,140 $ (23,140 ) $ - |
Inventories, Net (Tables)
Inventories, Net (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories are comprised of the following components: March 31, 2019 March 31, 2018 Finished Goods $ 5,679,245 $ 8,238,227 Inventory in Transit - 99,547 Estimated Cost of Future Returns 599,066 479,160 Subtotal 6,278,311 8,816,934 Less: Inventory Reserve 254,000 280,000 Total Inventories $ 6,024,311 $ 8,536,934 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Summary of Property and Equipment | A summary of property and equipment is as follows: USEFUL LIFE MARCH 31, 2019 MARCH 31, 2018 Computer and office equipment 5 years $ 140,575 $ 286,928 Furniture and fixtures 7 years 98,410 98,410 Warehouse equipment 7 years 209,419 238,471 Molds and tooling 3-5 years 1,466,837 2,788,905 1,915,241 3,412,714 Less: Accumulated depreciation 1,392,331 2,962,409 $ 522,910 $ 450,305 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease payments under property and equipment leases with terms exceeding one year as of March 31, 2019 are as follows: Operating Leases For fiscal year ending March 31, 2020 $ 651,000 2021 348,000 2022 116,000 2023 118,000 2024 and beyond 121,000 $ 1,354,000 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Equity [Abstract] | |
Summary of Stock Option Activity | A summary of stock option activity for each of the years presented is summarized below. Fiscal 2019 Fiscal 2018 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Stock Options: Balance at beginning of year 2,330,000 $ 0.22 1,970,000 $ 0.16 Granted 100,000 $ 0.55 480,000 $ 0.49 Exercised (160,000 ) $ 0.08 - $ - Forfeited (60,000 ) $ 0.11 (120,000 ) $ 0.45 Balance at end of year * 2,210,000 $ 0.25 2,330,000 $ 0.22 Options exercisable at end of year 2,110,000 $ 0.23 1,850,000 $ 0.15 * Total number of options outstanding as of March 31, 2019 includes 460,000 options issued to five current and two former directors as compensation and 1,150,000 options issue to key employees that were not issued from the Plan. |
Schedule of Employee Stock Options Outstanding | The following table summarizes information about employee stock options outstanding at March 31, 2019: Range of Exercise Price Number Outstanding at March 31, 2019 Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable at March 31, 2019 Weighted Average Exercise Price $0.03 - $0.33 1,630,000 3.8 $ 0.16 1,630,000 $ 0.16 $0.45 - $0.55 580,000 8.4 $ 0.55 480,000 $ 0.49 * 2,210,000 2,110,000 * Total number of options outstanding as of March 31, 2019 includes 460,000 options issued to five current and two former directors as compensation and 1,150,000 options issue to key employees that were not issued from the Plan. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Provision (Benefit) | The income tax provision (benefit) for federal, foreign, and state income taxes in the consolidated statements of income consisted of the following components for 2019 and 2018: 2019 2018 Income tax provision (benefit): Current: Federal $ (19,289 ) $ - State - - Total current Federal and State tax provision (benefit) (19,289 ) - Deferred: Federal 159,881 587,995 State 18,888 (43,118 ) Total Deferred Federal and State provision (benefit) 178,769 544,877 Total income tax provision (benefit) $ 159,480 $ 544,877 |
Schedule of Income Before Income Tax | The United States and foreign components of income before income taxes are as follows: 2019 2018 United States $ 607,652 $ 469,182 Foreign 183,375 228,181 $ 791,027 $ 697,363 |
Schedule of Difference Between Actual Tax Expenses and Expected Tax Expenses | The actual tax provision differs from the “expected” tax expense for the years ended March 31, 2019 and 2018 (computed by applying the U.S. Federal Corporate tax rate of 21 percent to income before taxes) as follows: 2019 2018 Expected tax expense $ 166,506 $ 212,657 State income taxes, net of Federal income tax benefit 13,478 10,341 Permanent differences 8,282 12,716 Deemed Dividend 20,813 70,267 Change in income tax rate - 346,062 Tax rate differential on foreign earnings (20,813 ) (70,267 ) Other (28,786 ) (36,899 ) Actual tax provision $ 159,480 $ 544,877 |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows: 2019 2018 Deferred tax assets: Federal net operating loss carryforward $ 236,476 $ 263,231 State net operating loss carryforward 272,758 289,584 AMT credit carryforward 19,289 92,723 Inventory differences 176,967 190,327 Allowance for doubtful accounts 11,599 18,462 Reserve for sales returns 67,439 55,505 Stock option compensation expense 109,464 104,676 Stock warrants 23,018 22,802 Accrued expenses 7,944 7,215 Total deferred tax assets 924,954 1,044,525 Deferred tax liabilities: Depreciation (108,706 ) (76,364 ) Prepaid expenses (57,882 ) (31,024 ) Net deferred tax assets $ 758,366 $ 937,137 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | The Company operates in one segment. Sales by geographic region for the period presented are as follows: FOR THE FISCAL YEARS ENDED March 31, 2019 March 31, 2018 North America $ 42,419,351 $ 56,537,688 Europe 3,723,913 4,080,249 Asia - 93,500 Australia 286,979 - South Africa 44,201 96,613 Others 8,554 - $ 46,482,998 $ 60,808,050 |
Reserves for Sales Returns (Tab
Reserves for Sales Returns (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Reserve For Sales Returns | |
Schedule of Reserve for Sales Returns | Changes in the Company’s reserve for sales returns are presented in the following table: Fiscal Year Ended March 31, 2019 March 31, 2018 Reserve for sales returns at beginning of the fiscal year $ 726,000 $ 600,000 Provision for estimated sales returns 3,997,946 3,775,846 Sales returns received (3,827,792 ) (3,649,846 ) Reserve for sales returns at end of the year $ 896,154 $ 726,000 |
Reserves (Tables)
Reserves (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |
Schedule of Valuation and Qualifying Accounts | Asset reserves and allowances for years ended March 31, 2019 and 2018 are presented in the following table: Balance at Charged to Reduction to Credited to Balance at Beginning of Costs and Allowance for Costs and End of Description Year Expenses Write off Expenses Year Year ended March 31, 2019 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $ 82,102 $ 411,862 $ (31,200 ) $ (411,668 ) $ 51,096 Inventory reserve $ 280,000 $ 100,000 $ (44,220 ) $ (81,780 ) $ 254,000 Year ended March 31, 2018 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $ 132,583 $ 3,224,684 $ (3,254,158 ) $ (21,007 ) $ 82,102 Inventory reserve $ 700,000 $ 150,000 $ (424,688 ) $ (145,312 ) $ 280,000 |
Quarterly Financial Data - Un_2
Quarterly Financial Data - Unaudited (Tables) | 12 Months Ended |
Mar. 31, 2019 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Financial Information | The quarterly unaudited results for the years ended March 31, 2019 and 2018 are set forth in the following table: Sales Gross Profit Net Earnings (Loss) Basic Earnings (Loss) Per Share Diluted Earnings (Loss) Per Share (In thousands) (In thousands) (In thousands) 2019 First quarter $ 1,837 $ 391 $ (1,034 ) $ (0.03 ) $ (0.03 ) Second quarter 24,305 5,207 1,217 0.03 0.03 Third quarter 19,452 5,626 1,290 0.03 0.03 Fourth quarter 889 549 (841 ) (0.01 ) 0.00 Fiscal Year 2019 $ 46,483 $ 11,773 $ 632 $ 0.02 $ 0.02 2018 First quarter $ 3,940 $ 1,079 $ (527 ) $ (0.01 ) $ (0.01 ) Second quarter 32,802 7,738 784 0.02 0.02 Third quarter 21,462 5,998 1,151 0.03 0.03 Fourth quarter 2,604 858 (1,256 ) (0.04 ) (0.04 ) Fiscal Year 2018 $ 60,808 $ 15,673 $ 152 $ (0.00 ) $ (0.00 ) |
Basis of Presentation (Details
Basis of Presentation (Details Narrative) | Mar. 31, 2019 |
Koncepts International Limited [Member] | |
Equity method investment, ownership percentage | 49.00% |
Treasure Green Holdings Ltd [Member] | |
Equity method investment, ownership percentage | 2.00% |
Sinostar Group [Member] | |
Equity method investment, ownership percentage | 51.00% |
Liquidity (Details Narrative)
Liquidity (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Net income | $ (841,000) | $ 1,290,000 | $ 1,217,000 | $ (1,034,000) | $ (1,256,000) | $ 1,151,000 | $ 784,000 | $ (527,000) | $ 631,547 | $ 152,486 |
Increase in inventory | (2,538,623) | $ 2,314,288 | ||||||||
Toys R Us bankruptcy's [Member] | ||||||||||
Bad debts recovery | $ 500,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | |
Accounting Policies [Line Items] | |||
Percentage of reserves for customers | 100.00% | ||
Foreign financial institutions actual deposits | $ 200,000 | $ 100,000 | |
Future inventory returns | 600,000 | 400,000 | |
Inventory reserves | 254,000 | 280,000 | |
Reserve for sales returns | 896,154 | 726,000 | $ 600,000 |
Stock option expense | $ 100,000 | $ 200,000 | |
Share based compensation, expected dividend yield | 0.00% | 0.00% | |
Share based compensation, risk-free interest rate | 2.08% | ||
Share based compensation, volatility | 216.33% | ||
Share based compensation, expected term | 3 years | 3 years | |
Share based compensation, risk-free interest rate, minimum | 1.08% | ||
Share based compensation, risk-free interest rate, maximum | 1.24% | ||
Share based compensation, volatility, minimum | 112.26% | ||
Share based compensation, volatility, maximum | 121.79% | ||
Advertising expense | $ 3,000,000 | $ 2,300,000 | |
Accrued cooperative advertising allowances | 600,000 | 100,000 | |
Research and development costs | $ 100,000 | 200,000 | |
Percentage of tax benefits recognized likelihood of being realized | greater than 50% | ||
Uncertain tax positions | |||
Liability for return of goods | 200,000 | ||
Realizable value of estimated return of goods | 500,000 | ||
Estimated sales amounts to be credited to customers due to inventory warranty and allowance programs | 700,000 | ||
ROU asset anticipated on adoption of new accounting standard | 1,200,000 | ||
Lease liability anticipated on adoption of new accounting standard | $ 1,200,000 | ||
Minimum [Member] | |||
Accounting Policies [Line Items] | |||
Cooperative advertising allowance, percentage | 1.00% | ||
Maximum [Member] | |||
Accounting Policies [Line Items] | |||
Cooperative advertising allowance, percentage | 13.00% | ||
Director [Member] | |||
Accounting Policies [Line Items] | |||
Stock compensation expense | $ 12,500 | $ 12,500 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Disaggregation of Revenue (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Net Sales | $ 889,000 | $ 19,452,000 | $ 24,305,000 | $ 1,837,000 | $ 2,604,000 | $ 21,462,000 | $ 32,802,000 | $ 3,940,000 | $ 46,482,998 | $ 60,808,050 |
Classic Karaoke Machines [Member] | ||||||||||
Net Sales | 25,100,000 | 38,800,000 | ||||||||
Download Karaoke Machines [Member] | ||||||||||
Net Sales | 13,000,000 | 14,100,000 | ||||||||
SMC Kids Toys [Member] | ||||||||||
Net Sales | 4,200,000 | 4,600,000 | ||||||||
Music and Accessories [Member] | ||||||||||
Net Sales | $ 4,200,000 | $ 3,300,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Changes in Consolidated Balance Sheet and Cash Flow Statement for Adoption of New Accounting Standards (Details) - USD ($) | 12 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | |
Inventories, net | $ 6,024,311 | $ 8,536,934 | |
Reserve for sales returns | 896,154 | 726,000 | $ 600,000 |
Warranty provisions | |||
Inventories | 2,538,623 | (2,314,288) | |
Reserve for sales returns | $ 170,154 | 126,000 | |
Warranty provisions | |||
Previously Reported [Member] | |||
Inventories, net | 8,057,774 | ||
Reserve for sales returns | |||
Warranty provisions | 246,840 | ||
Inventories | (2,211,428) | ||
Reserve for sales returns | |||
Warranty provisions | 23,140 | ||
Restatement Adjustment [Member] | |||
Inventories, net | 479,160 | ||
Reserve for sales returns | 726,000 | ||
Warranty provisions | (246,840) | ||
Inventories | (102,860) | ||
Reserve for sales returns | 126,000 | ||
Warranty provisions | $ (23,140) |
Significant Agreement (Details
Significant Agreement (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Jan. 29, 2019 | |
Minimum royalty guaranty required | $ 650,000 | |
Minimum royalty guaranty paid in advance | $ 250,000 | |
Minimum royalty guaranty paid | $ 50,000 | |
Royalty payment calculation terms | Royalty payments will be calculated at 9% of net sales up to the first 150,000 units; and 10% of net sales 150,001 units thereafter and are payable on a quarterly basis beginning September 30, 2019 | |
June 1, 2019 [Member] | ||
Minimum royalty guaranty paid | $ 200,000 | |
June 1, 2021 [Member] | ||
Minimum royalty guaranty paid in advance | 200,000 | |
June 1, 2022 [Member] | ||
Minimum royalty guaranty paid in advance | $ 200,000 |
Inventories, Net - Schedule of
Inventories, Net - Schedule of Inventory (Details) - USD ($) | Mar. 31, 2019 | Mar. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished Goods | $ 5,679,245 | $ 8,238,227 |
Inventory in Transit | 99,547 | |
Estimated Cost of Future Returns | 599,066 | 479,160 |
Subtotal | 6,278,311 | 8,816,934 |
Less: Inventory Reserve | 254,000 | 280,000 |
Total Inventories | $ 6,024,311 | $ 8,536,934 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 259,662 | $ 219,968 |
Disposal of fully depreciated assets | $ 1,800,000 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,915,241 | $ 3,412,714 |
Less: Accumulated depreciation | 1,392,331 | 2,962,409 |
Property and equipment, net | $ 522,910 | 450,305 |
Computer and Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 5 years | |
Property and equipment, gross | $ 140,575 | 286,928 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 7 years | |
Property and equipment, gross | $ 98,410 | 98,410 |
Warehouse Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 7 years | |
Property and equipment, gross | $ 209,419 | 238,471 |
Molds and Tooling [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,466,837 | $ 2,788,905 |
Molds and Tooling [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 3 years | |
Molds and Tooling [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 5 years |
Bank Financing (Details Narrati
Bank Financing (Details Narrative) - USD ($) | Aug. 02, 2018 | Aug. 01, 2017 | Jun. 22, 2017 | Jun. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 |
Line of Credit Facility [Line Items] | ||||||
First priority security ownership interest percentage | 100.00% | |||||
Line of credit facility, collateral amount | $ 800,000 | |||||
Term Note [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, interest rate during period | 1.75% | |||||
Line of credit facility, LIBOR Rate plus rate | 3.75% | |||||
Incurred interest expense | $ 22,000 | $ 23,000 | ||||
Line of credit facility, periodic payment | $ 125,000 | |||||
Outstanding balance | 100,000 | 600,000 | ||||
Subordinated Debt [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, maximum amount outstanding during period | $ 815,000 | |||||
Line of credit facility, interest rate during period | 6.00% | |||||
Incurred interest expense | $ 21,000 | 37,000 | ||||
Repayments of lines of credit | 815,000 | |||||
Line of credit facility, periodic payment | $ 123,000 | |||||
Maximum [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
First priority lien percentage | 65.00% | |||||
Prior 30 Days [Member] | Subordinated Debt [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, maximum amount outstanding during period | $ 1,000,000 | |||||
Revolving Credit Facility [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Debt instrument, term | 3 years | |||||
Line of credit facility, expiration date | Jul. 15, 2020 | |||||
Line of credit facility, description | Usage under the Revolving Credit Facility shall not exceed the sum of the following (the "Borrowing Base"): Up to 85% of the company's eligible domestic and Canadian accounts receivable and up to 90% of eligible foreign credit insured accounts aged less than 60 days past due (not to exceed 90 days from invoice date, cross aged on the basis of 50% or more past due with certain specific accounts qualifying for up to 120 days from invoice date not to exceed 30 days from the due date; plus Up to the lesser of (a) 60% of the cost of eligible inventory or (b) 85% of net orderly liquidation value percentage of eligible inventory (annual inventory appraisals required); minus Applicable reserves including a dilution reserve equal to 100% of the Company's advertising and return accrual reserves. Dilution reserve not to exceed availability generated from eligible accounts receivable. | |||||
Line of credit facility sub limits description | The Revolving Credit Facility includes the following sub-limits: Letters of Credit to be issued limited to $3.0 million. Inventory availability limited to $5.0 million. $0.5 million eligible in-transit inventory sublimit within the $5.0 million total inventory. Mandatory pay-down to $1.0 million (excluding letters of credit) for any 30 consecutive days between February 1 and April 30. | |||||
Line of credit facility, covenant terms | The Revolving Credit Facility must comply with the following quarterly financial covenants to avoid default: Fixed charge coverage ratio test of 1.1:1 times measured on a rolling four quarter basis, defined as EBITDA less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness. Capital expenditures limited to approximately $0.4 million per year. | |||||
Line of credit facility, interest rate during period | 0.75% | |||||
Line of credit facility, LIBOR Rate plus rate | 2.75% | |||||
Line of credit facility default rate | 2.00% | |||||
Line of credit facility, unused capacity, commitment fee percentage | 0.375% | |||||
Incurred interest expense | $ 200,000 | $ 200,000 | ||||
Revolving Credit Facility [Member] | Term Note [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Debt instrument, term | 2 years | |||||
Proceeds from lines of credit | $ 1,000,000 | |||||
Repayments of lines of credit | $ 1,900,000 | |||||
Revolving Credit Facility [Member] | Third Amendment [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, description | PNC issued a third amendment and waiver ("third amendment") to the Revolving Credit Facility, the Security Agreement in effect for fiscal 2019. The third amendment waived existing violations of the fixed charge coverage ratio of 1.1:1 and increased maximum capital expenditures from $300,000 to $375,000 per fiscal year. The Company incurred an amendment fee of $10,000 upon execution of the agreement. | |||||
Revolving Credit Facility [Member] | Peak Selling Season Between August 1 And December 31 [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, maximum amount outstanding during period | 15,000,000 | |||||
Revolving line of credit | 5,000,000 | |||||
Revolving Credit Facility [Member] | Peak Selling Season Between January 1 And July 31 [Member] | ||||||
Line of Credit Facility [Line Items] | ||||||
Line of credit facility, maximum amount outstanding during period | $ 7,500,000 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 700,000 | $ 700,000 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Rental Payments for Operating Leases (Details) | Mar. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
For fiscal year ending March 31, 2020 | $ 651,000 |
For fiscal year ending March 31, 2021 | 348,000 |
For fiscal year ending March 31, 2022 | 116,000 |
For fiscal year ending March 31, 2023 | 118,000 |
For fiscal year ending March 31, 2024 and beyond | 121,000 |
Total | $ 1,354,000 |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) | Jan. 24, 2019 | Aug. 03, 2018 | Aug. 02, 2018 | Aug. 01, 2017 | Jan. 31, 2019 | Mar. 31, 2019 | Mar. 31, 2018 |
Number of common stock equivalents to purchase shares of common stock | 2,210,000 | 2,330,000 | |||||
Dilutive Potential Securities | 1,630,000 | 1,850,000 | |||||
Former Director [Member] | |||||||
Subscription receivable | 20,000 | ||||||
Shares issued price per share | $ 0.08 | $ 0.11 | |||||
Number of shares issued | 80,000 | ||||||
Number of shares issued, value | $ 6,400 | ||||||
Former Director [Member] | May 2019 [Member] | |||||||
Proceeds from shares subscribed | $ 2,200 | ||||||
Current Director [Member] | |||||||
Shares issued price per share | $ 0.07 | ||||||
Number of shares issued | 60,000 | ||||||
Number of shares issued, value | $ 4,000 | ||||||
Board of Directors [Member] | |||||||
Shares issued price per share | $ 0.55 | ||||||
Number of shares issued | 22,725 | ||||||
Number of shares issued, value | $ 12,500 | ||||||
Board of Directors [Member] | Fiscal 2018 [Member] | |||||||
Shares issued price per share | $ 0.55 | ||||||
Number of shares issued | 22,725 | ||||||
Number of shares issued, value | $ 12,500 |
Shareholders' Equity - Summary
Shareholders' Equity - Summary of Stock Option Activity (Details) - $ / shares | 12 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | |||
Number of Options Exercised | (80,000) | |||
Stock Option [Member] | ||||
Number of Options, Balance at Beginning of Year | 2,330,000 | [1] | 1,970,000 | |
Number of Options Granted | 100,000 | 480,000 | ||
Number of Options Exercised | (160,000) | |||
Number of Options Forfeited | (60,000) | (120,000) | ||
Number of Options, Balance at End of Year | [1] | 2,210,000 | 2,330,000 | |
Number of Options, Exercisable at End of Year | 2,110,000 | 1,850,000 | ||
Weighted Average Exercise Price, Balance at Beginning of Year | $ 0.22 | [1] | $ 0.16 | |
Weighted Average Exercise Price Granted | 0.55 | 0.49 | ||
Weighted Average Exercise Price Exercised | 0.08 | |||
Weighted Average Exercise Price Forfeited | 0.11 | 0.45 | ||
Weighted Average Exercise Price, Balance at End of Period | [1] | 0.25 | 0.22 | |
Weighted Average Exercise Price, Options Exercisable at End of Year | $ 0.23 | $ 0.15 | ||
[1] | Total number of options outstanding as of March 31, 2019 includes 460,000 options issued to five current and two former directors as compensation and 1,150,000 options issue to key employees that were not issued from the Plan. |
Shareholders' Equity - Summar_2
Shareholders' Equity - Summary of Stock Option Activity (Details) (Parenthetical) | 12 Months Ended |
Mar. 31, 2019shares | |
Five Current Directors and Two Former Directors [Member] | |
Number of option issued for compensation during period | 460,000 |
Key Employees [Member] | |
Number of option issued for compensation during period | 1,150,000 |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Employee Stock Options Outstanding (Details) | 12 Months Ended | |
Mar. 31, 2019$ / sharesshares | ||
Stock Options Number Outstanding | shares | 2,210,000 | [1] |
Stock Option Number Exercisable | shares | 2,110,000 | [1] |
Exercise Price Range One [Member] | ||
Stock Options Outstanding Exercise Price, Lower Range Limit | $ 0.03 | |
Stock Options Outstanding Exercise Price, Upper Range Limit | $ 0.33 | |
Stock Options Number Outstanding | shares | 1,630,000 | |
Stock Option Outstanding Weighted Average Remaining Contractual Life | 3 years 9 months 18 days | |
Stock Option Outstanding Weighted Average Exercise Price | $ 0.16 | |
Stock Option Number Exercisable | shares | 1,630,000 | |
Stock Option Exercisable Weighted Average Exercise Price | $ 0.16 | |
Exercise Price Range Two [Member] | ||
Stock Options Outstanding Exercise Price, Lower Range Limit | 0.45 | |
Stock Options Outstanding Exercise Price, Upper Range Limit | $ 0.55 | |
Stock Options Number Outstanding | shares | 580,000 | |
Stock Option Outstanding Weighted Average Remaining Contractual Life | 8 years 4 months 24 days | |
Stock Option Outstanding Weighted Average Exercise Price | $ 0.55 | |
Stock Option Number Exercisable | shares | 480,000 | |
Stock Option Exercisable Weighted Average Exercise Price | $ 0.49 | |
[1] | Total number of options outstanding as of March 31, 2019 includes 460,000 options issued to five current and two former directors as compensation and 1,150,000 options issue to key employees that were not issued from the Plan. |
Shareholders' Equity - Schedu_2
Shareholders' Equity - Schedule of Employee Stock Options Outstanding (Details) (Parenthetical) | 12 Months Ended |
Mar. 31, 2019shares | |
Five Current Directors and Two Former Directors [Member] | |
Number of option issued for compensation during period | 460,000 |
Key Employees [Member] | |
Number of option issued for compensation during period | 1,150,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Net deferred tax assets | $ 758,366 | $ 937,137 |
Income tax rate | 20.10% | 28.40% |
Income tax provision | $ 159,480 | $ 544,877 |
Income tax, description | On December 22, 2017 the Tax Cut and Jobs Act was enacted which reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. | |
Federal income tax rate, percent | 21.00% | |
Operating loss available to use | $ 200,000 | |
Tac Cut and Jobs Act [Member] | ||
Income tax provision | $ 300,000 | |
Federal Tax [Member] | ||
Operating loss carryforwards | $ 1,100,000 | |
Operating loss carry forwards expiration period | Begin to expire in the year 2025. | |
Statel Tax [Member] | ||
Operating loss carryforwards | $ 5,200,000 | |
Operating loss carry forwards expiration period | Begin to expire beginning in 2024. |
Income Taxes - Schedule of Comp
Income Taxes - Schedule of Components of Income Tax Provision (Benefit) (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal | $ (19,289) | |
State | ||
Total current Federal and State tax (benefit) | (19,289) | |
Federal | 159,881 | 587,995 |
State | 18,888 | (43,118) |
Total Deferred Federal and State | 178,769 | 544,877 |
Total income tax provision | $ 159,480 | $ 544,877 |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Before Income Tax (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
United States | $ 607,652 | $ 469,182 |
Foreign | 183,375 | 228,181 |
Net income before income tax benefit | $ 791,027 | $ 697,363 |
Income Taxes - Schedule of Diff
Income Taxes - Schedule of Difference Between Actual Tax Expenses and Expected Tax Expenses (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Expected tax expense | $ 166,506 | $ 212,657 |
State income taxes, net of Federal income tax benefit | 13,478 | 10,341 |
Permanent differences | 8,282 | 12,716 |
Deemed Dividend | 20,813 | 70,267 |
Change in income tax rate | 346,062 | |
Tax rate differential on foreign earnings | (20,813) | (70,267) |
Other | (28,786) | (36,899) |
Actual tax provision | $ 159,480 | $ 544,877 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Mar. 31, 2019 | Mar. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Federal net operating loss carryforward | $ 236,476 | $ 263,231 |
State net operating loss carryforward | 272,758 | 289,584 |
AMT credit carryforward | 19,289 | 92,723 |
Inventory differences | 176,967 | 190,327 |
Allowance for doubtful accounts | 11,599 | 18,462 |
Reserve for sales returns | 67,439 | 55,505 |
Stock option compensation expense | 109,464 | 104,676 |
Stock warrants | 23,018 | 22,802 |
Accrued expenses | 7,944 | 7,215 |
Total deferred tax assets | 924,954 | 1,044,525 |
Depreciation | (108,706) | (76,364) |
Prepaid expenses | (57,882) | (31,024) |
Net deferred tax assets | $ 758,366 | $ 937,137 |
Segment Information (Details Na
Segment Information (Details Narrative) | 12 Months Ended |
Mar. 31, 2019Customer | |
Segment Reporting [Abstract] | |
Number of segment report | 1 |
Segment Information - Schedule
Segment Information - Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Segment Reporting Information [Line Items] | ||
Net Sales | $ 46,482,998 | $ 60,808,050 |
North America [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 42,419,351 | 56,537,688 |
Europe [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 3,723,913 | 4,080,249 |
Asia [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 93,500 | |
Australia [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 286,979 | |
South Africa [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | 44,201 | 96,613 |
Others [Member] | ||
Segment Reporting Information [Line Items] | ||
Net Sales | $ 8,554 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details Narrative) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Retirement Benefits [Abstract] | ||
Defined contribution plan, administrative expenses | $ 70,000 | $ 52,000 |
Concentrations of Credit Risk_2
Concentrations of Credit Risk, Customers, and Suppliers (Details Narrative) | 1 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Mar. 31, 2019USD ($)Customer | Mar. 31, 2018USD ($) | |
Number of customers | Customer | 5 | ||
Charge to bad debt expense | $ (442,671) | $ 3,203,677 | |
Sales revenue, net | 46,482,998 | 60,808,050 | |
Macau Subsidiary [Member] | |||
Sales revenue, net | $ 7,600,000 | $ 7,600,000 | |
Accounts Receivable [Member] | Three Customers [Member] | |||
Concentration of sales risk, percentage | 10.00% | ||
Accounts Receivable [Member] | Three Customers [Member] | North America [Member] | |||
Concentration of sales risk, percentage | 62.00% | ||
Accounts Receivable [Member] | Two Customers [Member] | North America [Member] | |||
Concentration of sales risk, percentage | 75.00% | ||
Sales Revenue [Member] | Toys R US [Member] | |||
Concentration of sales risk, percentage | 17.30% | ||
Sales Revenue [Member] | Five Customers [Member] | |||
Concentration of sales risk, percentage | 86.00% | 80.00% | |
Sales Revenue [Member] | Customer One [Member] | |||
Concentration of sales risk, percentage | 39.00% | 34.00% | |
Sales Revenue [Member] | Customer Two [Member] | |||
Concentration of sales risk, percentage | 14.00% | 17.00% | |
Sales Revenue [Member] | Customer Three [Member] | |||
Concentration of sales risk, percentage | 13.00% | 11.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Aug. 01, 2017 | Jun. 22, 2017 | Mar. 31, 2019 | Mar. 31, 2018 |
Related Party Transaction [Line Items] | ||||
Due from related parties, current | $ 300,000 | $ 1,200,000 | ||
Warehouse Facility [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue from related parties | $ 400,000 | $ 600,000 | ||
Related party gross margin percentage | 22.50% | 24.60% | ||
Revolving Credit Facility [Member] | ||||
Related Party Transaction [Line Items] | ||||
Line of credit facility interest rate | 0.75% | |||
Revolving Credit Facility [Member] | Two Year Term Note [Member] | ||||
Related Party Transaction [Line Items] | ||||
Proceeds from line of credit | $ 1,000,000 | |||
Line of credit facility, maximum amount outstanding during period | 800,000 | |||
Line of credit facility, periodic payment | $ 123,000 | 125,000 | ||
Repayments of lines of credit | $ 800,000 | |||
Debt instrument due date | Aug. 1, 2017 | |||
Accrued interest rate percentage | 6.00% | |||
Revolving Credit Facility [Member] | Two Year Term Note [Member] | Prime Rate [Member] | ||||
Related Party Transaction [Line Items] | ||||
Line of credit facility interest rate | 1.75% | |||
Revolving Credit Facility [Member] | Two Year Term Note [Member] | LIBOR Rate [Member] | ||||
Related Party Transaction [Line Items] | ||||
Line of credit facility interest rate | 3.75% | |||
Starlight Marketing Development, Ltd [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | $ 1,900,000 | |||
Notes payable, related parties, current | $ 800,000 | |||
Reimbursement Paid | 400,000 | $ 300,000 | ||
Payments for non recurring engineering fees | 21,000 | 43,000 | ||
Winglight Pacific Ltd [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue from related parties | $ 1,200,000 | $ 1,500,000 | ||
Related party gross margin percentage | 30.10% | 21.80% | ||
Merrygain Holding Co., Ltd [Member] | ||||
Related Party Transaction [Line Items] | ||||
Cost incurred for Storage fees and other services | $ 100,000 | $ 200,000 |
Reserve for Sales Returns (Deta
Reserve for Sales Returns (Details Narrative) | 12 Months Ended |
Mar. 31, 2019 | |
Reserve For Sales Returns Details Narrative Abstract | |
Reserve for sales return, description | Customers are either allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months) or granted a "defective allowance" consisting of a fixed percentage (between 1% and 5%) off of invoice price in lieu of returning defective products. |
Reserve for Sales Returns - Sch
Reserve for Sales Returns - Schedule of Reserve for Sales Returns (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Reserve For Sales Returns | ||
Reserve for sales returns at beginning of the fiscal year | $ 726,000 | $ 600,000 |
Provision for estimated sales returns | 3,997,946 | 3,775,846 |
Sales returns received | (3,827,792) | (3,649,846) |
Reserve for sales returns at end of the year | $ 896,154 | $ 726,000 |
Reserves - Schedule of Valuatio
Reserves - Schedule of Valuation and Qualifying Accounts (Details) - USD ($) | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Allowance for Doubtful Accounts [Member] | ||
Balance at Beginning of Year | $ 82,102 | $ 132,583 |
Charged to Costs and Expenses | 411,862 | 3,224,684 |
Reduction to Allowance for Write off | (31,200) | (3,254,158) |
Credited to Costs and Expenses | (411,668) | (21,007) |
Balance at End of Year | 51,096 | 82,102 |
Inventory Reserve [Member] | ||
Balance at Beginning of Year | 280,000 | 700,000 |
Charged to Costs and Expenses | 100,000 | 150,000 |
Reduction to Allowance for Write off | (44,220) | (424,688) |
Credited to Costs and Expenses | (81,780) | (145,312) |
Balance at End of Year | $ 254,000 | $ 280,000 |
Quarterly Financial Data - Un_3
Quarterly Financial Data - Unaudited - Schedule of Quarterly Financial Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Quarterly Financial Information Disclosure [Abstract] | ||||||||||
Sales | $ 889,000 | $ 19,452,000 | $ 24,305,000 | $ 1,837,000 | $ 2,604,000 | $ 21,462,000 | $ 32,802,000 | $ 3,940,000 | $ 46,482,998 | $ 60,808,050 |
Gross Profit | 549,000 | 5,626,000 | 5,207,000 | 391,000 | 858,000 | 5,998,000 | 7,738,000 | 1,079,000 | 11,773,199 | 15,672,778 |
Net Earnings (Loss) | $ (841,000) | $ 1,290,000 | $ 1,217,000 | $ (1,034,000) | $ (1,256,000) | $ 1,151,000 | $ 784,000 | $ (527,000) | $ 631,547 | $ 152,486 |
Basic Earnings (Loss) Per Share | $ (0.01) | $ 0.03 | $ 0.03 | $ (0.03) | $ (0.04) | $ 0.03 | $ 0.02 | $ (0.01) | $ 0.02 | $ 0 |
Diluted Earnings (Loss) Pe Share | $ 0 | $ 0.03 | $ 0.03 | $ (0.03) | $ (0.04) | $ 0.03 | $ 0.02 | $ (0.01) | $ 0.02 | $ 0 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($) | Jun. 18, 2019 | Jun. 10, 2019 |
Korcomptenz, Inc [Member] | ||
Cost of the project | $ 400,000 | |
Dimension Funding, LLC [Member] | ||
Agreement description | On June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC ("Dimension") to finance the entire ERP System project over a term of 60 months. Upon approval by Company management, Dimension will release progress payments directly to Korcompetenz as specific project milestones are met. Total progress payments will be made to the vendor over a period of approximately nine months and the Company will only be charged financing costs on the amounts released to the vendor. | |
Monthly installment payment | $ 7,257 | |
Interest rate | 6.22% |