Cover
Cover - shares | 3 Months Ended | |
Jun. 30, 2021 | Aug. 13, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2021 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Current Fiscal Year End Date | --03-31 | |
Entity File Number | 000-24968 | |
Entity Registrant Name | SINGING MACHINE CO INC | |
Entity Central Index Key | 0000923601 | |
Entity Tax Identification Number | 95-3795478 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 6301 NW | |
Entity Address, Address Line Two | 5th Way | |
Entity Address, Address Line Three | Suite 2900 | |
Entity Address, City or Town | Fort Lauderdale | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 33309 | |
City Area Code | (954) | |
Local Phone Number | 596-1000 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 35,937,593 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Jun. 30, 2021 | Mar. 31, 2021 |
Current Assets | ||
Cash | $ 1,383,230 | $ 396,579 |
Accounts receivable, net of allowances of $126,156 and $138,580, respectively | 5,562,834 | 2,298,922 |
Due from Crestmark Bank | 342,706 | 4,557,120 |
Inventories, net | 8,370,101 | 5,490,255 |
Prepaid expenses and other current assets | 190,708 | 221,071 |
Deferred financing costs | 35,938 | 15,359 |
Total Current Assets | 15,885,517 | 12,979,306 |
Property and equipment, net | 661,416 | 674,153 |
Deferred tax assets | 915,259 | 887,164 |
Operating Leases - right of use assets | 1,892,923 | 2,074,115 |
Other non-current assets | 94,952 | 147,173 |
Total Assets | 19,450,067 | 16,761,911 |
Current Liabilities | ||
Accounts payable | 6,262,655 | 2,461,103 |
Accrued expenses | 1,377,061 | 1,659,499 |
Revolving line of credit - Iron Horse Credit | 364,915 | 64,915 |
Customer deposits | 19,328 | 139,064 |
Refunds due to customers | 93,585 | 145,408 |
Reserve for sales returns | 749,691 | 960,000 |
Current portion of finance leases | 2,546 | |
Current portion of installment notes | 69,777 | 68,332 |
Current portion of note payable - Paycheck Protection Program | 172,685 | |
Current portion of operating lease liabilities | 827,238 | 794,938 |
Subordinated related party debt - Starlight Marketing Development, Ltd. | 502,659 | 502,659 |
Total Current Liabilities | 10,329,959 | 7,034,199 |
Installment notes, net of current portion | 194,954 | 212,949 |
Note payable - Payroll Protection Program, net of current portion | 271,215 | |
Operating lease liabilities, net of current portion | 1,124,325 | 1,334,010 |
Total Liabilities | 11,649,238 | 8,852,373 |
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 | 19,783,026 | 19,773,322 |
Accumulated deficit | (12,372,804) | (12,254,191) |
Total Shareholders’ Equity | 7,800,829 | 7,909,538 |
Total Liabilities and Shareholders’ Equity | 19,450,067 | 16,761,911 |
Common Class A [Member] | ||
Shareholders’ Equity | ||
Common stock, Class B, $0.01 par value; 100,000,000 shares authorized; 39,060,748 and 39,040,748 shares issued and outstanding, respectively | ||
Common Class B [Member] | ||
Shareholders’ Equity | ||
Common stock, Class B, $0.01 par value; 100,000,000 shares authorized; 39,060,748 and 39,040,748 shares issued and outstanding, respectively | 390,607 | 390,407 |
Starlight Consumer Electronics Co Ltd [Member] | ||
Current Liabilities | ||
Due to related party | 14,400 | 14,400 |
Starlight R&D, Ltd. [Member] | ||
Current Liabilities | ||
Due to related party | $ 48,650 | $ 48,650 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2021 | Mar. 31, 2021 |
Allowance for doubtful accounts receivable, net | $ 126,156 | $ 138,580 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common Class A [Member] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000 | 100,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
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 | 39,060,748 | 39,040,748 |
Common stock, shares outstanding | 39,060,748 | 39,040,748 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Income Statement [Abstract] | ||
Net Sales | $ 6,065,650 | $ 3,051,983 |
Cost of Goods Sold | 4,487,780 | 2,089,531 |
Gross Profit | 1,577,870 | 962,452 |
Operating Expenses | ||
Selling expenses | 577,982 | 298,993 |
General and administrative expenses | 1,421,352 | 1,363,290 |
Depreciation | 68,271 | 71,107 |
Total Operating Expenses | 2,067,605 | 1,733,390 |
Loss From Operations | (489,735) | (770,938) |
Other Income (Expenses) | ||
Gain from Payroll Protection Plan loan forgiveness | 448,242 | |
Gain - related party | 11,236 | |
Gain from damaged goods insurance claim | 131,292 | |
Gain from extinguishment of accounts payable | 390,000 | |
Interest expense | (99,529) | (29,590) |
Finance costs | (16,922) | (6,405) |
Total Other Income (Expenses), net | 343,027 | 485,297 |
Loss Before Income Tax Benefit | (146,708) | (285,641) |
Income Tax Benefit | 28,095 | 78,837 |
Net Loss | $ (118,613) | $ (206,804) |
Net Loss per Common Share | ||
Basic and Diluted | $ 0 | $ (0.01) |
Basic and Diluted | 39,050,638 | 38,557,643 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Cash flows from operating activities | ||
Net Loss | $ (118,613) | $ (206,804) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation | 68,271 | 71,107 |
Amortization of deferred financing costs | 16,922 | 6,405 |
Change in inventory reserve | 32,696 | |
Change in allowance for bad debts | (12,424) | (37,522) |
Stock based compensation | 5,104 | |
Change in net deferred tax assets | (28,095) | (78,837) |
Payroll Protection Plan loan forgiveness | (448,242) | |
Gain - related party | (11,236) | |
Gain from extinguishment of accounts payable | (390,000) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (3,251,488) | 124,722 |
Due from Crestmark Bank | 4,214,414 | 2,120,774 |
Accounts receivable - related parties | 100,000 | |
Insurance receivable | 1,268,463 | |
Inventories | (2,879,846) | 698,361 |
Prepaid expenses and other current assets | 30,363 | 38,316 |
Other non-current assets | 52,221 | 36,087 |
Accounts payable | 3,812,788 | (2,133,123) |
Accrued expenses | (278,096) | (521,007) |
Due to related parties | (100,000) | |
Customer deposits | (119,736) | |
Refunds due to customers | (51,823) | (415,387) |
Reserve for sales returns | (210,309) | (843,817) |
Operating lease liabilities, net of operating leases - right of use assets | 3,807 | (14,460) |
Net cash provided by (used in) operating activities | 793,982 | (244,026) |
Cash flows from investing activities | ||
Purchase of property and equipment | (55,534) | (45,314) |
Net cash used in investing activities | (55,534) | (45,314) |
Cash flows from financing activities | ||
Net Proceeds from revolving lines of credit | 300,000 | 1,400,000 |
Proceeds from note payable - Payroll Protection Program | 444,630 | |
Payment of deferred financing charges | (37,501) | (73,725) |
Payments on installment notes | (16,550) | (18,481) |
Proceeds from exercise of stock options | 4,800 | |
Payments on finance leases | (2,546) | (3,691) |
Net cash provided by financing activities | 248,203 | 1,748,733 |
Net change in cash | 986,651 | 1,459,393 |
Cash at beginning of year | 396,579 | 345,200 |
Cash at end of period | 1,383,230 | 1,804,593 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 125,456 | 12,971 |
Operating leases - right of use assets and lease liabilities at inception of lease | $ 16,364 | $ 2,184,105 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Shareholders' Equity - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Mar. 31, 2020 | $ 385,576 | $ 19,729,043 | $ (14,426,556) | $ 5,688,063 | |
Balance, shares at Mar. 31, 2020 | 38,557,643 | ||||
Net loss | (206,804) | (206,804) | |||
Balance at Jun. 30, 2020 | $ 385,576 | 19,729,043 | (14,633,360) | 5,481,259 | |
Balance, shares at Jun. 30, 2020 | 38,557,643 | ||||
Beginning balance, value at Mar. 31, 2021 | $ 390,407 | 19,773,322 | (12,254,191) | 7,909,538 | |
Balance, shares at Mar. 31, 2021 | 39,040,748 | ||||
Net loss | (118,613) | (118,613) | |||
Employee compensation-stock option | 5,104 | 5,104 | |||
Exercise of stock options | $ 200 | 4,600 | 4,800 | ||
Exercise of stock options, shares | 20,000 | ||||
Balance at Jun. 30, 2021 | $ 390,607 | $ 19,783,026 | $ (12,372,804) | $ 7,800,829 | |
Balance, shares at Jun. 30, 2021 | 39,060,748 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Jun. 30, 2021 | |
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. (“SMCL”) and SMC-Music, Inc. (“SMCM”), 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. We do business with a number of entities that are principally owned by the Company’s former Chairman, Philip Lau , including Starlight R&D Ltd (“SLRD”), Starlight Consumer Electronics USA, Inc., (“SCE”), Cosmo Communications Corporation of Canada, Inc. (“Cosmo”), Winglight Pacific, Ltd (“Winglight”) and Starlight Electronics Company Ltd (“SLE”), among others. |
LIQUIDITY
LIQUIDITY | 3 Months Ended |
Jun. 30, 2021 | |
Liquidity | |
LIQUIDITY | NOTE 2 – LIQUIDITY The Company reported a net loss of approximately $ 119 207 444,000 On August 5, 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with Koncepts International Limited (“Koncepts”) and Treasure Green Holdings, Ltd. (“Treasure Green”), pursuant to which the Company agreed to redeem approximately 19,623,155 7,162,000 On August 5, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional investors and a strategic investor for private placement of (i) 16,500,000 16,500,000 0.35 16,833,333 0.01 16,833,333 0.35 9,800,000 7,200,000 1,800,000 We believe that current working capital, the availability of cash from our Intercreditor Revolving Credit Facility (See Note 6 – Bank Financing), additional working capital generated by the private placement and cash generated from our operating forecast will be adequate to meet the Company’s liquidity requirements for at least the next twelve months. We believe the Intercreditor Revolving Credit Facility will be adequate to maintain and grow our business during the remaining term of the agreement. As both the Crestmark Facility and the IHC Facility are set to expire on June 15, 2022, the Company expects to negotiate a revision or extension of these debt facilities upon their maturity however, there can be no assurance that such revision or extension will occur or at what terms. |
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES | 3 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF ACCOUNTING POLICIES | NOTE 3 - SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months ended June 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by US GAAP for complete consolidated financial statements. In the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) The condensed consolidated balance sheet information as of March 31, 2021 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021. The interim condensed consolidated financial statements should be read in conjunction with that report. 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. COLLECTABILITY 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. 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. The Company is subject to chargebacks from customers for co-op program incentives, defective returns, return freight and handling charges that are deducted from open invoices and reduce collectability of open invoices. FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiary are translated to U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are recorded in the condensed consolidated statement of operations and translations are recorded in a separate component of shareholders’ equity. Any such amounts were not material during the periods presented. Concentration of Credit Risk At times, the Company maintains cash in United States bank accounts that are more than the Federal Deposit Insurance Corporation insured amounts. The Company also maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at June 30, 2021 and March 31, 2021 are approximately $ 109,000 225,000 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. As of June 30, 2021 and March 31, 2021 the estimated amounts for these future inventory returns were approximately $ 501,000 528,000 636,000 DEFERRED FINANCING COSTS The Company classifies deferred financing costs incurred when obtaining or renewing revolving credit facilities as assets in the accompanying condensed consolidated balance sheets as it is likely that during certain periods during non-peak season there will be no balance due on these credit facilities to offset the deferred financing costs. In June 2021, the Company incurred approximately $ 38,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) 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.” No impairment was recorded as of June 30, 2021 and 2020. LEASES The Company follows FASB ASC 842, “Leases”. The ASC requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. (See Note 7– LEASES). The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date. The liability is equal to the present value of the remaining minimum lease payments. The asset is based on the liability, subject to certain adjustments. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). As the interest rate implicit in the Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The Company utilizes the implicit rate for its finance leases. 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, customer deposits, refunds due to customers, and due to related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the notes payable, finance leases and installment notes approximate fair value either due to the relatively short period to maturity or the related interest is 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”. All revenue is generated from contracts with customers. The Company recognizes revenue when the control of the goods sold is transferred to the customer, in an amount, referred to as the transaction price, that reflects the consideration to which the Company is expected to be entitled in exchange for those goods. The Company determines revenue recognition utilizing the following five steps: (1) identification of the contract with a customer, (2) identification of the performance obligations in the contract (promised goods or services that are distinct), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations, and (5) recognition of revenue when, or as, the Company transfers control of the product or service for each performance obligation. The Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products). 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. The Company selectively participates in a retailer’s co-op promotion incentives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer awareness of new product launches, by providing marketing fund allowances to our customers. As these co-op promotion initiatives are not a distinct good or service and the Company cannot reasonably estimate the fair value of the benefit it receives from these arrangements, the cost of these allowances at the time they are offered to the customers are recorded as a reduction to net sales. For both three-month periods ended June 30, 2021 and 2020, co-op promotion incentives were approximately $ 272,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) Costs incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods are included in general and administrative expenses, in-bound freight costs are included in the cost of goods sold and accrued sales representative commissions are included in selling expenses in the accompanying consolidated statements of operations as our underlying customer agreements are less than one year. The Company disaggregates revenues by product line and 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 9 – GEOGRAPHICAL INFORMATION). While the Company generally does not allow products to be returned, the Company does provide for variable consideration contingent upon the occurrence of uncertain future events. Variable consideration is estimated at the expected value or at the most likely amount depending on the type of consideration. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company estimates variable consideration under our return allowance programs for goods returned to the customer for various reasons, whereby a sales return reserve is recorded based on historic return amounts, specific events as identified and management estimates. The Company’s reserve for sales returns was approximately $ 750,000 960,000 Revenue was derived from four different major product lines. Disaggregated revenue from these product lines for the three months ended June 30, 2021 and 2020 consisted of the following: SCHEDULE OF DISAGGREGATION OF REVENUE Product Line June 30, 2021 June 30, 2020 Three Months Ended Product Line June 30, 2021 June 30, 2020 Classic Karaoke Machines $ 4,448,000 $ 2,341,000 Licensed Product 771,000 - Music and Accessories 778,000 588,000 SMC Kids Toys 69,000 123,000 Total Net Sales $ 6,066,000 $ 3,052,000 SHIPPING AND HANDLING COSTS 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. For the three months ended June 30, 2021 and 2020 shipping and handling expenses were approximately $ 151,000 83,000 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 condensed consolidated statements of operations 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 for the three months ended June 30, 2021 and 2020 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 three months ended June 30, 2021 and 2020, the stock option expense was approximately $ 5,000 0 RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to results of operations as incurred. These expenses are shown as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. For the three months ended June 30, 2021 and 2020, these amounts totaled approximately $ 31,000 13,000 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 SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) The Company recognizes a liability for uncertain tax positions. 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% COMPUTATION OF (LOSS) EARNINGS PER SHARE Basic net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share reflects the potential dilution assuming shares of common stock were issued upon the exercise of outstanding in-the-money options and the proceeds thereof were used to purchase shares of Company common stock at the average market price during the period using the treasury stock method. For the three months ended June 30, 2021 and 2020, options to purchase 1,660,000 2,230,000 ADOPTION OF NEW ACCOUNTING STANDARDS In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes” (Topic 740). RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326) |
INVENTORIES, NET
INVENTORIES, NET | 3 Months Ended |
Jun. 30, 2021 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | NOTE 4 - INVENTORIES, NET SCHEDULE OF INVENTORY June 30, March 31, 2021 2021 Finished Goods $ 6,288,000 $ 5,348,000 Inventory in Transit 2,217,000 250,000 Estimated Amount of Future Returns 501,000 528,000 Subtotal 9,006,000 6,126,000 Less:Inventory Reserve 636,000 636,000 Inventories, net $ 8,370 $ 5,490 Inventories are comprised of the following components: |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND EQUIPMENT A summary of property and equipment is as follows: SUMMARY OF PROPERTY AND EQUIPMENT USEFUL June 30, March 31, LIFE 2021 2021 Computer and office equipment 5 7 $ 445,000 $ 445,000 Furniture and fixtures 7 98,000 98,000 Warehouse equipment 7 199,000 199,000 Molds and tooling 3 5 1,933,000 1,878,000 Property and equipment, gross 2,675,000 2,620,000 Less: Accumulated depreciation 2,014,000 1,946,000 Property and equipment, net $ 661 $ 674 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) Depreciation expense for the three months ended June 30, 2021 and 2020 was approximately $ 68,000 71,000 |
BANK FINANCING
BANK FINANCING | 3 Months Ended |
Jun. 30, 2021 | |
Debt Disclosure [Abstract] | |
BANK FINANCING | NOTE 6 – BANK FINANCING Intercreditor Revolving Credit Facility Crestmark Bank and Iron Horse Credit On June 16, 2020, the Company executed an Intercreditor Revolving Credit Facility on eligible accounts receivable and inventory which replaced the Company’s previous revolving credit facility with PNC Bank which was terminated on June 16, 2020. The Company signed a two-year Loan and Security Agreement for a $ 10.0 5.0 10.0 5.0 74,000 17,000 3,000 Under the Crestmark Facility: ● Advance rate shall not exceed 70% of Eligible Accounts Receivable aged less than 90 days from invoice date. ● Crestmark shall maintain a base dilution reserve of 1% for each 1% of dilution over 15%. ● Crestmark will implement an availability block of 20% of amounts due on Iron Horse Credit (“IHC”) Intercreditor Revolving Credit Facility. ● Mandatory pay-down of the loan to zero in January and February each year. The Crestmark Facility is secured by a perfected security interest in all assets including a first security interest in Accounts Receivable and Inventory. Notwithstanding the foregoing, Crestmark shall subordinate its first security interest in inventory to IHC as agreed between all parties. The Crestmark Facility bears interest at the Wall Street Journal Prime Rate plus 5.50 8.75 2,000,000 45,000 0 June 15, 2022 In addition, the Company executed a two-year Loan and Security Agreement with Iron Horse Credit (“IHC Facility”) for up to $ 2,500,000 Under the IHC Facility: ● Advance rate shall not exceed the lower of (a) 70% of the inventory cost or (b) 85% of Net Orderly Liquidation Value (NOLV) as determined by an independent third-party appraiser engaged by IHC. ● The Company must maintain a fixed charge coverage ratio test of 1:1 times measured on a rolling 12-month basis, defined as earnings before interest, taxes, depreciation and amortization (“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. This financial covenant was waived for the first six months of the IHC Facility. As of June 30, 2021, the Company was in compliance with this covenant. The IHC Facility is secured by a perfected security interest in the Company’s inventory. The IHC Facility bears interest at 1.292 15.51 1,000,000 39,000 8,000 June 15, 2022 365,000 65,000 As both the Crestmark Facility and the IHC Facility are set to expire on June 15, 2022, the Company expects to negotiate a revision or extension of these debt facilities upon their maturity however, there can be no assurance that such revision or extension will occur or at what terms. Note Payable Payroll Protection Plan On May 5, 2020, the Company received loan proceeds from Crestmark in the amount of approximately $ 444,000 448,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) Installment Notes Payable On June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC (“Dimension”) to finance an entire ERP System project over a term of 60 365,000 365,000 7.58% 8.55% 9.25% 7,459 265,000 281,000 6,000 7,000 Subordinated Debt/Note Payable to Related Party In conjunction with the Crestmark Facility and IHC Facility there is a subordination agreement on related party debt due to Starlight Marketing Development, Ltd. of approximately $ 803,000 803,000 6 9,000 12,000 In connection with the Intercreditor Revolving Credit Facility the Company was required to subordinate the subordinated note payable. Both the Crestmark Facility and IHC Facility agreements allow for the repayment of the subordinated note payable provided any amounts borrowed against these credit facilities are paid in full, the Company maintains a 1 : 1 debt coverage ratio and exhibits sufficient cash liquidity to support on-going operations. As of June 30, 2021 the Company met repayment requirements of the Intercreditor Revolving Credit Facility to make principal payments totaling $300,000. During the next twelve months the Company intends on making additional payments and pay off the remaining balance outstanding provided the Company meets all repayment requirements of the Crestmark Facility and IHC Facility agreements. As of June 30, 2021 and March 31, 2021, the remaining amount due on the note payable was approximately $ 503,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 - COMMITMENTS AND CONTINGENCIES LEGAL MATTERS On September 11, 2020 a Complaint was filed against the Company’s SMCL subsidiary and various staffing agencies used by SMCL in a Superior Court of San Bernadino County. The complaint alleges an employee of SMCL committed employment practice violations against a former temporary employee not employed by SMC Logistics. Management has investigated the allegation and has engaged with an employment attorney to defend the lawsuit. Management does not believe the claims have merit and does not believe the lawsuit will have a material adverse effect on our financial results. Management is not aware of any other legal proceedings other than matters that arise in the ordinary course of business. LEASES The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date. The liability is equal to the present value of the remaining minimum lease payments. The asset is based on the liability, subject to certain adjustments. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). As the interest rate implicit in the Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The Company utilizes the implicit rate for its finance leases. Operating Leases We have operating lease agreements for offices and a warehouse facility in Florida, California and Macau expiring in various years through 2024. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) We entered into an operating lease agreement, effective October 1, 2017, for the corporate headquarters located in Fort Lauderdale, Florida where we lease approximately 6,500 March 31, 2024 9,400 We entered into an operating lease agreement, effective June 1, 2013, for 86,000 we executed a three-year lease extension which will expire on August 31, 2023 65,300 We entered into an operating lease agreement, effective May 1, 2018, for 424 1,600 April 30, 2021 we executed a one-year lease extension which will expire on April 30, 2022 $1,700 Lease expense for our operating leases is recognized on a straight-line basis over the lease terms. SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES Supplemental balance sheet information related to leases as of June 30, 2021 is as follows: Assets: Operating lease - right-of-use assets $ 1,892,923 Liabilities Current Current portion of operating leases $ 827,238 Noncurrent Operating lease liabilities, net of current portion $ 1,124,325 SCHEDULE OF LEASE TERM AND DISCOUNT RATE Supplemental statement of operations information related to leases for the three months ended June 30, 2021 is as follows: Three Months Ended June 30, 2021 Operating lease expense as a component of general and administrative expenses $ 232,262 Supplemental cash flow information related to leases for the three months ended June 30, 2021 is as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating leases $ 228,454 Financing cash flow paid for finance leases $ 2,546 Lease term and Discount Rate Weighted average remaining lease term (months) Operating leases 27.0 Weighted average discount rate Operating leases 6.25 % Scheduled maturities of operating lease liabilities outstanding as of June 30, 2021 are as follows: SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING AND FINANCE LEASES Year Operating Leases 2021, for the remaining 6 months $ 466,342 2022 938,348 2023 674,488 2024 30,739 Total Minimum Future Payments 2,109,917 Less: Imputed Interest 158,354 Present Value of Lease Liabilities $ 1,951,563 |
STOCK OPTIONS
STOCK OPTIONS | 3 Months Ended |
Jun. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
STOCK OPTIONS | NOTE 8 - STOCK OPTIONS During the three months ended June 30, 2021 and 2020 the Company did not issue any stock options. 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. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) A summary of stock option activity for the three months ended June 30, 2021 is summarized below: SUMMARY OF STOCK OPTION ACTIVITY June 30, 2021 Number of Options Weighted Average Exercise Price Stock Options: Balance at beginning of period 1,680,000 $ 0.32 Granted - - Exercised (20,000 ) $ 0.24 Balance at end of period 1,660,000 $ 0.32 Options exercisable at end of period 1,560,000 $ 0.33 The following table summarizes information about employee stock options outstanding at June 30, 2021: SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING Range of Exercise Price Number Outstanding at June 30, 2021 Weighted Average Remaining Contractural Life Weighted Average Exercise Price Number Exercisable at June 30, 2021 Weighted Average Exercise Price $ .12 .38 1,110,000 2.6 $ 0.24 1,010,000 $ 0.23 $ .47 .55 550,000 6.2 $ 0.50 550,000 $ 0.50 * 1,660,000 1,560,000 * Total number of options outstanding as of June 30, 2021 includes 580,000 1,040,000 As of June 30, 2021, there was unrecognized expense of approximately $ 5,000 The intrinsic value of vested options as of June 30, 2021 was approximately $ 180,000 |
GEOGRAPHICAL INFORMATION
GEOGRAPHICAL INFORMATION | 3 Months Ended |
Jun. 30, 2021 | |
Segment Reporting [Abstract] | |
GEOGRAPHICAL INFORMATION | NOTE 9 - GEOGRAPHICAL INFORMATION Sales to customers outside of the United States for the three months ended June 30, 2021 and 2020 were primarily made by the Macau Subsidiary in US dollars. Sales by geographic region for the periods presented are as follows: SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION 2021 2020 FOR THE THREE MONTHS ENDED June 30, 2021 2020 North America $ 5,966,000 $ 2,816,000 Europe - 183,000 Australia 100,000 53,000 Net sales $ 6,066,000 $ 3,052,000 The geographic area of sales was based on the location where the product is delivered. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Jun. 30, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS All transactions listed below are related to the Company as they are all with affiliates of our former Chairman of the Board, Mr. Phillip Lau. DUE TO RELATED PARTIES On June 30, 2021 and March 31, 2021, the Company had amounts due to related parties in the amounts of approximately $ 63,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) TRADE On July 30, 2020, the Company and Cosmo reached agreement that Cosmo would no longer be the Company’s Canadian distributor and the Company became the sole and exclusive distributor of the Company’s products in Canada. As part of the agreement, the companies executed a Purchase and Sales agreement whereby the Company acquired all of Cosmo’s karaoke inventory for approximately $ 685,000 11,000 The Company incurred service expenses from Starlight Electronics Co, Ltd, (“SLE”) a related party. The services from SLE were approximately $ 91,000 |
RESERVE FOR SALES RETURNS
RESERVE FOR SALES RETURNS | 3 Months Ended |
Jun. 30, 2021 | |
Reserve For Sales Returns | |
RESERVE FOR SALES RETURNS | NOTE 11 – 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 allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months). 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 condensed consolidated balance sheets. Changes in the Company’s reserve for sales returns are presented in the following table: SCHEDULE OF RESERVE FOR SALES RETURNS Six Months Ended June 30, June 30, 2021 2020 Reserve for sales returns at beginning of the fiscal year $ 960,000 $ 1,224,000 Provision for estimated sales returns 539,000 284,000 Sales returns received (749,000 ) (1,128,000 ) Reserve for sales returns at end of the period $ 750,000 $ 380,000 |
REFUNDS DUE TO CUSTOMERS
REFUNDS DUE TO CUSTOMERS | 3 Months Ended |
Jun. 30, 2021 | |
Refunds Due To Customers | |
REFUNDS DUE TO CUSTOMERS | NOTE 12 – REFUNDS DUE TO CUSTOMERS As of June 30, 2021 and March 31, 2021 the amount of refunds due to customers was approximately $ 94,000 145,000 |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 3 Months Ended |
Jun. 30, 2021 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLANS | NOTE 13 - 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 three months ended June 30, 2021 and 2020 totaled approximately $ 18,000 14,000 |
CONCENTRATIONS OF CREDIT AND SA
CONCENTRATIONS OF CREDIT AND SALES RISK | 3 Months Ended |
Jun. 30, 2021 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS OF CREDIT AND SALES RISK | NOTE 14 - CONCENTRATIONS OF CREDIT AND SALES RISK 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 78 70 For the three months ended June 30, 2021, there were four customers who individually accounted for 10% or more of the Company’s net sales. Revenue from these customers as a percentage of net sales were 45 18 14 14 43 18 11 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Jun. 30, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS On August 5, 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with Koncepts International Limited (“Koncepts”) and Treasure Green Holdings, Ltd. (“Treasure Green”), pursuant to which the Company agreed to redeem approximately 19,623,155 7,162,000 Pursuant to the Redemption Agreement, neither Koncepts nor Treasure Green will remain shareholders of the Company. On August 5, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional investors and a strategic investor for private placement of (i) 16,500,000 16,500,000 0.35 16,833,333 0.01 16,833,333 0.35 Pursuant to the terms of the Purchase Agreement the Company is obligated to use commercially reasonable best efforts to file a registration statement providing for the resale by the purchasers of the Shares and Warrant Shares being sold in the Private Placement, as soon as practicable (and in any event within 30 days of the closing of the Private Placement). Under the Purchase Agreement the Company is also obligated to use its reasonable best efforts to submit an application to have the Company’s common stock listed on a national exchange by December 31, 2021, and to use its reasonable best efforts to have the Shares and Warrant Shares listed on such national exchange as soon as practicable following the submission of such application. The closing of the Private Placement took place on August 10, 2021, when the Shares, Common Warrants, and Pre-Funded Warrants were delivered to the purchasers and funds, in the amount of approximately $ 9,800,000 7,200,000 1,800,000 800,000 Stingray Group Inc. (TSX: RAY.A; RAY.B) “(Stingray”), a leading music, media and technology is part of the group of investors who participated in the Private Placement and have acquired a minority interest in the Company. Stingray is a long-standing business partner with the Company that provides our customers with music content from their extensive library of expertly produced and licensed karaoke content. |
SUMMARY OF ACCOUNTING POLICIES
SUMMARY OF ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Abstract] | |
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION | PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months ended June 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by US GAAP for complete consolidated financial statements. In the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) The condensed consolidated balance sheet information as of March 31, 2021 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021. The interim condensed consolidated financial statements should be read in conjunction with that report. |
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. |
COLLECTABILITY OF ACCOUNTS RECEIVABLE | COLLECTABILITY 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. 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. The Company is subject to chargebacks from customers for co-op program incentives, defective returns, return freight and handling charges that are deducted from open invoices and reduce collectability of open invoices. |
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiary are translated to U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are recorded in the condensed consolidated statement of operations and translations are recorded in a separate component of shareholders’ equity. Any such amounts 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 more than the Federal Deposit Insurance Corporation insured amounts. The Company also maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at June 30, 2021 and March 31, 2021 are approximately $ 109,000 225,000 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. As of June 30, 2021 and March 31, 2021 the estimated amounts for these future inventory returns were approximately $ 501,000 528,000 636,000 |
DEFERRED FINANCING COSTS | DEFERRED FINANCING COSTS The Company classifies deferred financing costs incurred when obtaining or renewing revolving credit facilities as assets in the accompanying condensed consolidated balance sheets as it is likely that during certain periods during non-peak season there will be no balance due on these credit facilities to offset the deferred financing costs. In June 2021, the Company incurred approximately $ 38,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) |
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.” No impairment was recorded as of June 30, 2021 and 2020. |
LEASES | LEASES The Company follows FASB ASC 842, “Leases”. The ASC requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. (See Note 7– LEASES). The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date. The liability is equal to the present value of the remaining minimum lease payments. The asset is based on the liability, subject to certain adjustments. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). As the interest rate implicit in the Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The Company utilizes the implicit rate for its finance leases. |
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, customer deposits, refunds due to customers, and due to related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the notes payable, finance leases and installment notes approximate fair value either due to the relatively short period to maturity or the related interest is 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”. All revenue is generated from contracts with customers. The Company recognizes revenue when the control of the goods sold is transferred to the customer, in an amount, referred to as the transaction price, that reflects the consideration to which the Company is expected to be entitled in exchange for those goods. The Company determines revenue recognition utilizing the following five steps: (1) identification of the contract with a customer, (2) identification of the performance obligations in the contract (promised goods or services that are distinct), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations, and (5) recognition of revenue when, or as, the Company transfers control of the product or service for each performance obligation. The Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products). 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. The Company selectively participates in a retailer’s co-op promotion incentives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer awareness of new product launches, by providing marketing fund allowances to our customers. As these co-op promotion initiatives are not a distinct good or service and the Company cannot reasonably estimate the fair value of the benefit it receives from these arrangements, the cost of these allowances at the time they are offered to the customers are recorded as a reduction to net sales. For both three-month periods ended June 30, 2021 and 2020, co-op promotion incentives were approximately $ 272,000 THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) Costs incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods are included in general and administrative expenses, in-bound freight costs are included in the cost of goods sold and accrued sales representative commissions are included in selling expenses in the accompanying consolidated statements of operations as our underlying customer agreements are less than one year. The Company disaggregates revenues by product line and 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 9 – GEOGRAPHICAL INFORMATION). While the Company generally does not allow products to be returned, the Company does provide for variable consideration contingent upon the occurrence of uncertain future events. Variable consideration is estimated at the expected value or at the most likely amount depending on the type of consideration. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company estimates variable consideration under our return allowance programs for goods returned to the customer for various reasons, whereby a sales return reserve is recorded based on historic return amounts, specific events as identified and management estimates. The Company’s reserve for sales returns was approximately $ 750,000 960,000 Revenue was derived from four different major product lines. Disaggregated revenue from these product lines for the three months ended June 30, 2021 and 2020 consisted of the following: SCHEDULE OF DISAGGREGATION OF REVENUE Product Line June 30, 2021 June 30, 2020 Three Months Ended Product Line June 30, 2021 June 30, 2020 Classic Karaoke Machines $ 4,448,000 $ 2,341,000 Licensed Product 771,000 - Music and Accessories 778,000 588,000 SMC Kids Toys 69,000 123,000 Total Net Sales $ 6,066,000 $ 3,052,000 |
SHIPPING AND HANDLING COSTS | SHIPPING AND HANDLING COSTS 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. For the three months ended June 30, 2021 and 2020 shipping and handling expenses were approximately $ 151,000 83,000 |
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 condensed consolidated statements of operations 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 for the three months ended June 30, 2021 and 2020 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 three months ended June 30, 2021 and 2020, the stock option expense was approximately $ 5,000 0 |
RESEARCH AND DEVELOPMENT COSTS | RESEARCH AND DEVELOPMENT COSTS Research and development costs are charged to results of operations as incurred. These expenses are shown as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. For the three months ended June 30, 2021 and 2020, these amounts totaled approximately $ 31,000 13,000 |
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 SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2021 and 2020 (Unaudited) The Company recognizes a liability for uncertain tax positions. 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% |
COMPUTATION OF (LOSS) EARNINGS PER SHARE | COMPUTATION OF (LOSS) EARNINGS PER SHARE Basic net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share reflects the potential dilution assuming shares of common stock were issued upon the exercise of outstanding in-the-money options and the proceeds thereof were used to purchase shares of Company common stock at the average market price during the period using the treasury stock method. For the three months ended June 30, 2021 and 2020, options to purchase 1,660,000 2,230,000 |
ADOPTION OF NEW ACCOUNTING STANDARDS | ADOPTION OF NEW ACCOUNTING STANDARDS In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes” (Topic 740). |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326) |
SUMMARY OF ACCOUNTING POLICIE_2
SUMMARY OF ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Abstract] | |
SCHEDULE OF DISAGGREGATION OF REVENUE | Revenue was derived from four different major product lines. Disaggregated revenue from these product lines for the three months ended June 30, 2021 and 2020 consisted of the following: SCHEDULE OF DISAGGREGATION OF REVENUE Product Line June 30, 2021 June 30, 2020 Three Months Ended Product Line June 30, 2021 June 30, 2020 Classic Karaoke Machines $ 4,448,000 $ 2,341,000 Licensed Product 771,000 - Music and Accessories 778,000 588,000 SMC Kids Toys 69,000 123,000 Total Net Sales $ 6,066,000 $ 3,052,000 |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Inventory Disclosure [Abstract] | |
SCHEDULE OF INVENTORY | SCHEDULE OF INVENTORY June 30, March 31, 2021 2021 Finished Goods $ 6,288,000 $ 5,348,000 Inventory in Transit 2,217,000 250,000 Estimated Amount of Future Returns 501,000 528,000 Subtotal 9,006,000 6,126,000 Less:Inventory Reserve 636,000 636,000 Inventories, net $ 8,370 $ 5,490 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
SUMMARY OF PROPERTY AND EQUIPMENT | A summary of property and equipment is as follows: SUMMARY OF PROPERTY AND EQUIPMENT USEFUL June 30, March 31, LIFE 2021 2021 Computer and office equipment 5 7 $ 445,000 $ 445,000 Furniture and fixtures 7 98,000 98,000 Warehouse equipment 7 199,000 199,000 Molds and tooling 3 5 1,933,000 1,878,000 Property and equipment, gross 2,675,000 2,620,000 Less: Accumulated depreciation 2,014,000 1,946,000 Property and equipment, net $ 661 $ 674 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES | Lease expense for our operating leases is recognized on a straight-line basis over the lease terms. SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES Supplemental balance sheet information related to leases as of June 30, 2021 is as follows: Assets: Operating lease - right-of-use assets $ 1,892,923 Liabilities Current Current portion of operating leases $ 827,238 Noncurrent Operating lease liabilities, net of current portion $ 1,124,325 |
SCHEDULE OF LEASE TERM AND DISCOUNT RATE | SCHEDULE OF LEASE TERM AND DISCOUNT RATE Supplemental statement of operations information related to leases for the three months ended June 30, 2021 is as follows: Three Months Ended June 30, 2021 Operating lease expense as a component of general and administrative expenses $ 232,262 Supplemental cash flow information related to leases for the three months ended June 30, 2021 is as follows: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow paid for operating leases $ 228,454 Financing cash flow paid for finance leases $ 2,546 Lease term and Discount Rate Weighted average remaining lease term (months) Operating leases 27.0 Weighted average discount rate Operating leases 6.25 % |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING AND FINANCE LEASES | Scheduled maturities of operating lease liabilities outstanding as of June 30, 2021 are as follows: SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING AND FINANCE LEASES Year Operating Leases 2021, for the remaining 6 months $ 466,342 2022 938,348 2023 674,488 2024 30,739 Total Minimum Future Payments 2,109,917 Less: Imputed Interest 158,354 Present Value of Lease Liabilities $ 1,951,563 |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
SUMMARY OF STOCK OPTION ACTIVITY | A summary of stock option activity for the three months ended June 30, 2021 is summarized below: SUMMARY OF STOCK OPTION ACTIVITY June 30, 2021 Number of Options Weighted Average Exercise Price Stock Options: Balance at beginning of period 1,680,000 $ 0.32 Granted - - Exercised (20,000 ) $ 0.24 Balance at end of period 1,660,000 $ 0.32 Options exercisable at end of period 1,560,000 $ 0.33 |
SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING | The following table summarizes information about employee stock options outstanding at June 30, 2021: SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING Range of Exercise Price Number Outstanding at June 30, 2021 Weighted Average Remaining Contractural Life Weighted Average Exercise Price Number Exercisable at June 30, 2021 Weighted Average Exercise Price $ .12 .38 1,110,000 2.6 $ 0.24 1,010,000 $ 0.23 $ .47 .55 550,000 6.2 $ 0.50 550,000 $ 0.50 * 1,660,000 1,560,000 * Total number of options outstanding as of June 30, 2021 includes 580,000 1,040,000 |
GEOGRAPHICAL INFORMATION (Table
GEOGRAPHICAL INFORMATION (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
Segment Reporting [Abstract] | |
SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION | Sales to customers outside of the United States for the three months ended June 30, 2021 and 2020 were primarily made by the Macau Subsidiary in US dollars. Sales by geographic region for the periods presented are as follows: SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION 2021 2020 FOR THE THREE MONTHS ENDED June 30, 2021 2020 North America $ 5,966,000 $ 2,816,000 Europe - 183,000 Australia 100,000 53,000 Net sales $ 6,066,000 $ 3,052,000 |
RESERVE FOR SALES RETURNS (Tabl
RESERVE FOR SALES RETURNS (Tables) | 3 Months Ended |
Jun. 30, 2021 | |
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: SCHEDULE OF RESERVE FOR SALES RETURNS Six Months Ended June 30, June 30, 2021 2020 Reserve for sales returns at beginning of the fiscal year $ 960,000 $ 1,224,000 Provision for estimated sales returns 539,000 284,000 Sales returns received (749,000 ) (1,128,000 ) Reserve for sales returns at end of the period $ 750,000 $ 380,000 |
LIQUIDITY (Details Narrative)
LIQUIDITY (Details Narrative) - USD ($) | Aug. 10, 2021 | Aug. 05, 2021 | May 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Net loss | $ 118,613 | $ 206,804 | |||
Shares redeemed | $ 7,162,000 | $ 19,623,155 | |||
Conversion of Stock, Shares Issued | 7,162,000 | ||||
Common Stock, Shares, Issued | 16,500,000 | ||||
Warrants and Rights Outstanding | $ 16,500,000 | ||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 0.01 | ||||
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | 16,833,333 | ||||
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | 16,833,333 | ||||
[custom:ClassOfWarrantOrRightExpenseOrRevenue] | $ 9,800,000 | ||||
Redemption Expenes | 7,200,000 | ||||
Increase (Decrease) in Operating Capital | $ 1,800,000 | ||||
Common Stock [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Net loss | |||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 0.35 | ||||
Common Stock Warrant [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ 0.35 | ||||
Paycheck Protection Program [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Proceeds from Loan Originations | $ (444,000) |
SCHEDULE OF DISAGGREGATION OF R
SCHEDULE OF DISAGGREGATION OF REVENUE (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Product Information [Line Items] | ||
Total Net Sales | $ 6,066,000 | $ 3,052,000 |
Karaoke Machines [Member] | ||
Product Information [Line Items] | ||
Total Net Sales | 4,448,000 | 2,341,000 |
Licensed Product [Member] | ||
Product Information [Line Items] | ||
Total Net Sales | 771,000 | |
Music and Accessories [Member] | ||
Product Information [Line Items] | ||
Total Net Sales | 778,000 | 588,000 |
SMC Kids Toys [Member] | ||
Product Information [Line Items] | ||
Total Net Sales | $ 69,000 | $ 123,000 |
SUMMARY OF ACCOUNTING POLICIE_3
SUMMARY OF ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||||
Jun. 30, 2021 | Jun. 30, 2020 | Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | |||||
Foreign financial institutions actual deposits | $ 109,000 | $ 225,000 | |||
Future inventory returns | 501,000 | 528,000 | |||
Inventory reserves | 636,000 | 636,000 | |||
Deferred Costs | 38,000 | ||||
Co-op promotion incentives | 272,000 | $ 272,000 | |||
Reserve for sales returns | 750,000 | 380,000 | $ 960,000 | $ 960,000 | $ 1,224,000 |
Shipping and handling expenses | 151,000 | 83,000 | |||
Stock option expense | 5,000 | 0 | |||
Research and development costs | $ 31,000 | $ 13,000 | |||
Percentage of tax benefits recognized likelihood of being realized | greater than 50% | ||||
Potentially dilutive securities | 1,660,000 | 2,230,000 |
SCHEDULE OF INVENTORY (Details)
SCHEDULE OF INVENTORY (Details) - USD ($) | Jun. 30, 2021 | Mar. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Finished Goods | $ 6,288,000 | $ 5,348,000 |
Inventory in Transit | 2,217,000 | 250,000 |
Estimated Amount of Future Returns | 501,000 | 528,000 |
Subtotal | 9,006,000 | 6,126,000 |
Less:Inventory Reserve | 636,000 | 636,000 |
Inventories, net | $ 8,370,101 | $ 5,490,255 |
SUMMARY OF PROPERTY AND EQUIPME
SUMMARY OF PROPERTY AND EQUIPMENT (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Mar. 31, 2021 | |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 2,675,000 | $ 2,620,000 |
Less: Accumulated depreciation | 2,014,000 | 1,946,000 |
Property and equipment, net | 661,416 | 674,153 |
Computer and Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 445,000 | 445,000 |
Computer and Office Equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 5 years | |
Computer and Office Equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 7 years | |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 7 years | |
Property and equipment, gross | $ 98,000 | 98,000 |
Warehouse Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Average useful life (in years) | 7 years | |
Property and equipment, gross | $ 199,000 | 199,000 |
Molds and tooling [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 1,933,000 | $ 1,878,000 |
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 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 68,000 | $ 71,000 |
BANK FINANCING (Details Narrati
BANK FINANCING (Details Narrative) - USD ($) | Jun. 16, 2020 | Jun. 16, 2020 | Jun. 18, 2019 | Jun. 18, 2019 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Mar. 31, 2021 | Mar. 31, 2020 | May 05, 2021 | Jun. 02, 2020 |
Line of Credit Facility [Line Items] | |||||||||||
Amortization | $ 17,000 | $ 3,000 | |||||||||
Paycheck Protection Program [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Loan balance | $ 444,000 | ||||||||||
Proceeds from loan | $ 448,000 | ||||||||||
Financing Agreement [Member] | Dimension FundingLLC [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Interest expenses | 6,000 | 7,000 | |||||||||
Debt instrument, term | 60 months | ||||||||||
Notes payable | $ 365,000 | $ 365,000 | $ 265,000 | $ 281,000 | |||||||
Financing Agreement [Member] | Dimension FundingLLC [Member] | Three Installment Notes [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Notes payable | 365,000 | ||||||||||
Financing Agreement [Member] | Dimension FundingLLC [Member] | Installment Note One [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Debt instrument, interest rate | 7.58% | 7.58% | |||||||||
Financing Agreement [Member] | Dimension FundingLLC [Member] | Installment Note Two [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Debt instrument, interest rate | 8.55% | 8.55% | |||||||||
Financing Agreement [Member] | Dimension FundingLLC [Member] | Installment Note Three [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Debt instrument, interest rate | 9.25% | 9.25% | |||||||||
Subordination Agreement [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Notes payable | 503,000 | 503,000 | 503,000 | ||||||||
Subordination Agreement [Member] | Starlight Marketing Development, Ltd [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Notes payable | 803,000 | 803,000 | |||||||||
Interest expense, related party | 9,000 | 12,000 | |||||||||
Subordination Agreement [Member] | Starlight Marketing Development, Ltd [Member] | Subordinated Notes Payable [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Notes payable | $ 803,000 | ||||||||||
Debt instrument, interest rate | 6.00% | ||||||||||
Payments of notes payable with principal and interest [Member] | Financing Agreement [Member] | Dimension FundingLLC [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Repayments of notes payable | $ 7,459 | ||||||||||
Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, maximum amount outstanding during period | $ 10,000,000 | ||||||||||
Revolving Credit Facility [Member] | Off Peak Season [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, maximum amount outstanding during period | 5,000,000 | ||||||||||
Revolving Credit Facility [Member] | Amortized Over One Year [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Cost associated with Revolving credit facility deferred | 74,000 | ||||||||||
Crestmark Bank [Member] | Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, interest rate during period | 5.50% | ||||||||||
Interest expenses | $ 2,000,000 | 2,000,000 | |||||||||
Interest expenses | $ 45,000 | $ 0 | $ 39,000 | $ 8,000 | |||||||
Credit facility expiry date | Jun. 15, 2022 | ||||||||||
Crestmark Bank [Member] | Revolving Credit Facility [Member] | Interest Rate Floor [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, interest rate during period | 8.75% | ||||||||||
Crestmark Bank [Member] | Peak Selling Season Between July 1 and December 31 [Member] | Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, maximum amount outstanding during period | 10,000,000 | ||||||||||
Crestmark Bank [Member] | Peak Selling Season Between January 1 and July 31 [Member] | Revolving Credit Facility [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, maximum amount outstanding during period | $ 5,000,000 | ||||||||||
IHC Facility [Member] | Two-Year Loan and Security Agreement [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Interest expenses | $ 1,000,000 | ||||||||||
Inventory financing | 2,500,000 | ||||||||||
Loan balance | $ 365,000 | $ 365,000 | $ 65,000 | ||||||||
IHC Facility [Member] | Interest Rate Per Month [Member] | Two-Year Loan and Security Agreement [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, interest rate during period | 1.292% | ||||||||||
IHC Facility [Member] | Interest Rate Per Annually [Member] | Two-Year Loan and Security Agreement [Member] | |||||||||||
Line of Credit Facility [Line Items] | |||||||||||
Line of credit facility, interest rate during period | 15.51% |
SCHEDULE OF SUPPLEMENTAL INFORM
SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES (Details) - USD ($) | Jun. 30, 2021 | Mar. 31, 2021 |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease - right-of-use assets | $ 1,892,923 | $ 2,074,115 |
Current portion of operating leases | 827,238 | 794,938 |
Operating lease liabilities, net of current portion | $ 1,124,325 | $ 1,334,010 |
SCHEDULE OF LEASE TERM AND DISC
SCHEDULE OF LEASE TERM AND DISCOUNT RATE (Details) | 3 Months Ended |
Jun. 30, 2021USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease expense as a component of general and administrative expenses | $ 232,262 |
Operating cash flow paid for operating leases | 228,454 |
Financing cash flow paid for finance leases | $ 2,546 |
Weighted average remaining lease term (months), Operating leases | 27 months |
Weighted average discount rate, Operating leases | 6.25% |
SCHEDULE OF FUTURE MINIMUM RENT
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING AND FINANCE LEASES (Details) | Jun. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2021, for the remaining 6 months | $ 466,342 |
2022 | 938,348 |
2023 | 674,488 |
2024 | 30,739 |
Total Minimum Future Payments | 2,109,917 |
Less: Imputed Interest | 158,354 |
Present Value of Lease Liabilities | $ 1,951,563 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Jun. 15, 2020 | May 01, 2018USD ($)ft² | Oct. 01, 2017USD ($)ft² | Jun. 01, 2013ft² | May 30, 2021USD ($) | Jun. 15, 2020USD ($) |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Rent expense | $ 1,700 | |||||
Lease extend term | we executed a one-year lease extension which will expire on April 30, 2022 | |||||
Operating Lease Agreement [Member] | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Operating lease space for office | ft² | 424 | 6,500 | 86,000 | |||
Lease expiration date | Apr. 30, 2021 | Mar. 31, 2024 | ||||
Rent expense | $ 1,600 | $ 9,400 | ||||
Lease extend term | we executed a three-year lease extension which will expire on August 31, 2023. The renewal base rent payment is $65,300 per month with a 3% increase every 12 months for the remaining term of the extension. | |||||
Three Year Lease Extension Agreement [Member] | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Lease expiration date | Aug. 31, 2023 | |||||
Rent expense | $ 65,300 |
SUMMARY OF STOCK OPTION ACTIVIT
SUMMARY OF STOCK OPTION ACTIVITY (Details) - Equity Option [Member] | 3 Months Ended |
Jun. 30, 2021$ / sharesshares | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Number of Options, Balance at Beginning of Year | shares | 1,680,000 |
Weighted Average Exercise Price, Balance at Beginning of Year | $ / shares | $ 0.32 |
Number of Options, Granted | shares | |
Weighted Average Exercise Price, Granted | $ / shares | |
Number of Options, Exercised | shares | (20,000) |
Weighted Average Exercise Price, Exercised | $ / shares | $ 0.24 |
Number of Options, Balance at End of Year | shares | 1,660,000 |
Weighted Average Exercise Price, Balance at End of Year | $ / shares | $ 0.32 |
Number of Options, Exercisable at End of Year | shares | 1,560,000 |
Weighted Average Exercise Price, Options Exercisable at End of Year | $ / shares | $ 0.33 |
SCHEDULE OF EMPLOYEE STOCK OPTI
SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING (Details) - $ / shares | 12 Months Ended | ||
Mar. 31, 2021 | Jun. 30, 2021 | ||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Stock Options Number Outstanding | [1] | 1,660,000 | |
Stock Option Number Exercisable | [1] | 1,560,000 | |
Exercise Price Range One [Member] | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Stock Options Outstanding Exercise Price, Lower Range Limit | $ 0.12 | ||
Stock Options Outstanding Exercise Price, Upper Range Limit | $ 0.38 | ||
Stock Options Number Outstanding | 1,110,000 | ||
Stock Option Outstanding Weighted Average Remaining Contractual Life | 2 years 7 months 6 days | ||
Stock Option Outstanding Weighted Average Exercise Price | $ 0.24 | ||
Stock Option Number Exercisable | 1,010,000 | ||
Stock Option Exercisable Weighted Average Exercise Price | $ 0.23 | ||
Exercise Price Range Two [Member] | |||
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | |||
Stock Options Outstanding Exercise Price, Lower Range Limit | 0.47 | ||
Stock Options Outstanding Exercise Price, Upper Range Limit | $ 0.55 | ||
Stock Options Number Outstanding | 550,000 | ||
Stock Option Outstanding Weighted Average Remaining Contractual Life | 6 years 2 months 12 days | ||
Stock Option Outstanding Weighted Average Exercise Price | $ 0.50 | ||
Stock Option Number Exercisable | 550,000 | ||
Stock Option Exercisable Weighted Average Exercise Price | $ 0.50 | ||
[1] | Total number of options outstanding as of June 30, 2021 includes 580,000 1,040,000 |
SCHEDULE OF EMPLOYEE STOCK OP_2
SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING (Details) (Parenthetical) | Mar. 31, 2021shares |
Five Current and Two Former Directors [Member] | |
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | |
Stock options outstanding | 580,000 |
Employees [Member] | |
Deferred Compensation Arrangement with Individual, Postretirement Benefits [Line Items] | |
Stock options outstanding | 1,040,000 |
STOCK OPTIONS (Details Narrativ
STOCK OPTIONS (Details Narrative) | 3 Months Ended |
Jun. 30, 2021USD ($) | |
Share-based Payment Arrangement [Abstract] | |
Other Expenses | $ 5,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | $ 180,000 |
SCHEDULE OF REVENUE BY GEOGRAPH
SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION (Details) - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | $ 6,066,000 | $ 3,052,000 |
North America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 5,966,000 | 2,816,000 |
Europe [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | 183,000 | |
AUSTRALIA | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Net sales | $ 100,000 | $ 53,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Mar. 31, 2021 | Jul. 30, 2020 | |
Related Party Transaction [Line Items] | ||||
Due to related parties | $ 63,000 | $ 63,000 | ||
Inventory, Net | 8,370,101 | $ 5,490,255 | ||
Related Party Transaction, Due from (to) Related Party | 11,000 | |||
Starlight Electronics CoLtd [Member] | ||||
Related Party Transaction [Line Items] | ||||
Service expenses | $ 91,000 | $ 91,000 | ||
Purchase And Sales Agreement [Member] | ||||
Related Party Transaction [Line Items] | ||||
Inventory, Net | $ 685,000 |
SCHEDULE OF RESERVE FOR SALES R
SCHEDULE OF RESERVE FOR SALES RETURNS (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Reserve For Sales Returns | ||
Reserve for sales returns at beginning of the fiscal year | $ 960,000 | $ 1,224,000 |
Provision for estimated sales returns | 539,000 | 284,000 |
Sales returns received | (749,000) | (1,128,000) |
Reserve for sales returns at end of the period | $ 750,000 | $ 380,000 |
REFUNDS DUE TO CUSTOMERS (Detai
REFUNDS DUE TO CUSTOMERS (Details Narrative) - USD ($) | Jun. 30, 2021 | Mar. 31, 2020 |
Refunds Due To Customers | ||
Refund due to customer | $ 94,000 | $ 145,000 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details Narrative) - USD ($) | 3 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Retirement Benefits [Abstract] | ||
Defined contribution plan, administrative expenses | $ 18,000 | $ 14,000 |
CONCENTRATIONS OF CREDIT AND _2
CONCENTRATIONS OF CREDIT AND SALES RISK (Details Narrative) - Customer Concentration Risk [Member] | 3 Months Ended | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | Mar. 31, 2021 | |
Accounts Receivable [Member] | Three Customers [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 78.00% | ||
Accounts Receivable [Member] | Four Customers [Member] | North America [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 70.00% | ||
Revenue Benchmark [Member] | Customer One [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 45.00% | 43.00% | |
Revenue Benchmark [Member] | SEC, Cosmo USA and Starlight Electronics USA [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 18.00% | 18.00% | |
Revenue Benchmark [Member] | Ram Light Management, Ltd [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 14.00% | 11.00% | |
Revenue Benchmark [Member] | Customer Four [Member] | |||
Concentration Risk [Line Items] | |||
Concentration of sales risk, percentage | 14.00% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Aug. 10, 2021 | Aug. 05, 2021 |
Subsequent Event [Line Items] | ||
Stock Redeemed or Called During Period, Value | $ 7,162,000 | $ 19,623,155 |
Number of shares issued | 16,833,333 | |
Exercise price | $ 0.01 | |
Increase in working capital | $ 1,800,000 | |
Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Execution of redemption agreement | 7,200,000 | |
Increase in working capital | 1,800,000 | |
Settlement expenses | 800,000 | |
Subsequent Event [Member] | Private Placement [Member] | ||
Subsequent Event [Line Items] | ||
Number of shares issued | 16,500,000 | |
Exercise price | $ 0.35 | |
Proceeds from warrants | $ 9,800,000 | |
Subsequent Event [Member] | Pre Funded Warrants [Member] | ||
Subsequent Event [Line Items] | ||
Number of shares issued | 16,833,333 | |
Number of shares issued | 16,833,333 | |
Exercise price | $ 0.01 | |
Common Stock [Member] | ||
Subsequent Event [Line Items] | ||
Exercise price | $ 0.35 | |
Common Stock [Member] | Subsequent Event [Member] | ||
Subsequent Event [Line Items] | ||
Redeemable common stock | 19,623,155 | |
Common Stock [Member] | Subsequent Event [Member] | Private Placement [Member] | ||
Subsequent Event [Line Items] | ||
Number of shares issued | 16,500,000 |