What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-07-14 compared with 2021-07-14 · 148 added, 109 removed, 87 unchanged (75% of the section changed)

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.

do business with a number of entities that are principally owned by the Company’s Chairman, Philip Lau, including Starlight R&D

Ltd (“SLRD”), Starlight Consumer Electronics USA, Inc., (“SCE”), Cosmo Communications Corporation of Canada,

(“Cosmo”), Winglight Pacific, Ltd (“Winglight”) and Starlight Electronics Company Ltd (“SLE”),

among others.

Machine is a leading global karaoke and music entertainment company that specializes in the design and production of quality karaoke

and music enabled consumer products for adults and children.

SMC’s products are among the most widely available karaoke products

in the world.

SMC’s mission is to “create joy through music.”

In order to deliver on this mission, SMC is focused on

the following multi-prong approach:

are primarily engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories and musical recordings.

are the leading global karaoke and music entertainment company that specializes in the design and production of quality karaoke and music

enabled consumer products for adults and children.

Our products are among the most widely available karaoke products in the world.

mission is to “create joy through music.” In order to deliver on this mission, we are focused on the following multi-prong

the short-term, improve profitability by optimizing operations and continue to expand gross margins.

the mid-to-long-term, continue to grow our global distribution and expand into new product categories that take advantage of SMC’s

the mid-to-long-term, continue to grow our global distribution and expand into new product categories that take advantage of our

vast distribution relationships and sourcing abilities.

portfolio of owned and licensed brands and products are organized into the following categories:

Karaoke —including

our flagship brand Singing Machine , SMC’s karaoke line is driven by quality products at affordable price points that deliver

great value to our customers.

All of Singing Machine’s karaoke products are Bluetooth™

enabled to allow access digital music

content via SMC’s mobile apps available on iOS and Android platforms.

The core karaoke line offers best-in-class innovative features

enable customers to output video to a TV screen, correct singer’s pitch in real-time, stream karaoke content directly

to the machine, sing duets, display scrolling lyrics in-time with the song, and play custom karaoke CD+G discs.

Its products are sold

directly to consumers via its retail channels, ecommerce, own website, and distributors worldwide.

This product category accounted for

approximately 76% of the Company’s net sales in fiscal 2021.

Products —including brands such as Carpool Karaoke .

In 2019, SMC entered into a 3-year license agreement with CBS®

for its Carpool Karaoke brand, made popular by James Corden on The Late Late Show with James Corden.

The Company launched an innovative

Carpool Karaoke Microphone that works specifically in the car.

The Company is actively exploring other new licensing opportunities.

product category accounted for approximately 10% of the Company’s net sales in fiscal 2021.

and Accessories —

the Company currently offers a line of traditional microphone accessories that are compatible with Singing

Machine karaoke machines.

These microphones feature an assortment of colors, come wired or wireless, and may include new features like

party lighting and voice changing effects.

The Company is also seeing growth in portable Bluetooth®

microphones which are marketed

under the Party Machine brand.

This product category accounted for approximately 10% of the Company’s net sales in fiscal

Machine Kids Youth Electronics —including the brand Singing Machine Kids .

SMC’s Kids line of products offer fun

music entertainment features designed specifically for children.

SMC Kids products provide a high quality introduction to singing and

music entertainment for young singers and offer innovative features like voice changing effects, recording, Bluetooth™

compatibility,

and portability.

This product category accounted for approximately 3% of the Company’s net sales in fiscal 2021.

Subscriptions —in conjunction with its premium partner, Stingray Digital, the Company offers karaoke music subscription services

for the iOS and Android platforms as well as a web-based download store and integrated streaming services for Singing Machine hardware.

The Company currently offers almost 20,000 licensed karaoke songs in the catalog.

This product category accounted for approximately 1%

of the Company’s net sales in fiscal 2021.

Product Portfolio

products are sold directly to distributors and retail customers.

Our portfolio of owned and licensed brands and products are organized

into the following categories:

including our flagship brand Singing Machine, our karaoke line is driven by quality products at affordable price points that we believe

deliver great value to our customers.

All of our karaoke products are Bluetooth® enabled to allow access to digital music content

via our mobile apps available on iOS and Android platforms.

We believe our core karaoke line offers best-in-class innovative features

that, including but not limited to enables customers to output video to a TV screen, correct singer’s pitch in real-time, stream

karaoke content directly to the machine, sing duets, display scrolling lyrics in-time with the song, and play custom karaoke CD+G discs.

The Company’s products are sold directly to consumers via its retail channels, ecommerce, its own website, and distributors worldwide.

This product category accounted for approximately 82% of our net sales in our fiscal year ended March 31, 2022.

Products — including brands such as Carpool Karaoke.

In 2019, we entered into a 3-year license agreement with CBS® for its

Carpool Karaoke brand, made popular by James Corden on The Late Show with James Corden.

We launched an innovative Carpool Karaoke Microphone

that works specifically in the car.

This license agreement with CBS® expires on September 30, 2022.

We are actively exploring renewing

the license agreement and exploring new licensing opportunities.

This product category accounted for approximately 3% of our net sales

in our fiscal year ended March 31, 2022.

and Accessories — we currently offer a line of traditional microphone accessories that are compatible with our karaoke machines.

These microphones feature an assortment of colors, come wired or wireless, and may include new features like party lighting and voice

changing effects.

We are also seeing growth in portable Bluetooth® microphones which are marketed under our Party Machine brand.

This product category accounted for approximately 9% of our net sales in our fiscal year ended March 31, 2022.

Machine Kids Youth Electronics — including the brand Singing Machine Kids.

Our kids line of products offer fun music entertainment

features designed specifically for children.

Our kids’ products provide a high-quality introduction to singing and music entertainment

for young singers and offer innovative features like voice changing effects, recording, Bluetooth® compatibility, and portability.

This product category accounted for approximately 5% of our net sales in our fiscal year ended March 31, 2022.

Subscriptions — in conjunction with our premium partner, Stingray Digital, we offer karaoke music subscription services for

the iOS and Android platforms as well as a web-based download store and integrated streaming services for our hardware.

offer almost 20,000 licensed karaoke songs in the catalog.

This product category accounted for approximately 1% of our net sales in our

fiscal year ended March 31, 2022.

Development and Design

development is a key element of our strategic growth plan.

We strive to delivery many new exciting consumer products to market every

We strive to deliver many new, exciting consumer products to market every

single year to retain our presence as the market-leader in consumer karaoke products.

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are created in conjunction with contract product designers and inventors in collaboration with our contract manufacturers in China to

deliver fun products that represent tremendous value to our customers.

In addition to new products, we always look for ways to improve

existing products to hit more affordable price points or improve features based upon market feedback.

operates in one principal industry segment across geographically diverse marketplaces, selling our products globally to large, national

retailers as well as independent retailers, on our retailer’s websites, and our own direct to consumer website.

deliver products that represent tremendous value to our customers.

In addition to new products, we always look for ways to improve existing

products to hit more affordable price points or improve features based upon market feedback.

operate in one principal industry segment across geographically diverse marketplaces, selling our products globally to large, national

retailers as well as independent retailers, on our retailer’s websites, and our own direct to consumer website.

In North America,

our customers include Amazon.com, Costco, Sam’s Club, Target and Wal-Mart.

our customers include Amazon, Costco, Sam’s Club, Target and Wal-Mart.

Our largest international territories are the U.K.

Australia where we sell through international distributors, representatives, and to select international retail customers in geographic

and Australia,

where we sell through international distributors, representatives.

We also sell to select international retail customers in geographic

locations where we do not have a direct sales presence.

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circuits and provide to our contract manufacturers for assembly into the final product.

While we are not responsible to source raw materials,

we rely on our contract manufacturers’

ability to secure injected plastic, wood cabinets, integrated circuits, TFT panels, speaker

drivers, and other components that are necessary for assembly into our final products.

While we are not responsible for sourcing raw

materials, we rely on our contract manufacturers’ ability to secure injected plastic, wood cabinets, integrated circuits, display

panels, speaker drivers, and other components that are necessary for assembly into our final products.

goods are produced by our contract manufacturers and are either shipped via ocean vessels to our distribution center in Ontario, California

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merchandise, however we have accepted overstock returns from our retail partners in the past.

Please see risk factor titled “ We

are subject to the risk that some of our large customers may return karaoke products that they have purchased from us and if this happens,

it would reduce our revenues and profitability” under “Risk Factors”.

seek to expand our direct-to-consumer sales, which we believe will increase overall gross margins and also increase brand awareness.

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although there is no single company that competes with us across all of our product categories.

Our largest direct competitors are Singsation®,

Singtrix®, eKids®, Bonaok, Karaoke USA™, and Ion®

Our largest direct competitors are Singsation®,

Singtrix®, eKids®, Bonaok, Karaoke USA™, and Ion® Audio.

primary method of competition in the industry consists of brand positioning, product innovation, quality, price, and timely distribution.

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and the quality and pricing of our products.

rely on a combination of trademarks, patents, and trade secrets to protect our intellectual property.

Our current U.S.

patents include

various designs for karaoke products.

The issued U.S.

patents expire at various times depending on the date of issuance during the next

In certain circumstances, we will partner with third parties to develop proprietary products, and, where appropriate, we have

license agreements related to the use of third-party innovation in our products.

The duration of our trademark registrations varies from

country to country.

However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations

are properly maintained.

to the Company’s top five customers together comprised approximately 90% and 80% of our net sales in fiscal 2021 and 2020, respectively.

In fiscal 2021, revenues from four of these customers represented greater than 10% of net sales at a percentage of 36%, 20%, 13% and

12% of total net sales.

In fiscal 2020, revenues from three of these customers represented greater than 10% of net sales at a percentage

of 41%, 13%, and 10% of total net sales.

have no long-term contracts with these customers, and as a result, our success depends heavily on our customers’

willingness to

rely on a combination of word and design mark trademarks and trade secrets to protect our intellectual property.

In certain circumstances,

we will partner with third parties to develop proprietary products, and, where appropriate, we have license agreements related to the

use of third-party innovation in our products.

The duration of our trademark registrations varies from country to country.

However, trademarks

are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.

to our top five customers together comprised approximately 90% of our net sales in both fiscal years ended March 31, 2022 and March 31,

In our fiscal year ended March 31, 2022, revenues from three of these customers represented greater than 10% of net sales at a

percentage of 37%, 18%, and 17% of total net sales.

In our fiscal year ended March 31, 2021, revenues from four of these customers represented

greater than 10% of net sales at a percentage of 36%, 20%, 13% and 12% of total net sales.

have no long-term contracts with these customers, and as a result, our success depends heavily on our customers’ willingness to

purchase and provide shelf space for our products.

do experience heightened seasonal demand for our products in our second and third quarters of our fiscal year.

In Fiscal 2021 and Fiscal

2020, approximately 86% and 85%, respectively of our net sales shipped in our second and third quarters.

However, we continually look

for products and new categories to reduce our reliance on seasonality.

In our fiscal year ended

March 31, 2022 and our fiscal year ended March 31, 2021, approximately 81% and 86%, respectively, of our net sales shipped in our second

and third quarters.

However, we continually look for products and new categories to reduce our exposure to seasonality variances.

of our products is designed to comply with all applicable mandatory and voluntary safety standards.

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and will continue to evaluate our coverage in the future in line with our expanding sales and product breadth.

believe that the development, attraction and retention of employees is an important factor to our Company’s success.

Capital Resources

believe that the development, attraction and retention of employees is an important factor to our Company’s success.

employees a wide range of benefits, including 100% paid health benefits for the employee, generous leave, vacation, and personal paid

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offer training and development programs encouraging advancement from within.

As of the filing of this document we had 33 employees, 16

As of the filing of this report, we had 32 employees, 17

of which are located at our corporate office and 15 at our logistics center in Ontario, California.

During peak shipping season, (July

thru December), we rely heavily on temporary labor at our logistics warehouse to handle the increased shipment volume.

through December), we rely heavily on temporary labor at our logistics warehouse to handle the increased shipment volume.

Environmental

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We are not currently aware of any material environmental liabilities associated with any of our operations.

to March 31, 2022, and as of the date of this report, Digital Power Lending, LLC

(“Digital Power Lending ”) beneficially

owns and BitNile Holdings, Inc.

(“BitNile Holdings”) and Milton C.

Ault, III (“Ault,” and collectively with

Digital Power Lending and BitNile Holdings, “BitNile”) may be deemed to beneficially own an aggregate of 1,568,849

shares of our common stock or approximately 52.0% of our outstanding shares.

Digital Power Lending is a wholly owned subsidiary of

BitNile Holdings.

Ault is the Executive Chairman of BitNile Holdings.

longs as BitNile continues to hold more than 50% of the voting power of our Company, we

will be a “controlled company” as defined under Nasdaq Marketplace Rules.

so long as we are a controlled company under Nasdaq Marketplace Rules, we are permitted to elect to rely on certain exemptions from corporate

governance rules, including:

exemption from the rule that a majority of our board of directors must be independent directors;

exemption from the rule that the compensation of our CEO must be determined or recommended solely by independent directors;

exemption from the rule that our director nominees must be selected or recommended solely by independent directors.

has indicated that it intends to appoint two directors to our Board of Directors.

Upon the appointment of the BitNile nominees, our Board of Directors will increase in size to seven directors, of which less than a majority will

be “independent” as defined under Nasdaq Marketplace Rules.

Stock Split and Nasdaq Listing

May 23, 2022, the Company effected a reverse stock split of its shares of common stock in a ratio of 1:30.

The reverse stock split was

affected to meet The Nasdaq Capital Market’s minimum bid price requirement.

All information

in this Annual Report on Form 10-K has been retroactively adjusted to give effect to this 1-for-30 reverse stock split.

common stock was approved for listing on the Nasdaq Capital Market under the symbol “MICS” and began trading on the Nasdaq

Capital Market on May 24, 2022.

May 23, 2022, we consummated a public offering of 1,000,000 shares of our common stock for gross proceeds of $4.0 million prior to deducting

underwriting discounts and commissions and other estimated offering expenses of approximately $0.7 million.

The offering closed on May

As compensation, we issued to the underwriter in the public offering warrants to purchase up to 100,000 shares of our common

The warrants are exercisable six months from the commencement of sales under the public offering, have an exercise price of $5.00

per share and expire five years from the date of issuance.

Redemption Agreement

to August 10, 2021, the Company was partially held by koncepts International Limited (“koncepts”) which was a major shareholder

of the Company that owned approximately 49% of our shares of common stock outstanding on a fully diluted basis as of March 31, 2021.

The Company was also partly held by Treasure Green Holdings Ltd.

(“Treasure Green) which owned approximately 2% of our common stock.

In total approximately 51% of the Company’s shares of common stock on a fully diluted basis as of March 31, 2021 were previously

owned by koncepts and Treasure Green.

koncepts and Treasure Green are owned by Fairy King Prawn Holdings Limited (“Fairy King”),

an investment holding company incorporated in the British Virgin Islands, principally owned by the Company’s then Chairman, Philip

August 5, 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with koncepts and Treasure

Green, pursuant to which the Company redeemed 654,105 shares of common stock of the Company (the “Redeemed Shares”).

closing of the transaction set forth in the Redemption Agreement took place on August 10, 2021, at which time the Redeemed Shares were

assigned and transferred back to the Company in consideration of a payment by the Company of approximately $7,162,000 to koncepts and

Treasure Green.

The Redeemed Shares were retired and returned to the unissued authorized capital of the Company.

to August 10, 2021, we did 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.

to the Redemption Agreement, neither koncepts nor Treasure Green remained shareholders of the Company and SLRD, SCE, Cosmo, Winglight

and SLE are no longer related parties.

Company is incorporated under the laws of the State of Delaware and was formed in 1994.

We are publicly traded on the OTCQX Market under

the symbol “SMDM”Our principal executive offices are located at 6301 NW 5 th Way, Suite 2900, Fort Lauderdale,

FL, and our telephone number is (954) 596-1000.

Our common stock is traded on the NASDAQ Capital

Market under the symbol “MICS”.

Our principal executive offices are located at 6301 NW 5 th Way, Suite 2900, Fort

Lauderdale, FL, and our telephone number is (954) 596-1000.

We maintain our corporate website at www.singingmachine.com .

file reports with the Securities and Exchange Commission (“SEC”), including an annual report on Form 10-K, quarterly reports

also includes corporate governance information, including our Code of Ethics and our Board committee charters.

The information contained

on our website does not constitute a part of this report.

file reports with the Securities and Exchange Commission (“SEC”), including an annual report on Form 10-K, quarterly reports

on Form 10-Q, current reports on Form 8-K, and amendments to those reports that we file with, or furnish to, the SEC.

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with the SEC.

Our website also includes corporate governance information, including our Code of Ethics and our Board committee charters.

The information contained on our website does not constitute a part of this report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business