What changed in this filing

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Item 1. Financial Statements

2024-08-19 compared with 2024-05-15 · 377 added, 210 removed, 318 unchanged (65% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Accounts receivable, net of allowances of $ 86,919 and $ 174,000 , respectively

Due from Oxford Bank

Accounts receivable related parties

20 unchanged sentences

Commitments and Contingencies

Shareholders’ Equity

Shareholders’ (Deficit) Equity

Preferred stock, $ 1.00 par value;

3 unchanged sentences

100,000,000 shares authorized;

6,418,061 issued and

outstanding at March 31, 2024 and December 31, 2023, respectively

7,418,061 issued and 6,418,061 shares outstanding at June 30, 2024 and 6,418,061 issued and outstanding at December 31, 2023.

Additional paid-in capital

2 unchanged sentences

( 25,915,000 )

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

See notes to the condensed consolidated financial statements

Total Shareholders’ (Deficit) Equity

Total Liabilities and Shareholders’ (Deficit) Equity

notes to the condensed consolidated financial statements

Singing Machine Company, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

March 31, 2024

March 31, 2023

Three Months Ended

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Cost of Goods Sold

2 unchanged sentences

General and administrative expenses

Operating lease impairment expense

Total Operating Expenses

2 unchanged sentences

( 2,431,000 )

( 8,441,000 )

( 4,578,000 )

Other (Expenses) Income

Gain from Employee Retention Credit Program refund

Other Expense

Interest expense

Total Other (Expenses) Income, net

Loss Before Income Tax Provision

Loss Before Income Tax Benefit (Provision)

( 6,171,000 )

( 2,460,000 )

Income Tax Provision

( 8,486,000 )

( 3,943,000 )

Income Tax Benefit (Provision)

( 1,502,000 )

$ ( 6,119,000 )

$ ( 2,460,000 )

$ ( 8,486,000 )

$ ( 5,445,000 )

Loss per common share

2 unchanged sentences

Basic and diluted

See notes to the condensed consolidated financial statements

notes to the condensed consolidated financial statements

Singing Machine Company, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

the Three Months Ended March 31, 2024 and 2023

Paid in Capital

Balance at December 31, 2023

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

the Three Months Ended June 30, 2024 and 2023

Balance at March 31, 2024

$ ( 28,282,000 )

1 unchanged sentence

( 6,119,000 )

Employee compensation-stock option

Stock based compensation

Balance at June 30, 2024

$ ( 34,401,000 )

$ ( 872,000 )

Additional Paid in

Balance at March 31, 2023

$ ( 19,517,000 )

( 2,460,000 )

Sale of common stock, net of offering costs

Stock based compensation

Balance at June 30, 2023

$ ( 21,977,000 )

the Six Months Ended June 30, 2024 and 2023

Balance at December 31, 2023

2 unchanged sentences

( 8,486,000 )

Stock based compensation

Balance at June 30, 2024

$ ( 34,401,000 )

Issuance of common stock

Exercise of pre-funded common stock warrants

Employee compensation-stock option

Balance at March 31, 2023

$ ( 872,000 )

Balance at December 31, 2022

$ ( 16,531,000 )

See notes to the condensed consolidated financial statements

The Singing Machine Company, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

March 31, 2024

March 31, 2023

$ ( 16,531,000 )

( 5,445,000 )

Sale of common stock, net of offering costs

Sale of common stock warrants

Stock based compensation

Balance at June 30, 2023

$ ( 21,977,000 )

notes to the condensed consolidated financial statements.

Singing Machine Company, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

June 30, 2024

June 30, 2023

For the Six Months Ended

June 30, 2024

June 30, 2023

Cash flows from operating activities

1 unchanged sentence

( 5,445,000 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for estimated cost of returns

1 unchanged sentence

Credit losses

Operating lease impairment expense

Loss from disposal of property and equipment

4 unchanged sentences

Accounts receivable

Due from banks

Accounts receivable - related parties

( 1,714,000 )

Prepaid expenses and other current assets

3 unchanged sentences

Accrued expenses

Refunds due to customer

Prepaids from customers

( 1,939,000 )

Customer deposits

Refunds due to customers

Reserve for sales returns

( 1,217,000 )

( 2,604,000 )

Operating lease liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

( 5,410,000 )

3 unchanged sentences

Cash flows from financing activities

Proceeds from issuance of stock, net of offering costs

Subscriptions receivable

Net payment on revolving lines of credit

Proceeds from sale of stock, net of offering costs

Net payments on revolving lines of credit

( 1,761,000 )

Payments on installment notes

Proceeds from exercise of common stock warrants

Payments on finance leases

Net cash used in financing activities

( 1,739,000 )

Net change in cash

4 unchanged sentences

Cash paid for interest

Non-Cash investing and financing cash flow information:

Equipment purchased under capital lease

1 unchanged sentence

Singing Machine Company, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 and 2023

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

1 – NATURE OF BUSINESS

10 unchanged sentences

Our results of operations, cash flows,

and all transactions impacting shareholders’ equity presented in this Quarterly Report on Form 10-Q as of March 31, 2024 are for

the three-month period ended March 31, 2024 and March 31, 2023.

November 20, 2023, the Company entered into an agreement to sell $ 2,000,000 in common stock through a private placement of common stock

(the “Private Placement”).

The Private Placement was completed with two Affiliates, (Stingray Group, Inc.

and Jay Foreman),

both of which were existing shareholders with Board representation.

The Private Placement was completed at $ 0.91 per share of common

stock, with a total of approximately 2,198,000 shares issued.

Net proceeds from the transaction were approximately $ 1,900,000 , net of

transaction fees of approximately $ 100,000 .

During the six-month period after the closing date, the purchasers may make a written request

for registration under the Securities Act of all or any portion of the shares purchased.

and all transactions impacting shareholders’ equity presented in this Quarterly Report on Form 10-Q as of June 30, 2024 are for

the three and six month periods ended June 30, 2024 and 2023.

Offering June 2024

June 26, 2024, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant

Capital markets, LLC, as sales agent (the “Agent”), pursuant to which the Company could offer and sell, from time to time,

through the Agent (the “ATM Offering”), up to approximately $ 1,100,000 in shares of the Company’s common stock.

July 8, 2024, the Company entered into the First Amendment to the Sales Agreement (the “Amendment”) to increase the number

of shares to be sold in the ATM Offering to $ 2,020,000 .

On August 9, 2024, the Company entered into the Second Amendment to the

Sales Agreement (the “Amendment”) to increase the number of shares to be sold in the ATM Offering to $ 3,100,000 .

three and six months ended June 30, 2024, the Company had not yet sold any shares of its common stock from this ATM Offering.

to the agreement, the Agent is to be paid $ 30,000 in fees to cover legal and administrative expenses and will receive an amount equal

to 3 % of the gross proceeds from each sale of the Company’s share of common stock.

to June 30, 2024 and through August 16, 2024 (the last trading day prior to filing), the Company sold 1,657,172

shares of common stock under the ATM offering, and received net proceeds from the ATM of approximately $ 1,676,000

after payment of brokerage commissions and administrative fees to the agent of approximately $ 51,000 .

June 11, 2024, the Company and its wholly owned subsidiary SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab

LLC” and collectively with the Company, the “Buyer”), SemiCab, Inc., a Delaware corporation (“SemiCab”

or the “Seller”), Ajesh Kapoor and Vivek Sehgal entered into an asset purchase agreement (the “Asset Purchase Agreement”)

pursuant to which the Seller agreed to sell and assign to the Company, and the Company agreed to purchase and assume from the Seller,

substantially all the assets, and certain specified liabilities relating to the business of the Seller.

Subject to certain exceptions

set forth in the Asset Purchase Agreement, the parties agreed that the Buyer will not assume the liabilities of the Seller.

an artificial intelligence, cloud-based collaborative transportation platform built to achieve the scalability required to predict and

optimize semi-tractor trailer load efficiency.

July 3, 2024, the parties closed on the asset purchase whereby the Company issued to the Seller (i) 641,806 shares of the Company’s

common stock (ii) a twenty percent ( 20 %) membership interest in SemiCab LLC.

to the asset acquisition agreement, the Company and Seller entered into an option agreement (the “Option Agreement”), granting

the Buyer the right to acquire all of the issued and outstanding capital securities of SMCB Solutions Private Limited, a wholly owned

subsidiary of the Seller, in consideration for 320,903 shares of common stock of the Company.

The Option Agreement has not been exercised

through the date of this filing.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

November 20, 2023, the Company entered into an agreement to sell $ 2,000,000

in common stock through a private placement of common stock (the “Private Placement”).

The Private Placement was

completed with two Affiliates, (Stingray Group, Inc.

and Jay Foreman), both of which were existing shareholders with Board

representation.

The Private Placement was completed at $ 0.91

per share of common stock, with a total of approximately 2,198,000

shares issued.

Net proceeds from the transaction were approximately $ 1,900,000 ,

net of transaction fees of approximately $ 100,000 .

During the six-month period after the closing date, the purchasers may make a written request for registration under the Securities

Act of all or any portion of the shares purchased.

During the six months ended June 30, 2024, Jay Foreman has made a written request

to register his 1,099,000

August 23, 2023, MICS NY entered into an Agreement of Lease (the “Lease Agreement”) with OAC 111 Flatiron, LLC and OAC Adelphi,

6 unchanged sentences

initial base rent in the amount of $ 30,000 beginning August 1, 2024, with scheduled increases over the term, as set forth in the Lease

March 2024, the Company initiated the termination of this lease under certain provisions made available under the Lease Agreement.

Landlord and the Company are in active discussions as to the terms of the lease termination however as of this filing, it is too early

in the negotiation process to estimate any potential loss, if any, related to the lease termination process.

Singing Machine Company, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 and 2023

February 15, 2023, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Aegis

Capital Corp, as sales agent (the “Agent”), pursuant to which the Company could offer and sell, from time to time, through

the Agent (the “ATM Offering”), up to approximately $ 1,800,000 in shares of the Company’s common stock.

For the three

months ended March 31, 2024 and 2023, the Company received net proceeds of approximately $ 0 and $ 36,000 , respectively, after payment

of brokerage commissions and administrative fees to the agent.

As of May 12, 2023, the Company terminated the Sales Agreement.

the three months ended June 30, 2024, the Company abandoned its plans to continue use of the leased space due to failure to receive a

liquor license.

Consequently, the Company exercised its early termination provision of the Lease Agreement which was not accepted by

the Landlord.

While attempting to settle, the Company failed to make the first recurring cash lease payment due on July 31, 2024, and

as a result defaulted on the lease.

Due to the abandonment of the lease, all assets related to the lease were impaired.

Assets including

security deposits, rent deposits and right of use assets of approximately $ 3,878,000 have been written off during the three months ended

June 30, 2024 and are included as a component of operating expenses in the accompanying condensed consolidated statements of operations.

July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC, filed a civil action in the Supreme Court of the State of New York against

MICS NY and the Company (“the Defendants”) for alleged breach of lease, seeking monetary damages including unpaid rent, future

unpaid rent, and other expenses related to the lease.

The complaint alleges the Defendants breached the lease in various material respects.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage

of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

3 – LIQUIDITY, GOING CONCERN AND MANAGEMENT PLANS

of March 31, 2024, the Company had cash on hand of approximately $ 4,125,000 which is not sufficient to fund the Company’s planned

of June 30, 2024, the Company had cash on hand of approximately $ 1,245,000 which is not sufficient to fund the Company’s planned

operations through one year after the date the consolidated financial statements are issued.

8 unchanged sentences

the ordinary course of business.

The Singing Machine Company,

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

intends to finance operations with future debt or equity financings, however, if and when such financings may occur are uncertain.

7 unchanged sentences

of Presentation

accompanying unaudited financial statements for the three months ended March 31, 2024 and 2023 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 8 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.

accompanying unaudited financial statements for the three months ended June 30, 2024 and 2023 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 8 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.

the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals)

2 unchanged sentences

for the full year.

The condensed consolidated balance sheet as of March 31, 2024 and condensed financial statements information for the

three months ended March 31, 2024 and 2023 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2023 is

derived from the audited consolidated balance sheet as of that date.

The condensed consolidated balance sheet as of June 30, 2024 and condensed financial statements information for the

three and six months ended June 30, 2024 and 2023 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2023

is derived from the audited consolidated balance sheet as of that date.

The condensed consolidated financial statements and notes hereto

3 unchanged sentences

disclosed on the Company’s annual report on Form 10-KT for the transition period ended December 31, 2023.

Singing Machine Company, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 and 2023

ACCOUNTING PRONOUNCEMENTS

11 unchanged sentences

Credit Facility

March 28, 2024, the Company entered into a Loan and Security Agreement with Oxford Business Credit (the “Credit Agreement”),

The Credit Agreement established a secured asset-backed revolving credit facility which is comprised of a maximum $ 2,000,000

revolving credit facility (“Credit Facility”).

Availability under the Credit Facility is determined monthly by a borrowing

base comprised of a percentage of eligible accounts receivable of the Borrowers.

The Company’s obligations under the Credit Agreement

are secured by a continuing security interest in all property of each Loan Party, subject to certain excluded collateral (as defined

in the Credit Agreement).

As of March 31, 2024, there was no availability under the Credit Facility as there were no eligible accounts

March 28, 2024, the Company entered into a Loan and Security Agreement (the “Credit Agreement”) with Oxford Business Credit

“Oxford”), as Lender.

The Credit Agreement established a secured asset-backed revolving credit facility which is comprised

of a maximum $ 2,000,000 revolving credit facility (“Credit Facility”).

Availability under the Credit Facility is determined

monthly by a borrowing base comprised of a percentage of eligible accounts receivable of the Borrowers.

The Company’s obligations

under the Credit Agreement are secured by a continuing security interest in all property of each Loan Party, subject to certain excluded

collateral (as defined in the Credit Agreement).

As of June 30, 2024, there was approximately $ 187,000 due from Oxford for cash collections

received that exceeded the amount due on the Credit Agreement.

As of June 30, 2024 there was approximately $ 89,000 available under the

Credit Facility.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

under the Credit Facility take the form of base rate loans at interest rates of the Wall Street Journal Prime Rate plus 2.5 %, but in

2 unchanged sentences

asset liens, capital expenditures, formation of new entities and financial covenants.

For the three months ended March 31, 2024, the

Company incurred interest expense of approximately $ 25,000 associated with financing costs from the Credit Agreement.

For the three and six months ended June 30, 2024,

the Company incurred interest expense of approximately $ 17,000 and $ 42,000 , respectively associated with financing costs from the Credit

Credit Agreement is for a two -year term that expires on November 28, 2026 , and automatically renews for an additional one-year term on

19 unchanged sentences

of each Loan Party, subject to certain excluded collateral (as defined in the Credit Facility).

associated with closing of the Credit Agreement of approximately $ 254,000

were deferred and being amortized over life of the loan.

During the three months ended March 31, 2024, and 2023, the Company

recorded interest expense of approximately $ 0

and $ 21,000 ,

respectively associated with the amortization of deferred financing costs from the Credit Agreement.

Singing Machine Company, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 and 2023

associated with closing of the Credit Agreement of approximately $ 254,000 were deferred and being amortized over life of the loan.

the three months and six months ended June 30, 2023 the Company incurred approximately $ 21,000 and $ 42,000 , respectively associated with

the amortization of deferred financing costs from the Credit Agreement.

under the Credit Facility took the form of base rate loans at interest rates of the greater of either (a) the Prime Rate plus 0.50% or

(b) the Secured Overnight Financing Rate (“SOFR”) 30-day term rate plus 3%, subject to a minimum of 0.050% in either case.

the three months ended March 31, 2024, and 2023, the Company incurred interest expense of approximately $ 0 and $ 36,000 , respectively,

associated with interest and financing costs from the Credit Agreement.

the three and six months ended June 30, 2023, the Company incurred interest expense of approximately $ 25,000

and $ 61,000 respectively, associated with interest

and financing costs from the Credit Agreement.

May 19, 2023, the Company executed a Waiver and First Amendment agreement which provides for a waiver of previous defaults and instituted

4 unchanged sentences

$ 5,000,000 to $ 2,000,000 .

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

November 17, 2023, the Company voluntarily terminated the Credit Agreement as the Company could not comply with the debt coverage financial

6 unchanged sentences

York, New York (the “Premises”).

It was the Company’s intention to use the Premises as a new karaoke venue, offering

immersive karaoke technology and audio-visual capabilities, with restaurant and bar offerings however due to lack of funding, the Company

initiated termination of the lease in March 2024 (See Note 8 - Operating Leases).

term of the Lease Agreement is for fifteen ( 15 ) years, or on such an earlier date upon which the term shall expire, be canceled or terminated

1 unchanged sentence

Pursuant to the Lease Agreement, MICS NY is obligated to pay an

initial base rent in the amount of $ 30,000 beginning July 1, 2024, with scheduled increases over the term, as set forth in the Lease

March 2024, the Company initiated the termination of this lease under certain provisions made available under the Lease Agreement.

Landlord and the Company are in active discussions as to the terms of the lease termination however as of this filing, it is too early

in the negotiation process to estimate any potential loss, if any, related to the lease termination process.

initial base rent in the amount of $ 30,000 beginning August 1, 2024, with scheduled increases over the term, as set forth in the Lease

the three months ended June 30, 2024, the Company abandoned its plans to continue use of the leased space due to failure to receive a

liquor license.

Consequently, the Company exercised its early termination provision of the Lease Agreement which was not accepted by

the Landlord.

While attempting to settle, the Company failed to make the first recurring cash lease payment due on July 31, 2024, and

as a result defaulted on the lease.

Due to the abandonment of the lease, all assets related to the lease were impaired.

Assets including

security deposits, rent deposits and right of use assets of approximately $ 3,878,000 have been written off during the three months ended

June 30, 2024 and are included as a component of operating expenses in the accompanying condensed consolidated statements of operations.

July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC, filed a civil action in the Supreme Court of the State of New York against

MICS NY and the Company (“the Defendants”) for alleged breach of lease, seeking monetary damages including unpaid rent, future

unpaid rent, and other expenses related to the lease.

The complaint alleges the Defendants breached the lease in various material respects.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage

of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

December 21, 2023, Ault Lending, LLC, a wholly owned subsidiary of Ault Alliance, Inc.

7 unchanged sentences

with an intent to dilute Ault’s ownership stake in the Company.

The Defendants have retained Delaware counsel to represent them

in this matter and the Company has filed a motion to dismiss the suit.

than what is disclosed above, we are not a party to, and our property is not the subject of, any pending material legal proceedings.

The Singing Machine Company,

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2024 and 2023

The Company filed a motion to dismiss the complaint.

Company’s assessment of the facts underlying the claims, the uncertainty of the litigation, and the preliminary stage of the case, the

Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

7 – OPERATING LEASES

2 unchanged sentences

Company entered into an operating lease agreement, effective October 1, 2017, for our corporate headquarters located in Fort Lauderdale,

Florida where we lease approximately 6,500 square feet of office space.

The lease expired on March 31, 2024 .

The base rent payment is

approximately $ 9,950 per month, subject to annual adjustments.

On February 22, 2024, the Company executed a lease extension for 14 months

effective April 1, 2024, and expires on May 31, 2025.

The base rent on the extension is approximately $10,553 per month subject to a

3% annual adjustment.

Company entered into an operating lease on August 23, 2023, for approximately 10,000 square feet of ground floor retail space and a portion

of the basement underneath the ground floor retail space.

The lease expires August 22, 2038 , and the monthly base rent is $ 30,000 , subject

to annual increases.

The lease includes a 11-month free rent period between July 1, 2023, and June 30, 2024 and also includes a $ 700,000

reimbursement for tenant improvements upon completion of construction milestones as defined in the lease.

Due to uncertainties as to

whether these milestones will be met timely, the Company has not recorded any amounts related to the tenant improvement allowance in

our condensed consolidated financial statements at lease inception or the three months ended March 31, 2024.

balance sheet information related to leases as of March 31, 2024 and December 31, 2023 is as follows:

Florida where we lease approximately 6,500 square feet of office space which expired on March 31, 2024 .

On February 22, 2024, the Company

executed a lease extension for 14 months effective April 1, 2024, and expires on May 31, 2025.

The base rent on the extension is approximately

$10,000 per month subject to a 3% annual adjustment.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

Company entered into an operating lease on August 23, 2023, for approximately 10,000 square feet of ground floor retail space and a

portion of the basement underneath the ground floor retail space.

The lease expires August 22, 2038 , and the monthly base rent is

$ 30,000 , subject to annual increases.

The lease includes a 11-month free rent period between July 1, 2023, and June 30, 2024 and

also includes a $ 700,000 reimbursement for tenant improvements upon completion of construction milestones as defined in the lease.

Due to uncertainties as to whether these milestones will be met timely, the Company has not recorded any amounts related to the

tenant improvement allowance in our condensed consolidated financial statements at lease inception for the three and six months

ended June 30, 2024.

(See Note 6).

balance sheet information related to leases as of June 30, 2024 and December 31, 2023 is as follows:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Operating lease liabilities, net of current portion

statement of operations information related to operating leases is as follows:

Supplemental statement of operations information related to operating leases is as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

1 unchanged sentence

Three Months Ended

March 31, 2024

March 31, 2023

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Operating lease expense as a component of general and administrative expenses

5 unchanged sentences

Weighted average discount rate

future payments under all operating leases as of March 31, 2024, are as follows:

future payments under all operating leases as of June 30, 2024, are as follows:

OF OPERATING LEASE MINIMUM FUTURE PAYMENTS

Payments due by period

2024 (remaining 9 months)

2024 (remaining six months)

Total minimum future payments

2 unchanged sentences

Operating lease liabilities, net of current portion

The Singing Machine Company,

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

March 31, 2024 and 2023

8 – STOCK COMPENSATION EXPENSE

5 unchanged sentences

under the 2022 Plan to the Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.

share base compensation awards issued under the 2022 Plan during the three months ended March 31, 2024 and 2023.

During the quarter

ended March 31, 2024 there were 1,250

shares forfeited during the three months ended March 31, 2024.

As of March 31, 2024 there were 166,719

shares available to be issued under the 2022 Plan.

of March 31, 2024, there was an unrecognized expense of approximately $ 98,000

remaining on options currently vesting over time with an approximate weighted average of fifteen

months until these options are fully vested.

The vested options as of March 31, 2024, had no

intrinsic value.

warrants issued and outstanding as of March 31, 2024 and December 31, 2023, were 902,113 .

were no share base compensation awards issued under the 2022 Plan during the three and six months ended June 30, 2024 and 2023.

were 4,000 and 5,250 shares forfeited during the three and six months ended June 30, 2024, respectively.

There were no shares forfeited

during the three and six months ended June 30, 2023.

As of June 30, 2024, there were 204,053 shares available to be issued under the

of June 30, 2024, there was an unrecognized expense of approximately $ 69,000

remaining on options currently vesting over time with an approximate weighted average of twelve

months remaining until these options are fully vested.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

vested options as of June 30, 2024, had no intrinsic value.

warrants issued and outstanding as of June 30, 2024 and December 31, 2023, were 902,113 .

There were no changes in the warrants outstanding

during the period.

Singing Machine Company, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024 and 2023

of March 31, 2024, the Company’s warrants by expiration date were as follows:

of June 30, 2024, the Company’s warrants by expiration date were as follows:

OF WARRANTS EXPIRATION

Common Warrants

Number of Common Warrants

Exercise Price

1 unchanged sentence

September 15, 2026

9 - COMPUTATION OF (LOSS) EARNINGS PER SHARE

of basic and dilutive loss per share for the three months ended March 31, 2024 and 2023 are as follows:

9 - COMPUTATION OF LOSS PER SHARE

of basic and dilutive loss per share for the three and six months ended June 30, 2024 and 2023 are as follows:

OF BASIC AND DILUTIVE LOSS PER SHARE

For the three months

ended March 31, 2024

For the three months

ended March 31, 2023

Weighted-average common and dilutive shares outstanding

Basic and diluted net loss per share

For the three months ended

June 30, 2024

For the three months ended

June 30, 2023

For the six months ended

June 30, 2024

For the six months ended

June 30, 2023

$ ( 6,119,000 )

$ ( 2,460,000 )

$ ( 8,486,000 )

$ ( 5,445,000 )

Weighted-average common shares outstanding

Basic loss per share

net loss per share is based on the weighted average number of shares of common stock outstanding during the period.

3 unchanged sentences

using the treasury stock method.

the three months ended March 31, 2024 and 2023, options to purchase 90,844 and 53,675 shares of common stock, respectively and options

to purchase 902,113 common stock warrants for both March 31, 2024 and 2023 were excluded in the calculation of diluted net loss per share

as the result would have been anti-dilutive.

the three and six months ended June 30, 2024 and 2023, options to purchase 108,511 and 108,343 shares of common stock, respectively and

options to purchase 902,113 common stock warrants for both June 30, 2024 and 2023 were excluded in the calculation of diluted net loss

per share as the result would have been anti-dilutive.

10 - INCOME TAXES

Company’s income tax provision for the three months ended March 31, 2024, was approximately $ 52,000 due to income taxes due on

amended federal tax returns filed for 2020 and 2021 which took into account the one-time refunds received from the Employee Retention

Credit program.

The Company’s income tax provision for the three months ended March 31, 2023, was approximately $ 1,502,000 as the

Company recognized a valuation reserve of all of its deferred tax assets based on the recent history of losses and forecasts that suggested

the Company would not be able to utilize the deferred tax assets in the future.

the three months ended June 30, 2024 and 2023 the Company recognized an income tax benefit of approximately $ 52,000

and $ 0 , respectively.

The Company is not forecasting any taxable income for the current year and had a loss before income tax benefit in the

previous year.

The Company’s income tax provision for the six months ended June 30, 2023, was approximately $ 1,502,000

as the Company recognized a valuation reserve of all of its deferred tax assets based on the recent history of losses and forecasts

that suggested the Company would not be able to utilize the deferred tax assets in the future.

Company’s income tax expense differs from the expected tax benefit/expense based on statutory rates primarily due to full valuation

allowance for all of its subsidiaries for the three months ended March 31, 2024 and 2023.

allowance for all of its subsidiaries for the three and six months ended June 30, 2024 and 2023.

Singing Machine Company, Inc.

6 unchanged sentences

OF REVENUE BY PRODUCT LINE

March 31, 2024

March,31, 2023

Three Months Ended

March 31, 2024

March,31, 2023

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Classic Karaoke Machines

2 unchanged sentences

Microphones and Accessories

Streaming Karaoke Machines

Music and other income

Total Net Sales

sales for both of the three months ended March 31, 2024 and 2023 of $ 2,426,000 and $ 3,383,000 , respectively, were made to North American

by geographic region for the periods presented are as follows:

OF SALES BY GEOGRAPHICAL REGION

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

North America

Total Net Sales

Company selectively participates in a retailer’s co-op promotion incentives by providing marketing fund allowances to its customers.

2 unchanged sentences

as a reduction to net sales.

For the three months ended March 31, 2024 and 2023, co-op promotion incentives were approximately $ 109,000

For the three months ended June 30, 2024 and 2023, co-op promotion incentives were approximately $ 240,000

and $ 91,000 , respectively.

For the six months ended June 30, 2024 and 2023, co-op promotion incentives were approximately $ 349,000 and

$ 264,000 , respectively.

Company estimates variable consideration under its return allowance programs for goods returned from the customer whereby a revenue return

1 unchanged sentence

The Company’s reserve

for sales returns as of March 31, 2024 and December 31, 2023, was approximately $ 2,419,000 and $ 3,390,000 , respectively.

for sales returns as of June 30, 2024 and December 31, 2023, was approximately $ 2,174,000 and $ 3,390,000 , respectively.

In conjunction

with the recording of the revenue sales return reserve, the Company estimates the cost of products that are expected to be returned under

its return allowance program whereby the estimated cost of product returns is recorded as an asset and is included in inventory on the

condensed consolidated balance sheets.

The Company’s estimated cost of returns as of March 31, 2024 and December 31, 2023, was

approximately $ 1,262,000 and $ 1,919,000 , respectively.

its return allowance program whereby the estimated cost of product returns is recorded as an asset.

The asset is separately stated as

returns asset on the condensed consolidated balance sheets.

The Company’s estimated cost of returns as of June 30, 2024 and December

31, 2023, was approximately $ 619,000 and $ 1,919,000 , respectively.

return program for defective goods is negotiated with each of the Company’s wholesale customers on a year-to-year basis.

6 unchanged sentences

for defective goods is included in the reserve for sales returns on the condensed consolidated balance sheets.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

12 - CONCENTRATIONS OF CREDIT RISK AND REVENUE

3 unchanged sentences

with several large customers.

At March 31, 2024, 69 % of accounts receivable were due from three customers in North America that individually

At June 30, 2024, 79 % of accounts receivable were due from three customers in North America that individually

owed over 10% of total accounts receivable.

1 unchanged sentence

that individually owed over 10% of total accounts receivable.

derived from our top three customers for the three months ended March 31, 2024, and 2023, were 84 %

of total revenue, respectively.

Revenues from customers representing greater than 10% of total net sales derived from our top

two customers as a percentage of net sales for the three months ended March 31, 2024, were 60 %

The loss of any of these customers could have an adverse impact on the Company.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

from customers representing greater than 10% of total net sales derived from our top three customers as a percentage of net sales were

39 %, 14 % and 13 % for the three months ended June 30, 2024.

Revenues from customers representing greater than 10% of total net sales derived

from one customer as a percentage of net sales was 87 % for the three months ended June 30, 2023.

Revenues from customers representing

greater than 10% of total net sales derived from our top three customers as a percentage of net sales were 50 %, 11 % and 10 % for the six

months ended June 30, 2024.

Revenues from customers representing greater than 10% of total net sales were derived from two customers

as a percentage of net sales were 86 % for the three months ended June 30, 2023.

Revenues from customers representing greater than 10%

of total net sales were derived from one customer as a percentage of net sales were 86 % for the six months ended June 30, 2023.The loss

of any of these customers could have an adverse impact on the Company.

13 – RELATED PARTY TRANSACTIONS

3 unchanged sentences

agreement with Stingray.

For the three months ended March 31, 2024, and 2023, amounts earned from the subscription agreement were

For the three months ended June 30, 2024, and 2023, the amounts earned from the subscription agreement were

approximately $ 109,000 and $ 176,000 , respectively.

This amount was included as a component of net sales in the accompanying condensed

consolidated statements of operations.

On March 31, 2024 and December 31 2023, the Company had approximately $ 133,000 and $ 269,000 , respectively,

due from Stingray for music subscription reimbursement.

For the six months ended June 30, 2024, and 2023, the amounts earned from the subscription

agreement were approximately $ 349,000 and $ 394,000 , respectively.

These amounts were included as a component of net sales in the accompanying

condensed consolidated statements of operations.

On June 30, 2024, the Company had approximately $ 1,000 due to Stingray.

31, 2023, the Company had approximately $ 269,000 due from Stingray for music subscription reimbursement.

the three and six months ended June 30, 2024, the Company advanced $ 415,000 to SemiCab for working capital.

As of June 30, 2024, the

company had approximately $ 415,000 due from SemiCab.

(See Note 2).

14 – ASSET ACQUISITION

June 11, 2024, the Company and its wholly owned subsidiary SemiCab,LLC, SemiCab, Inc., Ajesh Kapoor and Vivek Sehgal entered into the

Asset Purchase Agreement pursuant to which the Seller agreed to sell and assign to the Company, and the Company agreed to purchase and

assume from the Seller, substantially all the assets, and certain specified liabilities relating to the business of the Seller.

July 3, 2024, the parties completed the Asset Purchase Agreement whereby the Company issued to the Seller (i) 641,806 shares of the Company’s

common stock with a value of approximately $ 738,000 (ii) a twenty percent ( 20 %) membership interest in SemiCab LLC.

(See Note 2).

to the asset acquisition agreement, the Company and Seller entered into an option agreement (the “Option Agreement”), granting

the Buyer the right to acquire all of the issued and outstanding capital securities of SMCB Solutions Private Limited, a wholly owned

subsidiary of the Seller, in consideration for 320,903 shares of common stock of the Company.

connection with the asset acquisition agreement, effective July 3, 2024, SemiCab, LLC entered into employment agreements (the “Agreements”)

with Ajesh Kapoor and Vivek Sehgal Kapoor’s agreement spans three years with an annual base salary of $ 140,000 for 2024, $ 240,000

for 2025, and $ 300,000 for subsequent years, and Sehgal’s agreement also spans three years with an annual base salary of $ 105,000

for 2024, $ 210,000 for 2025, $ 240,000 for 2026, $ 270,000 for 2027, and $ 300,000 for 2028.

Both executives’ salaries are subject

to annual review by the Board.

They are eligible for annual performance-based bonuses contingent on specific goals set by the Board and

will participate in the 2022 Equity Incentive Plan, receiving annual equity issuances and cash-based incentives tied to revenue milestones.

Both are entitled to standard employee benefits, including health insurance and retirement plans.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

Forma Information

unaudited pro forma financial information below presents the effects of the Asset Purchase Agreement as though it had been completed

on January 1, 2023.

The pro forma adjustments are derived from the historically reported transactions of the respective companies.

pro forma results do not include anticipated combined effects or other expected benefits of the acquisition.

The pro forma results for

the six months ended June 30, 2024, and 2023 reflect the combined performance of the Company and the SemiCab business for that period.

The unaudited pro forma information is based on available data and certain assumptions that the Company believes are reasonable given

the circumstances.

However, actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial

This selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only and

is not intended to represent what the actual consolidated results of operations would have been had the Asset Purchase Agreement occurred

on January 1, 2023, nor does it attempt to forecast future consolidated results of operations.

OF PRO FORMA FINANCIAL INFORMATION

June 30, 2024

June 30, 2023

Six Months Ended

June 30, 2024

June 30, 2023

Operating loss from continuing operations

( 9,350,000 )

( 6,142,000 )

( 9,690,000 )

( 7,085,000 )

pro forma results for the six months ended June 30, 2023, include a net increase in operating expenses of $ 265,000 ,

consisting of legal and accounting expenses of approximately $ 215,000 associated

with the acquisition of SemiCab and $ 50,000 in

shares of SMC common stock issued to Vivek Sehgal as sign-on bonus.

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-Q

Item 1. Financial Statements