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LIQUIDITY | 12 Months Ended
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Mar. 31, 2023
Liquidity |
LIQUIDITY | NOTE 2 – LIQUIDITY The Company reported a net loss of approximately $4.6 million and used cash in operating activities of approximately $0.3 million for the fiscal year ended March 31, 2023. On October 14, 2022 the Company entered into the Credit Facility with Fifth Third Bank, as Lender replacing the existing credit facilities with Crestmark Bank (“Crestmark”) and Iron Horse Credit (“IHC”) that were terminated by the Company on October 13, 2022. The Credit Facility provides for a three-year secured revolving credit facility in an aggregate principal amount of up to $15,000,000 decreased to $7,500,000 during the period of January 1 through July 31 of each year. The Credit Facility matures on October 14, 2025. As of March 31, 2023 the Company was in default under the Credit Facility due to non-compliance with the fixed charge coverage ratio covenant of 1:05 : 1.0. On May 19, 2023 the Company executed a Waiver and First Amendment agreement which provides for a waiver of previous defaults and new covenants that are required. The Company must comply monthly with minimum liquidity (defined as excess loan availability plus cash on hand) of $2.5 million between February and July and $4.0 million between September and June. The Company must also maintain pre-defined minimum operating cash flows between February and August, 2023 until the Company achieves a fixed charge ratio of 1.15 : 1.0 beginning in September 2023 and throughout the remaining term of the agreement. As of this filing, the Company is in compliance with the amended covenants. On February 15, 2023 the Company launched an At-The-Market (“ATM”) offering pursuant to the Sales Agreement with Aegis Captial Corp. During the fiscal year ended March 31, 2023, the Company received total net proceeds from the ATM of approximately $36,000 on sales of 14,230 shares of common stock at an average price of $2.56 per share. After March 31, 2023, the Company received total net proceeds from the ATM of approximately $1.7 million on sales of 1,052,770 shares of common stock at an average price of $1.64 per share. The offering closed on May 12, 2023. The Company believes that our cash on hand, proceeds received from the ATM subsequent to March 31, 2023, working capital (net of cash), cash expected to be generated from our operating forecast, along with the availability of cash from our credit facilities (See Note 6 – BANK FINANCING) will be adequate to meet the Company’s liquidity requirements for at least twelve months from the filing of this report. As of the date of this filing, the Company has cash on hand of $1.6 million and availability under the Credit Facility of approximately $1.8 million. While the Company is optimistic that it will be successful in these efforts to achieve our plan, there can be no assurances that we will be successful in doing so. As such, the Company has a continued support letter from its parent company, Ault Alliance, through July 14, 2024. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2023 and 2022

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