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LIQUIDITY | 3 Months Ended
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Jun. 30, 2023
Liquidity |
LIQUIDITY | NOTE 3 – LIQUIDITY The Company reported a net loss of approximately $2,460,000 and used cash in operating activities of approximately $2,548,000 for the three months ended June 30, 2023. We currently have a three-year revolving Credit Facility with Fifth Third Bank for a $15.0 million facility (decreasing to $7.5 million in our off-peak season) on eligible accounts receivable and inventory which terminates on October 14, 2025. As of the date of the filing of this report, there was approximately $1.9 million available to borrow on the revolving Credit Facility based on eligible collateral. As of March 31, 2023, we were in default under the Credit Agreement due to non-compliance with the fixed charge coverage ratio covenant of 1:05 : 1.0. On May 19, 2023, we executed a Waiver and First Amendment agreement which provides for a waiver of previous defaults and agreed to new financial covenants. We 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 June and September. We must also maintain pre-defined minimum operating cash flows between February and August 2023, until we achieve a fixed charge ratio of 1.15 : 1.0 beginning in September 2023 and throughout the remaining term of the Credit Agreement. As of the date of this report, we are in compliance with the amended covenants and there is an outstanding balance on the Credit Facility of approximately $1.4 million. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2023 and 2022 (Unaudited) The Company believes that our cash on hand, 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 7 –FINANCING) will be adequate to meet the Company’s liquidity requirements for at least twelve months from the date of this report. While the Company is optimistic that it will be successful in these efforts to achieve our plan, there can be no assurance that we will be successful in doing so. As such, the Company has a continued support letter from its largest stockholder, Ault Alliance, through August 31, 2024.

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