EX-99.4 7 ex99-4.htm

 

Exhibit 99.4

 

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

 

Basis of Presentation and Principles of Consolidation

 

On June 11, 2024, The Singing Machine Company, Inc. (“SMC or “Company”) announced it had entered into an Asset Purchase Agreement to acquire all the assets and liabilities of SemiCab, Inc. (“SemiCab Transaction” or “Acquisition”). The SemiCab Transaction enabled SMC to acquire a leading AI-based logistics software & technology company, subject to a successful capital raise of $1,700,000 (“Capital Raise”) or more and other closing conditions described in the Company’s 8-K dated June 12, 2024.

 

The following unaudited pro forma combined condensed consolidated financial statements are based on the separate historical financial statements of SMC and SemiCab, Inc. (“SemiCab”) and give effect to the Acquisition and Capital Raise, including pro forma assumptions and adjustments related to the Acquisition, as described in the accompanying notes to the unaudited pro forma combined condensed financial statements.

 

The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2024, is presented as if the Acquisition and Capital Raise had occurred on March 31, 2024, including the full year results from SemiCab. The Unaudited Pro Forma Condensed Combined Statement of Operations for the nine month transition period beginning April 1, 2023 through December 31, 2023 gives effect to the Acquisition and Capital Raise, as if it had been completed on December 31, 2023, including the full year results from SemiCab. The historical financial information has been adjusted on a pro forma basis to reflect factually supportable items that are directly attributable to the Acquisition and Capital Raise, with respect to the Condensed Combined Statement of Operations only, expected to have a continuing impact on consolidated results of operations.

 

The Company allocates the purchase price of the Acquisition to the tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. Acquisition and Capital Raise related expenses and integration costs are expensed as incurred.

 

The Unaudited Pro Forma Condensed Combined Statement of Operations does not include the effects of the costs associated with any integration or restructuring activities resulting from the Acquisition, as they are nonrecurring in nature. However, the Unaudited Pro Forma Condensed Consolidated Balance Sheet includes a pro forma adjustment to reflect the accrual of certain anticipated Acquisition costs.

 

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

 

The pro forma adjustments reflecting the consummation of the acquisition are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed combined pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all the significant effects of the Acquisition based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Combined Company. The unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements and notes thereto of SMC and SemiCab.

 

1

 

 

The Singing Machine Company Inc.

PRO FORMA CONSOLIDATED BALANCE SHEETS

December 31, 2023

 

   The Singing Machine
Company Inc.		   SemiCab Inc.   Pro Forma Adjustments and Eliminations   Pro Forma Adjusted
The Singing Machine
Company Inc.		 
             Debit       Credit      
Assets                           
Current Assets                           
Cash  $6,703,000   $72,000   1,323,000   (4)      $8,098,000 
Accounts receivable   7,308,000    494,000                7,802,000 
Accounts receivable related parties   269,000    -                269,000 
Refund due from customer   -    143,000                143,000 
Inventory   6,871,000    -                6,871,000 
Returns asset   1,919,000    -                1,919,000 
Prepaid Expenses and other current assets   136,000    5,000                141,000 
Total Current Assets   23,206,000    714,000                25,243,000 
                            
Property and equipment, net of accumulated depreciation   404,000    3,000                407,000 
Operating leases - right of use assets   3,926,000    -                3,926,000 
Other non-current assets   179,000    14,000                193,000 
Goodwill   -    -   3,385,000   (1),(3)       3,385,000 
Total Assets  $27,715,000   $731,000               $33,154,000 
                            
Liabilities and Shareholders’ Equity                           
Current Liabilities                           
Accounts payable  $7,616,000   $668,000               $8,284,000 
Accrued expenses   2,614,000    149,000       (2)  220,000    2,983,000 
Refund due to customer   1,743,000    -                1,743,000 
Customer prepayments   687,000    -                687,000 
Reserve for sales returns   3,390,000    -                3,390,000 
Notes payable   -    833,000                833,000 
Current portion of loans from affiliates   -    315,000                315,000 
Due to factoring company   -    231,000                231,000 
Other current liabilities   75,000    320,000                395,000 
Current portion of operating lease liabilities   84,000    -                84,000 
Total Current Liabilities   16,209,000    2,516,000                18,945,000 
                            
Other liabilities, net of current portion   3,000                     278,000 
Loans from affiliates, net of current portion   -    385,000                385,000 
Operating lease liabilities, net of current portion   3,925,000    -                3,925,000 
Total Liabilities   20,137,000    2,901,000                23,258,000 
                            
Shareholders’ Equity                           
The Singing Machine Company, Inc. preferred stock $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding   -    -                - 
The Singing Machine Company, Inc. common stock $.01 par value; 100,000,000 shares authorized as of December 31, 2023   64,000    -       (1),(4)  27,000    91,000 
Additional paid-in-capital   33,429,000    -   51,000   (1),(4)  2,394,000    35,772,000 
Preferred equity SemiCab, Inc.   -    5,969,000   5,969,000   (1)       - 
Non-controlling interest    -    -       (3)  243,000    243,000 
Accumulated deficit   (25,915,000)   (8,139,000)  220,000   (1), (2), (5)   8,139,000    (26,135,000)
Total Shareholders’ Equity   7,578,000    (2,170,000)               9,971,000 
Total Liabilities and Shareholders’ Equity  $27,715,000   $731,000   10,948,000       10,948,000   $33,154,000 
                            
Share Count Reconciliation                           
The Singing Machine Company, Inc. preferred stock $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding   -    -   -       -    - 
Singing Machine Company, Inc. common stock, $0.01 par value, 100,000,000 shares authorized as of December 2023   6,418,061    -   -   (1),(4)   2,695,878    9,113,939 
SemiCab, Inc. preferred stock, $0.0001 par value, 12,000,000 authorized as of December 31, 2023   -    8,664,383   (8,664,383)  (1)   -    - 
SemiCab, Inc. common stock, $0.0001 par value, 88,000,000 authorized as of December 31, 2023   -    25,000,000   (25,000,000)  (1)   -    - 

 

Pro Forma Adjustments and Eliminations:
(1) Represents The Singing Machine Company Inc. (“SMC”) acquiring the net assets of SemiCab Inc (“SemiCab”) in exchange for 15% of 6,418,061 shares of SMC’s common stock issued and outstanding as of December 31, 2023. The purchase price of approximately $972,000 assumes 962,710 shares of SMC common stock issued to SemiCab at a price per share of $1.01 which was the market closing price of the SMC’s common stock on December 31, 2023.
   
(2) Represents legal and accounting expenses of approximately $220,000 associated with the acquisition of SemiCab Inc.
   
(3) Represents 20% non-controlling interest in acquired subsidiary post acquisition of SemiCab, Inc.
   
(4) Represents net proceeds of approximately $1,323,000 net of offering costs of $377,000 from a gross capital raise of $1,700,000, resulting in the issuance of 1,683,168 shares of SMC’s common stock based on the assumption of a sale pursuant to the closing conditions of the Asset Purchase Agreement.
   
(5) Represents stock compensation in the form of 50,000 shares at $1.01 per share of SMC common stock issued to Vivek Sehgal as sign-on bonus of approximately $51,000 upon closing of SemiCab acquisition.

 

2

 

 

The Singing Machine Company Inc.

PRO FORMA CONSOLIDATED BALANCE SHEETS

March 31, 2024

 

   The Singing Machine
Company Inc.		   SemiCab Inc.   Pro Forma Adjustments and Eliminations   Pro Forma Adjusted
The Singing Machine
Company Inc.		 
   (unaudited)   (unaudited)   Debit      Credit       
Assets                           
Current Assets                           
Cash  $4,125,000   $9,000   1,323,000   (4)      $ 5,457,000 
Accounts receivable   3,305,000    596,000                3,901,000 
Accounts receivable related parties   133,000    -                133,000 
Inventory   6,493,000    -                6,493,000 
Returns asset   1,262,000    -                1,262,000 
Prepaid Expenses and other current assets   214,000    17,000                231,000 
Total Current Assets   15,532,000    622,000                17,477,000 
                            
Property and equipment, net of accumulated depreciation   352,000    3,000                355,000 
Operating leases - right of use assets   3,841,000    -                3,841,000 
Other non-current assets   179,000    14,000                193,000 
Goodwill   -    -   3,802,000   (1),(3)        3,802,000 
Total Assets  $19,904,000   $639,000              $ 25,668,000 
                            
Liabilities and Shareholders’ Equity                           
Current Liabilities                           
Accounts payable  $3,947,000   $1,089,000       (2)  220,000   $ 5,256,000 
Accrued expenses   2,315,000    7,000                2,322,000 
Refund due to customer   1,443,000    -                1,443,000 
Customer prepayments   408,000    -                408,000 
Reserve for sales returns   2,419,000    -                2,419,000 
Notes payable   -    900,000                900,000 
Current portion of loans from affiliates   -    315,000                315,000 
Due to factoring company   -    301,000                301,000 
Other current liabilities   58,000    349,000                407,000 
Current portion of operating lease liabilities   55,000    -                55,000 
Total Current Liabilities   10,645,000    2,961,000                13,826,000 
                            
Loans from affiliates, net of current portion   -    385,000                385,000 
Operating lease liabilities, net of current portion   4,029,000    -                4,029,000 
Total Liabilities   14,674,000    3,346,000                18,240,000 
                            
Commitments and Contingencies                           
                            
Shareholders’ Equity                           
The Singing Machine Company Inc. preferred stock $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding   -    -                - 
The Singing Machine Company Inc. common Stock $.01 par value; 100,000,000 shares authorized; 9,298,901 issued and outstanding as of March 31, 2024   64,000    -       (1),(4),(5)  29,000     93,000 
Additional paid-in-capital   33,448,000    -   46,000   (1),(4),(5)  2,216,000     35,618,000 
Preferred equity - SemiCab, Inc.   -    5,969,000   5,969,000   (1)        - 
Non-controlling interest   -    -       (3)  219,000     219,000 
Accumulated deficit   (28,282,000)   (8,676,000)  220,000   (1),(2),(5)  8,676,000     (29,039,000)
Total Shareholders’ Equity   5,230,000    (2,707,000)               6,891,000 
Total Liabilities and Shareholders’ Equity  $19,904,000   $639,000   11,360,000      11,360,000   $ 25,668,000 
                            
Share Count Reconciliation                           
The Singing Machine Company, Inc. preferred stock $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding   -    -   -      -     - 
Singing Machine Company, Inc. common stock, $0.01 par value, 100,000,000 shares authorized as of December 2023   6,418,061    -   -   (1),(4)   2,880,842     9,298,903 
SemiCab, Inc. preferred stock, $0.0001 par value, 12,000,000 authorized as of December 31, 2023   -    8,664,383   (8,664,383)  (1)   -     - 
SemiCab, Inc. common stock, $0.0001 par value, 88,000,000 authorized as of December 31, 2023   -    25,000,000   (25,000,000)  (1)  -     - 

 

Pro Forma Adjustments and Eliminations:
(1) Represents The Singing Machine Company Inc. (“SMC”) acquiring the net assets of SemiCab Inc (“SemiCab”) in exchange for 15% of 6,418,061 shares of SMC’s common stock issued and outstanding as of March 31, 2024. The purchase price of approximately $876,000 assumes 962,710 shares of SMC common stock issued to SemiCab at a price per share of $0.91 which was the market closing price of SMC’s common stock on March 31, 2024.
   
(2) Represents legal and accounting expenses of approximately $220,000 associated with the acquisition of SemiCab Inc.
   
(3) Represents 20% non-controlling interest in acquired subsidiary post acquisition of SemiCab, Inc.
   
(4) Represents net proceeds of approximately $1,323,000 net of offering costs of $377,000 from a gross capital raise of $1,700,000, resulting in an issuance of 1,868,132 shares of SMC’s common stock based on the assumption of a sale pursuant to the closing conditions of the Asset Purchase Agreement.
   
(5) Represents stock compensation in the form of 50,000 shares at $.91 per share of SMC common stock issued to Vivek Sehgal as sign-on bonus of approximately $46,000 upon closing of SemiCab acquisition.

 

3

 

 

The Singing Machine Company Inc.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Transition Period Ended December 31, 2023

 

  

The Singing Machine

Company Inc.

   SemiCab Inc.   Pro Forma Adjustments and Eliminations  

Pro Forma Adjusted The Singing Machine

Company Inc.

 
           Debit     Credit     
                       
Net Revenue  $29,198,000   $6,036,000              $35,234,000 
                         - 
Cost of Revenue   23,008,000    5,853,000               28,861,000 
                           
Gross Profit   6,190,000    183,000               6,373,000 
                           
Operating Expenses                          
Selling general and administrative expenses   12,333,000    1,333,000   271,000  (2),(5)        13,937,000 
Product development   -    852,000               852,000 
Total Operating Expenses   12,333,000    2,185,000               14,789,000 
                           
Loss from Operations   (6,143,000)   (2,002,000)              (8,416,000)
                           
Other Income (Expenses), net                          
Gain on disposal of fixed assets   44,000    -               44,000 
Interest expense   (299,000)   (145,000)              (444,000)
Total Income (Expenses), net   (255,000)   (145,000)              (400,000)
                           
Loss Before Income Tax Benefit Provision   (6,398,000)   (2,147,000)              (8,816,000)
                           
Income Tax Provision   -    -               - 
                           
Net Loss  $(6,398,000)  $(2,147,000)             $(8,816,000)
                           
Net Loss per Common Share -                          
Basic and Diluted   (1.32)                  $(0.97)
                           
Weighted average number of common shares outstanding -                          
Basic and Diluted   4,864,540                    9,113,938 

 

Pro Forma Adjustments and Eliminations:
(2) Represents legal and accounting expenses of approximately $220,000 associated with the acquisition of SemiCab Inc.
   
(5) Represents 50,000 shares at $1.01 per share of SMC common stock issued to Vivek Sehgal as sign-on bonus of approximately $51,000 upon closing of SemiCab acquisition.

 

4

 

 

The Singing Machine Company Inc.

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended March 31, 2024

 

       
    The Singing Machine
Company Inc.		     SemiCab Inc.     Pro Forma Adjustments and Eliminations     Pro Forma Adjusted
The Singing Machine
Company Inc.		  
                    Debit       Credit          
                                         
Net Revenue   $ 2,426,000     $ 1,004,000                   $ 3,430,000  
                                      -  
Cost of Revenue     1,924,000       906,000                        2,830,000  
                                         
Gross Profit     502,000       98,000                       600,000  
                                         
Operating Expenses                                        
Selling general and administrative expenses     2,789,000       280,000     266,000   (2),(5)             3,335,000  
Product development     -       237,000                       237,000  
Total Operating Expenses     2,789,000       517,000                       3,572,000  
                                         
Loss from Operations     (2,287,000 )     (419,000 )                     (2,972,000 )
                                         
Other Expenses                                        
Interest expense     (28,000 )     (118,000 )                     (146,000 )
Total Other Expenses     (28,000 )     (118,000 )                     (146,000 )
                                         
Loss Before Income Provision     (2,315,000 )     (537,000 )                     (3,118,000 )
                                         
Income Tax Provision     (52,000 )     -                       (52,000 )
                                         
Net Loss   $ (2,367,000 )   $ (537,000 )                   $ (3,170,000 )
                                         
Net Loss per Common Share -                                        
Basic and Diluted   $ (0.37 )                             $ (0.34 )
                                         
Weighted average number of common shares outstanding -                                        
Basic and Diluted     6,418,061                               9,298,903  

 

Pro Forma Adjustments and Eliminations:
 
(2) Represents legal and accounting expenses of approximately $220,000 associated with the acquisition of SemiCab Inc.
   
(5) Represents 50,000 shares at $.91 per share of SMC common stock issued to Vivek Sehgal as sign-on bonus of $46,000 upon closing of SemiCab acquisition.

 

5