8-K
Algorhythm Holdings, Inc. (RIME)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 2023
THE
SINGING MACHINE COMPANY, INC.
(Exact name of registrant as specified in charter)
| Delaware | 001-41405 | 95-3795478 |
|---|---|---|
| (State<br> or other jurisdiction<br><br> <br>of<br> incorporation) | (Commission<br><br> <br>File<br> Number) | (IRS<br> Employer<br><br> <br>Identification<br> No.) |
6301NW 5th Way, Suite 2900
FortLauderdale, FL 33309
(Address of principal executive offices) (Zip Code)
(954)596-1000
(Registrant’s telephone number, including area code)
NotApplicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written<br> communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting<br> material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement<br> communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common<br> stock, par value $0.01 per share | MICS | The<br> Nasdaq Stock Market LLC (The Nasdaq Capital Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth ☐
If an emerging growth company, indicate by check mart if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item1.01 Entry into a Material Definitive Agreement.
On May 19, 2023, The Singing Machine Company, Inc. (the “Company”) and its wholly-owned subsidiary, SMC Logistics, Inc. (“SMC”), entered into a Waiver and First Amendment (the “Revolving Loan Amendment) to that certain Credit and Security Agreement (the “Credit Agreement”) with Fifth Third Bank, National Association, (“Fifth Third”), dated as of October 14, 2022.
The Revolving Loan Amendment provides for, among other things, (i) a waiver of all known existing defaults under the Credit Agreement as of the date of the Revolving Loan Amendment, (ii) the modification of the fixed charge coverage ratio of 1.15 to 1.00 as of the calculation dates set forth in the Revolving Loan Amendment, (iii) provides for certain minimum Liquidity (defined as Excess Availability plus cash on hand) amounts as of the calculation dates as set forth in the Revolving Loan Amendment, and (iv) provides for certain minimum Operating Cash Flow (as defined in the Credit Agreement) amounts as of the calculation dates as set forth in the Revolving Loan Amendment.
In the event that the Company fails to comply with certain requirements as set forth in the Revolving Loan Amendment, the Company shall have the right to effect a “Cure Right” (as defined in the Revolving Loan Amendment) as set forth in the Revolving Loan Amendment.
In connection with the entry into the Revolving Loan Amendment, the Company agreed to pay to Fifth Third a waiver and amendment fee of $10,000 concurrently with the Company’s entry into the Revolving Loan Amendment.
The description of the Revolving Loan Amendment is qualified in its entirety by reference to the Revolving Loan Amendment, a copy of which is filed as Exhibit 10.1 to this Form 8-K and is incorporated in this Item 1.01 by reference.
Item9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 10.1 | Waiver and First Amendment to Credit and Security Agreement dated May 19, 2023. |
| 104 | Cover<br> Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 25, 2023
| THE SINGING MACHINE COMPANY, INC. | |
|---|---|
| By: | /s/ Gary Atkinson |
| Gary<br> Atkinson | |
| Chief<br> Executive Officer |
Exhibit 10.1
WAIVERAND FIRST AMENDMENT
TOCREDIT AND SECURITY AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) is made and entered into this 19th day of May, 2023 by and between Fifth Third Bank (“Lender”), THE SINGING MACHINE COMPANY, INC., a Delaware corporation (“SMCI”) and SMC LOGISTICS, INC., a California corporation (“Logistics”) (hereinafter SMCI and Logistics are sometimes collectively referred to as “Borrowers” or individually referred to as a “Borrower”).
Recitals:
Lender and Borrowers are parties to a certain Credit and Security Agreement made as of October 14, 2022, (as amended (as at any time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”)) pursuant to which Lender has made certain loans to Borrowers.
Borrowers have violated Section 12.02 of the Credit Agreement for the November 30, 2022, December 31, 2022, January 31, 2023 and February 28, 2023 test periods (the “Violations”). The Violations constitute Events of Default under Section 13.01(b) of the Credit Agreement (the “Existing Events of Default”).
Borrower have requested that Lender waive the Violations and the Events of Default and amend the Credit Agreement as set forth herein.
Lender has agreed to waive the Violations and the Events of Default and amend the Credit Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
**1. Definitions.**Each capitalized term used in this Amendment, unless otherwise defined herein, shall have the meaning ascribed to such term in the Credit Agreement.
2. Waiver. Lender hereby waives the Violations and the Existing Events of Default resulting therefrom.
3. Amendmentsto Credit Agreement. The Credit Agreement is hereby amended as follows:
(a) Section 12.02 of the Credit Agreement is amended in its entirety so that such Section now reads as follows:
12.02 FixedCharge Coverage.
Borrower shall not permit Fixed Charge Coverage to be less than 1.15 to 1.00 as of the following calculation dates for the following calculation periods:
| Calculation Date | Calculation Period |
|---|---|
| September<br> 30, 2023 | the<br> eight month period then ending |
| October<br> 31, 2023 | the<br> nine month period then ending |
| November<br> 30, 2023 | the<br> ten month period then ending |
| December<br> 31, 2023 | the<br> eleven month period then ending |
| January<br> 31, 2024 and the last day of each month thereafter | the<br> twelve month period then ending |
(b) Section 12 of the Credit Agreement is further amended by adding the following sections thereto:
12.03 Liquidity.
Borrower shall not permit Liquidity (defined as Excess Availability plus cash on hand) to be less than the following amounts as of the following calculation dates (with such amounts to be calculated upon the receipt of the applicable monthly financial statement delivered in accordance with Section 7.3(a) hereof):
| Calculation Date | Minimum Liquidity | |
|---|---|---|
| February 28, 2023 | $ | 2,500,000 |
| March 31, 2023 | $ | 2,500,000 |
| April 30, 2023 | $ | 2,500,000 |
| May 31, 2023 | $ | 2,500,000 |
| June 30, 2023 | $ | 2,500,000 |
| July 31, 2023 | $ | 2,500,000 |
| August 31, 2023 | $ | 4,000,000 |
| September 30, 2023 | $ | 4,000,000 |
| October 31, 2023 | $ | 4,000,000 |
| November 30, 2023 | $ | 4,000,000 |
| December 31, 2023 | $ | 4,000,000 |
| January 31, 2024 | $ | 4,000,000 |
| February 28, 2024 | $ | 4,000,000 |
| March 31, 2024 | $ | 4,000,000 |
| April 30, 2024 | $ | 2,500,000 |
| May 31, 2024 | $ | 2,500,000 |
| June 30, 2024 | $ | 2,500,000 |
| July 31, 2024 | $ | 2,500,000 |
| The last day of each month thereafter during any period thereafter from and including August 31 through and including March 31 | $ | 4,000,000 |
| The last day of each month thereafter during any period thereafter from and including April 30 through and including July 31 | $ | 2,500,000 |
The foregoing amounts shall be calculated at each of the month end periods specified above upon receipt of the applicable monthly financial statement required hereunder for such month.
12.04 OperatingCash Flow.
Borrower shall not permit Operating Cash Flow to be less than the following amounts as of the following calculation dates for the following calculation periods:
| Calculation Date | Calculation Period | Minimum Operating Cash Flow |
|---|---|---|
| February<br> 28, 2023 | one<br> month period then ending | negative<br> ($750,000) |
| March<br> 31, 2023 | two<br> month period then ending | waived |
| April<br> 30, 2023 | three<br> month period then ending | negative<br> ($2,550,000) |
| May<br> 31, 2023 | four<br> month period then ending | negative<br> ($3,050,000) |
| June<br> 30, 2023 | five<br> month period then ending | negative<br> ($3,550,000) |
| July<br> 31, 2023 | six<br> month period then ending | negative<br> ($3,300,000) |
| August<br> 31, 2023 | seven<br> month period then ending | negative<br> ($1,300,000) |
12.05 EquityCure.
(a) Notwithstanding anything to the contrary contained in this Section 12, in the event that Borrower fails to comply with the requirements of Sections 12.02, 12.03 and/or Section 12.04 as of the last day of any month (a “Subject Covenant Default”), Borrower shall have the right to effect a “cure” of the Subject Covenant Default(s) (the “Cure Right”), subject to the terms and conditions of this Section 12.05. Subject to this Section 12.05, Borrower may exercise the Cure Right at any time during the period commencing on the first day after the end of the month with respect to which the Subject Covenant Default(s) occurred and continuing up to and including the date that is 30 calendar days after the date on which the Compliance Certificate with respect to such month is due in accordance herewith (the “Cure Right Exercise Period”). The Cure Right may be effected only during the Cure Right Exercise Period by Borrower either (i) issuing Equity Interests that are not Disqualified Equity Interests or (ii) Indebtedness on terms and conditions satisfactory to Lender which is subordinated to the repayment of the obligations pursuant to a subordination agreement with terms and conditions satisfactory to Lender, and using the net proceeds of such issuance to (1) with respect to a subject covenant default under Sections 12.02 and/or 12.04, make a cash contribution to the capital of Borrower, which amount, for covenant compliance purposes, shall be treated as a dollar-for-dollar increase in EBITDA for the applicable month, in an amount sufficient to cause Borrower to be in compliance with the requirements of Sections 12.02 and/or 12.04 as of the last day of the applicable month on a pro forma basis or (2) with respect to a subject covenant default under Section 12.03, make a payment on the Revolving Loans, which amount, for covenant compliance purposes, shall be treated as a dollar-for-dollar increase in Excess Availability as of the last day of the applicable month, in an amount sufficient to cause Borrower to be in compliance with the requirements of Section 12.03 as of the last day of the applicable month on a pro forma basis (hereinafter, the amounts set forth in clauses (a) and (b) shall be referred to as the “Cure Amounts”). Upon Borrower’s receipt of the applicable Cure Amount and Lender’s receipt of a Compliance Certificate giving effect to such Cure Amount and evidencing that the Subject Covenant Default(s) have been “cured” on a pro forma basis as of the relevant month (the “Cure Date”), Borrower shall be deemed to have satisfied the requirements of Sections 12.02, 12.03 and/or Section 12.04, as the case may be, as of the end of the applicable month, with the same effect as though there had been no failure to comply therewith at such date, and the Subject Covenant Default(s) shall be deemed cured and no longer continuing; provided that the Cure Date shall in no event occur after the expiration of the Cure Right Exercise Period.
(b) Notwithstanding anything herein to the contrary, (i) the applicable Cure Amount may not exceed the amount required to cure the relevant Subject Covenant Default, (ii) the Cure Amount or Cure Amounts shall not exceed $500,000 in the aggregate in any 365 day period, (iii) the Cure Right may not be exercised more than two (2) times in any twelve consecutive months, (iv) during the term of this Agreement, the Cure Right shall not be exercised more than four (4) times, and (v) in no event may any Cure Right be exercised if such Cure Right would result in a Change of Control.
4. Waiverand Amendment Fee. Borrower shall pay Lender a waiver and amendment fee of $10,000 on the date hereof.
5. ConditionPrecedent to Effectiveness. This Amendment shall be effective upon (a) Lender’s receipt of one or more counterparts of this Amendment, duly executed and delivered by Borrower and Lender, (b) Lender’s receipt of the $10,000 waiver and amendment fee referenced in Section 4 above, and (c) Lender’s receipt of resolutions from each Borrower’s governing authority authorizing the transactions set forth herein and authorizing the execution and delivery of documents required hereunder.
6. Ratificationand Reaffirmation. Each Borrower hereby ratifies and reaffirms the Obligations, the Loan Documents and all of such Borrower’s covenants, duties, indebtedness and liabilities under the Loan Documents.
7. Acknowledgmentsand Stipulations. Each Borrower acknowledges and stipulates that the Credit Agreement and the other Loan Documents executed by such Borrower are legal, valid and binding obligations of such Borrower that are enforceable against such Borrower in accordance with the terms thereof; all of the Obligations are owing and payable without defense, offset or counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date hereof, the same is hereby waived by such Borrower); and the security interests and liens granted by such Borrower in favor of Lender are duly perfected, first priority security interests and liens.
8. Representationsand Warranties. Each Borrower represents and warrants to Lender, to induce Lender to enter into this Amendment, that after giving effect to this Amendment, no Event of Default exists on the date hereof; the execution, delivery and performance of this Amendment have been duly authorized by all requisite corporate action on the part of such Borrower and this Amendment has been duly executed and delivered by such Borrower; and all of the representations and warranties made by such Borrower in the Credit Agreement are true and correct on and as of the date hereof.
9. Referenceto Credit Agreement. Upon the effectiveness of this Amendment, (a) each reference in the Credit Agreement to “this Agreement,” “hereunder,” or words of like import shall mean and be a reference to the Credit Agreement, as amended by this Amendment and (b) each reference in any Loan Document to the Credit Agreement shall mean a reference to the Credit Agreement, as amended by this Amendment.
10. Breachof Amendment. This Amendment shall be part of the Credit Agreement and a breach of any representation, warranty or covenant herein shall constitute an Event of Default.
11. Expensesof Lender. Each Borrower agrees to pay, on demand, all costs and expenses incurred by Lender in connection with the preparation, negotiation and execution of this Amendment and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Lender’s legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby.
12. Effectiveness;Governing Law. This Amendment shall be effective upon acceptance hereof by Lender (notice of which acceptance is hereby waived), whereupon the same shall be governed by and construed in accordance with the internal laws of the State of Illinois.
13. Successorsand Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
14.No Novation, etc. Except as otherwise expressly provided in this Amendment, nothing herein shall be deemed to amend or modify any provision of the Credit Agreement or any of the other Loan Documents, each of which shall remain in full force and effect. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and the Credit Agreement as herein modified shall continue in full force and effect.
15. Counterparts;Electronic Signatures. This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any manually executed signature page to this Amendment delivered by a party hereto by facsimile or other electronic transmission shall be deemed to be an original signature hereto.
16. FurtherAssurances. Each Borrower agrees to take such further actions as Lender shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby.
17. SectionTitles. Section titles and references used in this Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto.
18. Waiverof Jury Trial. To the fullest extent permitted by applicable law, the parties hereto each hereby waives the right to trial by juryin any action, suit, counterclaim or proceeding arising out of or related to this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under seal and delivered by their respective duly authorized officers on the date first written above.
| BORROWER: | |
|---|---|
| THE SINGING MACHINE COMPANY, INC. | |
| By: | /s/ Lionel Marquis |
| Name: | Lionel<br> Marquis |
| Title: | CFO |
| SMC LOGISTICS, INC. | |
| By: | /s/ Lionel Marquis |
| Name: | Lionel<br> Marquis |
| Title: | CFO |
| LENDER: | |
| FIFTH THIRD BANK, NATIONAL ASSOCIATION | |
| By: | /s/ Susan M. Davis |
| Name: | Susan<br> M. Davis |
| Title: | Senior<br> Director |