INCOME TAXES

12 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 10 - INCOME TAXES

The Company files separate tax returns in the United States and in Macau. The Macau Subsidiary has received approval from the Macau government to operate its business as a Macau Offshore Company (MOC), and is exempt from the Macau income tax. For the fiscal years ended March 31, 2012, 2011 and 2010, the Macau Subsidiary recorded no tax provision. The Company has now exhausted its ability to carry back any further losses and therefore will only be able to recognize tax benefits to the extent that it has future taxable income.

Due to the change of control of the Company, the net operating loss carry over is subject to the IRS Section 382 limitation. As of March 31, 2012, 2011 and 2010, The Singing Machine had net deferred tax assets of approximately $3.9 million, $3.5 million, and $4.1 million, respectively, against which the Company recorded valuation allowances totaling approximately $3.9 million, $3.5 million, and $4.1 million, respectively.

The income tax expense (benefit) for federal, foreign, and state income taxes in the consolidated statement of operations consisted of the following components for 2012, 2011, and 2010:

	2012			2011			2010
Current:
U.S. Federal	$	(146,918	)	$	(391,685	)	$	(999,213	)
State		26,299			(34,793	)		(96,851	)
Deferred		120,619			426,478			1,096,064
	$	-		$	-		$	-

The United States and foreign components of income (loss) before income taxes are as follows:

	2012			2011			2010
United States		(432,111	)		(1,152,015	)	$	(2,938,861	)
Foreign		895,227			532,467			(111,226	)
	$	463,116		$	(619,548	)	$	(3,050,087	)

The actual tax expense differs from the "expected" tax expense for the years ended March 31, 2012, 2011, and 2010 (computed by applying the U.S. Federal Corporate tax rate of 34 percent to income before taxes) as follows:

	2012			2011			2010
Expected tax expense (benefit)		157,459			(210,646	)		(1,037,030	)
State income taxes, net of Federal income tax benefit		26,299			(34,794	)		(96,852	)
Permanent differences		5,247			4,347			3,430
Change in valuation allowance		385,220			(632,559	)		983,094
Tax rate differential on foreign earnings		(304,377	)		(181,039	)		37,817
Other		(651,366	)		1,054,692			109,541
Actual tax (benefit) expense		-			-			-

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	2012			2011			2010
Deferred tax assets:
Federal net operating loss carryforward	$	2,579,924		$	2,141,339		$	2,822,902
State net operating loss carryforward		431,306			852,549			606,284
Hong Kong net operating loss carryforward
AMT credit carryforward		70,090			70,090			70,090
Inventory differences		438,773			24,572			263,103
Allowance for doubtful accounts		57,308			59,773			63,038
Reserve for sales returns		74,718			48,967			42,061
Charitable contributions		60,700			60,700			60,700
Accrued Vacation		9,551			8,550			12,385
Depreciation and amortization		135,660			198,606			149,478
Amortization of reorganization intangible		7,664			15,329			22,993
Total deferred tax assets		3,865,695			3,480,475			4,113,034
Deferred tax liability:
Depreciation
Total deferred tax liability
Net deferred tax assets before valuation allowance		3,865,695			3,480,475			4,113,034
Valuation allowance		(3,865,695	)		(3,480,475	)		(4,113,034	)
Net deferred tax assets	$	-		$	-		$	-

At March 31, 2012, the Company has federal tax net operating loss carry forwards in the amount of approximately $7.6 million, which expire beginning in the year 2013. In addition, state tax net operating loss carry forwards in the amount of approximately $12.0 million which expire beginning in 2013. The Company is no longer subject to income tax examinations for fiscal years before 2009.