SHAREHOLDERS’ EQUITY

12 Months Ended

Mar. 31, 2022

Share-Based Payment Arrangement [Abstract]

SHAREHOLDERS’ EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

COMMON STOCK ISSUANCES  

During the years ended March 31, 2022 and 2021 the Company issued the following common stock shares:

Fiscal 2022:

On May 17, 2021 the Company issued 667 shares of its common stock to a former member of the Board of Directors who exercised stock options at an average exercise price of $7.20 per share.

On August 20, 2021 the Company issued 575 shares of its common stock to our Board of Directors at $8.70 per share, pursuant to our annual director compensation plan for the fiscal year ending March 31, 2022.

On December 31, 2021 the Company issued 2,000 shares of its common stock to a member of the Board of Directors who exercised stock options at an average exercise price of $4.50 per share.

Fiscal 2021:

On October 30, 2020 the Company issued 14,667 shares of its common stock to three executive officers who exercised stock options at an average exercise price of $1.80 per share.

On November 6, 2020, the Company issued 1,437 shares of its common stock to our Board of Directors at $8.70 per share, pursuant to our annual director compensation plan for the fiscal year ending March 31, 2021.

STOCK OPTIONS

During the years ended March 31, 2022 and 2021 the Company issued the following stock options:

Fiscal 2022:

On August 23, 2021, the Company issued 1,334 stock options to two members of our Board of Directors at an exercise price of $8.70 per share pursuant to our annual director compensation plan for the fiscal year ended March 31, 2022.

On December 1, 2021, the Company issued 667 stock options to a new member of our Board of Directors at an exercise price of $8.10 per share pursuant to our annual director compensation plan for the fiscal year ended March 31, 2022.

On December 22, 2021 the Company issued 1,667 stock options to our Chief Revenue Officer at an exercise price of $8.10 per share pursuant to his compensation plan for the fiscal year ended March 31, 2021.

● For the year ended March 31, 2022: expected dividend yield of 0%, risk-free interest rate between 0.43% and 0.96%, respectively with volatility between 149.5% and 157.0% respectively with an expected term of three years.

Fiscal 2021:

On November 4, 2020, the Company issued 3,334 stock options to five members of our Board of Directors at an exercise price of $8.70 per share pursuant to our annual director compensation plan for the fiscal year ended March 31, 2021.

● For the year ended March 31, 2021: expected dividend yield of 0%, risk-free interest rate of .18%, volatility of 254.1% and expected term of three years.

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

A summary of stock option activity for each of the years presented is summarized below.

	Fiscal 2022					Fiscal 2021
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Stock Options:
Balance at beginning of year		56,000		$	9.60		74,333		$	7.80
Granted		3,667		$	7.80		3,333		$	8.70
Exercised		(2,667	)	$	5.40		(14,667	)	$	1.80
Forfeited		(667	)	$	3.60		(7,000	)	$	5.10
Balance at end of year *		56,333		$	9.90		56,000		$	9.60
Options exercisable at end of year		52,667		$	9.90		52,667		$	9.90

The following table summarizes information about employee stock options outstanding at March 31, 2022:

Range of Exercise Price		Number Outstanding at March 31, 2022		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2022		Weighted Average Exercise Price
$	3.60. - $11.40		38,000		3.7	$	7.50		34,333	$	7.20
$	14.10 - $16.50		18,333		4.9	$	15.00		18,333	$	15.00
	*		56,333						52,667

* Total number of options outstanding as of March 31, 2022 includes 20,000 options issued to three current and four former directors as compensation and 36,333 options issued to key employees as compensation.

As of March 31, 2022, there was unrecognized expense of approximately $12,000 remaining on options currently vesting over time with approximately six months remaining until these options are fully vested.

The vested options as of March 31, 2022 had no intrinsic value .

As per the execution of the August 2021 private placement as disclosed in Note 2 and Note 10, common warrants and pre-funded warrants issued and outstanding as of March 31, 2022 are as follows:

	Number of Shares
Warrants outstanding at March 31, 2021		-
Common warrants issued		1,155,556
Pre-funded warrants issued		561,111
Warrants outstanding at March 31, 2022		1,716,667

As of March 31, 2022, the Company’s warrants by expiration date were as follows:

Number of CommonWarrants	Number of Pre-funded Warrants		Exercise Price		Expiration Date
1,155,556	-	*	$	2.80	9/15/2026
-	561,111		$	0.30	N/A	*
1,155,556	561,111

* Effective with the opening of trading on the Nasdaq Stock Market on May 24, 2022, the exercise price of certain warrants issued by the Company pursuant to the terms of that certain Securities Purchase Agreement dated August 5, 2021, was adjusted so that the exercise price is $2.80. The warrants are not subject to further adjustment except for customary adjustments for stock dividends and splits, subsequent rights offerings, prorata distributions and fundamental transactions, as set forth in the warrants.

On April 12, 2022, the Board of Directors approved The Singing Machine Company, Inc. 2022 Equity Incentive Plan, or the 2022 Plan. The 2022 Plan provides for the issuance of equity incentive awards, such as stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance awards and other stock or cash-based awards collectively, the “Awards.” Awards may be granted under the 2022 Plan to the Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 and 2021

The maximum number of shares of common stock initially available for issuance under the 2022 Plan is 233,334 shares of common stock and thereafter an annual increase shall be added as of the first day of the Company’s fiscal year beginning in 2023, equal to the least of (i) 5% of the outstanding common stock on a fully diluted basis as of the end of the Company’s immediately preceding fiscal year, (ii) 33,334 shares, and (iii) a lesser amount as determined by the Board of Directors. The shares of common stock subject to stock awards granted under the 2022 Plan that lapse, terminate, expire prior to exercise, are canceled or are forfeited, shall again become available for issuance under the 2022 Plan. Shares

subject to a stock award under the 2022 Plan shall not again be made available for issuance or delivery under the 2022 Plan if such shares are (i) shares tendered by a participant or retained by the Company as full or partial payment to the Company for the exercise or purchase price of an award or (ii) shares used to satisfy tax withholding obligations in connection with an award.

Notwithstanding any other provision of the 2022 Plan to the contrary, unless the plan administrator determines otherwise with respect to a particular award, in the event of a change of control, if and to the extent an outstanding award is not converted, assumed, substituted for or replaced by the successor company, then such award will terminate upon effectiveness of the change of control. Prior to the change of control, the plan administrator may approve accelerated vesting and/or lapse of forfeiture or repurchase restrictions with respect to all or a portion of the unvested portions of such awards, any such determinations to be made by the plan administrator in its sole discretion. A change in control includes:

● certain acquisitions of beneficial ownership of more than 50% of our total voting power;

● a change in the composition of the board of directors during any two-year period such that the individuals who, as of the beginning of such two-year period, constitute the board of directors cease for any reason to constitute at least a majority of the board, as defined in the 2022 Plan; and

● the consummation of a company transaction, as defined in the 2022 Plan.

The Board of Directors may amend, suspend or terminate the 2022 Plan or a portion of it at any time; however, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the 2022 Plan. The 2022 Plan is scheduled to terminate automatically in ten (10) years following the earlier of (a) the date the Board of Directors adopted the 2022 Plan and (b) the date the shareholders approved the 2022 Plan.