STOCK OPTIONS AND WARRANTS

6 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE 9 - STOCK OPTIONS AND WARRANTS

EQUITY INCENTIVE PLAN

On April 12, 2022, our 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 maximum number of shares of common stock initially available for issuance under the 2022 Plan is 233,333 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) 333,334 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.

As of September 30, 2022 we had issued 137,426 common stock options and granted common stock of 15,803 under the 2022 Plan leaving 80,104 shares available for issue.

COMMON STOCK OPTIONS

During six months ended September 30, 2022 the Company issued 667, 4,000 and 1,334 stock options, respectively, from the 2022 Plan at an exercise price of $2.35, $8.11 and $7.40 per share, respectively to directors as compensation for their service.

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022 and 2021

(Unaudited)

During the six months ended September 30, 2022 the Company issued 33,334 and 3,667 stock options from the 2022 Plan at an exercise price of $4.00 per share and $8.65 per share, respectively, to the Company’s officers as incentive compensation for the successful up-listing of the Company’s common stock on the Nasdaq Capital Market and compensation related to their Fiscal 2022 annual incentive plan.

On June 28, 2022 and August 16, 2022 the Company issued 61,750 and 3,000 stock options respectively from the 2022 Plan to all employees (excluding Company officers) who had one year or more of service to the Company under an Employee Incentive Plan at an exercise price of $8.11 and $8.65 per share, respectively.

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions outlined below. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees. The following inputs were used to value each option grant:

● For the six months ended September 30, 2022: expected dividend yield of 0%, risk-free interest rate between 2.63% and 3.21%, respectively with volatility between 166.1% and 176.3% respectively with an expected term of three years.

A summary of stock option activity for the six months ended September 30, 2022 is summarized below:

	September 30, 2022
	Number of Options			Weighted Average Exercise Price
Stock Options:
Balance at beginning of period		56,343		$	9.90
Granted		107,752		$	6.83
Forfeited		(2,668	)	$	5.63
Balance at end of period		161,427		$	7.90
Options exercisable at end of period		51,341		$	10.19

The following table summarizes information about employee stock options outstanding at September 30, 2022:

Range of Exercise Price		Number Outstanding at September 30, 2022		Weighted Average Remaining Contractural Life		Weighted Average Exercise Price		Number Exercisable at September 30, 2022		Weighted Average Exercise Price
	$2.35 - $7.20		58,669		4.4	$	4.95		21,667	$	6.82
	$8.10 - $9.60		81,086		9.2	$	8.25		8,002	$	7.62
	$11.40 - $16.50		21,672		4.5	$	14.42		21,672	$	14.42
	*		161,427						51,341

* Total number of options outstanding as of September 30, 2022 includes 23,343 options issued to six current and three former directors as compensation, and 73,334 options issued to Company officers as compensation and 64,750 issued to employees as part of an Employee Stock Incentive Plan.

As of September 30, 2022, there was unrecognized expense of approximately $531,000 remaining on options currently vesting over time with an approximate average of twenty-eight months remaining until these options are fully vested.

The intrinsic value of vested options as of September 30, 2022 was approximately $1,000.

WARRANTS

In connection with the August 2021 Private Placement disclosed in Note 2 and Note 11, common warrants and pre-funded warrants issued and outstanding as of September 30, 2022 are as follows:

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022 and 2021

(Unaudited)

	September 30, 2022
	Number of Common Warrants			Weighted Average Exercise Price		Number of Pre-Funded Warrants			Weighted Average Exercise Price
Warrants:
Warrants outstanding at April 1, 2022		1,155,557		$	2.80		561,113		$	0.30
Warrants issued		100,000		$	5.00		-			N/A
Warrants exercised		(309,001	)	$	2.80		(561,113	)	$	0.30
Warrants outstanding at September 30, 2022		946,556		$	3.03		-			N/A
Warrants exercisable at September 30, 2022		846,556		$	2.80		-			N/A

As of September 30, 2022, the Company’s outstanding warrants by expiration date were as follows:

Number of Common Warrants	Exercise Price		Expiration Date
846,556	$	2.80		September 15, 2026
100,000	$	5.00		May 23, 2027
946,556