SHAREHOLDERS’ EQUITY

12 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

SHAREHOLDERS’ EQUITY

NOTE 8 – SHAREHOLDERS’ EQUITY

EQUITY INCENTIVE PLAN

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 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 stockholders approved the 2022 Plan.

COMMON STOCK OPTIONS

During the years ended March 31, 2023 and 2022 the Company issued the following stock options:

Fiscal 2023:

During the fiscal year ended March 31, 2023, the Company issued 667, 4,000 and 1,334 stock options, respectively, under 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.

During the fiscal year ended March 31, 2023 the Company issued 33,334 and 3,667 stock options, respectively, from the 2022 Plan at an exercise price of $4.00 per share and $8.65 per share 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.

Fiscal 2022:

On August 23, 2021, the Company issued 1,334 Board approved 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 Board approved 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 Board approved 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.

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

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 fiscal year ended March 31, 2023: expected dividend yield of 0%, risk-free interest rate between 2.63% and 3.21%, respectively with volatility between 166.1% and 196.3% respectively with an expected term of three years.

● For the fiscal 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.

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

	Fiscal 2023							Fiscal 2022
	Number of Options			Weighted Average Exercise Price		Weighted Average Contractual Life		Number of Options			Weighted Average Exercise Price		Weighted Average Contractual Life
Stock Options:
Balance at beginning of year		56,343		$	9.90		4.1		56,010		$	9.60		5.4
Granted		107,752		$	6.83		-		3,667		$	7.80
Exercised		-		$	-		-		(2,667	)	$	5.40
Forfeited		(2,668	)	$	5.63		-		(667	)	$	3.60
Balance at end of year *		161,427		$	7.90		6.6		56,343		$	9.90		4.1
Options exercisable at end of year		53,675		$	9.90				52,667		$	9.90

The following table summarizes information about employee stock options outstanding at March 31, 2023:

Range of Exercise Price		Number Outstanding at March 31, 2023		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at March 31, 2023		Weighted Average Exercise Price
	$2.35. - $7.20		58,669		3.9	$	5.00		23,334	$	6.38
	$8.10 - $9.60		81,086		8.7	$	8.25		8,669	$	9.00
	$11.40 - 16.50		21,672		4.0	$	14.42		21,672	$	14.42
	*		161,427						53,675

* Total number of options outstanding as of March 31, 2023 includes 23,343 options issued to six current and three former directors as compensation, 73,334 options issued to Company officers as compensation and 64,750 options issued to employees as part of an Employee Stock Incentive Plan.

As of March 31, 2023, there was unrecognized expense of approximately $380,000 remaining on options currently vesting over time with approximately 25 months remaining until these options are fully vested.

The vested options as of March 31, 2023 had no intrinsic value. As of March 31, 2023, there were 125,581 shares under the 2022 Plan available to be issued.

THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023 and 2022

WARRANTS

As per private placement and public offering as disclosed in Note 10 and Note 11, common warrants and pre-funded warrants issued and outstanding as of March 31, 2023 are as follows:

	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		-			-
Warrants exercised		(353,444	)	$	2.80		(561,113	)	$	0.30
Warrants outstanding at March 31, 2023		902,113		$	3.04		-			N/A
Warrants exercisable at March 31, 2023		902,113		$	3.04		-			N/A

As of March 31, 2023, the Company’s warrants by expiration date were as follows:

Number of CommonWarrants		Exercise Price		Expiration Date
	802,113	$	2.80	September 15, 2026
	100,000	$	5.00	May 23, 2027
	902,113

* 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, pro-rata distributions and fundamental transactions, as set forth in the warrants.

COMMON STOCK ISSUANCES

During the years ended March 31, 2023 and 2022 the Company issued the following common stock shares:

Fiscal 2023:

On June 28, 2022 the Company issued 2,468 shares of its common stock to four members of our Board of Directors at $8.11 per share, pursuant to our annual director compensation plan for the fiscal year ending March 31, 2023.

On August 19, 2022 the Company issued 10,000 shares of its common stock to investor relations firms at $9.37 per share pursuant to a vendor agreement for investor relation services performed.

On August 19, 2022 the Company issued 3,335 shares of its common stock to the Company’s officers at $9.37 per share to pursuant an incentive bonus compensation agreement relating to the Company’s Fiscal 2022 performance.

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.