Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer ~~[ ]~~☐ Accelerated filer ~~[ ]~~ ☐ Non-accelerated filer ~~[ ]~~ ☐ Smaller Reporting Company ~~[X]~~☒ Emerging growth company ~~[ ]~~☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

Indicated by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ~~[ ]~~☐ No ~~[ ]~~☐

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

							December 31, 2021			March 31, 2021
	December 31, 2020			March 31, 2020			(unaudited)
	(Unaudited)
Assets
Current Assets
Cash	$	823,373		$	345,200		$	7,375,305		$	396,579
Accounts receivable, net of allowances of $281,501 and $337,461 respectively		8,972,049			1,860,500
Due from banks		3,560,812			2,388,438
Accounts receivable related party - Winglight Pacific, Ltd		-			100,000
Insurance claim receivable		-			1,268,463
Accounts receivable, net of allowances of $306,975 and $138,580, respectively								12,254,098			2,210,881
Due from Crestmark Bank								-			4,557,120
Accounts receivable related party - Stingray Group, Inc.								159,125			88,041
Inventories, net		5,336,912			7,601,277			11,126,298			5,490,255
Prepaid expenses and other current assets		141,168			252,473			284,206			221,071
Deferred financing costs		33,791			3,333			17,188			15,359
Total Current Assets		18,868,105			13,819,684			31,216,220			12,979,306

Property and equipment, net		655,839			771,349			580,922			674,153
Deferred tax assets		413,335			1,285,721			638,391			887,164
Operating Leases - right of use assets		2,269,108			573,874			1,488,258			2,074,115
Other non-current assets		97,797			150,509			136,885			147,173
Total Assets	$	22,304,184		$	16,601,137		$	34,060,676		$	16,761,911

Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	3,961,840		$	5,041,610		$	5,982,552		$	2,461,103
Accrued expenses		2,108,900			1,529,168			2,417,409			1,659,499
Due to related party - Starlight Consumer Electronics Co., Ltd.		14,400			14,400			14,400			14,400
Due to related party - Starlight Electronics Co., Ltd		-			372,300
Due to related party - Starlight R&D, Ltd.		115,016			115,016			48,650			48,650
Revolving line of credit - Iron Horse Credit		64,915			-
Revolving lines of credit								8,626,840			64,915
Customer deposits								9,520			139,064
Refunds due to customers		101,731			806,475			90,075			145,408
Reserve for sales returns		2,966,434			1,224,000			2,922,457			960,000
Current portion of finance leases		6,336			14,953			7,421			2,546
Current portion of installment notes		66,917			63,098			72,760			68,332
Current portion of note payable - Paycheck Protection Program		296,649			-			-			172,685
Current portion of operating lease liabilities		779,905			321,389			860,528			794,938
Current portion of subordinated related party debt - Starlight Marketing Development, Ltd.		750,000			-
Subordinated related party debt - Starlight Marketing Development, Ltd.								352,659			502,659
Total Current Liabilities		11,233,043			9,502,409			21,405,271			7,034,199

Finance leases, net of current portion		-			2,550			12,592			-
Installment notes, net of current portion		230,572			283,193			157,812			212,949
Note payable - Payroll Protection Program, net of current portion		147,251			-			-			271,215
Operating lease liabilities, net of current portion		1,540,226			322,263			685,304			1,334,010
Subordinated related party debt - Starlight Marketing Development, Ltd.,		52,659			802,659
Total Liabilities		13,203,751			10,913,074			22,260,979			8,852,373

Commitments and Contingencies								-			-

Shareholders’ Equity

Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, Class A, $0.01 par value; 100,000 shares authorized; no shares issued and outstanding		-			-
Common stock, Class B, $0.01 par value; 100,000,000 shares authorized; 39,040,748 and 38,557,643 shares issued and outstanding, respectively		390,407			385,576
Preferred stock, $1.00 par value; 1,000,000 shares authorized; 0 shares issued and outstanding								-			-
Common stock, Class A, $0.01 par value; 100,000 shares authorized; 0 shares issued and outstanding								-			-
Common stock, Class B, $0.01 par value; 100,000,000 shares authorized;36,636,264 and 39,040,748 shares issued and outstanding, respectively								366,362			390,407
Common stock								366,362			390,407
Additional paid-in capital		19,768,217			19,729,043			24,542,633			19,773,322
Accumulated deficit		(11,058,191	)		(14,426,556	)		(13,109,298	)		(12,254,191	)
Total Shareholders’ Equity		9,100,433			5,688,063			11,799,697			7,909,538
Total Liabilities and Shareholders’ Equity	$	22,304,184		$	16,601,137		$	34,060,676		$	16,761,911

	For the Three Months Ended						For the Nine Months Ended
	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019			For the Three Months Ended						For the Nine Months Ended
				(restated)						(restated)			December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020

Net Sales	$	16,972,603		$	13,857,576		$	42,309,825		$	37,552,329		$	21,244,306		$	16,972,603		$	44,678,929		$	42,309,825

Cost of Goods Sold		11,998,640			11,486,520			30,550,406			29,747,376			15,934,842			11,998,640			34,464,291			30,550,406

Gross Profit		4,973,963			2,371,056			11,759,419			7,804,953			5,309,464			4,973,963			10,214,638			11,759,419

Operating Expenses
Selling expenses		1,490,560			1,740,777			3,264,364			3,692,070			1,406,175			1,490,560			2,717,642			3,264,364
General and administrative expenses		1,925,233			1,442,192			5,130,396			5,048,517			2,154,553			1,925,233			5,352,902			5,130,396
Depreciation		65,465			77,161			204,353			196,210			55,007			65,465			190,087			204,353
Total Operating Expenses		3,481,258			3,260,130			8,599,113			8,936,797			3,615,735			3,481,258			8,260,631			8,599,113

Income (Loss) from Operations		1,492,705			(889,074	)		3,160,306			(1,131,844	)
Income From Operations														1,693,729			1,492,705			1,954,007			3,160,306

Other Income (Expenses)
Gain from Paycheck Protection Plan loan forgiveness														-			-			448,242			-
Gain - related party														-			187,988			11,236			187,988
Gain from damaged goods insurance claim		-			-			1,067,829			-			-			-			-			1,067,829
Gain from extinguishment of accounts payable		-			-			390,000			-			-			-			236,472			390,000
Gain - related party		187,988			-			187,988			-
Interest expense		(231,034	)		(105,583	)		(388,355	)		(156,097	)		(155,573	)		(231,034	)		(365,966	)		(388,355	)
Finance costs		(18,432	)		(3,334	)		(43,268	)		(10,000	)		(9,375	)		(18,432	)		(35,672	)		(43,268	)
Total Other Income (Expenses), net		(61,478	)		(108,917	)		1,214,194			(166,097	)
Total Other (Expenses) Income, net														(164,948	)		(61,478	)		294,312			1,214,194

Income (Loss) Before Income Tax (Provision) Benefit		1,431,227			(997,991	)		4,374,500			(1,297,941	)
Income Before Income Tax Provision														1,528,781			1,431,227			2,248,319			4,374,500

Income Tax (Provision) Benefit		(263,932	)		240,042			(1,006,135	)		294,633
Income Tax Provision														(102,886	)		(263,932	)		(248,664	)		(1,006,135	)

Net Income (Loss)	$	1,167,295		$	(757,949	)	$	3,368,365		$	(1,003,308	)
Net Income													$	1,425,895		$	1,167,295		$	1,999,655		$	3,368,365

Net Income (Loss) per Common Share
Basic and Diluted	$	0.03		$	(0.02	)	$	0.09		$	(0.03	)
Net Income per Common Share
Basic													$	0.03		$	0.03		$	0.04		$	0.09
Diluted	$	0.03		$	(0.02	)	$	0.09		$	(0.03	)	$	0.03		$	0.03		$	0.04		$	0.09

Weighted Average Common and Common
Equivalent Shares:
Weighted Average Common and Common Equivalent Shares:
Basic		38,885,185			38,557,643			38,667,221			38,524,698			53,410,249			38,885,185			46,787,545			38,667,221
Diluted		39,156,481			38,557,643			39,041,074			38,524,698			53,635,368			39,156,481			47,109,854			39,041,074


	For the Nine Months Ended						For the Nine Months Ended
	December 31, 2020			December 31, 2019			December 31, 2021			December 31, 2020

Cash flows from operating activities
Net Income (loss)	$	3,368,365		$	(1,003,308	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net Income							$	1,999,655		$	3,368,365
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		204,353			196,210			190,087			204,353
Amortization of deferred financing costs		43,268			9,999			35,672			43,268
Change in inventory reserve		482,926			150,000			297,661			482,926
Change in allowance for bad debts		(55,960	)		133,024			168,395			(55,960	)
Loss from disposal of property and equipment								4,394			-
Stock based compensation		17,605			27,506			38,376			17,605
Change in net deferred tax assets								248,773			872,386
Gain from Paycheck Protection Plan loan forgiveness								(448,242	)		-
Gain - related party		(187,988	)		-			(11,236	)		(187,988	)
Change in net deferred tax assets		872,386			(294,633	)
Gain from extinguishment of accounts payable		390,000			-			(236,472	)		(390,000	)
Changes in operating assets and liabilities:
Accounts receivable		(7,055,589	)		(6,125,452	)		(10,123,571	)		(7,055,589	)
Due from banks		(1,172,374	)		(211,089	)		4,557,120			(1,172,374	)
Accounts receivable - related parties		100,000			(895,217	)		(159,125	)		100,000
Insurance receivable		1,268,463			(1,286,158	)		-			1,268,463
Inventories		1,781,439			(2,228,603	)		(5,933,704	)		1,781,439
Prepaid expenses and other current assets		111,305			134,598			(63,135	)		111,305
Other non-current assets		52,712			67,023			10,288			52,712
Accounts payable		(1,469,770	)		5,742,186			3,769,157			(689,770	)
Accrued expenses		579,732			1,780,393			762,252			579,732
Due to related parties		(184,312	)		399,672			-			(184,312	)
Customer deposits								(129,544	)		-
Refunds due to customers		(704,744	)		479,758			(55,333	)		(704,744	)
Reserve for sales returns		1,742,434			3,650,163			1,962,457			1,742,434
Operating lease liabilities, net of operating leases - right of use assets		(18,755	)		(41,797	)		2,741			(18,755	)
Net cash provided by operating activities		165,496			684,275
Net cash (used in) provided by operating activities								(3,113,334	)		165,496
Cash flows from investing activities
Purchase of property and equipment		(88,843	)		(517,546	)		(77,599	)		(88,843	)
Net cash used in investing activities		(88,843	)		(517,546	)		(77,599	)		(88,843	)
Cash flows from financing activities
Proceeds from Issuance of stock - net of transaction expenses								9,000,580			-
Payment of redemption and retirement of treasury stock								(7,162,452	)		-
Net proceeds from revolving lines of credit		64,915			-			8,561,925			64,915
Proceeds from note payable - Payroll Protection Program		443,900			-
Payment of bank term note		-			(125,000	)
Proceeds from note payable - Paycheck Protection Program								-			443,900
Payment of deferred financing charges		(73,726	)		-			(37,501	)		(73,726	)
Proceeds from installment notes		-			283,840
Payments on installment notes		(48,802	)		(7,304	)		(50,709	)		(48,802	)
Proceeds from subscription receivable		-			2,200
Proceeds from exercise of stock options		26,400			10,200			14,000			26,400
Payment on subordinated debt - related party		-		��	(12,708	)		(150,000	)		-
Payments on finance leases		(11,167	)		(10,757	)		(6,184	)		(11,167	)
Net cash provided by financing activities		401,520			140,471			10,169,659			401,520
Net change in cash		478,173			307,200			6,978,726			478,173

Cash at beginning of period		345,200			211,408
Cash at beginning of year								396,579			345,200
Cash at end of period	$	823,373		$	518,608		$	7,375,305		$	823,373

Supplemental disclosures of cash flow information:
Cash paid for interest	$	429,264		$	167,954		$	378,076		$	429,264
Operating leases - right of use assets initial adoption	$	-		$	1,108,330
Operating lease liabilities - initial adoption	$	-		$	1,234,368
Equipment purchased under capital lease							$	23,651		$	-
Issuance of common stock and warrants for stock issuance expenses							$	547,838		$	-
Operating leases - right of use assets and lease liabilities at inception of lease	$	2,184,105		$	-		$	16,364		$	2,184,105

	Preferred Stock				Common Stock				Additional Paid in		Subscriptions		Accumulated
	Shares		Amount		Shares		Amount		Capital		Receivable		Deficit			Total			Preferred Stock				Common Stock				Additional Paid		Accumulated
																			Shares		Amount		Shares		Amount		in Capital		Deficit			Total

Balance at September 30, 2021																				-	$	-		36,576,264	$	365,762	$	24,530,384	$	(14,535,193	)	$	10,360,953

Net income																														1,425,895			1,425,895
Issuance of stock
Issuance of stock, shares
Issuance of pre-funded warrants
Payment of stock issuance expenses
Issuance of stock for stock issuance expenses
Issuance of stock for stock issuance expenses, shares
Redemption and retirement of treasury shares
Redemption and retirement of treasury shares, shares
Issuance of common stock - directors
Issuance of common stock - directors, shares
Issuance of common stock - non-employee
Issuance of common stock - non-employee, shares
Employee compensation-stock option																								-		-		3,649		-			3,649
Issuance of common stock - directors																						-
Issuance of common stock - directors, shares
Exercise of stock options																								60,000		600		8,600		-			9,200

Balance at December 31, 2021																				-	$	-		36,636,264	$	366,362	$	24,542,633	$	(13,109,298	)	$	11,799,697

Balance at September 30, 2020		-	$	-		38,557,643	$	385,576	$	19,729,043	$	-	$	(12,225,486	)	$	7,889,133			-	$	-		38,557,643	$	385,576	$	19,729,043	$	(12,225,486	)	$	7,889,133

Net income														1,167,295			1,167,295													1,167,295			1,167,295
Employee compensation-stock option										5,105							5,105											5,105					5,105
Issuance of common stock - directors						43,105		431		12,069							12,500							43,105		431		12,069					12,500
Exercise of stock options						440,000		4,400		22,000							26,400					-		440,000		4,400		22,000					26,400

Balance at December 31, 2020		-	$	-		39,040,748	$	390,407	$	19,768,217	$	-	$	(11,058,191	)	$	9,100,433			-	$	-		39,040,748	$	390,407	$	19,768,217	$	(11,058,191	)	$	9,100,433

Balance at September 30, 2019		-	$	-		38,557,643	$	385,577	$	19,719,038	$	-	$	(11,814,915	)	$	8,289,700

Net loss														(757,949	)		(757,949	)
Employee compensation-stock option										5,002							5,002

Balance at December 31, 2019		-	$	-		38,557,643	$	385,577	$	19,724,040	$	-	$	(12,572,864	)	$	7,536,753

																				Preferred Stock				Common Stock						Additional Paid in			Accumulated
																				Shares		Amount		Shares			Amount			Capital			Deficit			Total

Balance at March 31, 2021																					-	$	-		39,040,748		$	390,407		$	19,773,322		$	(12,254,191	)	$	7,909,538

Net income																									-			-			-			1,999,655			1,999,655
Issuance of stock																									16,500,001			165,000			4,785,000			-			4,950,000
Issuance of pre-funded warrants																									-			-			4,881,667			-			4,881,667
Payment of stock issuance expenses																									-			-			(831,087	)		-			(831,087	)
Issuance of stock for stock issuance expenses																									571,428			5,714			(5,714	)		-			-
Redemption and retirement of treasury shares																									(19,623,155	)		(196,231	)		(4,111,459	)		(2,854,762	)		(7,162,452	)
Issuance of common stock - directors																									17,242			172			4,828			-			5,000
Issuance of common stock - non-employee																									50,000			500			16,500			-			17,000
Employee compensation-stock option																									-			-			16,376			-			16,376
Exercise of stock options																							-		80,000			800			13,200			-			14,000

Balance at December 31, 2021																					-	$	-		36,636,264		$	366,362		$	24,542,633		$	(13,109,298	)	$	11,799,697
	Preferred Stock				Common Stock				Additional Paid in		Subscriptions			Accumulated
	Shares		Amount		Shares		Amount		Capital		Receivable			Deficit			Total

Balance at March 31, 2020		-	$	-		38,557,643	$	385,576	$	19,729,043	$	-		$	(14,426,556	)	$	5,688,063			-	$	-		38,557,643		$	385,576		$	19,729,043		$	(14,426,556	)	$	5,688,063
Beginning balance																					-	$	-		38,557,643		$	385,576		$	19,729,043		$	(14,426,556	)	$	5,688,063

Net income															3,368,365			3,368,365							-			-			-			3,368,365			3,368,365
Employee compensation-stock option										5,105								5,105													5,105						5,105
Issuance of common stock - directors						43,105		431		12,069		-						12,500
Issuance of common stock directors																									43,105			431			12,069						12,500
Exercise of stock options						440,000		4,400		22,000								26,400					-		440,000			4,400			22,000						26,400

Balance at December 31, 2020		-	$	-		39,040,748	$	390,407	$	19,768,217	$	-		$	(11,058,191	)	$	9,100,433			-	$	-		39,040,748		$	390,407		$	19,768,217		$	(11,058,191	)	$	9,100,433

Balance at March 31, 2019		-	$	-		38,464,753	$	384,648	$	19,687,263	$	(2,200	)	$	(11,569,556	)		8,500,155

Net loss															(1,003,308	)		(1,003,308	)
Employee compensation-stock option										15,006								15,006
Collection of subscription receivable												2,200						2,200
Exercise of stock options						60,000		600		9,600								10,200
Issuance of common stock - directors						32,890		329		12,171								12,500

Balance at December 31, 2019		-	$	-		38,557,643	$	385,577	$	19,724,040	$	-		$	(12,572,864	)	$	7,536,753
Ending balance																					-	$	-		39,040,748		$	390,407		$	19,768,217		$	(11,058,191	)	$	9,100,433

See notes to the condensed consolidated financial ~~statements.~~statements

The Singing Machine Company, Inc., a Delaware corporation (the “Company”, “SMC”, “The Singing Machine”) and its three wholly-owned subsidiaries SMC (Comercial Offshore De Macau) Limitada (“Macau Subsidiary”), SMC Logistics, Inc. (“SMC-L”) and SMC-Music, Inc.(“SMC-M”) are primarily engaged in the development, marketing, and sale of consumer karaoke audio systems, accessories, musical instruments and musical recordings. The products are sold by SMC to retailers and distributors for resale to consumers.

NOTE 2 – ~~RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~LIQUIDITY AND RECENT EQUITY EVENTS

The Company ~~has determined that in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contract with Customers~~,~~” the Company incorrectly accounted~~ for the cost of its cooperative (“co-op”) promotion allowances (previously referred to as “cooperative advertising”) with its customers as selling expenses instead of a reduction in net sales for the three and nine months ended December 31, ~~2019, as these co-op promotion allowances are not a distinct good or service~~2021 reported net income of approximately $2,000,000 and used cash in operating activities of approximately $3,113,000. In May, 2020 the Company ~~cannot reasonably estimate~~received loan proceeds from Crestmark Bank in the ~~fair value~~amount of approximately $444,000 under the Paycheck Protection Program (“PPP”) established by the government to assist companies with financial relief due to COVID-19. The Company used the loan proceeds for loan forgiveness eligible purposes, including payroll, benefits, rent and utilities, and maintained its existing payroll levels during the forgiveness eligible period. In June 2021 the Company received notification from the SBA that the loan had been forgiven in its entirety. For the nine months ended December 31, 2021, a gain of approximately $448,000 (including principal and interest) from the forgiveness of the ~~benefit it receives from these arrangements.~~

~~The effects of this accounting error do not impact~~loan was included in other income and expenses in the ~~condensed consolidated balance sheets, statements of cash flows and statements of shareholders’ equity. The effects are confined to the~~accompanying condensed consolidated statements of ~~operations,~~income.

In August 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with its majority shareholders, Koncepts International Limited (“Koncepts”) and ~~these notes~~Treasure Green Holdings, Ltd. (“Treasure Green”), pursuant to ~~condensed consolidated financial statements.~~which the Company redeemed 19,623,155 shares of common stock of the Company (the “Redeemed Shares”). The ~~tables below~~closing of the transactions set forth in the ~~condensed consolidated statements~~Redemption Agreement took place on August 10, 2021, at which time the Redeemed Shares were assigned and transferred back to the Company and retired.

In August 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional investors and a strategic investor for private placement of ~~operations, including~~(i) 16,500,001 shares of its common stock (the “Shares”) together with common warrants to purchase up to 16,500,000 shares of common stock with an exercise price of $0.35 per share, and (ii) 16,833,333 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock at an exercise price of $0.01 per share, together with Common Warrants to purchase up to 16,833,333 shares of common stock at an exercise price of $0.35 per share (the “Private Placement”). Shares issuable upon the ~~balances~~exercise of the Pre-Funded Warrants and Common Warrants are hereinafter referred to as ~~originally reported, adjustments~~the “Warrant Shares”. The closing of the Private Placement took place on August 10, 2021, when the Shares, Common Warrants, and Pre-Funded Warrants were delivered to the purchasers and funds, in the amount of approximately $9,832,000, were received by the Company. Approximately $7,162,000 of the funds received were used to execute the Redemption Agreement and the ~~as restated balances~~Company paid approximately $7,162,000 to Koncepts and Treasure Green. The Redeemed Shares were retired and are available for ~~each~~reissuance in the future.

~~December 31, 2020~~Company’s liquidity requirements for at least twelve months from the filing of this report. As both the Crestmark Bank (“Crestmark Facility”) and ~~2019~~the Iron Horse Credit (“IHC”) Facility (“IHC Facility”) are set to expire on June 15, 2022, the Company expects to negotiate a revision or extension of these debt facilities upon their maturity, however, there can be no assurance that such revision or extension will occur or at what terms.

The condensed consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company accounts and transactions have been eliminated in the condensed consolidated financial statements. The accompanying unaudited financial statements for the three months and nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 have been prepared in accordance with accounting principles generally accepted ~~accounting principles~~in the United States of America (“US GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by ~~accounting principles generally accepted in the United States~~US GAAP for complete consolidated financial statements. In the opinion of management, such condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations.

The condensed consolidated results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated balance sheet information as of March 31, ~~2020~~2021 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form ~~10-K/A~~10-K for the year ended March 31, ~~2020.~~2021. The interim condensed consolidated financial statements should be read in conjunction with that report.

The Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Future events and their effects cannot be determined with absolute certainty; therefore, the determination of estimates requires the exercise of judgment. Historically, past changes to these estimates have not had a material impact on the Company’s financial condition. However, circumstances could change which may alter future expectations.

The Singing Machine’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers, current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient to respond to normal business conditions. Management sets 100% reserves for customers in bankruptcy and other reserves based upon historical collection experience. Should business conditions deteriorate or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have a negative impact on operations.

The Company is subject to chargebacks from customers for ~~cooperative promotional programs,~~co-op program incentives, defective returns, return freight and handling charges that are deducted from open invoices and reduce collectability of open invoices.

The functional currency of the Macau Subsidiary is the Hong Kong dollar. The financial statements of the subsidiary are translated to U.S. dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are recorded in the condensed consolidated statements of ~~operations~~income and translations are recorded in a separate component of shareholders’ equity. Any such amounts were not material during the periods presented.

At times, the Company maintains cash in United States bank accounts that are more than the Federal Deposit Insurance Corporation insured amounts. The Company also maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at December 31, ~~2020~~2021 and March 31, ~~2020~~2021 are approximately ~~$801,000~~$125,000 and ~~$217,000,~~$225,000, respectively.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable.

Inventories are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or net realizable value, as determined using the first in, first out method. Inventories also include an estimate for the net realizable value of expected future inventory returns due to warranty and ~~promotional~~allowance programs. As of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 the estimated amounts for these future inventory returns were approximately ~~$1,846,000~~$1,978,000 and ~~$1,367,000,~~$528,000, respectively. The Company reduces inventory on hand to its net realizable value on an item-by-item basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews the Company’s investment in inventories for such declines in value. As of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 the Company had inventory reserves of approximately ~~$917,000~~$934,000 and ~~$434,000~~$636,000, respectively for estimated excess and obsolete ~~inventory~~inventory.

The Company classifies deferred financing costs incurred when obtaining or renewing revolving credit facilities as assets in the accompanying condensed consolidated balance sheets as it is likely that during certain periods during non-peak season there will be no balance due on these credit facilities to offset the deferred financing costs. In June ~~2020,~~2021, the Company incurred approximately ~~$74,000~~$38,000 in deferred financing costs associated with the ~~closing~~one-year renewal of ~~the Crestmark Facility and~~ the IHC Facility which are being amortized over twelve months and were classified as current assets on the accompanying condensed consolidated balance sheets.

The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with ~~FASB ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” No impairment was recorded as of December 31, 2021 and 2020.

The Company follows FASB ASC 842, “Leases”. The ASC requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. (See Note 6–7– LEASES).

The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date. The liability is equal to the present value of the remaining minimum lease payments. The asset is based on the liability, subject to certain adjustments. Operating leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result in a front-loaded expense pattern (similar to capital leases under the prior accounting standard). As the interest rate implicit in the Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease payments. The Company utilizes the ~~implicit~~financing interest rate for its finance leases.

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated and straight-line methods.

We follow FASB ASC 825, “Financial Instruments”, which requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate that value. For purposes of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, due from related parties, accounts payable, accrued expenses, customer deposits, refunds due to customers, and due ~~to/from~~to related parties approximates fair value due to the relatively short period to maturity for these instruments. The carrying amounts on the ~~subordinated debt to Starlight Marketing Development, Ltd. (related party),~~notes payable, finance leases and installment notes approximate fair value either due to the relatively short period to maturity ~~and~~or the related interest is accrued at a rate similar to market rates. The carrying ~~amount~~amounts on the revolving ~~lines~~line of credit ~~approximate~~approximates fair value due the relatively short period to maturity and related interest accrued at market rates. The carrying amount on the Payroll Protection Program note payable approximates fair value due the relatively short period to maturity as management intends to apply for total forgiveness of the loan in the current fiscal year.

The Company recognizes revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers”. All revenue is generated from contracts with customers. The Company recognizes revenue when the goods are delivered and control of the goods sold is transferred to the customer, in an amount, referred to as the transaction price, that reflects the consideration to which the Company is expected to be entitled in exchange for those ~~goods at a point in time.~~goods. The Company determines revenue recognition utilizing the following five steps: (1) identification of the contract with a customer, (2) identification of the performance obligations in the contract (promised goods or services that are distinct), (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations, and (5) recognition of revenue when, or as, the Company transfers control of the product or service for each performance obligation.

The Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products). The Company’s contracts have no financing elements, payment terms are less than 120 days and have no further contract asset or liability obligations once control of goods is transferred to the customer. Revenue is recorded in the amount of consideration the Company expects to receive for the sale of these goods.

The Company selectively participates in a retailer’s co-op promotion ~~initiatives~~incentives to maximize sales of the Company’s products on the retail floor or to assist in developing consumer awareness of new product launches, by providing marketing fund allowances to our customers. As these co-op promotion initiatives are not a distinct good or service and the Company cannot reasonably estimate the fair value of the benefit it receives from these arrangements, the cost of these allowances at the time they are offered to the customers are recorded as a reduction to net sales. For the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020 co-op promotion ~~allowances~~incentives were approximately ~~$858,000~~$796,000 and ~~$1,662,000,~~$858,000, respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020 co-op promotion ~~allowances~~incentives were approximately ~~$2,032,000~~$1,805,000 and ~~$2,858,000,~~$2,032,000, respectively.

Costs incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods are included in general and administrative expenses, in-bound freight costs are included in the cost of goods sold and accrued sales representative commissions are included in selling expenses in the accompanying condensed consolidated statements of ~~operations~~income as our underlying customer agreements are less than one year.

The Company disaggregates revenues by product line and major geographic region as most of its revenue is generated by the sales of karaoke hardware and the Company has no other material business segments (See Note 911 – ~~GEOGRAPHICAL INFORMATION)~~Geographical Information).

While the Company generally does not allow products to be returned, the Company does provide for variable consideration contingent upon the occurrence of uncertain future events. Variable consideration is estimated at the expected value or at the most likely amount depending on the type of consideration. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company estimates variable consideration under our return allowance programs for goods returned ~~to the customer~~from our customers for various reasons, whereby a sales return reserve is recorded based on historic return amounts, specific events as identified and management estimates.

The Company’s reserve for sales returns ~~was~~were approximately ~~$2,966,000~~$2,922,000 and ~~$1,224,000~~$960,000 as of December 31, ~~2020~~2021 and March 31, ~~2020,~~2021, respectively.

Revenue is derived from ~~four~~five different major product lines. Disaggregated revenue from these product lines for the three and nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 consisted of the following:

~~Shipping and handling costs are performed by both the Company and third-party logistics companies.~~ Shipping and handling activities are performed before the customer obtains control of the goods sold to them and are considered activities to fulfill the Company’s promise to transfer the goods. For the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 shipping and handling expenses were approximately ~~$512,000~~$369,000 and ~~$675,000,~~$512,000, respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 shipping and handling expenses were approximately ~~$900,000~~$654,000 and ~~$989,000,~~$900,000, respectively. These expenses are classified as a component of selling expenses in the accompanying condensed consolidated statements of ~~operations.~~income.

The Company follows the provisions of the FASB ASC 718-20, “Compensation – Stock Compensation Awards Classified as Equity”. ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed in the condensed consolidated statements of ~~operations~~income over the service period (generally the vesting period). The Company uses the Black-Scholes option valuation model to value stock options. Employee stock option compensation expense for the three and nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire portion of the award. For the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, the stock option expense was approximately ~~$5,000.~~$3,000 and $5,000, respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, the stock option expense was ~~$5,000~~approximately $16,000 and ~~$15,000,~~$5,000, respectively.

Research and development costs are charged to results of operations as incurred. These expenses are shown as a component of general and administrative expenses in the condensed consolidated statements of ~~operations.~~income. For the three months ended December 31, ~~2020~~2021 and ~~2019,~~2020, these amounts totaled approximately ~~$33,000~~$11,000 and ~~$13,000,~~$33,000, respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019,~~2020, these amounts totaled ~~$48,000~~$61,000 and ~~$36,000,~~$48,000 respectively.

The Company follows the provisions of FASB ASC 740 “Accounting for Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized. As of December 31, 2020 and March 31, 2020 the Company recognized a valuation allowance reserve of approximately $88,000 for deferred tax assets relating to net operating loss carryforwards that the Company will more than likely not be able to realize prior to their expiration.

The Company analyzes its deferred tax assets and liabilities at the end of each interim period and, based on management’s best estimate of its full year effective tax rate, recognizes cumulative adjustments to its deferred tax assets and liabilities. For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 we estimated our effective tax rate to be approximately ~~23%~~11% and ~~22%~~23%, respectively. As of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 the Singing Machine had net deferred tax assets of approximately ~~$413,000~~$638,000 and ~~$1,286,000,~~$887,000, respectively. The Company recorded an income tax provision of approximately ~~$264,000~~$103,000 and $264,000 for the three months ended December 31, 2021 and 2020, ~~and an income tax benefit of approximately $240,000 for the three months ended December 31, 2019.~~respectively. The Company recorded an income tax provision of approximately ~~$1,006,000~~$249,000 and $1,006,000 for the nine months ended December 31, 2021 and 2020, ~~and an income tax benefit of approximately $295,000 for the nine months ended~~ respectively.

The Company recognizes a liability for uncertain tax positions. An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. As of December 31, ~~2020,~~2021, there were no uncertain tax positions that resulted in any adjustment to the Company’s provision for income taxes. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions.

Computation of dilutive shares for the three and nine months ended December 31, 2021 and 2020 are as follows:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNING PER SHARE

	For the three months ended December 31, 2020		For the nine months ended December 31, 2020		For the three months ended December 31, 2021		For the three months ended December 31, 2020		For the nine months ended December 31, 2021		For the nine months ended December 31, 2020
Basic weighted average common shares outstanding		38,885,000		38,667,000		53,410,249		38,885,185		46,787,545		38,667,221
Effect of dilutive stock options		271,000		374,000		225,119		271,296		322,309		373,853

Diluted weighted average of common shares outstanding		39,156,000		39,041,000
Diluted weighted average common shares outstanding						53,635,368		39,156,481		47,109,854		39,041,074

Basic net income per share is based on the weighted average number of shares of common stock outstanding during the period. Pre-funded warrants to purchase 16,833,333 shares of common stock are included in basic weighted average shares outstanding as deemed outstanding. Diluted net income per share reflects the potential dilution assuming shares of common stock were issued upon the exercise of outstanding in-the-money options and the proceeds thereof were used to purchase shares of the Company’s common stock at the average market price during the period using the treasury stock method. For the three and nine months ended December 31, ~~2020,~~2021, options to purchase approximately ~~271,000~~225,000 and ~~374,000~~322,000 shares of common stock, respectively, have been included in the calculation of diluted net income per share as compared to approximately ~~371,000~~271,000 and 374,000 shares of common stock, respectively, that were ~~excluded~~included in the calculation of diluted net income per share for ~~both~~ the three and nine months ended December 31, ~~2019,~~2020. For the three and nine months ended December 31, 2021, options and warrants to purchase approximately 35,416,667 shares of common stock, have been excluded in the calculation of diluted net income per share as compared to approximately 730,000 shares that were excluded in the calculation of diluted net income per share for the three and nine months ended December 31, 2020 as the result would have been anti-dilutive.

~~In December 2019, the FASB issued ASU 2019-12, “Income Taxes~~ ~~(Topic 740).~~ Among several issues addressed in this ASU, there was one area that may potentially affect the Company’s calculations of interim income tax provision or benefit. The guidance specifies that an entity should apply the annual effective tax rate to the year-to date income or loss as long as the tax benefits for any losses are expected to be realized during the year or would be recognizable as a deferred tax asset at the end of the year eliminating the requirement of a valuation allowance for that interim period. There is specific guidance for circumstances in which an entity incurs a loss on a year-to-date basis that exceeds the anticipated ordinary loss for the year, which is an exception to the general guidance in Subtopic 740-270. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. We are currently evaluating the potential effects of this updated guidance on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326). This ASU represents a significant change in the current accounting model by requiring immediate recognition of management’s estimates of current expected credit losses. Under the prior model, losses were recognized only as they were incurred, which delayed recognition of expected losses that might not yet have met the threshold of being probable. The amendments in ASU 2016-03 for smaller reporting companies are effective for ~~fiscal years~~the Company beginning ~~after~~ April 1, 2023, including interim periods within that fiscal year. Early adoption is permitted. We are currently evaluating the potential effects of this updated guidance on our condensed consolidated financial statements and related disclosures.

December 31, March 31,
2020 2020

Finished Goods $ 4,189,000 $ 6,595,000
Inventory in Transit 219,000 73,000
Estimated Amount of Future Returns 1,846,000 1,367,000
Subtotal 6,254,000 8,035,000
Less:Inventory Reserve 917,000 434,000

Inventories, net $ 5,337,000 $ 7,601,000

	USEFUL	December 31,		March 31,		USEFUL		December 31,		March 31,
	LIFE	2020		2020		LIFE		2021		2021

Computer and office equipment	5-7 years	$	445,000	$	445,000		5-7 years	$	440,000	$	445,000
Furniture and fixtures	7 years		98,000		98,000		7 years		98,000		98,000
Warehouse equipment	7 years		199,000		195,000		7 years		210,000		199,000
Molds and tooling	3-5 years		1,765,000		1,680,000		3-5 years		1,946,000		1,878,000
			2,507,000		2,418,000				2,694,000		2,620,000
Less: Accumulated depreciation			1,851,000		1,647,000				2,113,000		1,946,000
		$	656,000	$	771,000			$	581,000	$	674,000

Depreciation expense for the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 was approximately ~~$65,000~~$55,000 and ~~$77,000,~~$65,000, respectively. Depreciation expense for the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 was approximately ~~$204,000~~$190,000 and ~~$196,000,~~$204,000, respectively.

Intercreditor Revolving Credit Facility Crestmark Bank and Iron Horse Credit

On June 16, 2020, the Company executed an Intercreditor Revolving Credit Facility on eligible accounts receivable and inventory which replaced the Company’s previous revolving credit facility with PNC Bank which was terminated on June 16, 2020. The Company signed a two-year Loan and Security Agreement for a ~~$10.0~~$10.0 million financing facility ~~with~~under the Crestmark ~~Bank (“Crestmark Facility”)~~Facility on eligible accounts receivable. The outstanding loan balance cannot exceed ~~$10.0~~$10.0 million during peak selling season between July 1 and December 31and is reduced to a maximum of ~~$5.0~~$5.0 million between January 1 and July ~~31.~~31 with the ability to exceed when required. Costs associated with closing of the Intercreditor Revolving Credit Facility of approximately ~~$74,000 are~~$74,000 were deferred and ~~will be~~were amortized over one year. During the three ~~and nine~~ months ended December 31, 2021 and 2020 the Company incurred amortization expense of approximately ~~$19,000~~$10,000 and ~~$40,000,~~$19,000, respectively associated with the amortization of deferred financing costs from the Intercreditor Revolving Credit Facility.

During the nine months ended December 31, 2021 and 2020 the Company incurred amortization expense of approximately $36,000and ~~2019~~$40,000, respectively associated with the amortization of deferred financing costs from the Intercreditor Revolving Credit Facility.

The Crestmark Facility is secured by a perfected security interest in all assets including a first security interest in Accounts Receivable and Inventory. Notwithstanding the foregoing, Crestmark shall subordinate its first security interest in inventory to IHC as agreed between all parties. The Crestmark Facility bears interest at the Wall Street Journal Prime Rate plus ~~5.50%~~5.50% with a floor of ~~8.75%~~8.75%. Interest and Maintenance Fees shall be calculated on the higher of the actual average monthly loan balance from the prior month or a minimum average loan balance of ~~$2,000,000.~~$2,000,000. For the three ~~and nine~~ months ended December 31, 2021 and 2020 the Company recorded interest expense of approximately ~~$100,000~~$106,000 and ~~$151,000,~~$100,000, respectively. For the nine months ended December 31, 2021 and 2020 the Company recorded interest expense of approximately $202,000 and $151,000, respectively. The Crestmark Facility expires on June 15, ~~2022.~~2022. As of December 31, ~~2020,~~2021, the Company had noan outstanding balance of approximately $6,637,000 on the Crestmark Facility.

In addition, the Company executed a two-year Loan and Security Agreement with Iron Horse Credit ~~(“IHC Facility”)~~ for up to ~~$2,500,000~~$2,500,000 in inventory financing.

The IHC Facility is secured by a perfected security interest in the Company’s inventory. The IHC Facility bears interest at ~~1.292%~~1.292% per month or ~~15.51%~~15.51% annually. Interest shall be calculated on the higher of the actual average monthly loan balance from the prior month or a minimum average loan balance of ~~$1,000,000.~~$1,000,000. Costs associated with the renewal of the IHC Facility of approximately $38,000 were deferred and are being amortized over one year. Interest expense for the three months ended December 31, 2021 and 2020 were approximately $34,000 and $41,000, respectively. Interest expense for the nine months ended December 31, 2021 and 2020 ~~was~~were approximately ~~$41,000~~$120,000 and ~~$103,000,~~$103,000, respectively. The IHC Facility expires on June 15, ~~2022.~~2022. As of December 31, ~~2020,~~2021 and March 31, 2021, there was an outstanding balance of approximately ~~$65,000.~~$1,990,000 and $65,000, respectively.

On June 22, 2017, the Company renewed the existing revolving credit facility (the “PNC Revolving Credit Facility”) with PNC Bank, National Association (“PNC”) for an additional three years which was terminated on June 16, 2020 and replaced by the Intercreditor Revolving Credit Facility with Crestmark and IHC. In September 2019, the Company defaulted on the PNC Revolving Credit Facility due to non-compliance with the fixed charge coverage ratio requirement. In November 2019, the Company entered into a Forbearance Agreement with PNC whereby PNC delayed taking action they would have been be entitled to under a default through March 31, 2020. The Company remained in default of the Forbearance Agreement up until termination of the Revolving Credit Facility on June 16, 2020 at which time the Company executed the Intercreditor Revolving Credit Facility with Crestmark and IHC. As of December 31, ~~2020,~~2021 there was approximately $510,000 of available borrowings under these facilities.

As both the Crestmark Facility and ~~March 31, 2020 there were no amounts due~~the IHC Facility are set to expire on ~~the PNC Revolving Credit Facility. During the three months ended December 31, 2020 and 2019~~June 15, 2022, the Company ~~incurred interest expense~~expects to negotiate a revision or extension of approximately $0 and $86,000, respectively, on amounts borrowed against the PNC Revolving Credit Facility. During the nine months ended December 31, 2020 and 2019 the Company incurred interest expense of approximately $0 and $119,000, respectively on amounts borrowed against the PNC Revolving Credit Facility.these debt facilities upon their maturity however, there can be no assurance that such revision or extension will occur or at what terms.

On May 5, 2020, the Company received loan proceeds from Crestmark in the amount of approximately ~~$444,000~~$444,000 under the Paycheck Protection Program ~~(“PPP”~~(the “PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which ~~provides~~provided for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest may be forgivable to the extent the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eligible period. The unforgiven portion of the PPP loan iswas payable over two years at an interest rate of 1%, with a deferral of payments until a forgiveness application ~~has been~~was accepted and reviewed by the ~~SBA,~~Small Business Administration (“SBA”), and the SBA ~~has~~ provided Crestmark with the loan forgiveness amount. ~~For the three months ended December 31, 2020 and 2019~~In June 2021 the Company ~~incurred interest expense of approximately $1,000~~received notification from the SBA that the loan had been forgiven in its entirety and ~~$0, respectively.~~we were notified by Crestmark that the debt was discharged. For the nine months ended December 31, ~~2020 and 2019 the Company incurred interest expense~~2021, a gain of approximately ~~$3,000~~$448,000 (including principal and ~~$0, respectively. As of December 31, 2020 there was an outstanding balance on~~interest) from the ~~PPP note payable of approximately $444,000. The Company currently expects to apply for~~ forgiveness of the ~~entire~~ loan ~~balance.~~was included in other income and expenses in the accompanying condensed consolidated statements of income.

On June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC (“Dimension”) to finance an entire ERP System project over a term of 60 months at a cost of approximately ~~$365,000.~~$365,000. As of December 31, ~~2020,~~2021, the Company had executed three installment notes totaling approximately ~~$365,000~~$365,000 for payments issued to the project vendor. The installment notes have 60-month terms with interest rates of ~~7.58%~~7.58%, ~~8.55%~~8.55% and ~~9.25%~~9.25%, respectively. The installment notes are payable in monthly installments of ~~$7,459~~$7,459 which include principal and interest. As of December 31, ~~2020,~~2021, and March 31, ~~2020~~2021 there was an outstanding balance on the installment notes of approximately ~~$297,000~~$231,000 and ~~$346,000,~~$281,000, respectively. For the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company incurred interest expense of approximately ~~$6,000.~~$5,000 and $6,000, respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company incurred interest expense of approximately ~~$20,000~~$16,000 and ~~$14,000,~~$20,000, respectively.

In conjunction with the Crestmark Facility and IHC Facility there is a subordination agreement on related party debt due to Starlight Marketing Development, Ltd. of approximately ~~$803,000.~~$803,000. On June 1, 2020 the remaining amount due on the subordinated debt of approximately ~~$803,000~~$803,000 was converted to a note payable (“subordinated note payable”) which bears interest at 6%6%. As part of the agreement to convert the subordinated debt to a note payable it was agreed that interest expense would be accrued at the same 6% interest rate on the unpaid principal retroactively from the date that previously scheduled payments had been missed. During the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 interest expense was approximately ~~$12,000~~$3,000 and ~~$0,~~$12,000, respectively on the subordinated note payable and the related party subordinated debt. During the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 interest expense was approximately ~~$36,000~~$17,000 and ~~$0,~~$36,000, respectively on the subordinated note payable and the related party subordinated debt.

In connection with the Intercreditor Revolving Credit Facility the Company was required to subordinate the ~~subordinated~~ note payable. Both the Crestmark Facility and IHC Facility agreements allow for the repayment of the subordinated note payable provided any amounts borrowed against these credit facilities are paid in full, the Company maintains a 1 : 1 debt coverage ratio and exhibits sufficient cash liquidity to support on-going operations. As of December 31, ~~2020,~~2021 the Company ~~missed~~met repayment requirements of the ~~first scheduled payment due on December 31, 2020~~Intercreditor Revolving Credit Facility and ~~obtained a waiver from~~has made cumulative principal payments totaling $450,000. During the ~~subordinated note holder allowing~~next twelve months the ~~first payment to be deferred until February 2021. The~~ Company intends ~~to make~~on making additional payments ~~per~~and pay off the ~~note repayment schedule providing~~remaining balance outstanding provided the Company meets all repayment requirements of the Crestmark Facility and IHC Facility agreements.

~~Scheduled maturities~~As of ~~outstanding debt~~December 31, 2021 and March 31, 2021, the remaining amount due on the note payable was approximately $353,000 and $503,000 respectively. The remaining amount due on the subordinated note payable was classified as a current liability as of December 31, ~~2020 are as follows:~~2021 and March 31, 2021 on the condensed consolidated balance sheets.

Year Ended December 31, Revolving Line of Credit Iron Horse Credit Installment Notes Note Payable Payroll Protection Program Subordinated Related Party Debt
2021 $ 65,000 67,000 297,000 750,000
2022 - 73,000 149,000 53,000
2023 - 79,000 - -
2024 - 75,000 - -
2025 and beyond - 3,000 - -

Scheduled Payments $ 65,000 $ 297,000 $ 446,000 $ 803,000

During the nine-months ended December 31, 2020, we have recovered approximately $2,336,000 from our cargo insurance coverage which settled approximately $1,268,000 in an insurance claim receivable with the remaining proceeds reflected in other income and (expenses) as a gain from damaged goods insurance claim in the condensed consolidated statements of operations. For the three and nine months ended December 31,In January 2020, the ~~gain from damaged goods insurance claim was approximately $0~~World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and ~~$1,068,000, respectively.~~the risks to the international community. The ~~insurance claim is now closed.~~WHO declared COVID-19 a global pandemic on March 11, 2020 and since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic remains highly unpredictable and dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future. We continue to experience various degrees of manufacturing cost pressures due to raw material and electronic component shortages as well as inflationary price increases. Although we regularly monitor the financial health and operations of companies in our supply chain, and use alternative suppliers when necessary and available, any financial hardship or government restrictions on our suppliers or sub-suppliers caused by the COVID-19 pandemic could cause a disruption in our ability to obtain raw materials or components required to manufacture our products and adversely affect our operations.

Management is not aware of any legal proceedings other than matters that arise in the ordinary course of ~~business~~.business.

We have operating lease agreements for offices and a warehouse facility in Florida, California and ~~Hong Kong~~Macau expiring in various years through 2024.

We entered into an operating lease agreement, effective October 1, 2017, for the corporate headquarters located in Fort Lauderdale, Florida where we lease approximately 6,500 square feet of office space. The lease expires on March 31, ~~2024.~~2024. The base rent payment is approximately ~~$8,800~~$9,700 per month, subject to annual adjustments.

We entered into an operating lease agreement, effective June 1, 2013, for 86,000 square feet of warehouse space in Ontario, California for our logistics operations. On June 15, 2020 we executed a three-year lease extension which will expire on August 31, ~~2023.~~2023. The renewal base rent payment is ~~$65,300~~$65,300 with a 3% increase every 12 months for the remaining term of the ~~extension.~~extension.

~~We entered into an operating~~In May 2021 we executed a one-year lease ~~agreement, effective May 1, 2018,~~ for 424 square feet of office space in ~~Macau. The rent is fixed at approximately $1,600 per month for the duration of the lease~~Macau which ~~expires~~will expire on April 30, ~~2021.~~2022. The lease provides for a renewal option to extend the lease. Rent expense on the new lease is fixed at approximately $1,700 per month for the duration of the lease term.

Lease expense for our operating leases is recognized on a straight-line basis over the lease terms.

On ~~May 25, 2018 and June 4, 2018,~~July 1, 2021 we entered into ~~two~~a long-term capital leasing ~~arrangements~~arrangement with ~~Wells Fargo Equipment Finance (“Wells Fargo”)~~Union Credit Corporation to finance the leasing of ~~two~~a used forklift ~~vehicles~~ in the amount of approximately ~~$44,000.~~$24,000. The ~~leases~~lease require monthly payments in the amount of ~~$1,279~~approximately $755 per month over a total lease term of 36 months which commenced on ~~June~~July 1, ~~2018.~~2021. The agreement has an effective interest rate of ~~4.5%~~9.9% and the Company has the option to purchase the equipment at the end of the lease term for one dollar. As of December ~~31, 2020~~30, 2021 and March 31, ~~2020,~~2021, the remaining amounts due on ~~these~~this capital leasing ~~arrangements~~arrangement was approximately ~~$6,000~~$20,000 and ~~$18,000,~~$0, respectively. For the three and nine months ended December 31, 2021 and 2020 the Company incurred interest expense of $696 and $1,072, respectively.

Supplemental balance sheet information related to leases as of December 31, ~~2020~~2021 is as follows:


Assets:
Operating lease - right-of-use assets	$	2,269,108	$	1,488,258
Finance leases as a component of property and equipment, net of accumulated depreciation of $16,582		26,945
Finance leases as a component of Property and equipment, net of accumulated depreciation of $1,735				18,278
Liabilities
Current
Current portion of operating leases	$	779,905	$	860,528
Current portion of finance leases		6,336		7,421
Noncurrent
Operating lease liabilities, net of current portion	$	1,540,226	$	685,304
Finance leases, net of current portion		-		12,592

Supplemental statement of operations information related to leases for the three and nine months ended December 31, ~~2020~~2021 is as follows:

Supplemental cash flow information related to leases for the nine months ended December 31, ~~2020 and 2019~~2021 is as follows:

Scheduled maturities of operating and finance lease liabilities outstanding as of December 31, ~~2020~~2021 are as follows:

Year ended December 31,	Operating Leases		Finance Leases
Year					Operating Leases		Finance Leases

2021	$	911,000	$	6,000
2022		932,000		-	$	937,590	$	9,065
2023		674,000		-		674,488		9,065
2024		31,000		-		30,739		4,533
Total Minimum Future Payments		2,548,000		6,000		1,642,817		22,663

Less: Imputed Interest		228,000		-		96,985		2,650

Present Value of Lease Liabilities	$	2,320,000	$	6,000	$	1,545,832	$	20,013

During the nine months ended December 31, ~~2020 and 2019~~2021 the Company issued ~~100,000~~40,000 and 20,000 stock options, respectively, at an exercise price of ~~$.29~~$.29 and ~~$.38,~~$.27, respectively to directors as compensation for their service.

During the three and nine months ended December 31, 2021 the Company issued 50,000 stock options at an exercise price of $.22 to the Vice President of Sales and Marketing as compensation due under his fiscal 2021 incentive bonus plan.

During the three and nine months ended December 31, 2020 the Company issued 100,000 stock options at an exercise price of $.29 to directors as compensation for their service.

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:

A summary of stock option activity for the nine months ended December 31, ~~2020~~2021 is summarized below:

	December 31, 2020					December 31, 2021
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Stock Options:
Balance at beginning of period		2,230,000		$	0.26		1,680,000		$	0.32
Granted		100,000		$	0.29		110,000		$	0.25
Exercised		(440,000	)	$	0.06		(80,000	)	$	0.18
Forfeited		(190,000	)	$	0.19
Balance at end of period		1,700,000		$	0.32		1,710,000		$	0.33

Options exercisable at end of period		1,600,000		$	0.32		1,600,000		$	0.33

The following table summarizes information about employee stock options outstanding at December 31, ~~2020:~~2021:

* Total number of options outstanding as of December 31, 2020 includes 600,000 options issued to five current and two former directors as compensation and 1,040,000 options issued to key employees that were not issued from the Plan.SCHEDULE OF EMPLOYEE STOCK OPTIONS OUTSTANDING

As of December 31, ~~2020~~2021, there was unrecognized expense of approximately ~~$15,000~~$17,000 remaining on options currently vesting over time with approximately ~~ten~~nine months remaining until these options are fully vested.

The intrinsic value of vested options as of December 31, ~~2020~~2021 was approximately ~~$121,000.~~$40,000.

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 December 31, 2021 are as follows:

As of December 31, 2021, the Company’s warrants by expiration date were as follows:

On August 5, 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with Koncepts and Treasure Green, pursuant to which the Company redeemed 19,623,155 shares of common stock of the Company (the “Redeemed Shares”). The closing of the transaction set forth in the Redemption Agreement took place on August 10, 2021, at which time the Redeemed Shares were assigned and transferred back to the Company and the Company paid approximately $7,162,000 to Koncepts and Treasure Green. The Redeemed Shares were retired and are available for reissuance in the future. Pursuant to the Redemption Agreement, neither Koncepts nor Treasure Green remained shareholders of the Company.

On ~~November 6, 2020,~~August 5, 2021, the Company ~~issued 43,105~~entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional investors and the strategic investor for private placement of (i) 16,500,001 shares of its common stock (the “Shares”) together with Common Warrants to ~~its Board~~purchase up to 16,500,000 shares of ~~Directors valued at $0.29~~common stock with an exercise price of $0.35 per share, ~~pursuant~~and (ii) 16,833,333 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock at an exercise price of $0.01 per share, together with Common Warrants to ~~our annual director compensation plan~~purchase up to 16,833,333 shares of common stock at an exercise price of $0.35 per share (the “Private Placement”).

The Common Warrants and Pre-Funded Warrants are collectively referred to as (the “Warrants”). The Warrants are exercisable at any time at the option of the holder, have a term of 5 years from the issuance date and provide for cashless exercise under certain conditions. The Company determined that the Warrants meet the conditions for equity classification. Shares issuable upon exercise of the Warrants are hereinafter referred to as the “Warrant Shares”. The exercise price and number of the Warrant Shares are subject to anti-dilution and other adjustments for certain stock dividends, stock splits, subsequent rights offerings, pro rata distributions or certain equity structure changes.

Pursuant to the terms of the Purchase Agreement, on September 3, 2021, the Company filed a registration statement providing for the ~~fiscal year ending March~~resale by the purchasers of the Shares and Warrant Shares sold in the Private Placement, which registration statement became effective on September 15, 2021. Additionally, under the terms of the Purchase Agreement, the Company is obligated to use its reasonable best efforts to submit an application to have the Company’s common stock listed on a national exchange by December 31, ~~2020.~~2021, and to use its reasonable best efforts to have the Shares and Warrant Shares listed on such national exchange as soon as practicable following the submission of such application. As of December 31, 2021 an application with NASDAQ has been submitted and is pending approval. Should the NASDAQ application be approved, the shareholders of the Company have approved a reverse stock split simultaneous with the up-listing.

The closing of the Private Placement took place on August 10, 2021, when the Shares and Warrants were delivered to the purchasers and funds, in the amount of approximately $9,832,000, were received by the Company. Approximately $7,162,000 of the funds was used to execute the Redemption Agreement (See Note 9 – August 2021 Stock Redemption).

Stingray Group Inc. (“Stingray” or the “strategic investor”), a leading music, media and technology is part of the group of investors who participated in the Private Placement and have acquired a minority interest in the Company. Stingray is a long-standing business partner with the Company that provides our customers with music content from their extensive library of expertly produced and licensed karaoke content and is now a related party (see Note 12- Related Party Transactions).

In connection with the Private Placement, on July 6, 2021, the Company entered into a Placement Agency Agreement with A.G.P./Alliance Global Partners (“AGP”), which provided for AGP to serve as the exclusive placement agent, advisor or underwriter (the “placement agent services”). Pursuant to the Placement Agency Agreement, upon closing of the Private Placement, the Company paid AGP placement fees of $630,000(representing 7% of the gross proceeds raised in the Private Placement excluding proceeds raised from the strategic investor, plus 3.5% of the aggregate gross proceeds raised from the strategic investor), and issued AGP warrants to purchase 1,333,333 shares of the Company’s common stock (the “Advisor Warrants”) (representing 5% of the aggregate number of Shares and Pre-Funded Warrants sold in the Private Placement, excluding the Shares sold to the strategic investor). The Advisor Warrants have the same exercise price ($0.35) and terms as the Common Warrants issued in the Private Placement. The Company estimated the fair value of the Advisor Warrants to be approximately $359,000 using the Black-Scholes Model based on the following input assumptions: common stock price of $0.33, expected life of the warrants of 2.5 years; stock price volatility of 168%; dividend yield of 0%; and the risk-free interest rate of 2.65%.

In addition to the placement fees paid to AGP, the Company incurred additional offering costs for direct incremental legal, consulting, accounting and filing fees related to the Private Placement of approximately $390,000, of which one consultant was issued 571,428 shares of restricted common stock with an aggregate fair value of approximately $189,000 and a cash payment of $100,000. Total offering costs related to the Private Placement amounted to approximately $1,379,000, which is recorded ~~director compensation~~as an offset to additional paid in capital in the accompanying condensed consolidated statements of ~~$12,500 during the three and nine months ended~~ stockholders’ equity.

Sales to customers outside of the United States for the three and nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 were primarily made by the Macau Subsidiary in US dollars. Sales by geographic region for the periods presented are as follows:

The geographic area of sales was based on the location where the product is delivered.

All transactions listed below are related to the Company as ~~they~~Cosmo Communications, Inc (“Cosmo”) and Starlight Electronics Co., Ltd (“SLE”) are ~~all with~~ affiliates of our former Chairman of the Board, Mr. Phillip Lau. Additionally, Stingray is part of the group of investors who participated in the Private Placement and have acquired a minority interest in the Company (see Note 10 – August 2021 Private Placement ).

On December 31, ~~2020~~2021 and March 31, ~~2020, in the aggregate the Company had approximately $0 and $100,000, respectively, due from related parties for goods and services sold to these companies.~~

~~On December 31, 2020 and March 31, 2020,~~2021, the Company had amounts due to related parties in the amounts of approximately ~~$129,000 and $502,000~~$63,000 respectively for ~~facility fees, storage and administrative~~ services provided toby these companies and licensing fees for use of pedestal model molds and tools owned by the former parent company.

On December 31, 2021 and March 31, 2021, the Company ~~by these related parties.~~had amounts due from Stingray of approximately $159,000 and $88,000, respectively for shared revenue from music content provided to our customers from their library of produced and licensed karaoke content.

~~During~~The Company has a music subscription sharing agreement with Stingray. For the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company ~~did not sell any products to Winglight Pacific, Ltd. (“Winglight”)~~received music subscription revenue of approximately $160,000 and $188,000, ~~a related party. During~~respectively. For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company ~~sold~~received music subscription revenue of approximately $0$384,000 and $852,000, respectively to Winglight at a discounted price similar to prices granted to major direct import customers shipped internationally with freight prepaid. The average gross profit margin on sales to Winglight for the nine months ended December 31, 2020 and 2019 was NA and 23.7%$290,000, respectively. ~~The product was shipped to Cosmo Communications of Canada (“Cosmo”), another related company and the Company’s primary distributor of its products to Canada at that time.~~

During the three months ended December 31, 2020 and 2019 the Company sold approximately $0 and $45,000 respectively, of product directly to Cosmo from its California warehouse facility. During the nine months ended December 31, 2020 and 2019 the Company sold approximately $0 and $284,000, respectively of product directly to Cosmo from its California warehouse facility. These amounts were included as a component of net sales in the accompanying condensed consolidated statements of ~~operations.~~income.

On July 30, 2020, the Company and Cosmo reached agreement that Cosmo would no longer be the Company’s Canadian distributor and the Company became the sole and exclusive distributor of the Company’s products in Canada. As part of the agreement, the companies executed a Purchase and Sales agreement whereby the Company acquired all of Cosmo’s karaoke inventory for approximately ~~$685,000.~~$685,000. During the three and nine months ended December 31, ~~2020,~~2021, there was a gain of approximately ~~$188,000~~$11,000 from Cosmo related to ~~the payment~~payments received in ~~fiscal 2021~~Fiscal 2022 on prior year sales and the related receivable previously reversed and written off as initially deemed uncollectible.

The Company incurred service expenses from ~~Starlight Electronics Co, Ltd, (“SLE”) a related party.~~SLE. The services from SLE were approximately $91,000 for the three months ended December 31, ~~2020~~2021 and ~~2019 were approximately $91,000.~~2020. The services from SLE for the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 were approximately ~~$272,000 and $282,000, respectively.~~$272,000. These amounts were included as a component of general and administrative expenses in the accompanying condensed consolidated statements of ~~operations.~~income.

A return program for defective goods is negotiated with each of our wholesale customers on a year-to-year basis. Customers are allowed to return defective goods within a specified period of time after shipment (between 6 and 9 months). The Company does make occasional exceptions to this return policy and accordingly records a sales return reserve based on historic return amounts, specific exceptions as identified and management estimates.

The Company records a sales reserve for its return goods programs at the time of sale for estimated sales returns that may occur. The liability for defective goods is included in the reserve for sales returns on the condensed consolidated balance sheets.

Changes in the Company’s reserve for sales returns are presented in the following table:

							Nine Months Ended
	December 31,			December 31,			December 31,			December 31,
	2020			2019			2021			2020
Reserve for sales returns at beginning of the year	$	1,224,000		$	896,000		$	960,000		$	1,224,000
Provision for estimated sales returns		4,187,000			6,757,000			4,020,000			4,187,000
Sales returns received		(2,445,000	)		(3,107,000	)		(2,058,000	)		(2,445,000	)

Reserve for sales returns at end of the period	$	2,966,000		$	4,546,000		$	2,922,000		$	2,966,000

As of December 31, ~~2020~~2021 and March 31, ~~2020~~2021 the amount of refunds due to customers was approximately ~~$102,000~~$90,000 and ~~$807,000, respectively. Refunds due to customers at December 31, 2020 were~~$145,000, respectively, primarily due to one customer for overstock returns. Refunds due to customers at March 31, 2020 were primarily due to one major customer which reflects approximately $1,691,000 of chargebacks less approximately $1,181,000 that the customer had deducted on payment remittances to the Company as of March 31, 2020. The remaining $297,000 was primarily due to amounts due to two major customers for overstock returns.

The Company has a 401(k) plan for its employees to which the Company makes contributions at rates dependent on the level of each employee’s contributions. Contributions made by the Company are limited to the maximum allowable for federal income tax purposes. The amounts charged to operations for contributions to this plan and administrative costs during the three months ended both December 31, ~~2020~~2021 and ~~2019~~2020 totaled approximately ~~$20,000 and $15,000, respectively.~~$20,000. The amounts charged to operations for contributions to this plan and administrative costs during the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 totaled approximately ~~$54,000~~$55,000 and ~~$47,000,~~$54,000, respectively. The amounts are included as a component of general and administrative expense in the accompanying condensed consolidated statements of ~~operations.~~income. The Company does not provide any post-employment benefits to retirees.

The Company derives a majority of its revenues from retailers of products in the United States. The Company’s allowance for doubtful accounts is based upon management’s estimates and historical experience and reflects the fact that accounts receivable are concentrated with several large

customers. At December 31, ~~2020, 41%~~2021, approximately 75% of accounts receivable were due from ~~two~~four customers in North America that individually owed over 10% of total accounts receivable. At March 31, ~~2020, 82%~~2021, 70% of accounts receivable were due from three customers in North America that individually owed over 10% of total accounts receivable.

The Company generates most of its revenue from retailers of products in the United States with a significant amount of sales concentrated with several large customers the loss of which could have an adverse impact on the financial position of the Company. For the three months ended December 31, 2021, there were five customers who individually accounted for 10% or more of the Company’s net sales. Revenue derived from these customers as a percentage of net sales were 25%, 24%, 17%, 17% and 10% respectively. For the three months ended December 31, 2020, there were five customers who individually accounted for 10% or more of the Company’s net sales. Revenue derived from these customers as a percentage of net sales were ~~22%~~22%, ~~22%~~22%, ~~19%~~19%, ~~12%~~12% and 12%, ~~and 12%~~ respectively.

For the ~~three~~nine months ended December 31, ~~2019,~~2021, there were four customers who individually accounted for 10% or more of the Company’s net sales. Revenue derived from these customers as a percentage of net sales were ~~25%~~37%, ~~21%~~19%, ~~13%~~16% and ~~10%~~11%, respectively.

For the nine months ended December 31, 2020, there were four customers who individually accounted for 10% or more of the Company’s net sales. Revenue derived from these customers as a percentage of net sales were ~~34%~~34%, ~~19%~~19%, ~~13%~~13% and ~~13%~~13%, respectively. ~~For~~

In August 2021, the Company secured vendor invoice credits of approximately $236,000 from a factory involved with a damaged goods incident during fiscal 2020 which is reflected as gain from extinguishment of accounts payable in the condensed consolidated statement of income for the nine months ended December 31, 2019, there were three customers who individually accounted for 10% or more of the Company’s net sales. Revenue derived from these customers as a percentage of net sales were 38%, 14% and 10%, respectively.2021.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes included elsewhere in this quarterly report. This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. (See Part II, Item 1A, “Risk Factors “). These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements.

Statements included in this quarterly report that do not relate to present or historical conditions are called “forward-looking statements.” Such forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions. Words such as “believes,” “forecasts,” “intends,” “possible,” “estimates,” “anticipates,” “expects,” “plans,” “should,” “could,” “will,” and similar expressions are intended to identify forward-looking statements. Our ability to predict or project future results or the effect of events on our operating results is inherently uncertain. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved.

Important factors to consider in evaluating such forward-looking statements include, but are not limited to: (i) changes in external factors or in our internal budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate; and (iv) the effects of adverse general economic conditions, both within the United States and globally, (v) vendor price increases and decreased margins due to competitive pricing during the economic downturn (vi)various competitive market factors that may prevent us from competing successfully in the marketplace and (vii) other factors described in the risk factors section of our Annual Report on Form 10-K, this Quarterly Report on 10-Q, or in our other filings made with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Our products are sold throughout North America, Europe and Australia primarily through major mass merchandisers and warehouse clubs, on-line retailers and to a lesser extent department stores, lifestyle merchants, direct mail catalogs and showrooms, music and record stores, and specialty stores.

Representative customers include Amazon, Best Buy, BJ’s Wholesale, Costco, Sam’s Club, Target, and Wal-Mart. Our business has historically been subject to seasonal fluctuations causing our revenues to vary from quarter to quarter and between the same periods in different fiscal years. Our products are manufactured for the most part based on the purchase indications of our customers. We are uncertain of how significantly our business would be harmed by a prolonged economic recession, but we anticipate that continued contraction of consumer spending would negatively affect our revenues and profit margins.

Sales of consumer electronics and toy products in the retail channel are highly seasonal, with a majority of retail sales occurring during the period from September through December in anticipation of the holiday season, which includes Christmas. A substantial majority of our sales occur during the second quarter ending September 30 and the third quarter ending December 31. Sales in our second and third quarter, combined, accounted for approximately ~~85%~~86% and ~~94%~~85% of net sales in fiscal 2021 and 2020, respectively.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community. The WHO declared COVID-19 a global pandemic on March 11, 2020 and ~~2019, respectively.~~

~~The~~since that time many of the previously imposed restrictions and other measures which were instituted in response have been subsequently reduced or lifted. However, the COVID-19 pandemic ~~has significantly affected U.S. consumer shopping patterns~~remains highly unpredictable and ~~caused~~dynamic and its duration and extent continue to be dependent on various developments, such as the emergence of variants to the virus that may cause additional strains of COVID-19, the administration and ultimate effectiveness of vaccines, and the eventual timeline to achieve a sufficient level of herd immunity among the general population. Accordingly, the COVID-19 pandemic may continue to have negative effects on the health of the U.S. economy for the foreseeable future. We continue to ~~deteriorate. We cannot foresee whether~~experience various degrees of manufacturing cost pressures due to raw material and electronic component shortages as well as inflationary price increases. Although we regularly monitor the ~~outbreak~~financial health and operations of ~~COVID-19 will be effectively contained, nor can we predict the severity~~companies in our supply chain, and ~~duration of its impact~~use alternative suppliers when necessary and available, financial hardship or government restrictions on our ~~business and~~suppliers or sub-suppliers caused by the COVID-19 pandemic could cause a disruption in our ~~financial results. If the outbreak of COVID-19 is not effectively and timely controlled,~~ability to obtain raw materials or components required to manufacture our ~~business operations, financial condition, and liquidity may be materially~~products and adversely ~~affected~~affect our operations.

Further, as aconsumer demand improved and economic activity increased, we have experienced supply chain challenges, including increased lead times, port closures in China and delays in Los Angeles, global container shortages, as well as inflation of logistics and labor costs due to availability constraints and high demand. We expect these inflationary trends to continue throughout the remainder of the fiscal year. We may also experience logistical issues with when we receive inventory and the timing of customer demand which could result ~~of prolonged disruptions~~ in ~~consumer spending, a lack of~~potential future reductions in profit margins and/or the need for additional inventory reserves.

During Fiscal 2021, we experienced growth in our karaoke, microphone, and toy categories as the pandemic increased demand for ~~our products, forced retail store closures~~home entertainment. For the current fiscal year, demand from consumers and ~~other factors that we cannot foresee.~~ retailers continue to remain strong led by shortages of toys and home entertainment product availability in the market.

The extent ~~to which~~of the COVID-19 ~~will impact~~pandemic’s effect on our ~~business~~operational and ~~our~~ financial ~~results~~performance in the future will depend on future developments, ~~which are highly uncertain~~including the duration, geographic location and ~~cannot~~intensity of the pandemic, the impact of virus variants, the rate of vaccinations, our continued ability to manufacture and distribute our products, as well as any future actions that may be ~~predicted.~~taken by governmental authorities or by us relating to the pandemic. For more information regarding factors and events that may impact our business, results of operations and financial condition as a result of the COVID-19 pandemic, see “Risk Factors” included in Item 1A. “Risk Factors” in our 2021 Annual Report on Form 10-K.

The following table sets forth, for the periods indicated, certain items related to our consolidated statements of ~~operations~~income as a percentage of net sales for the three and nine months ended December 31, ~~2020~~2021 and ~~2019:~~2020:

	For Three Months Ended						For Nine Months Ended						For Three Months Ended						For the Nine Months Ended
	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019			December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020

Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Cost of Goods Sold		70.7	%		82.9	%		72.2	%		79.2	%		75.0	%		70.7	%		77.1	%		72.2	%

Gross Profit		29.3	%		17.1	%		27.8	%		20.8	%		25.0	%		29.3	%		22.9	%		27.8	%

Operating Expenses
Selling expenses		8.8	%		12.6	%		7.7	%		9.8	%		6.6	%		8.8	%		6.1	%		7.7	%
General and administrative expenses		11.3	%		10.4	%		12.1	%		13.4	%		10.1	%		11.3	%		12.0	%		12.1	%
Depreciation and amortization		0.4	%		0.6	%		0.5	%		0.5	%		0.3	%		0.4	%		0.4	%		0.5	%

Total Operating Expenses		20.5	%		23.6	%		20.3	%		23.7	%		17.0	%		20.5	%		18.5	%		20.3	%

Income (Loss) from Operations		8.8	%		-6.5	%		7.5	%		-2.9	%		8.0	%		8.8	%		4.4	%		7.5	%

Other Income and (Expenses)
Other Income (Expenses)
Gain from Paycheck Protection Plan loan forgiveness														0.0	%		0.0	%		1.0	%		0.0	%
Gain - related party														0.0	%		1.1	%		0.0	%		0.4	%
Gain from damaged goods insurance claim		0.0	%		0.0	%		2.5	%		0.0	%		0.0	%		0.0	%		0.0	%		2.5	%
Gain from vendor credit for damaged goods		0.0	%		0.0	%		0.9	%		0.0	%
Contigency gain - related party		1.1	%		0.0	%		0.4	%		0.0	%
Gain from extinguishment of accounts payable														0.0	%		0.0	%		0.5	%		0.9	%
Interest expense		-1.4	%		-0.8	%		-0.9	%		-0.4	%		-0.7	%		-1.4	%		-0.8	%		-0.9	%
Financing costs		-0.1	%		0.0	%		-0.1	%		0.0	%
Finance costs														0.0	%		-0.1	%		-0.1	%		-0.1	%

Total Other Income and (Expenses)		-0.4	%		-0.8	%		2.8	%		-0.4	%
Total Other Income (expenses), net														-0.7	%		-0.4	%		0.6	%		2.8	%

Income (Loss) Before Income Tax (Provision) Benefit		8.4	%		-7.3	%		10.3	%		-3.3	%
Income Before Income Tax Provision														7.3	%		8.4	%		5.0	%		10.3	%

Income Tax (Provision) Benefit		-1.6	%		1.7	%		-2.4	%		0.8	%
Income Tax Provision														-0.5	%		-1.6	%		-0.6	%		-2.4	%

Net Income (Loss)		6.8	%		-5.6	%		7.9	%		-2.5	%

Net Income														6.8	%		6.8	%		4.5	%		7.9	%

QUARTER ENDED DECEMBER 31, ~~2020~~2021 COMPARED TO THE QUARTER ENDED DECEMBER 31, ~~2019~~2020

Net sales for the quarter ended December 31, ~~2020~~2021 increased to approximately ~~$16,973,000~~$21,244,000 from ~~$13,858,000~~approximately $16,973,000 an increase of approximately ~~$3,115,000~~$4,271,000 as compared to the same period ended December 31, ~~2019. This~~2020. The increase in net sales was primarily due to ~~an increase~~strong demand for products and goods that shipped late in ~~sales to two major customers of approximately $2,798,000~~the season due ~~in part~~ to the ~~continued success~~late arrival of goods that were scheduled to ship in the ~~Carpool Karaoke Microphone (“CPK”) product and increased demand in consumer electronics products~~previous quarter but were significantly delayed at the Port of Los Angeles due to ~~COVID-19 and a reduction in co-op promotion allowances of approximately $803,000.~~global logistics issues affecting all industries.

Gross profit for the quarter ended December 31, ~~2020~~2021 increased to approximately ~~$4,974,000~~$5,309,000 from ~~$2,371,000~~approximately $4,974,000 an increase of approximately ~~$2,603,000~~$335,000 as compared to the same period in the prior year. ~~Approximately $601,000 of the increase was commensurate with the~~The increase in net sales contributed approximately ~~$803,000 was due~~$1,252,000 to ~~a decrease in co-op promotion allowances with~~ the ~~remaining variance primarily due to an~~ increase in gross profit but was offset by a reduction in gross profit margin ~~on the mix~~ of ~~products sold.~~approximately $917,000.

Gross profit margin for the three months ended December 31, ~~2020~~2021 was ~~29.3%~~25.0% compared to ~~17.1%~~29.3% for the three months ended December 31, ~~2019. The increase~~2020. There was a decrease in ~~CPK~~Carpool Karaoke (“CPK) product sales, of approximately $2,256,000, which ~~yielded significantly higher profit margin~~ accounted for approximately ~~5.1~~2.9 margin points of the ~~increase. The decrease in co-op promotion allowances accounted for approximately 4.9 points of the 12.2~~4.3 gross profit margin point ~~increase~~decrease with the remaining ~~2.2 points in margin increase~~1.4 point decrease primarily due to ~~the higher margin yield~~product cost increases in ~~the remaining mix of products sold.~~raw materials and a significant increase in freight costs due to global logistics issues that were only partially passed on to customers.

For the quarter ended December 31, ~~2020,~~2021, total operating expenses increased to approximately ~~$3,481,000~~$3,616,000 compared to approximately ~~$3,260,000~~$3,481,000 from the same period in the prior year. This represents an increase in total operating expenses of approximately ~~$221,000~~$135,000 from the quarter ended December 31, ~~2019. Selling~~2020. The increase in operating expenses decreased by approximately $250,000, There was a reduction in discretionary marketing spending of approximately $181,000 associated with one-time roll-out expenses of the CPK product in the prior fiscal year with the remaining decreaseis primarily due to an increase in general and administrative expenses of approximately $229,000. There was an increase in pallet expenses, warehouse supplies and expense and temporary labor at our California facility of approximately $206,000 due to an increase in third party logistics business as well as price increases due to inflation and supply chain shortages. There was an increase in legal, accounting, consulting fees and investor relations expenses of approximately $138,000 primarily related to the private placement transaction (see Note 10 - AUGUST 2021 PRIVATE PLACEMENT). There was an increase in bad debt reserve expense of approximately $165,000 related to the increase in net sales and accounts receivable. These increases were offset by a decrease in ~~freight expense associated with a one-time freight charge~~payroll expenses of approximately $295,000 primarily due to significant decrease in executive bonus accruals during the ~~prior fiscal year for damaged goods received by one major customer.~~three months ended December 31, 2021 compared to the three month period ended December 31, 2020.

There was income from operations of approximately ~~$483,000 to approximately $1,925,000~~$1,694,000 for the three months ended December 31, ~~2020~~2021 compared to approximately $1,442,000 for the same period ended December 31, 2019. There was an increase in payroll expense of approximately $346,000 primarily due to payment of officer and key employee bonuses as well as additional COVID related bonus payments made to our California warehouse personnel. There was an increase in rent expense of approximately $78,000 from the new lease renewal for the California warehouse which commenced in September 2020. The remaining variance was primarily due to other variable expenses associated with the increase in net sales.

~~There was~~ income from operations of approximately $1,493,000 for the three months ended December 31, ~~2020 compared to a loss from operations of approximately $889,000 for the three months ended December 31, 2019.~~2020. The increase in income from operations of approximately ~~$2,382,000~~$201,000 was primarily due to the increase in gross profit ~~of approximately $2,603,000~~ offset by ~~a decrease~~the increase in ~~selling~~operating expenses ~~of approximately $250,000~~ as explained above.

Other ~~income and (expenses), net~~expenses increased by approximately ~~$48,000~~$103,000 to approximately ~~$61,000~~$165,000 in other expenses, net for the three months ended December 31, ~~2020~~2021 compared to approximately ~~$109,000~~$61,000 in other expenses, net for the same period ended December 31, ~~2019. There~~2020. During the three months ended December 31, 2020 there was ~~an increase~~a gain from related party of approximately $188,000 from related party accounts receivable that had previously been written off as uncollectible. During the three months ended December 31, 2021 there was a reduction in interest expense and finance amortization ~~of deferred financing~~ costs of approximately ~~$140,000 associated with the financing terms of the Crestmark Facility and IHC Facility which was offset by a gain of approximately $188,000 from Cosmo related~~$85,000 compared to the ~~payment in fiscal 2021 on prior year sales and~~three months ended December 31, 2020 which offset the gain from related ~~receivable previously reversed and written off as initially deemed uncollectible.~~party.

For the three months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company recognized an income tax provision of approximately ~~$264,000~~$103,000 and ~~an income tax benefit of approximately $240,000,~~$264,000, respectively, due to management’s best estimate of the Company’s full year effective tax rate of approximately ~~23.0%~~11.1% and ~~22.7%~~23.0%, respectively.

For the three months ended December 31, ~~2020~~2021 there was net income of approximately ~~$1,167,000~~$1,426,000 compared to a net ~~loss~~income of approximately ~~$758,000~~$1,167,000 for the same period a year ago. The ~~increase~~decrease in net income was primarily due to the same reasons discussed in Income ~~(Loss)~~ from Operations, Other Income (Expenses) and Income Taxes.

NINE MONTHS ENDED DECEMBER 31, ~~2020~~2021 COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, ~~2019~~2020

Net sales for the nine months ended December 31, ~~2020~~2021 increased to approximately ~~$42,310,000~~$44,679,000 from ~~$37,552,000~~$42,310,000 an increase of approximately ~~$4,758,000~~$2,369,000 as compared to the same period ended December 31, 2019. There was an increase in sales of approximately $4,380,000 to one major customer whose internet business flourished during the COVID pandemic and also had significant success selling our CPK product. The remaining increase of approximately $378,000 is2020 primarily due to sales increases in two “club store” customers that increased ~~sales of our~~their assortment due to increased consumer demand and was offset by a decrease in CPK product ~~by some of our other major customers.~~sales.

Gross profit for the nine months ended December 31, ~~2020 increased~~2021 decreased to approximately ~~$11,759,000~~$10,215,000 from approximately ~~$7,805,000 an increase~~$11,759,000 a decrease of approximately ~~$3,954,000~~$1,544,000 as compared to the same period in the prior year. ~~Approximately $1,037,000 of the increase was commensurate with~~Despite the increase in net sales, which contributed approximately ~~$826,000~~$658,000 increase in gross profit margin, this increase was ~~due to~~offset by a decrease of approximately $2,202,000 in ~~co-op promotion allowances with the remaining variance primarily due to an increase in~~gross profit margin or approximately 4.9 margin points on ~~the mix of~~ products sold.

Gross profit margin for the nine months ended December 31, ~~2020~~2021 was ~~27.8%~~22.9% compared to ~~20.8%~~27.8% for the nine months ended December 31, ~~2019. The increase~~2020. There was a decrease in CPK product sales, ~~which yielded significantly~~(that yield a substantially higher gross profit margin than our traditional product) of approximately $2,493,000, which accounted for approximately ~~3.6~~2.5 margin points of the ~~increase.~~4.9 gross profit margin point decrease. The remaining decrease ~~in co-op promotion allowances accounted for~~of approximately ~~2.0~~2.4 points of ~~the 7.0~~gross margin ~~point increase with the remaining 1.4 points in margin increase~~was primarily due to ~~the higher margin yield~~product cost increases in ~~the remaining mix of products sold.~~raw materials and a significant increase in freight costs due to global logistics issues that were only partially passed on to customers.

For the nine months ended December 31, ~~2020,~~2021, total operating expenses decreased to approximately ~~$8,599,000~~$8,261,000 compared to approximately ~~$8,937,000~~$8,599,000 from the same period in the prior year. This represents a decrease in total operating expenses of approximately $338,000 from the nine months ended December 31, ~~2019. Selling~~2020. The decrease in operating expenses ~~decreased by approximately $428,000~~is primarily due to a decrease in selling expenses of $547,000. There was a decrease in freight expenses of approximately $460,000 associated with a decrease in outbound freight as two major club accounts did not have special projects requiring the company to ship freight prepaid instead of collect as well as inbound freight expense reduction due to a decrease in product returns. There was a reduction in ~~discretionary marketing spending~~royalty expense of approximately ~~$525,000 associated with one-time roll-out~~$325,000 primarily due to the reduction in CPK sales as explained in net sales. These decreases in selling expenses ~~of the CPK product in the prior fiscal year~~were offset by an increase in discretionary marketing expense of approximately ~~$108,000~~$284,000.

These decreases in ~~royalty expense associated with the~~selling expenses of approximately $547,000 were offset by an increase in ~~CPK licensed product sales.~~

~~General~~general and administrative expenses ~~increased by~~of approximately ~~$81,000~~$223,000 primarily due to an increase in legal, accounting, consulting fees and investor relations expenses primarily related to the private placement transaction (see Note 10 - AUGUST 2021 PRIVATE PLACEMENT).

There was income from operations of approximately ~~$5,130,000~~$1,954,000 for the nine months ended December 31, ~~2020~~2021 compared to approximately $5,049,000 for the same period ended December 31, 2019. There was an increase in payroll expense of approximately $386,000 primarily due to payment of officer and key employee bonuses as well as additional COVID related bonus payments made to our California warehouse personnel. This increase was offset by a decrease of approximately $346,000 one-time administrative expenses incurred in the prior year relating to the processing of damaged goods received by one major customer with the remaining variance due to other variable administrative expenses.

~~There was~~ income from operations of approximately $3,160,000 for the nine months ended December 31, ~~2020 compared to a loss from operations of approximately $1,132,000 for the nine months ended December 31, 2019.~~2020. The ~~increase~~decrease in income from operations of approximately ~~$4,292,000~~$1,206,000 was primarily due to the ~~increase~~reduction in operating expenses offset by the decrease in gross profit ~~and decrease in selling and general administrative expenses~~ as explained above.

Other income ~~and (expenses), net increased~~decreased by approximately ~~$1,380,000~~$920,000 to approximately ~~$1,214,000~~$294,000 in other income, net for the nine months ended December 31, ~~2020~~2021 compared to approximately ~~$166,000~~$1,214,000 in other ~~expenses,~~income, net for the same period ended December 31, ~~2019~~2020. During the nine months ended December 31, 2021 there were one-time gains of approximately $696,000 primarily due to forgiveness of the loan under the Paycheck Protection Program of approximately $448,000 which included principal and interest and there was an accounts payable forgiveness of approximately $236,000 from one vendor on goods that were damaged in the prior year compared to a recovery of approximately $1,068,000 in out-of-pocket expenses relating to a prior year damaged goods insurance claim during the nine months ended December 31 2020 and ~~a vendor extinguishing~~ accounts payable forgiveness of $390,000 from the ~~factory that~~vendor who caused the ~~damage. There~~damaged goods problem. During the nine months ended December 31, 2020 there was a gain from related party of approximately $188,000 from ~~Cosmo~~ related ~~to the payment in fiscal 2021 on prior year sales and the related~~party accounts receivable that had previously ~~reversed and~~been written off as ~~initially deemed~~ uncollectible. ~~These increases~~The remaining variance in other income, ~~were offset by an increase~~net was primarily due to a decrease in interest expense and amortization of deferred financing costs ~~of approximately $266,000~~ associated with the financing terms of the Crestmark Facility and IHC Facility.

For the nine months ended December 31, ~~2020~~2021 and ~~2019~~2020 the Company ~~recognized~~recorded an income tax provision of approximately ~~$1,006,000~~$249,000 and an ~~income tax benefit of~~ approximately ~~$295,000,~~$1,006,000, respectively, due to management’s best estimate of the Company’s full year effective tax rate of approximately ~~23.0%~~11.1% and ~~22.7%~~23.0%, respectively.

For the nine months ended December 31, ~~2020~~2021 there was net income of approximately ~~$3,368,000~~$2,000,000 compared to a net ~~loss~~income of approximately ~~$1,003,000~~$3,368,000 for the same period a year ago. The ~~increase~~decrease in net income was primarily due to the same reasons discussed in Income ~~(Loss)~~ from Operations, Other Income (Expenses) and Income Taxes.

As of December 31, ~~2020, the Company~~2021, Singing Machine had cash on hand of approximately ~~$823,000~~$7,375,000 as compared to cash on hand of approximately ~~$684,000~~$823,000 on December 31, ~~2019.~~2020. We had working capital of approximately ~~$7,635,000~~$9,811,000 as of December 31, ~~2020.~~ 2021. Net cash used in operating activities was approximately $3,113,000 for the nine months ended December 31, 2021. During the nine months ended December 31, 2021 there was an increase in accounts receivable of approximately $10,124,000 due to a seasonal increase in sales and an increase in inventories of approximately $5,933,000 due to in-transit and receipt of inventory intended for peak season shipments but were received too late to ship due to global logistics issues. These increases in net cash used in operating activities were offset by an increase in in accounts payable and accrued expenses of approximately $4,531,000 due to delayed receipt of seasonal purchases of product for the peak season due to global logistics issues. There was a decrease in amounts due from Crestmark Bank of approximately $4,557,000 as cash collected in excess of amounts due on the revolving credit during the first quarter was used to pay for the seasonal increase in inventory. There was a seasonal increase in reserve for sales returns of approximately $1,962,000.

Net cash provided by operating activities was approximately $165,000 for the nine months ended December 31, ~~2020, as compared to approximately $684,000 provided by operating activities for the same period a year ago. See below for discussion of borrowing availability under our existing lending arrangements.~~

2020. During the nine months ended December 31, 2020 there was a decrease in insurance receivable of approximately $1,268,000 as we received proceeds for the one-time damaged goods incident that occurred in the prior fiscal year as well as a gain from the extinguishment of accounts payable of $390,000 from one vendor related to the damaged goods issue. There was a decrease in inventory of approximately $1,781,000 as the Company sold excess inventory left over from the prior fiscal year. There was a seasonal increase in reserves for sales returns of approximately $1,742,000. There was an increase in accrued expenses of approximately $580,000 primarily due to seasonal co-op promotion allowances, commissions and royalties. These increases in cash provided by operations were offset by an increase in accounts receivable of approximately $7,056,000 due to peak season sales. There was an increase in amounts due from banks of approximately $1,172,000 due to cash collected in excess of amounts due on the revolving credit facilities with Crestmark Bank. There was a reduction in refunds due to customers of approximately $705,000 primarily due to settlement of prior year damaged goods claims with one major customer. There was a decrease in accounts payable of approximately $1,470,000 as the Company sold off excess inventory from the prior year and did not need to purchase as much new inventory to fulfill orders.

Net cash provided by operating activities was approximately $684,000 for the nine months ended December 31, 2019. During the nine months ended December 31, 2019 there was an increase in accounts payable of approximately $5,742,000 as we held back payments to one vendor who caused the damaged goods issue with one major customer pending resolution of the related insurance claim filed. There was an increase in reserves for sales returns of approximately $3,650,000 based on anticipated returns of CPK product as well as in increase in overstock returns of core product due to decreased performance in the consumer electronic and toy industry segments in general. There was an increase in accrued expenses of approximately $1,780,000 primarily due to the significant increase in advertising allowance granted to customers to assist in customer product sell-through related to the CPK product as well as to help mitigate overstock returns of core product after peak season. These increases in cash provided by operations were offset by an increase in accounts receivable of approximately $6,125,000 due to peak season sales, an increase in insurance receivable of approximately $1,286,000 relating to damaged goods claims from one customer, an increase of approximately $2,229,000 in inventories due to increased estimated future returns primarily related to the CPK product. There were increases in related party accounts receivable of approximately $895,000 due to peak seasonal amounts due for goods shipped to our Canadian distributor.

Net cash used in investing activities for the nine months ended December 31, ~~2020~~2021 was approximately ~~$89,000~~$78,000 as compared to approximately ~~$517,000~~$89,000 used in investing activities for the same period ended a year ~~ago. Investing activities~~ago and consisted primarily of purchases of molds and tooling for new ~~products~~products.

Net cash provided by financing activities for the nine months ended December 31, ~~2020. In~~2021 was approximately $6,979,000 compared to cash provided by financing activities of approximately $402,000 for the same period ended of the prior ~~fiscal year,~~year. We borrowed approximately $8,562,000 from our Crestmark Facility and IHC Facility for working capital. In August 2021, the Company ~~invested in a new Enterprise Resourcing Planning (ERP) system~~received net proceeds of approximately ~~$304,000~~$1,838,000 from the execution of private placement and stock redemption agreements as summarized in the next two paragraphs. These financing activities were offset by a payment of $150,000 on the subordinated related party debt, payment of deferred finance charges associated with the closing of the Crestmark and IHC Facilities of approximately $38,000 with the remaining ~~cash~~difference used to pay scheduled installments on installment notes and finance leases.

In August 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional investors and a strategic investor for private placement of (i) 16,500,001 shares of its common stock (the “Shares”) together with common warrants to purchase up to 16,500,000 shares of common stock for an exercise price of $0.35 per share, and (ii) 16,833,333 pre-funded warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock at an exercise price of $0.01 per share, together with Common Warrants to purchase up to 16,833,333 shares of common stock at an exercise price of $0.35 per share (the “Private Placement”). Shares issuable upon the exercise of the Pre-Funded Warrants and Common Warrants are hereinafter referred to as the “Warrant Shares”. The closing of the Private Placement took place on August 10, 2021, when the Shares, Common Warrants, and Pre-Funded Warrants were delivered to the purchasers and funds, in ~~investment activities consisting primarily~~the amount of ~~purchases~~approximately $9,800,000, were received by the Company. Approximately $7,200,000 of ~~new product molds~~the funds received were used to execute the Redemption Agreement as explained in the next paragraph. The Company received an increase in working capital of approximately $1,800,000 of working capital after settlement of expenses associated with closing of these transactions.

In August, 2021, the Company entered into a stock redemption agreement (the “Redemption Agreement”) with Koncepts International Limited (“Koncepts”) and ~~tooling.~~Treasure Green Holdings, Ltd. (“Treasure Green”), pursuant to which the Company agreed to redeem 19,623,155 shares of common stock of the Company (the “Redeemed Shares”). The closing of the transactions set forth in the Redemption Agreement took place on August 10, 2021, at which time the Redeemed Shares were assigned and transferred back to the Company and the Company paid approximately $7,200,000 to Koncepts and Treasure Green. The Redeemed Shares were retired and are available for reissuance in the future.

Net cash provided by financing activities for the nine months ended December 31, 2020 was approximately ~~$402,000 compared to cash provided by financing activities of approximately $140,000 for the same period ended of the prior year.~~$402,000. We received loan proceeds from Crestmark in the amount of approximately $444,000 under the Paycheck Protection Program with the remaining variance primarily due to repayments of installment and capital lease payments. In the prior fiscal year we received approximately $284,000 from a financing arrangement with Dimension Funding to finance implementation of a new Enterprise Resource Planning system. This increase in cash provided by financing activities were offset by payments of finance leases and the bank term note of approximately $136,000.

On June 16, 2020, the Company executed an Intercreditor Revolving Credit Facility with Crestmark and IHC on eligible accounts receivable and inventory which replaced the Company’s previous revolving credit facility with PNC Bank which was terminated on June 16, 2020 (See Note 56 – Bank Financing). As of this filing, we have borrowed approximately ~~$65,000~~$2,500,000 on the IHC Facility, ~~which provides for a~~is the maximum loan amount ~~of $2,500,000~~ on eligible inventory allowed by this facility and ~~had no borrowings~~borrowed approximately $1,000,000 on our Crestmark Facility which will make available up to $10,000,000 of eligible accounts receivable as the ~~next twelve months progress.~~fiscal year progresses. As of this filing the Company has approximately ~~$171,000~~no additional borrowings currently available from ~~these two credit facilities based on eligible inventory with IHC and a mandatory pay-down of~~ the Crestmark ~~Facility loan to $0 for~~facility until the ~~months~~end of ~~January and February.~~February as per the facility agreement at which time the Company will have approximately $1,000,000 available on the facility.

In August 2019, a major customer received goods that were significantly water damaged due to excess moisture absorbed in pallets shipped by the factory. As a result we incurred a loss in cash flow of approximately $1,559,000 in revenue and approximately $849,000 in additional out of pocket expenses to retrieve, inspect, warehouse and properly destroy the goods in the prior fiscal year. As of this filing we have we recovered approximately $2,336,000 from our cargo insurance coverage which settled approximately $1,268,000 in insurance claim receivable with the remaining proceeds reflected in other income and (expenses) as a gain from damaged goods insurance claim in the condensed consolidated statement of operations. For the three and nine months ended December 31, 2020 the gain from damaged goods insurance claim was approximately $0 and $1,068,000, respectively. We also secured vendor invoice credits of $390,000 from the factory that caused the damage which is reflected as gain from extinguishment of accounts payable in the condensed consolidated statement of operations for the nine months ended December 31, 2020.

On May 5, 2020, the Company received loan proceeds from Crestmark ~~Bank~~ in the amount of approximately $444,000 under the Paycheck Protection Program (“PPP”). The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest may be forgivable to the extent the Company uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eligible period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments until a forgiveness application has been accepted and reviewed by the ~~SBA,~~Small Business Administration (“SBA”), and the SBA ~~has~~ provided Crestmark with the loan forgiveness amount. In June 2021 the Company received notification from the SBA that the loan had been forgiven in its entirety. For the nine months ended December 31, 2021, a gain of approximately $448,000 (including principal and interest) from the forgiveness of the loan was included in other income and expenses in the accompanying condensed consolidated statements of income.

In August 2019, a major customer received goods that were significantly water damaged due to excess moisture absorbed in pallets shipped by the factory. As a result we incurred a loss in cash flow of approximately $1,559,000 in revenue and approximately $849,000 in additional out of pocket expenses to retrieve, inspect, warehouse and properly destroy the goods in the prior fiscal year. As of this filing we have we recovered approximately $2,336,000 from our cargo insurance coverage which settled approximately $1,268,000 in insurance claim receivable with the remaining proceeds reflected in other income and (expenses) as a gain from damaged goods insurance claim in the condensed consolidated statement of income. For the three and nine months ended December 31, 2020 the ~~Company incurred interest expense~~gain from damaged goods insurance claim was approximately $0 and $1,068,000, respectively. We also secured vendor invoice credits of ~~approximately $1,000~~$390,000 from the factory that caused the damage which is reflected as gain from extinguishment of accounts payable in the condensed consolidated statement of income for the nine months ended December 31, 2020.

We believe that current working capital, cash expected to be generated from our operating forecast, along with the availability of cash from our credit facilities (See Note 6 – BANK FINANCING) assuming that they are revised and ~~$3,000, respectively. The~~or extended, will be adequate to meet the Company’s liquidity requirements for at least twelve months from the filing of this report. As both the Crestmark Bank (“Crestmark Facility”) and the Iron Horse Credit (“IHC”) Facility (“IHC Facility”) are set to expire on June 15, 2022, the Company ~~currently~~ expects to ~~apply for forgiveness~~negotiate a revision or extension of ~~the entire loan balance.~~these debt facilities upon their maturity, however, there can be no assurance that such revision or extension will occur or at what terms.

Historically, our operations have been seasonal, with the highest net sales occurring in our second and third fiscal quarters (reflecting increased orders for systems and music merchandise during the Christmas holiday season) and to a lesser extent the first and fourth quarters of the fiscal year. Sales in our second and third fiscal quarters, combined, accounted for approximately 85% and 94% of net sales in fiscal 2020 and 2019, respectively.

Our results of operations may also fluctuate from quarter to quarter as a result of the amount and timing of orders placed and shipped to customers, as well as other factors. The fulfillment of orders can therefore significantly affect results of operations on a quarter-to-quarter basis.

The Company’s interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgement increases such judgements become even more subjective. While management believes that its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in the Company’s ~~2020 Form 10K/A.~~2021 Annual Report.

As of the end of the period covered by this ~~Quarterly Report,~~report, we conducted an evaluation, ~~as required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act,~~ under the supervision and with the participation of our ~~Chief Executive Officer~~chief executive officer and ~~Chief Financial Officer~~chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, ~~concluded that due~~as appropriate, to ~~the material weakness described below, our disclosure controls and procedures were not effective at a reasonable assurance level as of the end of the period covered by this Report.~~allow timely decisions regarding required disclosure.

~~A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding~~In connection with the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A material weakness is any deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective as of the period covered by this Quarterly Report.

~~Following the initial~~ filing of our Form 10-K for the year ended March 31, ~~2020, our Forms 10-Q for the three months ended June 30, 2020 the six months ended September 30, 2020, management~~2021, we identified a material weakness ~~in our internal controls over financial reporting that existed as of the dates of those filings~~primarily related to the ~~design and implementation of control activities intended~~consolidated financial statement close process that failed to ~~mitigate the risk that transactions be incorrectly accounted for~~detect errors which could have been material in ~~accordance with generally accepted accounting principles. Specifically, we did not maintain effective internal controls over~~ the accounting for ~~costs related~~inventory cutoff and the inventory valuation of estimated returns. Specifically, the Company currently has a deficient process to ~~our co-op promotion allowances, pursuant~~close the consolidated financial statements and prepare comprehensive and timely account analysis, due in part to ~~ASC 606, Revenue from Contract with Customers, as we incorrectly recorded these allowances as selling expenses when they should be recorded as~~ a ~~reduction in net sales. This material weakness~~new accounting software system, which resulted in material misstatements to the consolidated statements of operations for the aforementioned periods. The consolidated balance sheets, statement of cash flows, statement of shareholders’ equity, net income or loss for the affected periods remained unaffected.certain adjusting journal entries.

The Company’s management has begun to design and implement certain remediation measures to address the above-described material weakness and enhance the Company’s internal control in order to remediate this material weakness. As part of our remediation measures, the Company has identified and will implement plans to enhance the Company’s process and controls including ~~ensuring adequate resources and use~~the following measures:

Based on the progress to date of ~~accounting experts for guidance in~~implementing these remediation measures, the ~~application of new accounting standards.~~Company anticipates that this material weakness will be remediated by March 31, 2022.

There ~~was~~were no ~~change~~changes in ~~our~~the Company’s internal ~~control~~controls over financial reporting ~~identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred~~ during the ~~period covered by this report~~quarter ended December 31, 2021, that ~~has~~ materially affected, or iswere reasonably likely to materially affect ~~our~~the Company’s internal control over financial reporting.

Management is not aware of any legal proceedings other than matters that arise in the ordinary course of business.

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~DELAWARE~~delaware		95-3795478
(State of Incorporation )		(IRS Employer I.D. No.)

~~Title of each class~~		~~Trading Symbol(s)~~		~~Name of each exchange on which registered~~
~~Common Stock, Class B~~		~~SMDM~~		~~OTCQX~~

CLASS		NUMBER OF SHARES OUTSTANDING
Common Stock, $0.01 par value		~~39,040,748~~36,636,264 as of February ~~19, 2021~~11, 2022

			~~INDEX~~

		Page No.
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets – December 31, ~~2020~~2021 (Unaudited)and March 31, ~~2020~~2021	3

	Condensed Consolidated Statements of ~~Operations~~Income – Three and ~~Nine~~nine months ended December 31, ~~2020~~2021 and ~~2019 (Unaudited)~~2020(Unaudited)	4

	Condensed Consolidated Statements of Cash Flows - Nine months ended December 31, ~~2020~~2021 and ~~2019 (Unaudited)~~2020(Unaudited)	5

	Condensed Consolidated Statements of Shareholders’ Equity – Three and ~~Nine~~nine months ended December 31, 2021 and 2020 ~~and 2019~~ (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements - December 31, 2021 and 2020 (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2325

Item 4.4.	Controls and Procedures	2325

			PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2426

Item 1A.	Risk Factors	2426

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2426

Item 3.	Defaults Upon Senior Securities	2426

Item 4.	Mine Safety Disclosures	2426

Item 5.	Other Information	2426

Item 6.	Exhibits	2426

SIGNATURES		2527

	Three Months Ended				Nine Months Ended
Product Line	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
				(as restated)				(as restated)

Classic Karaoke Machines	$	8,296,000	$	9,223,000	$	25,320,000	$	26,980,000
Download Karaoke Machines		3,898,000		3,254,000		7,314,000		5,163,000
SMC Kids Toys		609,000		306,000		1,003,000		911,000
Music and Accessories		4,170,000		1,075,000		8,673,000		4,498,000

Total Net Sales	$	16,973,000	$	13,858,000	$	42,310,000	$	37,552,000

	~~[X]~~☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

		For quarter ended December 31, ~~2020~~2021

	☐
	~~[ ]~~	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from _____ to ______.

	For the Three Months Ended
	As Reported						As Restated
	December 31, 2019			Adjustment			December 31, 2019
Net Sales	$	15,519,516		$	(1,661,940	)	$	13,857,576

Cost of Goods Sold		11,486,520			-			11,486,520

Gross Profit		4,032,996			(1,661,940	)		2,371,056

Operating Expenses
Selling expenses		3,402,717			(1,661,940	)		1,740,777
General and administrative expenses		1,442,192			-			1,442,192
Depreciation		77,161			-			77,161
Total Operating Expenses		4,922,070			(1,661,940	)		3,260,130

Loss from Operations		(889,074	)		-			(889,074	)

Other Expenses
Interest Expense		(105,583	)		-			(105,583	)
Finance Costs		(3,334	)		-			(3,334	)
Total Other Expenses		(108,917	)		-			(108,917	)

Loss Before Income Tax Benefit		(997,991	)		-			(997,991	)

Income Tax Benefit		240,042			-			240,042

Net Loss	$	(757,949	)	$	-		$	(757,949	)


Revenue by Product Line

	Three Months Ended				Nine Months Ended
Product Line	December 31, 2021		December 31, 2020		December 31, 2021		December 31, 2020

Classic Karaoke Machines	$	17,732,000	$	11,998,000	$	37,216,000	$	32,337,000
Licensed Product		645,000		1,644,000		1,510,000		4,332,000
SMC Kids Toys		1,051,000		662,000		2,145,000		1,229,000
Microphones and Accessories		1,657,000		2,481,000		3,424,000		4,122,000
Music Subscriptions		159,000		188,000		384,000		290,000

Total Net Sales	$	21,244,000	$	16,973,000	$	44,679,000	$	42,310,000

	●	Advance rate shall not exceed 70% of Eligible Accounts Receivable aged less than 90 days from invoice date.
	●	Crestmark shall maintain a base dilution reserve of 1% for each 1% of dilution over 15%.
	●	Crestmark will implement an availability block of 20% of amounts due on Iron Horse Credit ~~(“IHC”)~~ Intercreditor Revolving Credit Facility.
	●	~~Mandatory pay-down of the loan to zero in January and February each year.~~

	●	Advance rate shall not exceed the lower of (a) 70% of the inventory cost or (b) 85% of Net Orderly Liquidation Value (NOLV) as determined by an independent third-party appraiser engaged by IHC.
	●	The Company must maintain a fixed charge coverage ratio test of 1:1 times measured on a rolling 12-month basis, defined as earnings before interest, taxes, depreciation and amortization (“EBITDA”) less non-financed capital expenditures, cash dividends and distributions paid and cash taxes paid divided by the sum of interest and principal on all indebtedness. ~~This financial~~The Company was not in compliance with this covenant ~~has been waived~~as of October 31, 2021 and November 30, 2021; however, waivers from default were obtained from IHC for ~~the first six months of the IHC Facility.~~these months. As of December 31, ~~2020,~~2021, the Company iswas in compliance with this covenant.

Year Ended December 31,	Revolving Line of Credit Iron Horse Credit		Installment Notes		Note Payable Payroll Protection Program		Subordinated Related Party Debt
2021	$	65,000		67,000		297,000		750,000
2022		-		73,000		149,000		53,000
2023		-		79,000		-		-
2024		-		75,000		-		-
2025 and beyond		-		3,000		-		-

Scheduled Payments	$	65,000	$	297,000	$	446,000	$	803,000

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow paid for operating leases			$	693,657
Financing cash flow paid for finance leases			$	6,184

Lease term and Discount Rate
Weighted average remaining lease term (months)
Operating leases	21.1
Finance leases	31.0
Weighted average discount rate
Operating leases	6.25	%
Finance leases	9.86	%

Range of Exercise Price		Number Outstanding at December 31, 20		Weighted Average Remaining Contractural Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2020		Weighted Average Exercise Price
$	.03 - $.38		1,150,000		4.3		0.23		1,050,000		0.23
$	.47 - $.55		550,000		6.7		0.50		550,000		0.50
	*		1,700,000						1,600,000

Range of Exercise Price		Number Outstanding at December 31, 2021		Weighted Average Remaining Contractural Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2021		Weighted Average Exercise Price
$.12 - $.38			1,160,000		2.9	$	0.24		1,050,000	$	0.24
$.47 - $.55			550,000		5.2	$	0.50		550,000	$	0.50
-*	^*		1,710,000						1,600,000

	Number of Shares
Warrants outstanding at March 31, 2021		-
Common warrants issued		34,666,667
Pre-funded warrants issued		16,833,333
Warrants outstanding at December 31, 2021		51,500,000

Number of CommonWarrants	Number of Pre-funded Warrants		Exercise Price		Expiration Date
34,666,667		-	$	0.35	9/15/2026
-		16,833,333	$	0.01	N/A-*
34,666,667		16,833,333

31.1	Certification of Gary Atkinson, Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

31.2	Certification of Lionel Marquis, Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.*

32.1	Certifying Statement of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.*

32.2	Certifying Statement of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.*

101.INS	Inline XBRL Instance Document

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

	~~THE SINGING MACHINE COMPANY, INC.~~

Date: February ~~22, 2021~~14, 2022	By:	/s/ Gary Atkinson
		Gary Atkinson
		Chief Executive Officer

		/s/ Lionel Marquis
		Lionel Marquis
		Chief Financial Officer