Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards | | Option Awards (1) | | Non-Equity incentive plan compensation | | Change in Pension Value and Non-Qualified Deferred Compensation Earnings | | All other compensation (2) | | Total Compensation | |
Yi Ping Chan (3) | | | 2007 | | $ | 245,115 | | $ | - | | $ | - | | $ | 24,000 | | $ | - | | $ | - | | $ | 56,025 | | $ | 325,140 | |
Former Interim CEO & COO | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Danny Zheng (4) | | | 2007 | | $ | 159,231 | | $ | - | | $ | - | | $ | 20,000 | | $ | - | | $ | - | | $ | 13,894 | | $ | 193,125 | |
Former Interim Chief Executive Officer & Chief Financial Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Alicia Haskamp | | | 2007 | | $ | 152,500 | | $ | - | | $ | - | | $ | 20,000 | | $ | - | | $ | - | | $ | 44,435 | | $ | 216,935 | |
Senior Vice President of Sales & Product Development | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dennis Norden (5) | | | 2007 | | $ | 126,325 | | $ | - | | $ | - | | $ | 10,000 | | $ | - | | $ | - | | $ | 12,479 | | $ | 148,804 | |
*Anton H. Handal became the Chief Executive Officer on June 21, 2007 and did not receive any compensation from the Company during fiscal year 2007Name and Principal Position | | Year | | Salary | | | Bonus | | | Stock Awards | | | Option Awards | | | Non-Equity Incentive Plan Comp | | | Non-Qualified Deferred Compensation Earnings | | | Other Comp | | | TOTAL COMP | |
Gary Atkinson (1) | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interim Chief Executive Officer | | 2010 | | $ | 82,361.73 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | $ | 82,361.73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Anton Handal (2) | | 2010 | | $ | 0.00 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | $ | 0.00 | |
Former Chief Executive Officer | | 2009 | | $ | 0.00 | | | | - | | | | - | | | $ | 11,744.00 | | | | - | | | | - | | | | - | | | $ | 11,744.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Carol Lau | | 2010 | | $ | 0.00 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | $ | 0.00 | |
Chief Financial Officer | | 2009 | | $ | 0.00 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bernardo Melo | | 2010 | | $ | 138,702.68 | | | $ | 10,000.00 | | | | - | | | | - | | | | - | | | | - | | | | - | | | $ | 148,702.68 | |
VP Global Sales & Marketing | | 2009 | | $ | 130,000.00 | | | | 29,515.95 | | | | | | | | | | | | | | | | | | | $ | 3,662.50 | | | $ | 163,178.45 | |
(1)Represents stock-based compensation expense for the fiscal year ended March 31, 2007, for stock options granted in 2007 under SFAS 123(R), Share based payments Mr. Atkinson was appointed as discussed in Note 1, “Stock Based Compensation” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed on July 16, 2007.
(2) Includes matching contributions under our 401(k) savings plan, medical and life insurance pursuant to the executive's employment agreement and other expenses described herein. For Yi Ping Chan for fiscal year 2007, this amount includes $40,000 in moving expenses per the separation agreement dated December 6, 2006. For Alicia Haskamp, a housing allowance of approximately $27,000 is included.
(3) Yi Ping Chan resigned as Interim CEO and Chief Operating Officer effective December 31, 2006. Any exercisable options expired 90 days after leaving the Company.
(4) Mr. Danny Zheng joined our Company on April 19, 2004 as financial controller and became our Chief Financial Officer on April 5, 2005 and our Interim Chief Executive Officer on JanuaryNovember 1, 2007. On June 21, 2007,2009, however his salary reported in the above table is for the full Fiscal year 2010.
(2) Mr. ZhengHandal resigned as our Interim Chief ExecutiveFinancial Officer, andeffective November 1, 2009. He did not receive a salary during Fiscal 2010. However he had an option to purchase warrants held by koncepts International Limited which expired on July 1, 2009. Upon payment of $5,000, Mr. Anton “Tony” H.Handal had the option to purchase 750,000 stock warrants in the Company with an exercise price of $0.35 per share, exercisable at any time. Mr. Handal was appointed as our Chief Executive Officer.also awarded 300,000 stock options on October 3, 2008, with an exercise price of $0.14 per share, which were not exercisable until October 3, 2009. The fair value of the option award has been calculated in accordance with FASB ASC 718-20. Those options expired January 31, 2010.
(5) Mr. Norden was terminated by the Company effective December 8, 2006. Any exercisable options expired 90 days after leaving the Company.
GRANTS OF PLAN BASED AWARDS
Name and Principal Position | | Grant Date | | All Other Option Awards: Number of Securities Underlying Options(#) | | Exercise or Base Price of Option Awards ($/Sh) (1) | | Grant Date Fair Value of Stock and Option Awards (2) | |
| | | | | | | | | |
Yi Ping Chan | | | 4/10/2006 | | | 120,000 | | $ | 0.33 | | $ | 24,000 | |
Former Interim CEO & COO | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Danny Zheng | | | 4/10/2006 | | | 100,000 | | $ | 0.33 | | $ | 20,000 | |
Chief Financial Officer & Former Interim Chief Executive Officer | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Alicia Haskamp | | | 4/10/2006 | | | 100,000 | | $ | 0.33 | | $ | 20,000 | |
Senior Vice President of Sales & Product Development | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Dennis Norden | | | 4/10/2006 | | | 50,000 | | $ | 0.33 | | $ | 10,000 | |
Former Vice President of Sales | | | | | | | | | | | | | |
(1) The exercise price of the stock option awards is equal to the closing price of the common stock as reported by the American Stock Exchange on the date of the grant of the award.
(2) Refer to Note 1 “Stock Based Compensation” in the Notes to the Consolidated Financial Statements included in our Annual Report filed July 16, 2007 on Form 10K for the relevant assumptions used to determine the valuation of our option awards.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information with respect to grants of options to purchase our common stock under our Year 2001 Stock Option Plan to the named executive officers during the fiscal year ended March 31, 2007:2010:
Name and Principal Position | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Bernardo Melo | | | 4,000 | | | | - | | | | N/A | | | | 1.97 | | 12/19/2013 | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
| | | 6,500 | | | | - | | | | N/A | | | | 1.54 | | 2/6/2014 | | | | | | | | | | | | | | | | |
| | | 20,000 | | | | - | | | | N/A | | | | 0.6 | | 5/8/2015 | | | | | | | | | | | | | | | | |
| | | 30,000 | | | | - | | | | N/A | | | | 0.33 | | 4/9/2011 | | | | | | | | | | | | | | | | |
| | | 60,500 | | | | - | | | | | | | | | | | | | | | | | | | | | | | | | | |
EMPLOYMENT AGREEMENTS
As of December 13, 2010 the Company has no employment contracts with any of its employees.
Name and Principal Position | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Exercise Price ($) | | Option Expiration Date | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Yi Ping Chan | | | - | | | - | | | N/A | | | N/A | | | N/A | |
Former Interim CEO & COO | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Danny Zheng | | | 7,200 | | | 4,800 | | | N/A | | | 1.05 | | | 4/26/2014 | |
Chief Financial Officer & Fomer Interim Chief Executive Officer | | | 23,333 | | | 46,667 | | | | | | 0.60 | | | 5/8/2015 | |
| | | 30,000 | | | - | | | | | | 0.34 | | | 1/19/2011 | |
| | | - | | | 100,000 | | | | | | 0.33 | | | 4/9/2011 | |
| | | 60,533 | | | 151,467 | | | | | | | | | | |
Alicia Haskamp | | | | | | | | | | | | | | | | |
Senior Vice President of Sales & Product Development | | | 14,400 | | | 3,600 | | | N/A | | | 9.00 | | | 10/31/2012 | |
| | | 30,000 | | | - | | | | | | 5.60 | | | 3/7/2013 | |
| | | 8,400 | | | 5,600 | | | | | | 1.97 | | | 12/19/2013 | |
| | | 10,600 | | | - | | | | | | 1.97 | | | 12/19/2013 | |
| | | 26,667 | | | 53,333 | | | | | | 0.60 | | | 5/8/2015 | |
| | | - | | | 100,000 | | | | | | 0.33 | | | 4/9/2011 | |
| | | 90,067 | | | 162,533 | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Dennis Norden | | | - | | | - | | | N/A | | | N/A | | | N/A | |
Former Vice President of Sales | | | | | | | | | | | | | | | | |
*The Company does not grant any stock-based awards
EMPLOYMENT AGREEMENTS
The Company has an employment contract with its Chief Financial Officer as of March 31, 2007. The employment agreement was entered into on July 20, 2006, with Danny Zheng, Chief Financial Officer of the Company. Based on the agreement, Mr. Zheng’s base salary is $160,000 per year. The agreement also includes a monthly car allowance of $500 per month and a bonus, which is at the sole discretion of the Company’s Board of Directors. The agreement expires on July 17, 2008. In the event of a termination without cause, as defined in the agreement, the employee would be entitled to his base salary earned up to the effective date of termination.
Mr. Zheng received a cash bonus of $12,000 in fiscal year 2006. He did not receive any cash bonus in fiscal year 2007.
We awarded Mr. Zheng options to purchase 12,000 shares of our common stock, which vest in 5 years, at an exercise price of $1.05 per share in April 2004. We awarded 70,000 stock options, which vest in 3 years, to Mr. Zheng at exercise price of $0.60 on May 9, 2005. On January 20, 2006, the Company granted 30,000 stock options, which vest in 1 year, at an exercise price of $.34 per share. On April 10, 2006, Mr. Zheng was given stock options, which vest in 1 year, to purchase 100,000 shares of our common stock at an exercise price of $.33 per share. All of these options were granted under our Year 2001 Stock Option Plan and were granted at a price that was equal to closing price of our common stock on the date of grant.
In addition, the Company entered into an employee agreement with Alicia Haskamp, Senior Vice President of Sales and Product Development, on October 4, 2006. Based on the agreement, the base salary is $160,000 per year. The agreement also includes a monthly car allowance of $500 per month and a bonus, which is based on hardware net sales revenue. The agreement expires on October 31, 2008. In the event of a termination without cause, as defined in the agreement, the employee would be entitled to their base salary earned up to the effective date of termination.
Anton H. Handal who became our Chief Executive Officer effective June 21, 2007, has no employment agreements with the Company as of the date of this report.
SEPARATION AND CONSULTING AGREEMENTS
OnAs of December 6, 2006,13, 2010 the Company entered into adid not have any separation and release agreement with Yi Ping Chan, former interim chief executive officer and chief operating officer of the Company. Per the agreement, Mr. Chan is entitled to a severance payment equal to $72,916, in addition to a relocation expense of $40,000. These amounts were included in the general and administrative expenses for the twelve months ended March 31, 2007.or consulting agreements.
EQUITY COMPENSATION PLANS AND 401(K) PLAN
We have two stock option plans: our 1994 Amended and Restated 1994 Management Stock Option Plan ("1994 Plan") and our Year 2001 Stock Option Plan ("Year 2001 Plan"). Both the 1994 Plan and the Year 2001 Plan provide for the granting of incentive stock options and non-qualified stock options to our employees, officers, directors and consultantsconsultants. As of March 31, 2007,2010, we had 13,0500 options issued and outstanding under our 1994 Plan and 1,369,840646,710 options are issued and outstanding under our Year 2001 Plan.
The following table gives information about equity awards under our 1994 Plan and the Year 2001 Plan.
PLAN CATEGORY | | NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDINGS OPTION, WARRANTS AND RIGHTS | | WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS | | NUMBER OF SECURITIES REMAINING AVAILABLE FOR EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES IN COLUMN (A)) | |
| | | | | | | |
Equity Compensation Plans approved by Security Holders | | | 1,382,890 | | $ | 1.86 | | | 625,160 | |
| | | | | | | | | | |
Equity Compensation Plans Not approved by Security Holders | | | 0 | | $ | 0 | | | 0 | |
| | | | | WEIGHTED-AVERAGE | | | NUMBER OF SECURITIES | |
| | NUMBER OF SECURITIES | | | EXERCISE PRICE OF | | | REMAINING AVAILABLE FOR EQUITY | |
| | TO BE ISSUED UPON | | | OUTSTANDING | | | COMPENSATION PLANS | |
| | EXERCISE OF OUTSTANDING | | | OPTIONS, WARRANTS | | | (EXCLUDING SECURITIES IN | |
PLAN CATEGORY | | OPTIONS, WARRANTS AND RIGHTS | | | AND RIGHTS | | | COLUMN (A)) | |
Equity Compensation Plans approved by Security Holders | | | 646,710 | | | $ | .56 | | | | 343,010 | |
| | | | | | | | | | | | |
Equity Compensation Plans Not approved by Security Holders | | | 0 | | | $ | 0 | | | | 0 | |
Our 1994 Plan was originally adopted by our Board of Directors in May 1994 and was approved by our shareholders on June 29, 1994. Our shareholders approved amendments to our 1994 Plan in March 1999 and September 2000. The 1994 Plan reserved for issuance up to 1,950,000 million shares of our common stock pursuant to the exercise of options granted under the Plan. As of March 31, 2003, we had granted all the options that are available for grant under our 1994 Plan. As of March 31, 2007,2010, we have 13,0500 options issued and outstanding under the 1994 Plan and all of these options are fully vested as of March 31, 2007..
YEAR 2001 PLAN
On June 1, 2001, our Board of Directors approved the Year 2001 Plan and it was approved by our shareholders at our special meeting held September 6, 2001. The Year 2001 Plan was developed to provide a means whereby directors and selected employees, officers, consultants, and advisors of the Company may be granted incentive or non-qualified stock options to purchase common stock of the Company. The Year 2001 Plan authorizes an aggregate of 1,950,000 shares of the Company `sCompany’s common stock with a maximum of 450,000 shares to any one individual in any one fiscal year. The shares of common stock available under the Year 2001 Plan are subject to adjustment for any stock split, declaration of a stock dividend or similar event. At March 31, 2007,2010, we have granted 1,369,8401,079,225 options under the Year 2001 Plan, 569,257586,710 of which are fully vested.
The Year 2001 Plan is administered by our Stock OptionCompensation Committee ("Committee"), which consists of two or more directors chosen by our Board. The Committee has the full power in its discretion to (i) grant options under the Year 2001 Plan, (ii) determine the terms of the options (e.g. - vesting, exercise price), (iii) to interpret the provisions of the Year 2001 Plan and (iv) to take such action as it deems necessary or advisable for the administration of the Year 2001 Plan.
Options granted to eligible individuals under the Year 2001 Plan may be either incentive stock options ("ISO's"), which satisfy the requirements of Code Section 422, or nonstatutorynon-statutory options ("NSO's"), which are not intended to satisfy such requirements. Options granted to outside directors, consultants and advisors may only be NSO's. The option exercise price will not be less than 100% of the fair market value of the Company's common stock on the date of grant. ISO's must have an exercise price greater to or equal to the fair market value of the shares underlying the option on the date of grant (or, if granted to a holder of 10% or more of our common stock, an exercise price of at least 110% of the under underlying shares fair market value on the date of grant). The maximum exercise period of ISO's is 10 years from the date of grant (or five years in the case of a holder with 10% or more of our common stock). The aggregate fair market value (determined at the date the option is granted) of shares with respect to which an ISO are exercisable for the first time by the holder of the option during any calendar year may not exceed $100,000. If that amount exceeds $100,000, our Board ofthen the Committee may designate those shares thatoption, as to the excess, will be treated as NSO's.
Options granted under the Year 2001 Plan are not transferable except by will or applicable laws of descent and distribution. Except as expressly determined by the Committee, no option shall be exercisable after thirty (30) days following an individual's termination of employment with the Company or a subsidiary, unless such termination of employment occurs by reason of such individual's disability, retirement or death. The Committee may in its sole discretion, provide in a grant instrument that upon a change of control (as defined in the Year 2001 Plan) that all outstanding optionoptions issued to the grantee shall automatically, accelerate and become full exercisable. Additionally, the obligations of the Company under the Year 2001 Plan are binding on (1) any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company or (2) any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company. In the event of any of the foregoing, the Committee may, at its discretion, prior to the consummation of the transaction, offer to purchase, cancel, exchange, adjust or modify any outstanding options, as such time and in such manner as the Committee deems appropriate.
401(K) PLAN
Effective January 1, 2001, we adopted a voluntary 401(k) plan. All employees with at least one year of service are eligible to participate in our 401(k) plan. We make a matching contribution of 100% of salary deferral contributions up to 3% of pay, plus 50% of salary deferral contributions from 3% to 5% of pay for each payroll period. The amounts charged to earnings for contributions to this plan and administrative costs during the years ended March 31, 2007, 20062010, 2009, 2008 and 20052007 totaled approximately $39,460, $39,572$15,749, $10,886, $21,674 and $30,025,$39,460, respectively.
The Report of the Executive Compensation/Stock Option Committee on Executive Compensation does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
EXECUTIVE COMPENSATION PHILOSOPHY
PHILOSOPHY
The Executive Compensation Committee believes that the Singing Machine must maintain short and long-term executive compensation plans that enable us to attract and retain well-qualified executives. Furthermore, we believe that our compensation plans must also provide a direct incentive for our executives to create shareholder value. A well designed executive compensation plan will align the interests between the executives and the shareholders as well as creating a positive environment of goals, performances and rewards.
We believe that the executive compensation should reflect the success of the management team, rather than the individual, in attaining the key operating objectives such as revenues growth, operation cost reduction, fund raising and the appreciation of the stock price. A clear measurement should be established to reward the performance. We will also evaluate our executive compensation package by comparison to similar companies to ensure the competitiveness of our compensation.
In furtherance of this philosophy, the compensation of our executives generally consists of three components: base salary, annual cash incentives and long-term performance-based incentives.
BASE SALARIES
Annual base salaries for executive officers are initially determined by evaluating the responsibility of the position and the experience and the skill sets of the individual. Also taken into consideration is the competitiveness of the market place for executive talent, including a comparison of base annual salaries with comparable positions within similar companies.
INCENTIVE CASH BONUSES
Generally, we award cash bonuses to our management employees and other employees, based on their personal performance in the past year and overall performance of our Company. The overall performance of our Company includes the revenue growth, reduction of the operation expenses, fund raising and the stock price appreciation.
LONG TERM COMPENSATION - STOCK OPTION GRANTS
We have utilized stock options to motivate and retain executive officers and other employees for the long-term. We believe that stock options closely align the interests of our executive officers and other employees with those of our stockholders and provide a major incentive to building stockholder value. Options are typically granted annually, and are subject to vesting provisions to encourage officers and employees to remain employed with the Company. Our stock options are usually granted at a price equal to or above the fair market value of our common stock on the date of grant. As such, our officers only benefit from the grant of stock options if our stock price appreciates. Generally, we try to tie bonus payments to our financial performance. However, if an individual has made significant contributions to our Company, we will provide them with a bonus payment for their efforts even if our Company's financial performance has not been strong.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
On October 17, 2003, Yi Ping Chan became our Interim Chief Executive Officer. Mr. Chan's salary was $250,000 per year, as set forth in his employment agreement. In July 2003, Mr. Chan agreed to accept 15% of his salary during the nine-month period between July 1, 2003 through March 31, 2004 in the form of stock rather than cash. We also agreed to grant Mr. Chan options to purchase 150,000 shares of our common stock, at an exercise price of $5.60 per share, of which 50,000 options vest each year and to reimburse him for moving expenses of up to $40,000. Mr. Chan has voluntarily cancelled the 150,000 options on May 10, 2006.
We did not grant any cash bonuses to Mr. Chan in fiscal 2006 or fiscal 2007.
We awarded Mr. Chan options to purchase 52,800 shares of our common stock at an exercise price of $1.97 per share in December 2003. These shares were voluntarily cancelled in fiscal year 2007. We awarded 80,000 stock options to Mr. Chan at exercise price of $0.60 on May 9, 2005. On April 10, 2006, Mr. Chan was given stock options, which vest in 1 year, to purchase 120,000 shares of our common stock at an exercise price of $.33 per share. All of these options were granted under our Year 2001 Stock Option Plan and were granted at a price that was equal to closing price of our common stock on the date of grant. Mr. Chan's options, with the exception of the options granted in fiscal 2007, vest at a rate of one-third per year over a period of three years. Mr. ChanAnton Handal resigned as Interim Chief Executive Officer of the Company effectiveon November 1, 2009. Gary Atkinson was appointed as of December 31, 2006.
Danny Zheng served as the Company’s Interim Chief Executive Officer from January 1, 2007 through June 21, 2007. During this time,effective the same date. Mr. Zheng hadAtkinson does not have an employment contract with the Company and has an annual salary of $86,000. Mr. Atkinson’s reported salary amount for Fiscal 2010, as shown in the Chief Financial Officer position, which was entered into on July 20, 2006. Based on the agreement, Mr. Zheng’s basetable above, is less than his salary is $160,000 per year. The agreement also includesdue to a monthly car allowance of $500 per month and a bonus, which is at the sole discretion of the Company’s Board of Directors. The agreement expires on July 17, 2008. Mr. Zheng was not granted any cash bonuses in fiscal 2007.Company-wide temporary 10% pay reduction imposed during Fiscal 2010.
COMPENSATION COMMITTEE REPORT
The compensation committee is responsible for discharging the responsibilities of the board with respect to compensation of executive officers. The compensation committee sets performance goals and objectives for the chief executive officer and the other executive officers, evaluates their performance with respect to those goals and sets their compensation based upon the evaluation of their performance. The compensation committee assesses the information it receives in accordance with its business judgment. The compensation committee also periodically reviews director compensation. All decision with respect to executive and director compensation are approved by the compensation committee and recommended to the full board of directors for ratification.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis (the “CD&A”) for the year ended March 31, 20072010 with management. In reliance on the reviews and discussions referred to above, the compensation committee recommended to the board, and the board has approved, that the CD&A be included in the Company’s Annual Report on Form 10-K for the year ended March 31, 20072010 that was filed with the SEC on July 16, 2007.14, 2010.
Submitted by the Compensation Committee of the Board of Directors:
Carol Lau (Chairwoman), Jay Bauer & Harvey Judkowitz | Harvey Judkowitz and Stewart Merkin |
The members of our Executive Compensation Committee in the fiscal year ended March 31, 20072010 were Ms. Carol Lau (Chairwoman), Messrs. Judkowitz and Bauer.Merkin. None of the members of the Compensation Committee in fiscal 20072010 were or are current officers or employees of the Singing Machine or any of its subsidiaries. None of these persons have served on the board of directors or on the compensation committee of any other entity that has an executive officer serving on our board of directors or on our Compensation Committee.
OWNERS AND MANAGEMENT
The following table sets forth as of OctoberJuly 1, 20072010 (the “record date”), certain information concerning beneficial ownership of our common stock by:
| · | all directors of the Singing Machine, |
· | all named executive officers of the Singing Machine; and |
· | persons known to own more than 5% of our common stock. |
We had 29,948,876Security ownership is based on 37,585,794 shares of our common stock issued and outstanding. In addition,computing the following amounts were included as they will benumber and percentage of shares beneficially owned by a person, shares of common stock subject to convertible securities and options currently convertible or exercisable, or convertible or exercisable within 60 days of OctoberJuly 1, 2007: 2,500,000 stock warrants and 984,593 stock options issued under2010, are counted as outstanding, but these shares are not counted as outstanding for computing the 1994 and 2001 Stock Option Plans.percentage ownership of any other person.
As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days. Unless otherwise noted beneficial ownership consistsbelow, and subject to applicable property laws, to our knowledge each person has sole investment and sole voting power over the shares shown as beneficially owned by them. Unless otherwise noted, the principal address of sole ownership, votingeach of the directors and investment rights.officers listed below is c/o The Singing Machine Company, Inc., 6601 Lyons Road, Building A-7, Coconut Creek, FL 33073.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
As of June 15, 2010
Name and Address of Beneficial Owner | | Amount and Nature of Certain Beneficial Ownership of Common Stock | | | Percentage of outstanding shares of common stock | |
| | | | | | |
Security Ownership of Management: | | | | | | |
Gary Atkinson | | | 7,753 | | | | * | |
Anton Handal | | | - | | | | * | |
Lionel Marquis | | | - | | | | * | |
Bernardo Melo (1) | | | 60,500 | | | | * | |
Bernard Appel (2) | | | 162,305 | | | | * | |
Harvey Judkowitz (2) | | | 172,305 | | | | * | |
Carol Lau (2) | | | 68,857 | | | | * | |
Yat Tung Lau (2) | | | 68,857 | | | | * | |
Peter Hon (2) | | | 68,857 | | | | * | |
Stewart Merkin (2) | | | 139,958 | | | | * | |
Officers & Directors as a Group (9 persons) | | | 749,392 | | | | 2.0 | % |
| | | | | | | | |
Security Ownership of Certain Beneficial Owners: | | | | | | | | |
koncepts International Ltd. (3) | | | 19,932,679 | | | | 51.3 | % |
Arts Electronics Ltd. (4) | | | 3,745,917 | | | | 10.0 | % |
Gentle Boss Investments Ltd (5) | | | 2,100,000 | | | | 5.6 | % |
| | | | | | | | |
* Less than 1% | | | | | | | | |
| | | | | | | | |
Total Shares of Common Stock as of June 15, 2010 | | | 37,585,794 | | | | | |
Stock Options Exercisable within 60 days of June 15,2010 | | | 1,836,710 | | | | | |
| | | | | | | | |
Total | | | 39,422,504 | | | | | |
Name and position of owner | | Title of Class | | Shares of Common Stock (1) | | Percent of Common Stock | |
| | | | | | | |
Yi Ping Chan | | | Common Stock | | | 21,580 | | | * | |
Former Interim CEO snd Chief Operating Officer | | | | | | | | | | |
| | | | | | | | | | |
Danny Zheng | | | Common Stock | | | 186,267 | | | * | |
Chief Financial Officer & Former Chief Executive Officer | | | | | | | | | | |
| | | | | | | | | | |
Alicia Haskamp | | | Common Stock | | | | | | | |
Senior Vice President of Sales and Product Development | | | | | | 266,733 | | | * | |
| | | | | | | | | | |
Dennis Norden | | | Common Stock | | | | | | | |
Former Vice President of Sales | | | | | | - | | | * | |
| | | | | | | | | | |
Joseph Bauer (2) | | | Common Stock | | | 1,336,141 | | | 4.00% | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Bernard Appel | | | Common Stock | | | 74,022 | | | * | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Harvey Judkowitz | | | Common Stock | | | 74,022 | | | * | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Carol Lau | | | Common Stock | | | 574 | | | * | |
Chairwoman | | | | | | | | | | |
| | | | | | | | | | |
Yat Tung Lau | | | Common Stock | | | 574 | | | * | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Peter Hon | | | Common Stock | | | 574 | | | * | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Marc Goldberg | | | Common Stock | | | 2,688 | | | * | |
Former Director | | | | | | | | | | |
| | | | | | | | | | |
Stewart Merkin | | | Common Stock | | | 51,675 | | | * | |
Director | | | | | | | | | | |
| | | | | | | | | | |
Koncept International Ltd (3) | | | Common Stock | | | 17,875,536 | | | 53.55% | |
Majority Shareholder | | | | | | | | | | |
| | | | | | | | | | |
Gentle Boss Investments Ltd | | | Common Stock | | | 2,100,000 | | | 6.29% | |
Shareholder | | | | | | | | | | |
| | | | | | | | | | |
All Directors and Executive Officers as a Group | | | Common Stock | | | 1,748,117 | | | 5.24% | |
(1) Includes stock options to purchase 60,500 shares of common stock, which is exercisable within 60 days of the record date.
(2) Includes as to the person indicated, the following outstanding stock options to purchase shares of the Company’s Common Stock issued under the 1994 and 2001 Stock Option Plans, which will be vested and exercisable within 60 days of October 1, 2007: 186,267 options held by Danny Zheng; 1666,733 options held by Alicia Haskamp; 102,740 options held by Jay Bauer; 60,000the record date: 120,000 options held by Bernie Appel; 60,000120,000 options held by Harvey Judkowitz, 100,000 held by Stewart Merkin, and 40,000 held by Stewart Merkin.each of Carol Lau, Peter Hon, and Yat-Tung Lau.
(3) Includes 138,423 shares held individually by Mr. Bauer, 299,016 held by Mr. Bauer’s wife, 178,374 held jointly by Mr. Bauer and his wife, 369,400 shares held by Mr. Bauer’s pension account, 245,500 shares held in Mr. Bauer’s Family LTD Partnership, 2,688a common stock purchase warrant to purchase 1,250,000 shares of common stock, for fiscal year 2007 service and 102,740 issuable upon the exercise of stock options that can bewhich is exercisable within 60 days of October 1, 2007.
the record date. The address for koncepts International Limited is 5/F Shing Dao Industrial Bldg, 232 Aberdeen Main Road, Aberdeen China.
(3) Includes 2,500,000 stock warrants exercised on April 10, 2007.(4) The address for Arts Electronics Ltd. is Room 101, Fo Tan Ind CTR 1/F, 26-28 Au Pui Wan, Fo Tan, Shatin N.T. Hong Kong.
(5) The address for Gentle Boss Investments Ltd. is Unit 6, 9/F, Tower B, 55 Hoi Yuen Road, Kwun Tong, Kowloon Hong Kong.
On or about July 10, 2003, an officer and two directorsThere are no other family relationships among any of our Company advanced $1 million to our Company pursuant to written loan agreements. The officerofficers or other directors, except for Chairwoman Carol Lau who is Yi Ping Chanthe aunt of Director Yat Tung Lau and the directors were Josef A. Bauermother of Gary Atkinson, the Company’s Interim Chief Executive Officer and Howard Moore. Mr. Moore resigned from our Board, effective as of October 17, 2003. Additionally, Maureen LaRoche, a business associate of Mr. Bauer, participated in the financing. The loans are subordinated to the factoring company and accrued interest at 9.5% per annum. These loans were originally scheduled to be repaid by October 31, 2003, but were extended past March 31, 2006. All interest was accrued, and the unpaid amount totaled approximately $9,500 as of March 31, 2007. A portion of the loans and the accrued interest in the amount of $409,500 has been converted into 563,274 shares of common stock at $0.72 per share on January 5, 2005. In addition, another portion of the loans in the amount of $200,000 has been converted into 277,778 shares of common stock on May 18, 2005. On December 4, 2006, Yi Ping Chan was repaid $25,244 ($25,000 principle and $244 interest). On November 29, 2005 Maureen LaRoche was repaid $107,917 ($100,000 principle and $7,917 interest) and $50,000 of principle on August 15, 2006. The balance of related party loan as of March 31, 2007 was $225,000. The remainder of the loans will be extended for 3 years at an interest rate of 5.5%.General Counsel.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
The Audit Committee is responsible for assisting the Board in monitoring (1) the quality and integrity of our financial statements, (2) our compliance with regulatory requirements and (3) the independence and performance of our independent auditors. Among other responsibilities, the Audit Committee reviews, in its oversight capacity, our annual financial statement with both management and the independent auditors and meets periodically with our independent auditors to consider their evaluation of our financial and internal controls. The Audit Committee also recommends to the Board of Directors the selection of the company's independent certified public accountants. The Audit Committee is composed of three directors and operates under a written charter adopted and approved by the Board of Directors. During fiscal 2007,2010, all of the Audit Committee members were non-employee directors and were independent as defined by the AMEX listing standardsapplicable rules in effect during fiscal 2007.2010. The members of the Audit Committee during fiscal 20072010 were Harvey Judkowitz, Bernard Appel and Stewart Merkin. Mr. Judkowitz served as the Chairman of the Audit Committee.
In discharging its duties during fiscal 2007,2010, the Audit Committee met with and held discussions with management and our independent auditors, Berkovits, LagoMallah, Furman & Company, LLP.PA. Management represented to the independent auditors that our audited financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee also discussed with Berkovits, LagoMallah, Furman & Company, LLPPA the matters required to be discussed by Statement on Auditing Standards No. 61, "Communications with Audit Committees." In addition, Berkovits, LagoMallah, Furman & Company, LLP,PA, provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1, "Independence Discussion with Audit Committees," and the Audit Committee discussed with Berkovits, LagoMallah, Furman & Company, LLP,PA, its independence.
Based on the above-mentioned review and discussions with management and the independent auditors, the representations of management and the report of the independent auditors to our committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2007.2010.
Audit Committee
Harvey Judkowitz, Chairman
Bernard Appel
Stewart Merkin
The sevensix persons set below are proposed to be elected as directors at the Annual Meeting. If elected, each of these directors will hold office until the next Shareholder meeting in 20082012 or until his or her successor is duly elected and qualified.
Bernard Appel
Josef Bauer
Peter Hon
Harvey Judkowitz
Carol Lau
Yat Tung Lau
Stewart Merkin
All of the nominees are currently serving as directors. Each nominee has agreed to be named in this Proxy Statement and to serve as a director if elected. For biographical information regarding the nominees, see "Management" section of this Proxy Statement. Management expects that each nominee will be available for election, but if any of them is not a candidate at the time when the election occurs, it is intended that such proxy will be voted for the election of another nominee to be designated by the Board of Directors to fill such vacancy.
Vote Required and Recommendation
Assuming a quorum is present, the seven nominees for election to the Board of Directors who receive the greatest number of votes cast for the election of directors by the shares present, in person or by proxy, shall be elected directors. Shareholders do not have the right to cumulate their votes for directors. In the election of directors, an abstention or broker non-vote will have no effect on the outcome.
The Board recommends stockholders to vote "for" each of the nominees for director set forth above.
We are asking our shareholders to ratify the Audit Committee's appointment of Berkovits, LagoMallah, Furman & Company, LLPPA as our independent certified public accountants for the fiscal year ending March 31, 2008.2011. In the event the shareholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent auditing firm at any time during the year if the Audit Committee determines that such a change would be in our company and our shareholder's best interests.
We engaged Berkovits, LagoMallah, Furman & Company, LLPPA as our independent auditor on October 15, 2004 and Berkovits, LagoMallah, Furman & Company, LLPPA audited our consolidated financial statements for the fiscal years ended March 31, 2007, March 31, 20062010 and March 31, 2005.2009. Representatives of Berkovits, LagoMallah, Furman & Company, LLPPA are expected to be present at the meeting and will have the opportunity to make a statement if they desire to do so. It is also expected that they will be available to respond to appropriate questions.
The following is a summary of the fees billed to the Singing Machine by Berkovits, Lago & Co, LLP, HLB Hodgson Impey Cheng and Grant Thornton, LLPMallah Furman, Certified Public Accountants for professional services rendered for the fiscal years ended March 31, 2007Fiscal 2010 and 2006:Fiscal 2009:
Fee Category | | Fiscal 2007 | | Fiscal 2006 | | | Fiscal 2010 | | | Fiscal 2009 | |
| | | | | | | | | | | |
Audit Fees | | $ | 227,675 | | $ | 136,693 | | | $ | 132,147 | | | $ | 134,950 | |
Tax Fees | | | 15,000 | | | 18,500 | | | | 15,000 | | | | 11,000 | |
All Other Fees | | | 1,150 | | | 1,500 | | | | 1,000 | | | | 1,954 | |
| | | | | | | | | | | | | | | |
Total Fees | | $ | 243,825 | | $ | 156,693 | | | $ | 148,147 | | | $ | 147,904 | |
Audit Fees - Consists of fees billed for professional services rendered for the audit of the Singing Machine's consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that were provided by Mallah Furman, Certified Public Accountants (formerly Berkovits Lago & Co, LLP, HLB Hodgson Impey Cheng and Grant Thornton LLPLLP) in connection with statutory and regulatory filings or engagements. For fiscal year 2007 amount also includes approximately $47,000 for audit fees in conjunction with acquisition by Starlight.engagements
Tax Fees - - Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.
All Other Fees - Consists of fees for products and services other than the services reported above.
Out of the total fiscal 2007Fiscal 2010 and fiscal 2006Fiscal 2009 audit and other fees, $164,774$127,890 and $133,443$134,950 were billed by Berkovits, Lago and Co., LLP,Mallah Furman, Certified Public Accountants respectively.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Audit Committee's policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
Vote Required and Recommendation
The ratification of the selection of, as our independent certified public accountants Berkovits, Lago andMallah, Furman & Company, LLPPA for the fiscal year ending March 31, 2008,2011, requires the affirmative vote of the holders of a majority of shares of the Company's common stock, present in person or by proxy at the annual meeting.
The Board recommends shareholders to vote "for" the ratification of the selection of Berkovits, Lago andMallah, Furman & Company, LLP,PA, as our independent auditors for the fiscal year ended March 31, 2008.2011.
We are mailing copies of our Annual Report on Form 10-K for the year ended March 31, 20072010 with this proxy statement to our shareholders of record as of October 1, 2007.December 15, 2010.
STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
We have adopted a procedure approved by the SEC called "householding." Under this procedure, certain stockholders of record who have the same address and last name will receive only one copy of our Annual Report, Proxy Statement and any additional proxy soliciting materials sent to stockholders until such time as one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure will reduce duplicate mailings and save printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to receive separate proxy cards.
If you received a household mailing this year, and you would like to have additional copies of our Annual Report and Proxy Statement mailed to you, please submit your request to Corporate Secretary, The Singing Machine Company, Inc., 6601 Lyons Road, Bldg. A-7, Coconut Creek, FL 33073, or call (954) 596-1000. Upon your request, we will promptly deliver a separate copy of our Annual Report and Proxy Statement. You may also contact us at the address or phone number above if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future. If you would like to opt out of householding for future mailings, call (954) 596-1000 or send a written request to the Corporate Secretary at the above address, and your request will be effective within 30 days.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Under SEC rules, any stockholder who intends to present a proposal at our next Annual Meeting of Stockholders must submit the proposal, in writing, so that we receive it at our principal executive office by June 5, 2008September 15, 2010 in order for the proposal to be included in our Proxy Statement and proxy for such meeting. The submission of a stockholder proposal does not guarantee that it will be included in our Proxy Statement. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
PROXY SOLICITATION COSTS
The proxies being solicited hereby are being solicited by the Company. The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this Proxy Statement, the Proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. Officers and regular employees of the Company may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock.
As of the date of this Proxy Statement, we are not aware of any matter to be presented for action at the meeting other than the matters set forth above. If any other matter is properly brought before the meeting for action by shareholders, proxies in the enclosed form returned to us will be voted in accordance with the recommendation of the Board of Directors, or in the absence of such a recommendation, in accordance with the judgment of the proxy holders.
Coconut Creek, Florida
October 10, 2007December 13, 2010
THE SINGING MACHINE COMPANY, INC.
PROXY FOR ANNUAL MEETING TO BE HELD ON NOVEMBER 5, 2007JANUARY 13, 2011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Carol Lau as proxy, with the power to appoint his substitute, to represent and to vote all the shares of common stock of The Singing Machine Company, Inc. (the "Company"), which the undersigned would be entitled to vote, at the Company's Annual Meeting of Stockholders to be held on November 5, 2007 Thursday, January 13, 2011 and at any adjournments thereof, subject to the directions indicated on the reverse side hereof.
In their discretion, the proxy is authorized to vote upon any other matter that may properly come before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--ThisIMPORTANT—This Proxy must be signed and dated on the reverse side.
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of The Singing Machine Company, Inc. to be held at the Company’s executive offices located at 6601 Lyons Road, Building A-7, Coconut Creek, Florida 33073, on Monday, November 5, 2007,Thursday, January 13, 2011, beginning at 9:00 a.m. local time.
Please read the proxy statement which describes the proposals and presents other important information, and complete, sign and return your proxy promptly in the enclosed envelope.
| VOTING BY MAIL | |
| Simply mark, sign and date your proxy card and return it in the postage-paid envelope. | |
COMPANY NUMBER | | CONTROL NUMBER |
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 & 2
1. | Election of Directors Nominees: | | FOR | WITHHOLD | WITHHOLD |
| Nominees: | | | |
Bernard Appel | | | | |
Josef Bauer | | | | |
Peter Hon | | | | |
Harvey Judkowitz | | | | |
Carol Lau | | | | |
Yat Tung Lau | | | | |
Stewart Merkin | | | | |
| _____ | | | |
| Bernard Appel | ¨ | ¨ | |
| Peter Hon | ¨ | ¨ | |
| Harvey Judkowitz | ¨ | ¨ | |
| Carol Lau | ¨ | ¨ | |
| Yat Tung Lau | ¨ | ¨ | |
| Stewart Merkin | ¨ | ¨ | |
_________________________________________________________________________ | | |
| (Except nominee(s) written above) | | | | |
| | | FOR | | AGAINST | | ABSTAIN |
| | | | | |
|
2. | Proposal to ratify Berkovits LagoMallah, Furman & Company, LLP PA as the Company’s independent auditors for fiscal year 2008 | | o | | | ¨ | ¨ | ¨ |
If you plan to attend the Annual Meeting please mark this boxo
¨
Dated:________________ 200_
Signature ______________________________________________________________________
Name (printed) _________________________________________________________________
Title __________________________________________________________________________
Important: Please sign exactly as name appears on this proxy. When signing as attorney, executor, trustee, guardian, corporate officer, etc., please indicate full title.