| SUMMARY OF ACCOUNTING POLICIES | NOTE
3 - SUMMARY OF ACCOUNTING POLICIES PRINCIPLES
OF CONSOLIDATION AND BASIS OF PRESENTATION 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, 2021 and 2020 have been prepared in accordance with accounting principles
generally accepted 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 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
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December
31, 2021 and 2020 (Unaudited) The
condensed consolidated balance sheet information as of March 31, 2021 was derived from the audited consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021. The interim condensed consolidated financial
statements should be read in conjunction with that report. USE
OF ESTIMATES 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. COLLECTABILITY
OF ACCOUNTS RECEIVABLE 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 co-op program incentives, defective returns, return freight and handling charges
that are deducted from open invoices and reduce collectability of open invoices. FOREIGN
CURRENCY TRANSLATION 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 income and translations are recorded in a separate component of shareholders’ equity. Any such amounts were not material during
the periods presented. CONCENTRATION
OF CREDIT RISK 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, 2021 and March 31, 2021 are approximately $ 125,000 225,000 Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable. INVENTORY 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 allowance programs. As of December 31, 2021 and March 31, 2021 the estimated amounts for
these future inventory returns were approximately $ 1,978,000 528,000 934,000 636,000 DEFERRED
FINANCING COSTS 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 2021, the Company incurred approximately $ 38,000 LONG-LIVED
ASSETS 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 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
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December
31, (Unaudited) LEASES 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
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 financing interest rate for its finance leases. PROPERTY
AND EQUIPMENT 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. FAIR
VALUE OF FINANCIAL INSTRUMENTS 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 related parties approximates fair value due to the
relatively short period to maturity for these instruments. The carrying amounts on the notes payable, finance leases and installment
notes approximate fair value either due to the relatively short period to maturity or the related interest is accrued at a rate similar
to market rates. The carrying amounts on the revolving line of credit approximates fair value due the relatively short period to maturity
and related interest accrued at market rates. REVENUE
RECOGNITION AND RESERVE FOR SALES RETURNS 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. 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 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, 2021 and 2020 co-op promotion incentives were approximately
$ 796,000 858,000 1,805,000 2,032,000 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 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 11 – Geographical Information). THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December
31, 2021 and 2020 (Unaudited) 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 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 were approximately $ 2,922,000 960,000 Revenue
is derived from five different major product lines. Disaggregated revenue from these product lines for the three and nine months ended
December 31, 2021 and 2020 consisted of the following: SCHEDULE
OF DISAGGREGATION OF REVENUE
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 SHIPPING
AND HANDLING COSTS 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, 2021 and 2020 shipping and handling
expenses were approximately $ 369,000 512,000 654,000 900,000 STOCK
BASED COMPENSATION 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 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, 2021 and 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, 2021 and 2020, the stock option expense was approximately
$ 3,000 5,000 16,000 5,000 RESEARCH
AND DEVELOPMENT COSTS 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 income. For the three months ended December 31, 2021 and 2020, these amounts totaled
approximately $ 11,000 33,000 61,000 48,000 INCOME
TAXES 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. 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, 2021 and 2020 we estimated our effective tax rate to be approximately 11 23 638,000 887,000 103,000 264,000 249,000 1,006,000 THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December
31, 2021 and 2020 (Unaudited) 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% COMPUTATION
OF EARNINGS PER SHARE 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, 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 53,410,249 38,885,185 46,787,545 38,667,221
Effect
of dilutive stock options 225,119 271,296 322,309 373,853
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 16,833,333 225,000 322,000 271,000 374,000 35,416,667 730,000 RECENT
ACCOUNTING PRONOUNCEMENTS In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326) The
amendments in ASU 2016-03 for smaller reporting companies are effective for the Company beginning 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. | NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF ACCOUNTING POLICIES PRINCIPLES
OF CONSOLIDATION The
accompanying consolidated financial statements include the accounts of the Company, its Macau Subsidiary, SMCL, and SMCM. All inter-company
accounts and transactions have been eliminated in consolidation for all periods presented. USE
OF ESTIMATES 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 statements. However, circumstances could change which may alter future expectations. COLLECTIBILITY
OF ACCOUNTS RECEIVABLE 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% FOREIGN
CURRENCY TRANSLATION 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 statement of operations and translations
would be recorded in a separate component of shareholders’ equity. Any such amounts were not material during the periods presented. Concentration
of Credit Risk At
times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured
amounts. The Company maintains cash balances in foreign financial institutions. The amounts at foreign financial institutions at March
31, 2021 and 2020 were approximately $ 0.2 THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS March
31, 2021 and 2020 Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable. INVENTORY 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 allowance programs. As of March 31, 2021 and March 31, 2020 the estimated amounts for these
future inventory returns were approximately $ 1.0 1.4 0.6 0.4 LONG-LIVED
ASSETS 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 Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-05, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” PROPERTY
AND EQUIPMENT 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. FAIR
VALUE OF FINANCIAL INSTRUMENTS 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, accounts payable, accrued expenses,
customer deposits, refunds due to customers, and due to related parties approximates fair value due to the relatively short period to
maturity for these instruments. The carrying amounts on the notes payable, finance leases and installment notes approximate fair value
either due to the relatively short period to maturity or the related interest is accrued at a rate similar to market rates. The carrying
amounts on the revolving line of credit approximates fair value due the relatively short period to maturity and related interest accrued
at market rates. REVENUE
RECOGNITION AND RESERVE FOR SALES RETURNS 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 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. 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 selectively participates in a retailer’s co-op promotion 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. Co-op promotion incentives were approximately $ 2.0 2.9 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. 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 consolidated statements of operations as our underlying customer agreements are
less than one year. THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS March
31, 2021 and 2020 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 10 – SEGMENT 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 from the customer 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 were approximately $ 1.0 1.2 During
fiscal 2021 and 2020 revenue was derived from five different major product lines. Disaggregated approximate revenue from these product
lines consisted of the following: SCHEDULE OF DISAGGREGATION OF REVENUE
Product Line March 31, 2021 March 31, 2020
Revenue by Product Line
Fiscal Years Ended
Product Line March 31, 2021 March 31, 2020
Karaoke Machines $ 34,700,000 $ 32,600,000
Licensed Products 4,700,000 2,000,000
Microphones and Accessories 4,700,000 2,600,000
SMC Kids Toys 1,300,000 900,000
Music Subscriptions 400,000 400,000
Total Net Sales $ 45,800,000 $ 38,500,000 SHIPPING
AND HANDLING COSTS 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 both Fiscal 2021 and 2020 shipping and handling expenses were approximately
$ 1.2 STOCK-BASED
COMPENSATION 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 consolidated statement of operations 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 in fiscal years 2021 and 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 years ended March 31, 2021 and 2020, the stock option expense was approximately $ 10,000 20,000 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.
● For
the year ended March 31, 2021: expected dividend yield of 0% .18% 146.7% three years
● For
the year ended March 31, 2020: expected dividend yield of 0% 2.08 194.5% three years The
Company’s directors were issued shares of stock as compensation for their service. For the years ended March 31, 2021and 2020,
the stock compensation expense to directors was $ 12,500 RESEARCH
AND DEVELOPMENT COSTS All
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 consolidated statements of operations. For both years ended March 31, 2021 and 2020, these amounts totaled
approximately $ 0.1 THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS March
31, 2021 and 2020 INCOME
TAXES 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. 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% COMPUTATION
OF EARNINGS (LOSS) PER SHARE Computation
of dilutive shares for fiscal years ended March 31, 2021 and 2020 are as follows: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNING PER SHARE
Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2020
Basic weighted average common shares outstanding 38,760,092 38,532,889
Effect of dilutive stock options 368,558 -
Diluted weighted average of common shares outstanding 39,128,650 38,532,889 Basic
net income per share is based on the weighted average number of shares of common stock outstanding during the period. 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 Company common stock at the average market price during the period using the
treasury stock method. 750,000 2,230,000 ADOPTION
OF NEW ACCOUNTING STANDARDS In
December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740). RECENT
ACCOUNTING PRONOUNCEMENTS: In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326) THE
SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS March
31, 2021 and 2020 |
