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<SEC-DOCUMENT>0001116502-02-001004.txt : 20020723
<SEC-HEADER>0001116502-02-001004.hdr.sgml : 20020723
<ACCEPTANCE-DATETIME>20020723142906
ACCESSION NUMBER:		0001116502-02-001004
CONFORMED SUBMISSION TYPE:	10KSB/A
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20020331
FILED AS OF DATE:		20020723

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SINGING MACHINE CO INC
		CENTRAL INDEX KEY:			0000923601
		STANDARD INDUSTRIAL CLASSIFICATION:	PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652]
		IRS NUMBER:				953795478
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10KSB/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24968
		FILM NUMBER:		02708452

	BUSINESS ADDRESS:	
		STREET 1:		6601 LYONS ROAD
		STREET 2:		BLDG A-7
		CITY:			COCONUT CREEK
		STATE:			FL
		ZIP:			33073
		BUSINESS PHONE:		9545961000

	MAIL ADDRESS:	
		STREET 1:		6601 LYONS ROAD BLDG
		CITY:			COCONUT CREEK
		STATE:			FL
		ZIP:			33073
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB/A
<SEQUENCE>1
<FILENAME>singingmachine-10ka.txt
<DESCRIPTION>AMENDED ANNUAL REPORT
<TEXT>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-KSB/A

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 2002

                                    0 - 24968
                                    ---------
                             Commission File Number

                        THE SINGING MACHINE COMPANY, INC.
                        ---------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

                Delaware                                   95-3795478
- ---------------------------------------      ----------------------------------
        (State of incorporation)            (I.R.S. Employer Identification No.)

             6601 Lyons Road, Building A-7, Coconut Creek, FL 33073
             ------------------------------------------------------
                    (Address of principal executive offices)

                                 (954) 596-1000
                                 --------------
                (Issuer's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
   --------------------------------------------------------------------------
   Title of each class              Name of each Exchange on which Registered
      Common Stock                            American Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------
                                      None

Check whether the Issuer: (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports); and (2) has been
subject to such filing requirements for the past 90 days. |X| Yes |_| No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|

 State issuer's revenues for its most recent fiscal year:  $61,828,894.


The aggregate market value of the Registrant's voting stock held by
non-affiliates, based upon the closing price for the common stock of $10.00 per
share as reported on the American Stock Exchange on July 17, 2002 was
approximately $52,611,730 (based on 8,100,953 shares outstanding).

ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS: Indicate
whether the Issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. |X| Yes |_| No

APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the Issuer's classes of common stock, as of the latest practicable date.

There were 8,134,701 shares of common stock, issued and outstanding at July 22,
2002.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

Transitional Small Business Disclosure Format (check one):  Yes |_|  No |X|

<PAGE>

                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY


                      INDEX TO ANNUAL REPORT ON FORM 10-KSB

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2002

<TABLE>
<CAPTION>

                                                                                                      PAGE
                                     PART I

<S>            <C>                                                                                    <C>
Item 1.       Business                                                                                  1
Item 2.       Properties                                                                                5
Item 3.       Legal Proceedings                                                                         5
Item 4.       Submission of Matters to a Vote of Security Holders                                       5

                                    PART II

Item 5.       Market for Company's Common Equity and Related Stockholder Matters                        6
Item 6.       Management's Discussion and Analysis of Financial Condition and Results of                7
              Operations
Item 7.       Financial Statements                                                                     19
Item 8.       Changes in and Disagreements with Accountants on Accounting and Financial                19
              Disclosure

                                    PART III

Item 9.       Directors, Executive Officers, Promoters and Control Persons; Compliance with            19
              Section 16(a) of the Exchange Act
Item 10.      Executive Compensation                                                                   21
Item 11.      Security Ownership of Certain Beneficial Owners and Management                           26
Item 12.      Certain Relationships and Related Transactions                                           27
Item 13.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K                         28

SIGNATURES                                                                                             31
</TABLE>

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 10-KSB, including
without limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," "intends," and words of similar import, constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the section entitled "Management's Discussion and Analysis of
Financial Position and Results of Operations - Factors That May Affect Future
Results and Market Price of Stock."

Readers are cautioned not to place undue reliance on these forward- looking
statements, which reflect management's opinions only as of the date hereof. The
Company undertakes no obligation to revise or publicly release the results of
any revisions to these forward- looking statements. Readers should carefully
review the risk factors described in other documents the Company files from time
to time with the Securities and Exchange Commission.



<PAGE>

                                     PART I

FORWARD STOCK SPLIT

         On March 14, 2002, The Singing Machine Company, Inc. declared a 3-for-2
stock split to its stockholders of record as of March 4, 2002. All information
in this Annual Report on Form 10-KSB has been restated to give effect to this
3-for-2 stock split.

ITEM 1. BUSINESS
        --------

OVERVIEW

         The Singing Machine Company, Inc. (the "Company," "we" or "us") is
engaged in the production, distribution, marketing and sale of consumer karaoke
audio equipment, accessories and music. We contract for the manufacture of all
electronic equipment products with factories located in the Far East. We also
produce and market karaoke music, including CD plus graphics ("CD+G's"), and
audiocassette tapes containing music and lyrics of popular songs for use with
karaoke recording equipment. One track of those tapes offers music and vocals
for practice and the other track is instrumental only for performance by the
participant. Virtually all of the cassettes sold by us are accompanied by
printed lyrics, and our karaoke CD+G's contain lyrics, which appear on the video
screen. We contract for the reproduction of music recordings with independent
studios.

         We were incorporated in California in 1982. We originally sold our
products exclusively to professional and semi-professional singers. In 1988, we
began marketing karaoke equipment for home use. We believe we were the first
company to offer karaoke electronic recording equipment and music for home use
in the United States.

         In May 1994, we merged into a wholly owned subsidiary incorporated in
Delaware with the same name. As a result of that merger, the Delaware
corporation became the successor to the business and operations of the
California corporation and retained the name The Singing Machine Company, Inc.
In July 1994, we formed a wholly owned subsidiary in Hong Kong, now known as
International SMC (HK) Ltd. ("International SMC"), to coordinate our production
and finance in the Far East.

         In November 1994, we closed an initial public offering of 2,070,000
shares of our common stock and 2,070,000 warrants. In April 1997, we filed a
voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code. On
March 17, 1998, our plan of reorganization was approved by the U.S. Bankruptcy
Court. On June 10, 1998, our plan of reorganization had been fully implemented.

         Since emerging from bankruptcy, our revenues have steadily increased.
Our revenues increased from $6.2 million in the fiscal year ended March 31, 1998
to $61.8 million in the fiscal year ended March 31, 2002. We had an operating
loss of approximately $1.6 million in the fiscal year ended March 31, 1998
compared to net income of $8.065 million in the fiscal year ended March 31,
2002.

PRODUCT LINES

         We currently have a product line of 18 different models of karaoke
machines, incorporating such features as CD plus graphics player sound
enhancement, graphic equalizers, echo tape record/playback features, and
multiple inputs and outputs for connection to compact disc players and video
cassette recorders. Our machines sell at retail prices ranging from $30 for
basic units to $400 for semi-professional units. We currently offer our music in
two formats - multiplex cassettes and CD+G's with retail prices ranging from
$6.99 to $19.99. We currently have a song library of over 3,000 recordings,
which we license from publishers. Our library of master recordings covers the
entire range of musical tastes including popular hits, golden oldies, country,
rock and roll, and rap. We even have backing tracks for opera and certain
foreign language recordings.



                                       1
<PAGE>

MARKETING, SALES AND DISTRIBUTION

MARKETING

         We rely on management's ability to determine the existence and extent
of available markets for our products. Our management has considerable marketing
and sales background and devotes a significant portion of its time to
marketing-related activities. We achieve both domestic and direct sales by
marketing our hardware and music products primarily through our own sales force
and 14 independent sales representatives. Our representatives are located in
various states and are paid a commission based upon sales in their respective
territories. The sales representative agreements are generally one (1) year
agreements, which automatically renew on an annual basis, unless terminated by
either party on 30 days' notice. We work closely with our major customers to
determine marketing and advertising plans.

         We also market our products at various national and international trade
shows each year. We regularly attend the following trade shows and conventions:
the Consumer Electronics Show each January in Las Vegas; the American Toy Fair
each February in New York and the Hong Kong Electronics Show each October in
Hong Kong, We spent approximately $181,800 on research and development in fiscal
2002, primarily to develop prototypes and working samples.

         Our karaoke machines and music are marketed under the Singing
Machine(R) trademark throughout the United States, primarily through department
stores, mass merchandisers, direct mail catalogs and showrooms, music and record
stores, national chains, specialty stores, and warehouse clubs. Our karaoke
machines and karaoke music are currently sold in such stores as Best Buy, J.C.
Penney, Sears, Target and Toys R Us.

         Our licensing agreements with MTV Networks and Nickelodeon have further
expanded our brand name and our customer base. Through our license with MTV, we
have begun to focus on the 12 to 24 year old market and through our agreement
with Nickelodeon, we have reached an even younger age group between the ages of
3-6.

         In November 2001, we signed an international distributorship agreement
with Arbiter Group, PLC ("Arbiter"). Arbiter is the exclusive distributor of
Singing Machine(R) karaoke machines and music products in the United Kingdom and
a non-exclusive distributor in all other European countries. The agreement
terminates on December 31, 2003, subject to an automatic renewal provision.

SALES

         As a percentage of total revenues, our net sales in the aggregate to
our five largest customers during the fiscal years ended March 31, 2002 and
2001, respectively, were approximately 87% and 78% respectively. In fiscal 2002
and 2001, Best Buy and Toys R Us accounted for more than 10% of our revenues.
Furthermore, in fiscal 2002, Costco accounted for more than 10% of our revenues.
Although we have long-established relationships with all of our customers, we do
not have long-term contractual arrangements with any of them. A decrease in
business from any of our major customers could have a material adverse effect on
our results of operations and financial condition.

         Returns of electronic hardware and music products by our customers are
generally not permitted except in approved situations involving quality defects,
damaged goods, goods shipped in error or goods that are shipped on a consignment
basis. Our policy is to give credit to our customers for the returns in
conjunction with the receipt of new replacement purchase orders. Our credit
policies are tailored to our customer base. We have not suffered significant
credit losses to date.

DISTRIBUTION

         We distribute hardware products to retailers and wholesale distributors
through two methods: shipment of products from inventory (domestic sales), and
shipments directly from our Hong Kong subsidiary or manufacturers in the Far
East of products (direct sales). Domestic sales, which account for substantially
all of our music sales, are made to customers located throughout the United
States from inventories maintained at our warehouse facilities in Florida or
California.


                                       2
<PAGE>



         Domestic Sales. Our strategy of selling products from a domestic
warehouse enables us to provide timely delivery and serve as a "domestic
supplier of imported goods." We purchase electronic recording products overseas
from certain factories in China for our own account, and warehouse the products
in leased facilities in Florida and California. We are responsible for costs of
shipping, insurance, customs clearance, duties, storage and distribution related
to such products and, therefore, warehouse sales command higher sales prices
than direct sales. We generally sell from our own inventory in less than
container-sized lots. In the fiscal year ended March 31, 2002, approximately 55%
of our sales were domestic sales.

         Direct Sales. We ship some hardware products sold by us directly to
customers from the Far East through International SMC. Sales made through
International SMC are completed by either delivering products to the customers'
common carriers at the shipping point or by shipping the products to the
customers' distribution centers, warehouses, or stores. Direct sales are made in
larger quantities (generally container sized lots) to customers in Italy,
England, Canada, South America and the United States, who pay International SMC
pursuant to their own international, irrevocable, transferable letters of credit
or on an open account. In the fiscal year ended March 31, 2002, approximately
45% of our sales were direct sales.

MANUFACTURING AND PRODUCTION

         Our karaoke machines are manufactured and assembled by third parties
pursuant to design specifications provided by us. Currently, we have ongoing
relationships with six factories, located in the Shenzhen province of the
People's Republic of China, who assemble our karaoke machines. In manufacturing
our karaoke related products, these factories use molds and certain other
tooling, some of which are owned by International SMC. Our products contain
electronic components manufactured by other companies such as Panasonic, Sanyo,
Toshiba, and Sony. Our manufacturers purchase and install these electronic
components in our karaoke machines and related products. The finished products
are packaged and labeled under our trademark, The Singing Machine(R).

         We have obtained copyright licenses from music publishers for all of
the songs in our music library. We contract with outside studios on a work-for
hire basis to produce recordings of these songs. After the songs have been
recorded, we use outside companies to mass-produce the CD+G's and
audiocassettes.

         While our equipment manufacturers purchase our supplies from a small
number of large suppliers, all of the electronic components and raw materials
used by us are available from several sources of supply, and we do not
anticipate that the loss of any single supplier would have a material long-term
adverse effect on our business, operations, or financial condition. Similarly,
although we primarily use three factories to manufacture our karaoke machines
and a small number of studios to record our music, we do not anticipate that the
loss of any single manufacturer or single studio would have a material long-term
adverse effect on our business, operations or financial condition. To ensure
that our high standards of product quality and factories meet our shipping
schedules, we utilize Hong Kong based employees of International SMC as our
representatives. These employees include product inspectors who are
knowledgeable about product specifications and work closely with the factories
to verify that such specifications are met. Additionally, key personnel
frequently visit our factories for quality assurance and to support good working
relationships.

         All of the electronic equipment sold by us is warranted to the end user
against manufacturing defects for a period of ninety (90) days for labor and
parts. All music sold is similarly warranted for a period of 30 days. During the
fiscal years ended March 31, 2002 and 2001, warranty claims have not been
material to our results of operations.

LICENSE AGREEMENTS WITH MTV AND NICKELODEON

         In November 2000, we entered into a multi-year merchandise license
agreement with MTV Networks, a division of Viacom International, Inc., to create
the first line of MTV karaoke machine and compact disks with graphics ("CD+G's")
featuring music for MTV's core audience. Under the licensing agreement, we
produced two MTV-branded machines for the fiscal 2002 year: (1) a large format
karaoke machine with a built in, fully functional television that enables users
to view song lyrics and (2) a small karaoke system that connects to a
television. We also produced exclusive CD+G's featuring music catering to MTV's
core audience that were distributed with the MTV branded karaoke machines. As of
March 31, 2002, we exceeded the minimum guaranteed royalty payments established
in the license agreement. For fiscal 2003, we are producing two additional MTV
karaoke machines, a duet microphone and additional MTV branded CD+G's titles. In
fiscal 2002, we sold 6 MTV branded CD+G's, in fiscal 2003, we expect to sell 20
different MTV CD+G titles. The MTV license expires on December 31, 2004.


                                       3
<PAGE>

         We distribute the MTV licensed products through our established
distribution channels, including Best Buy, Costco, JC Penny, Musicland, Sam's
Club, Sears and Toys R Us. Our distribution network also includes the online
versions of these retail customers.

         In December 2001, we entered into a multi-year license agreement with
the Nickelodeon division of MTV Networks. Under this license, we will create a
line of two Nickelodeon branded machines and music for the fiscal 2003 year.
These products will be distributed through our established distribution
channels. Our initial shipment date is scheduled for August 15, 2002. Over the
term of this license agreement, we are obligated to make guaranteed minimum
royalty payments of $450,000. We do not believe that the payment of these
guaranteed fees will adversely affect our ongoing operations. The Nickelodeon
license expires on December 31, 2004.

COMPETITION

         Our business is highly competitive. Our major competitors for karaoke
machines and related products are Casio Computer Corp., Grand Prix, Memorex, JVC
and Pioneer Corp. We believe that competition for karaoke machines is based
primarily on price, product features, reputation, delivery times, and customer
support. Our primary competitors for producing karaoke music are Pocket Songs
and Sound Choice. We believe that competition for karaoke music is based
primarily on popularity of song titles, price, reputation and delivery times.

         We try to stay ahead of our competition by introducing new products
each year and upgrading our existing products. We believe that we were one of
the first companies to introduce CD+G technology to karaoke machines. In fiscal
2003, we introduced 6 new karaoke models, including 2 MTV branded machines. In
fiscal 2003, we will be introducing a karaoke machine with a built-in-video
monitor and camera.

         In addition, we compete with all other existing forms of entertainment
including, but not limited to, motion pictures, video arcade games, home video
games, theme parks, nightclubs, television and prerecorded tapes, CD's, and
videocassettes. Our financial position depends, among other things, on our
ability to keep pace with changes and developments in the entertainment industry
and to respond to the requirements of our customers. Many of our competitors
have significantly greater financial, marketing, and operating resources and
broader product lines than we do.

TRADEMARKS

         We have registered various trademarks with the United States Patent &
Trademark Office for our Singing Machine(R) products and also have common law
rights in these trademarks. We have also registered our trademark in Germany,
the Benelux countries, Switzerland and the United Kingdom.

COPYRIGHTS AND LICENSES

         We hold federal and international copyrights to substantially all of
the music productions comprising our song library. However, since each of those
productions is a re-recording of an original work by others, we are subject to
contractual and/or statutory licensing agreements with the publishers who own or
control the copyrights of the underlying musical compositions. We are obligated
to pay royalties to the holders of such copyrights for the original music and
lyrics of all of the songs in our library that have not passed into the public
domain. We are currently a party to more than 3,000 different written copyright
license agreements.

         The majority of the songs in our song library are subject to written
copyright license agreements, oftentimes referred to as synchronization
licenses. Our written licensing agreements for music provide for royalties to be
paid on each song. The actual rate of royalty is negotiable, but typically
ranges from $0.09 to $0.18 per song on each CD or audiocassette that is sold.
Our written licenses typically provide for quarterly royalty payments, although
some publishers require reporting on a semi-annual basis.

         We currently have compulsory statutory licenses for approximately 30
songs in our song library, which are sold as audiocassettes. The Federal
Copyright Act creates a compulsory statutory license for all non-dramatic
musical works, which have been distributed to the public in the United States.
Royalties due under compulsory licenses are payable monthly and are based on the
statutory rate. The statutory rate is the greater of $0.08 per song for five
minutes of playing time or $0.0155 per minute of playing time or fraction
thereof with respect to each item of music produced and distributed by us. We
also have written license agreements for substantially all of the printed
lyrics, which are distributed with our audiocassettes, which licenses also
typically provide for quarterly payments of royalties at the statutory rate.


                                       4
<PAGE>

GOVERNMENT REGULATION

         Our karaoke machines must meet the safety standards imposed in various
national, state, local and provincial jurisdictions. Our karaoke machines sold
in the United States are designed, manufactured and tested to meet the safety
standards of Underwriters Laboratories, Inc. or Electronic Testing Laboratories.
Our production and sale of music products is subject to federal copyright laws.

         Our manufacturing operations in China are subject to foreign
regulation. China has permanent "normal trade relations" ("NTR") status under US
tariff laws, which provides a favorable category of US import duties. China's
NTR status became permanent on January 1, 2002, following enactment of a bill
authorizing such status upon China's admission to the World Trade Organization
("WTO") effective as of December 1, 2001. This substantially reduces the
possibility of China losing its NTR status, which would result in increasing
costs for the Company.

EMPLOYEES

         As of April 15, 2002, we employed 47 persons, all of whom are full-time
employees, including four executive officers. Thirteen of our employees are
located at International SMC's corporate offices in Hong Kong. The remaining
thirty-four employees are based in the United States, including the four
executive positions; twelve are engaged in warehousing and technical support,
and eighteen in accounting, marketing, sales and administrative functions.

ITEM 2. PROPERTIES
        ----------

         Our corporate headquarters are located in Coconut Creek, Florida in an
11,200 square foot office and warehouse facility. Our three leases for this
office space expire on August 30, 2004. We sublease showroom space at the
International Toy Center in New York City. We have leased 9,393 square feet of
office and showroom space in Hong Kong from which we oversee our China based
manufacturing operations. Our two leases for this space in the Ocean Center
building expire on April 30, 2005 and May 31, 2005, respectively.

         We have one central warehouse facility in Compton, California for
79,000 square feet. Our lease expires on February 23, 2008. We have also
subleased warehouse space in Carson, California, that we previously leased for
warehouse space to an unrelated third party until the expiration of the lease.

         We believe that the facilities are well maintained, in substantial
compliance with environmental laws and regulations, and adequately covered by
insurance. We also believe that these leased facilities are not unique and could
be replaced, if necessary, at the end of the term of the existing leases.

ITEM 3. LEGAL PROCEEDINGS
        -----------------

         We filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of Florida, case number 97-22199-BKC-RBR, on April 11, 1997. On March 17, 1998,
the U.S. Bankruptcy Court confirmed our First Amended Plan of Reorganization. As
of June 10, 1998, our plan has been fully implemented.

         We are not a party to any material legal proceeding, nor to the
knowledge of management, are any legal proceedings threatened against us. From
time to time, we may be involved in litigation relating to claims arising out of
our operations in the normal course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

         No matters were submitted to a vote of security holders through a
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.



                                       5
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        ------------------------------------------------------------------

         Our common stock currently trades on the American Stock Exchange under
the symbol "SMD." We began trading on the AMEX on March 8, 2001. From January
26, 1996 through March 7, 2001, we traded on the National Association of
Securities Dealers, Inc.'s OTC Bulletin Board under the symbol "SING". Set forth
below is the range of high and low information for our common stock as traded on
the American Stock Exchange from March 8, 2001 through March 31, 2002, as
reported by Commodity Systems, Inc. Also, set forth is the range of our high and
low bid information for our common stock as traded on the OTC Bulletin Board
from April 1, 2000 through March 8, 2001, as reported by the National Quotation
Bureau, Inc. This information regarding trading on the OTC Bulletin Board
represents prices between dealers and does not reflect retail mark-up or
markdown or commissions, and may not necessarily represent actual market
transactions. This information contained in this table has been restated to give
effect to our 3-for-2 stock split to stockholders of record on March 4, 2002.
<TABLE>
<CAPTION>

       FISCAL PERIOD                                                         HIGH                     LOW
       2002:
       -----
<S>                                                                        <C>                     <C>
       First Quarter (April 1 - June 30, 2001)                             $ 4.45                  $ 2.90
       Second Quarter (July 1 - September 30, 2001)                          5.02                    3.70
       Third Quarter (October 1 - December 31, 2001)                        16.19                    4.30
       Fourth Quarter (January 1 - March 31, 2002)                          17.80                   12.53

       2001:
       -----
       First Quarter (April 1 - June 30, 2000)                              $3.00                   $1.65
       Second Quarter (July 1 - September 30, 2000)                          2.75                    1.46
       Third Quarter (October 1 - December 31, 2000)                         4.42                    2.33
       Fourth Quarter (January 1 - March 8, 2001)                            3.83                    2.42
       Fourth Quarter (March 8 - March 31, 2001)                             4.00*                   3.06*
</TABLE>

- -------------

* The Company began trading on the American Stock Exchange on March 8, 2001 and
the following prices represent the high and low sales prices on the AMEX during
the period noted above.

         As of June 15, 2002, there were approximately 311 record holders of our
outstanding common stock.

COMMON STOCK
- ------------

         The Company has never declared or paid cash dividends on its common
stock and the Company's Board of Directors intends to continue its policy for
the foreseeable future. Furthermore, the Company's credit facility with LaSalle
Business Credit, Inc. restricts the Company from paying any dividends to its
shareholders, unless it obtains prior written consent from LaSalle. Future
dividend policy will depend upon the Company's earnings, financial condition,
contractual restrictions and other factors considered relevant by the Company's
Board of Directors and will be subject to limitations imposed under Delaware
law.

         On March 14, 2002, the Company effected a 3 for 2 stock split for all
shareholders on record as of March 4, 2002.


                                       6
<PAGE>


SALE OF UNREGISTERED SECURITIES

         During the three-month period ended March 31, 2002, nine employees and
one former director exercised stock options issued under our 1994 Amended and
Restated Management Stock Option Plan. The employees exercised options to
acquire an aggregate of 380,275 shares of our common stock. The names of the
option holders, the dates of exercise of the number of shares purchased, the
exercise price and the proceeds received by us are listed below.

                  Date of
   Name           Exercise   No. of Shares  Exercise Price   Proceeds

Eddie Steele      01-03-02     262,500         $  .287       $75,250
Eddie Steele      01-03-02      45,000         $ 1.107       $49,800
Eddie Steele      01-03-02      15,000         $ 2.04        $30,600
Alicia Haskamp    01-03-02       6,000         $ 2.04        $12,240
M. McElligott     02-06-02       3,750         $ 2.04        $ 7,650
Brian Cino        02-06-02         675         $  .287       $   193.50
Brian Cino        02-06-02       1,350         $ 2.04        $ 2,754
Jorge Otaeugi     02-06-02       2,250         $  .287       $   645
Jorge Otaeugi     02-06-02       2,250         $ 2.04        $ 4,590
John Steele       02-06-02       7,500         $ 2.04        $15,300
Terry Phillips    02-19-02         450         $ 2.04        $   918
Alan Schor        02-19-02       7,500         $ 2.04        $15,300
Robert Torrelli   03-07-02         150         $ 2.04        $   306
John DeNovi       03-07-02       2,550         $ 3.27        $ 8,330
John Steele       03-14-02      22,500         $ 2.04        $45,900
Terry Phillips    03-22-02         900         $ 2.04        $ 1,836

         Each of these employees and former director paid for the shares with
cash. The shares issued to our employees were registered under the Securities
Act on a registration statement on Form S-8. As such, no restrictive legends
were placed on the shares, except control legends were placed on the shares
issued to Eddie Steele.

         During the three-month period ended March 31, 2002, four warrant
holders exercised their warrants to acquire an aggregate of 78,000 shares of
common stock. The names of the warrant holders, the dates of exercise of the
number of shares purchased, the exercise price and the proceeds received by the
Company are listed below.

                          Date of
Name                      Exercise   No. of Shares     Exercise Price  Proceeds

Eddie Steele              01-03-02       12,000           $ 1.33     $16,000
Fred Merz                 02-19-02        6,000           $ 1.33     $ 8,000
FRS Investments           03-04-02       30,000           $ 0.917    $27,500
John Klecha               03-19-02       30,000           $ 1.33     $40,000

         Each of these warrant holders exercised their warrants in reliance upon
Section 4(2) of the Securities Act of 1933, because each of the holders was
sophisticated and had access to comprehensive information about the Company. The
Company placed legends on the certificates stating that the securities were not
registered under the Securities Act and set forth the restrictions on their
transferability and sale.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
        CONDITION AND RESULTS OF OPERATIONS
        -----------------------------------

         The following discussions and analysis should be read in conjunction
with, and is qualified in its entirety by, the Financial Statements included
elsewhere herein. Historical results are not necessarily indicative of trends in
operating results for any future period.

                                       7
<PAGE>


RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
income and expense items expressed as a percentage of the Company's total
revenues:

                                                     YEAR ENDED MARCH 31,
                                                 ----------------------------
                                                  2002       2001       2000
                                                 ------     ------     ------

Total Revenues ..............................    100.0%     100.0%     100.0%

Cost of Sales ...............................     67.0       65.5       72.1

Operating expenses ..........................     19.7       19.8       19.9

Operating income ............................     13.3       14.7        8.0

Other expenses, net .........................      0.09       2.5        5.0

Income before taxes .........................     13.2       12.2        3.0

Provision (benefit) for income taxes ........       .2         .1       (0.8)

Income (loss) ...............................     13.0       12.0        3.8


THE YEAR ENDED MARCH 31, 2002 AS COMPARED TO THE YEAR ENDED MARCH 31, 2001

NET SALES

         Net sales for the fiscal year ended March 31, 2002 increased 80.2% to
$61,828,894 compared to $34,306,839 for the fiscal year ended March 31, 2001.
The Company's growth was driven by strong sales of the Company's MTV licensed
merchandise and the introduction of new karaoke machines and music titles. We
generated $23,354,270 million or 37.8% of our net sales from products sold under
the MTV license. In fiscal 2002, our sales of music increased to $6,306,547 or
10.2% of our net sales compared with $3,087,615 or 9% of our net sales in fiscal
2001.

GROSS PROFIT

         Gross profit for the fiscal year ended March 31, 2002 was $20,380,003
or 33% of sales compared to $11,833,690 or 34.5% of sales for the fiscal year
ended March 31, 2001. The decrease in gross margin compared to the prior year is
due to the realization of volume discounts by our largest customers. This was
offset to some degree by reduced prices that we paid our manufacturers for our
karaoke machines because of our increased purchases.

OPERATING EXPENSES

         Operating expenses increased to $12,144,623, or 19.7% of sales, for the
year ended March 31, 2002 from $6,806,097, or 19.8% of sales, for the year ended
March 31, 2001. This increase in operating expenses was primarily attributed to
the increase in expenses associated with: (1) the opening of the Company's Hong
Kong office, (2) the Company's first advertising campaign and (3) certain
expenses which are considered variable as they relate directly to the level of
sales.

         In December 2000, the Company's wholly-owned subsidiary, International
SMC, opened a Hong Kong office. For the fiscal year ended March 31, 2002, this
office incurred SG&A expenses of approximately $1,144,734 compared to $418,618
in the prior year. By opening this office, the Company saved the manufacturers
agency fees, which were paid on each shipment in prior years. The Hong Kong
office has fixed overhead expenses every month, as opposed to per shipment
agency fees. We realized the greatest benefit from our Hong Kong office in the
third quarter of fiscal 2002, when we purchased the largest amount of inventory.


                                       8
<PAGE>

         Our advertising expense increased to $2,377,638 for the fiscal year
ended March 31, 2002 compared to $921,359 for the fiscal year ended March 31,
2001. Advertising expense consists of two components: Co-operative advertising
and direct advertising expense. Co-operative advertising is paid directly to the
customer and is based directly on the amount of sales. The customer has complete
discretion as to the use of these funds. Co-operative advertising expenses
accounted for $972,000 of the increase in advertising expenses. In fiscal 2002,
the Company embarked on its first formal advertising campaign, which used print
advertising, radio spots, sponsorships, promotions and other media. The cost for
this advertising campaign was approximately $484,000 and this is a direct
advertising expense.

         Other expenses, termed variable expenses, contributed to the increase
in operating expenses. These expenses included royalty expense, sales
commissions, warehouse expenses, and travel. The largest increase can be seen in
royalty expense, which increased approximately $1,713,000 over the prior year,
primarily from the sale of items under the MTV licensing agreement. Our
commissions payable to our independent sales representatives increased by
$457,000 during fiscal 2002, because of increased sales. Our warehouse related
expenses also increased by $478,000. These expenses are due to the increased
importing of the Company's karaoke machines from Hong Kong. Our compensation
expenses increased by $569,935 during our last fiscal year. We grew from 22
employees at March 31, 2001 to 47 employees at March 31, 2002.

DEPRECIATION AND AMORTIZATION

         The Company's depreciation and amortization expenses were $394,456 for
the fiscal year ended March 31, 2002, up from $301,064 in the prior year. The
increase in depreciation and amortization expenses can be attributed to the
Company's acquisition of new fixed assets during fiscal 2002, which included
computers, furniture and other equipment in all of the Company's locations in
Florida, California and Hong Kong. It also included the addition of new molds
for our expanded product line. The amortization expense includes the
amortization of a fee paid to LaSalle Bank for our line of credit facility and
the amortization of remaining deferred guarantee fees related to the factoring
agreement we terminated in April 2001.

OTHER EXPENSES

         Other expenses were $50,821 for the fiscal year ended March 31, 2002
compared with net expenses of $839,572 for the fiscal year ended March 31, 2001.
The Company had a large decrease in these miscellaneous items primarily because
of the elimination of factoring fees and a decrease in interest expense
resulting in a net decrease of $543,279. The Company terminated its factoring
agreement in April 2001 and no longer incurs the fees and interest associated
with it. The Company replaced the factoring agreement with a lower cost credit
facility with LaSalle Business Credit in April 2001. The Company has also begun
to generate income from royalty payments received in Hong Kong for the use of
Company owned molds by other parties.

 INCOME BEFORE INCOME TAX EXPENSE

         The Company's income before income taxes increased 95.4% to $8,184,559
for the fiscal year ended March 31, 2002, compared to $4,188,021 for the fiscal
year ended March 31, 2001. This increase in profit is due primarily to the
increase in sales.

INCOME TAX EXPENSE

         The Company files separate tax returns for the parent and for the Hong
Kong Subsidiary. The income tax expense consists of taxes associated with
federal, foreign and state income taxes in the consolidated statement of income.

         During fiscal 2002, the Company showed a profit in both the U.S. parent
company and International SMC, its wholly-owned Hong Kong subsidiary. The U.S.
parent company's federal tax liability in fiscal 2002 was eliminated due to the
utilization of operating loss carryforwards from prior years. As a result of
this, the income tax recognized in fiscal 2002 in the amount of $119,277 is
primarily for state income taxes. As of March 31, 2002, the Company had usable
net operating loss carryforward of $714,159 for federal income tax purposes. The
Company expects to utilize the remaining NOL in fiscal 2003.


                                       9
<PAGE>

         The Company's Hong Kong subsidiary has applied for a Hong Kong offshore
claim income tax exemption based on the locality of the profits of the Hong Kong
subsidiary. Management believes that the exemption will be approved because the
source of all profits of the Hong Kong subsidiary is from exporting to customers
outside of Hong Kong. Accordingly, no provision for foreign income taxes on the
profits of the Hong Kong subsidiary have been provided in the accompanying
consolidated financial statements. As of June 25, 2002, the Company has not
received official approval of this Hong Kong tax exemption for fiscal 2002.

         In the event the exemption is not approved, the Hong Kong subsidiary
profits will be taxed at a flat rate of 16% resulting in an estimated income tax
expense of $725,000 and $460,000 for 2002 and 2001, respectively.

NET INCOME

         As a result of the foregoing, the Company's net income increased 93.7%
to $8,065,282 for the fiscal year ended March 31, 2002, compared to $4,164,701
for the fiscal year ended March 31, 2001.

THE YEAR ENDED MARCH 31, 2001 AS COMPARED TO THE YEAR ENDED MARCH 31, 2000

NET SALES

         Net sales increased 80.3% in the fiscal year ended March 31, 2001. The
increase in revenue from $19,032,320 in fiscal 2000 to $34,306,839 in fiscal
2001 can be attributed to the addition of a major customer and increased
awareness of karaoke in the retail community. The addition of this customer
alone added 20% to our revenues for fiscal 2001. Our sales of karaoke machines
and karaoke music comprised 93% and 7%, respectively, of our sales in fiscal
2000.

GROSS PROFIT

         Gross profit for fiscal 2001 was 34.5% of sales compared to 27.9% of
sales in fiscal year 2000. The increased gross margin in fiscal 2001 is due to a
favorable decrease in the cost of products, both hardware and music, resulting
primarily from volume discounts. Another factor of increased gross margin is the
increased percentage of music sales as compared to hardware sales. Overall, the
gross profit on music sales is higher than that of hardware.

OPERATING EXPENSES

         Operating expenses increased by 80.1% in fiscal 2001 compared to fiscal
2000. A good portion of this increase in operating expenses was due to the
significant increase in sales and its impact on variable selling expenses such
as freight expense, sales commissions, cooperative advertising, and travel
expenses, among others. Another factor of this change is the addition of
personnel, increasing compensation expense. The Company grew from 12 employees
at March 31, 2000 to 22 employees at March 31, 2001. The accrual for management
bonus also attributed to the increase in operating expenses. This expense is due
largely to increased sales, but also to fairly stable expenses for the fiscal
year.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization expenses increased from $116,369 in
fiscal 2000 to $301,064 in fiscal 2001. The addition of new product molds in
Hong Kong and the opening of a new Hong Kong office contributed to this
increase. Also contributing to this increase was the expansion of our home
office in Coconut Creek into another unit next to our existing office space.

OTHER EXPENSES

         Other expenses decreased from $947,982 in fiscal year 2000 to $839,572
in fiscal year 2001. This is primarily due to the expense in fiscal 2000 of
non-cash based guarantee fees.

         Loss on accounts receivable due to factoring was 0.25% of total
revenues in fiscal 2001 compared to 2.3% of total revenues in fiscal 2000. This
decrease is due to the favorable factoring rates negotiated for the year.


                                       10
<PAGE>

INCOME TAX EXPENSE

         The Company files separate tax returns for the parent and for the Hong
Kong Subsidiary. The income tax expense (benefit) consists of taxes associated
with federal, foreign and state income taxes in the consolidated statement of
income.

         During fiscal 2001, the Company showed a profit in both the U.S. parent
company and International SMC, its wholly-owned Hong Kong subsidiary. The U.S.
parent company's tax liability was eliminated due to the utilization of
operating loss carryforwards from prior years. As a result of this, the income
tax recognized in fiscal 2001 in the amount of $23,320 is a result of the
federal alternative minimum tax. Although the Company's NOL expires on various
dates through 2019, the Company expects to utilize the remaining NOL in fiscal
year 2003.

         The Company's Hong Kong subsidiary applied for a Hong Kong offshore
claim income tax exemption for the calendar year ended March 31, 2001.
Management believes that the exemption will be approved because the source of
all profits of the Hong Kong subsidiary is from exporting to customers outside
of Hong Kong. Accordingly, no provision for foreign income taxes on the profits
of the Hong Kong subsidiary has been made. As of June 20, 2002, the Hong Kong
offshore claim exemption for fiscal 2001 has not been approved.

NET INCOME

         Net income after taxes (tax benefit) for the fiscal year ended March
31, 2001 and 2000 was $4,164,701 and $737,985, respectively. The increase in
sales and stability of general expenses are attributed to the increased bottom
line. The tax expense for fiscal 2001 is due to alternative minimum tax. The
Company has remaining net operating loss carry forwards to cover US taxes that
may have been due on the profitability of the Company.

LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2002, the Company had current assets of $20,451,705 and
total assets of $21,664,451 compared to current assets of $9,016,324 and total
assets of $10,509,682 at March 31, 2001. This increase in current assets and
total assets is primarily due to the increase in (i) cash and cash equivalents
due to increased sales and collections of accounts receivable, (ii) accounts
receivable for sales in the fourth quarter and (iii) inventories. In the fourth
quarter of 2002, Best Buy began taking our goods on a consignment basis instead
of a purchase basis. We recorded approximately $2.875 million in sales returns
and reversed related costs of sales in February 2002 and Best Buy retained the
inventory on a consignment basis. From the date of the sales returns through
March 31, 2002, we recorded approximately $2.442 million of sales from the
consignment inventory. We increased our inventory levels as of March 31, 2002,
in anticipation of the potential strike by longshoremen and other dockworkers on
the California seaboard in July 2002.

         Current liabilities increased to $3,194,377 as of March 31, 2002,
compared to $1,591,021 at March 31, 2001. This increase in current liabilities
is primarily due to the accrual of expenses for royalties, management bonuses
and allowances for advertising expenses among others. At March 31, 2002, the
balance of the credit facility with LaSalle Business Credit was zero. Increased
royalty expenses include royalty expenses payable to MTV for the sale of
licensed merchandise, as well as other agencies and publishers with whom we hold
licenses for our recorded music.

         The Company's stockholders' equity increased to $18,470,074 as of March
31, 2002 from $8,918,661 as of March 31, 2001, due to the exercise of options
and warrants, the write off of deferred guarantee fees and the current fiscal
year net income.

         Cash flows provided by operating activities were $2,954,687 during the
fiscal year ended March 31, 2002. Cash flows were used in operating activities
primarily due to increases in accounts receivable in the amount of $3,114,627
and inventory in the amount of $4,460,890. Cash flows were provided by operating
activities primarily due to an increase in accounts payable and accrued expenses
in the amount of $1,563,603 and net income of $8,065,282. These increases are a
direct result of the increased volume of sales for the fiscal year.

         Cash provided by investing activities during this same period were
$230,049. Cash provided by investing activities resulted primarily from receipt
of $933,407 previously invested with the Company's factor. Other factors
provided by investing activities consisted of $117,425 received from our
officers as repayments on loans and $298,900 received from the sale of an
unconsolidated subsidiary. Cash used in investing activities consisted of
property and equipment in the amount of $613,691 and a $513,684 deposit placed
for a letter of credit facility with Hong Kong Shanghai Banking Corporation.


                                       11
<PAGE>

         Cash flows provided by financing activities were $1,319,190 during the
fiscal year ended March 31, 2002. This consisted of proceeds from the exercise
of warrants and options in the amount of $1,319,190. As the credit line at
LaSalle National Bank was zero at this date, the amount of loan proceeds and
repayments was the same, $21,856,653.

         The Company expects that its capital needs will increase during fiscal
2003. Our capital needs stem primarily from our need to purchase sufficient
levels of inventory for the Christmas season. Our principal sources of capital
in the next twelve months include our operating cash flows, borrowings under our
credit facility with LaSalle and advances made under three letters of credit
issued to our factories. At the present time, our credit facility with LaSalle
provides us with up to $10 million in financing depending upon the time of the
year. We are seeking increased financing from LaSalle or another third party by
the end of July 2002. We would like to have credit facilities in excess of $20
million available for the upcoming holiday season.

         We entered into a credit facility with LaSalle in April 2001. Under
this credit facility, LaSalle will advance up to 75% of the Company's eligible
accounts receivable, plus up to 40% of eligible inventory, plus up to 40% of
commercial letters of credit issued by LaSalle minus reserves as set forth in
the loan documents. The credit facility is subject to loan limits from zero to
$10,000,000 depending on the time of the year, as stipulated in the loan
documents. Advances made under the credit facility bear interest at LaSalle's
prime rate plus .5%. There is also an annual fee of 1% of the loan maximum, or
$100,000. The credit facility expires on April 26, 2004 and is automatically
renewable for one-year terms thereafter. Under the terms of the credit facility,
the Company is required to maintain certain financial ratios and conditions. The
loan contains a clean up period every 12 months where the loan amount must go to
zero for a period of time. The loan is secured by a first lien on all present
and future assets of the Company, except certain tooling located in China.

         Our Hong Kong subsidiary, International SMC, maintains a letter of
credit facility with the Hong Kong Shanghai Banking Corporation ("HSBC"). The
facility requires International SMC to maintain a separate deposit account in
the amount of $513,684. This amount is included in deposits at March 31, 2002.
During April and May 2002, HSBC agreed to issue International SMC two
documentary letters of credit to finance its purchases of karaoke machines from
our factories. One letter of credit provides for advances of up to $200,000 per
draw, provided that the total drawings do not exceed $2 million. The other
letter of credit is for $1 million. These letters of credit expire on December
21, 2002 and November 30, 2002, respectively and our factories are the
beneficiaries. In June 2002, International SMC obtained a $1 million documentary
letter of credit from Fortis Bank, formerly known as Belgian Bank, Hong Kong, a
subsidiary of Generale Bank, Belgium. This letter of credit expires on December
6, 2002 and one of our factories is the beneficiary.

         International SMC also has use of a $500,000 credit facility from
Fortis Bank. This facility is a revolving line based upon drawing down a maximum
of 15% of the value of export letters of credit held by Fortis Bank. There is no
maturity date except that Fortis Bank reserves the right to revise the terms and
conditions at the Bank's discretion. The cost of this credit facility is the
U.S. Dollar prime rate plus 1.25%. Repayment of principal plus interest shall be
made upon negotiation of the export letters of credit, but not later than ninety
(90) days after the advance. This credit facility is not currently in use and
the terms are being renegotiated.

         As of March 31, 2002, we do not have any material commitments for
capital expenditures, other than (i) our obligation to make certain guaranteed
minimum royalty payments in the amount of $450,000 under our licensing agreement
with Nickelodeon, (ii) our lease for our warehouse space in California and (iii)
our purchases of inventory from certain factories in China. We also have
contractual obligations under our real estates leases in Florida, Hong Kong and
California. Except for the foregoing, we do not have any present commitment that
is likely to result in our liquidity increasing or decreasing in any material
way. In addition, except for the Company's need for additional capital to
finance inventory purchases, the Company knows of no trend, additional demand,
event or uncertainty that will result in, or that is reasonably likely to result
in, the Company's liquidity increasing or decreasing in any material way.



                                       12
<PAGE>


EXCHANGE RATES

         We sell all of our products in U.S. dollars and pay for all of our
manufacturing costs in either U.S. or Hong Kong dollars. Operating expenses of
the Hong Kong office are paid in Hong Kong dollars. The exchange rate of the
Hong Kong dollar to the U.S. dollar has been fixed by the Hong Kong government
since 1983 at HK$7.80 to U.S.$1.00 and, accordingly, has not represented a
currency exchange risk to the U.S. dollar. We cannot assure you that the
exchange rate between the United States and Hong Kong currencies will continue
to be fixed or that exchange rate fluctuations will not have a material adverse
effect on our business, financial condition or results of operations.

SEASONAL AND QUARTERLY RESULTS

         Historically, the Company's operations have been seasonal, with the
highest net sales occurring in the second and third quarters (reflecting
increased orders for equipment and music merchandise during the Christmas
selling months) and to a lesser extent the first and fourth quarters of the
fiscal year. Sales in the Company's fiscal second and third quarter, combined,
accounted for approximately 81% of net sales in fiscal 2002 and 75% of net sales
in fiscal 2001.

         The Company's 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.

INFLATION

         Inflation has not had a significant impact on the Company's operations.
The Company has historically passed any price increases on to its customers
since prices charged by the Company are generally not fixed by long-term
contracts.

CRITICAL ACCOUNTING POLICIES

         The U.S. Securities and Exchange Commission defines critical accounting
policies as "those that are both most important to the portrayal of a company's
financial condition and results, and require management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain". Preparation of our
financial statements involves the application of several such policies. These
policies include: estimates of accruals for product returns, the realizability
of the deferred tax asset, calculation of our allowance for doubtful accounts
and the Hong Kong income tax exemption.

         Accrual for product returns. We regularly receive requests from our
customers for product returns. Our accrual amount is based on historical
experience and is recorded as a reduction of sales and costs of sales and as a
liability equal to the resulting gross profit on the estimated returns. At March
31, 2002, the accrual was approximately $164,000.

         Realizability of Deferred Tax Asset. We eliminated our valuation
allowance on the deferred tax asset since we determined that it is more likely
than not that the deferred tax asset will be realized.

         Estimate for Doubtful Accounts. We estimate an allowance for doubtful
accounts using the specific identification method since a majority of accounts
receivable are concentrated with several customers whose credit worthiness is
evaluated periodically by us. The allowance was $12,022 at March 31, 2002.

         Hong Kong Income Tax Exemption. We estimated that the Hong Kong income
tax to be zero based on our assessment of the probability that the application
for the Hong Kong income tax exemption would be approved.

         In addition to the above policies, several other policies, including
policies governing the timing of revenue recognition, are important to the
preparation of our financial statements, but do not meet the definition of
critical accounting policies because they do not involve subjective or complex
judgments.


                                       13
<PAGE>


RISK FACTORS

         Set forth below and elsewhere in this Annual Report on Form 10-KSB and
in the other documents we file with the SEC are risks and uncertainties that
could cause actual results to differ materially from the results contemplated by
the forward looking statements contained in this Annual Report.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

WE RELY ON SALES TO A LIMITED NUMBER OF KEY CUSTOMERS WHICH ACCOUNT FOR A LARGE
PORTION OF OUR NET SALES

         As a percentage of total revenues, our net sales to our five largest
customers during the fiscal year ended March 31, 2002 and 2001were approximately
87% and 78% respectively. In fiscal 2002, Best Buy, Toys R Us and Costco
accounted for 35.7%, 27.8% and 10.5% of our net sales. In fiscal 2001, Best Buy
and Toys R Us accounted for 34.9% and 20.4% of our net sales. Although we have
long-established relationships with many of our customers, we do not have
long-term contractual arrangements with any of them. A substantial reduction in
or termination of orders from any of our largest customers could adversely
affect our business, financial condition and results of operations. In addition,
pressure by large customers seeking price reductions, financial incentives,
changes in other terms of sale or requesting that we bear the risks and the cost
of carrying inventory, such as consignment agreements, could adversely affect
our business, financial condition and results of operations. If one or more of
our major customers were to cease doing business with us, significantly reduced
the amount of their purchases from us or returned substantial amounts of our
products, it could have a material adverse effect on our business, financial
condition and results of operations.

OUR LICENSING AGREEMENT WITH MTV IS IMPORTANT TO OUR BUSINESS

         We generated $23,354,270, or 37.8% of our net sales, in fiscal 2002
from our sales of MTV licensed merchandise. Management values this license with
MTV and desires to continue this licensing relationship. If the MTV license were
to be terminated or failed to be renewed, our business, financial condition and
results of operations could be adversely affected. However, management believes
that our company has developed a strong brand name in the karaoke industry and
that it will be able to continue to develop and grow its business, even if the
MTV licensing relationship did not exist.

INVENTORY MANAGEMENT AND CONSIGNMENT ARRANGEMENT WITH BEST BUY, OUR LARGEST
CUSTOMER

         Because of our reliance on manufacturers in the Far East, our
production lead times are relatively long. Therefore, we must commit to
production in advance of customers orders. If we fail to forecast customers or
consumer demand accurately we may encounter difficulties in filling customer
orders or liquidating excess inventories, or may find that customers are
canceling orders or returning products. Distribution difficulties may have an
adverse effect on our business by increasing the amount of inventory and the
cost of storing inventory. During our fourth quarter, Best Buy began taking our
goods on a consignment basis. Additionally, changes in retailer inventory
management strategies could make inventory management more difficult. Any of
these results could have a material adverse effect on our business, financial
condition and results of operations.

OUR INABILITY TO COMPETE AND MAINTAIN OUR NICHE IN THE ENTERTAINMENT INDUSTRY
COULD HURT OUR BUSINESS

         The business in which we are engaged is highly competitive. Our major
competitors for karaoke machines and related products are Casio Computer Co,
Grand Prix, JVC, Memorex and Pioneer Corp. We believe that competition for
karaoke machines is based primarily on price, product features, reputation,
delivery times, and customer support. Our primary competitors for producing
karaoke music are Pocket Songs and Sound Choice. We believe that competition for
karaoke music is based primarily on popularity of song titles, price, reputation
and delivery times.

         We believe that our new product introductions and enhancements of
existing products are material factors for our continued growth and
profitability. In fiscal 2002, we produced 6 new karaoke machines. However, many
of our competitors are substantially larger and have significantly greater
financial, marketing and operating resources than we have. No assurance can be
given that we will continue to be successful in introducing new products or
further enhancing our existing products.


                                       14
<PAGE>

         In addition, we must compete with all the other existing forms of
entertainment including, but not limited to: motion pictures, video arcade
games, home video games, theme parks, nightclubs, television and prerecorded
tapes, CD's and video cassettes.

WE ARE SUBJECT TO SEASONALITY, WHICH IS AFFECTED BY VARIOUS ECONOMIC CONDITIONS
AND CHANGES RESULTING IN FLUCTUATIONS IN QUARTERLY RESULTS

         We have experienced, and will experience in the future, significant
fluctuations in sales and operating results from quarter to quarter. This is due
largely to the fact that a significant portion of our business is derived from a
limited number of relatively large customer orders, the timing of which cannot
be predicted. Furthermore, as is typical in the karaoke industry, the quarters
ended September 30 and December 31 will include increased revenues from sales
made during the holiday season.

         Additional factors that can cause our sales and operating results to
vary significantly from period to period include, among others, the mix of
products, fluctuating market demand, price competition, new product
introductions by competitors, fluctuations in foreign currency exchange rates,
disruptions in delivery of components, political instability, general economic
conditions, and the other considerations described in this section entitled Risk
Factors.

WE HAVE SIGNIFICANT FUTURE CAPITAL NEEDS WHICH ARE SUBJECT TO THE UNCERTAINTY OF
ADDITIONAL FINANCING

         We currently have a $10 million credit facility from LaSalle Business
Credit. In order to meet our projected needs for the holiday season, we would
like to obtain financing in excess of $20 million. We are seeking this
additional financing from LaSalle Business Credit or a different lender, if
LaSalle does not want to increase our credit line. If adequate funds are not
available on acceptable terms, or at all, we may be unable to sustain our rapid
growth, which would have a material adverse effect on our business, results of
operations, and financial condition.

OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF THE CALIFORNIA
LONGSHOREMEN GO ON STRIKE

         During fiscal 2002, approximately 55% of our sales were domestic sales,
which were made from our warehouses in California and Florida. During June and
July 2002, longshoremen and other dockworkers represented by the International
Longshore and Warehouse Union, have threatened to go on strike. Since we import
a significant amount of karaoke electronic recording equipment from the Far East
to California, the strike would have a material adverse effect on our business,
results of operations and financial condition. In the event that the strike
occurs, we have developed contingency plans. However, all of these contingency
plans will result in increased costs to our company and may reduce our
profitability in fiscal 2003.

WE MAY NOT BE ABLE TO SUSTAIN OR MANAGE OUR RAPID GROWTH

         We experienced rapid growth in net sales and net income in the last
year. Our net sales for the fiscal year ended March 31, 2002 increased 80.2% to
$61.8 million compared to $34.3 million for the fiscal year ended March 31,
2002. Similarly, our net income increased to $8.06 million for fiscal 2002
compared to $4.6 million for fiscal 2001. As a result, comparing our
period-to-period operating results may not be meaningful, and results of
operations from prior periods may not be indicative of future results. We cannot
assure you that we will continue to experience growth in, or maintain our
present level of, net sales or net income.

         Our growth strategy calls for us to continuously develop and diversify
our karaoke products by (i) developing new karaoke machines and music products,
(ii) entering into additional license agreements (iii) expanding into
international markets, (iv) developing new retail customers in the United States
and (v) obtaining additional financing. Our growth strategy will place
additional demands on our management, operational capacity and financial
resources and systems. To effectively manage future growth, we must continue to
expand our operational, financial and management information systems and train,
motive and manage our work force.

         In addition, implementation of our growth strategy is subject to risks
beyond our control, including competition, market acceptance of new products,
changes in economic conditions, our ability to maintain our licensing agreements
with MTV and Nickelodeon and our ability to finance increased levels of accounts
receivable and inventory necessary to support our sales growth, if any.
Accordingly, we cannot assure you that our growth strategy will be implemented
successfully.


                                       15
<PAGE>

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE

         Market prices of the securities of companies in the toy and
entertainment industry are often volatile. The market prices of our common stock
may be affected by many factors, including:

         -quarterly variations in our operating results;

         -operating results that vary from the expectations of investors and
         securities analysts;

         -changes in expectations as to our future financial performance,
         including financial estimates by investors and securities analysts;

         - the actions of our customers and competitors (including new product
         line announcements and introduction);

         - regulations affecting our manufacturing operations in China;

         - other factors affecting the entertainment and consumer electronics
         industries in general; and

         - sales of our common stock into the public market.

         In addition, the stock market periodically has experienced significant
price and volume fluctuations which may have been unrelated to the operating
performance of particular companies.

OUR MANUFACTURING OPERATIONS ARE LOCATED IN THE PEOPLE'S REPUBLIC OF CHINA,
SUBJECTING US TO RISKS COMMON IN INTERNATIONAL OPERATIONS

         We are dependent upon six factories in the People's Republic of China
to manufacture all of our electronic products. Our arrangements with these
factories are subject to the risks of doing business abroad, such as import
duties, trade restrictions, work stoppages, foreign currency fluctuations,
limitations on the repatriation of earnings, political instability, and other
factors which could have an adverse impact on our business. Furthermore, we have
limited control over the manufacturing processes themselves. As a result, any
difficulties encountered by the third-party manufacturers that result in product
defects, production delays, cost overruns or the inability to fulfill orders on
a timely basis could adversely affect our business, financial condition and
results of operations. We believe that the loss of any one or more of our
manufacturers would not have a long-term material adverse effect on us because
other manufacturers with whom we do business would be able to increase
production to fulfill our requirements. However, the loss of certain of our
manufacturers, could, in the short-term, adversely affect our business until
alternative supply arrangements were secured.

WE MAY HAVE SIGNIFICANT RETURNS, MARKDOWNS AND PURCHASE ORDER CANCELLATIONS

         As is customary in the consumer electronics industry, the Company has,
on occasion, (i) permitted certain customers to return slow-moving items for
credit, (ii) provided price protection to certain customers by making price
reductions effective as to certain products then held by customers in inventory
and (ii) accepted customer cancellations of purchase orders issued to the
Company. The Company expects that it will continue to be required to make such
accommodations in the future. Any significant increase in the amount of returns,
markdowns or purchaser order cancellations could have a material adverse effect
on the Company's results of operations.

WE DEPEND ON THIRD PARTY SUPPLIERS FOR PARTS FOR OUR KARAOKE MACHINES AND
RELATED PRODUCTS, AND IF WE CANNOT OBTAIN SUPPLIES AS NEEDED, OUR OPERATIONS
WILL BE SEVERELY DAMAGED

         Our growth and ability to meet customer demand depends in part on our
capability to obtain timely deliveries of karaoke machines and our electronic
products. We rely on third party suppliers to produce the parts and materials we
use to manufacture and produce these products. If our suppliers are unable to
provide our factories with the parts and supplies, we will be unable to produce
our products. We cannot guarantee that we will be able to purchase the parts we
need at reasonable prices or in a timely fashion. In the last several years,
there have been shortages of certain chips that we use in our karaoke machines.
However, we have anticipated this shortage and have made commitments to our
factories to purchase chips in advance. If we are unable to purchase these parts
and materials, we will experience severe production problems, which may possibly
result in the termination of our operations.


                                       16
<PAGE>

CONSUMER DISCRETIONARY SPENDING MAY AFFECT KARAOKE PURCHASES AND IS AFFECTED BY
VARIOUS ECONOMIC CONDITIONS AND CHANGES

         Our business and financial performance may be damaged more than most
companies by adverse financial conditions affecting our business or by a general
weakening of the economy. Purchases of karaoke machines and music are considered
discretionary for consumers. Our success will therefore be influenced by a
number of economic factors affecting discretionary and consumer spending, such
as employment levels, business, interest rates, and taxation rates, all of which
are not under our control. Adverse economic changes affecting these factors may
restrict consumer spending and thereby adversely affect our growth and
profitability.

WE MAY BE INFRINGING UPON THE COPYRIGHTS OF THIRD PARTIES

         Each song in our catalog is licensed to us for specific uses. Because
of the numerous variations in each of our licenses for copyrighted music, there
can be no assurance that we have complied with scope of each of our licenses.
Additionally, third parties over whom we exercise no control may use our sound
recordings in such a way that is contrary to our license agreement and by
violating our license agreement we may be liable for contributory copyright
infringement. Any infringement claims may have a negative effect on our ability
to sell products.

WE HAVE SIGNIFICANT RELIANCE ON LARGE RETAILERS WHICH ARE SUBJECT TO CHANGES IN
THE ECONOMY

         We sell products to retailers, including department stores, lifestyle
merchants, direct mail retailers which are catalogs and showrooms, national
chains, specialty stores, and warehouse clubs. Certain of such retailers have
engaged in leveraged buyouts or transactions in which they incurred a
significant amount of debt, and some are currently operating under the
protection of bankruptcy laws. Despite the difficulties experienced by retailers
in recent years, we have not suffered significant credit losses to date.
Deterioration in the financial condition of our customers could have a material
adverse effect on our future profitability.

OUR NET INCOME MAY BE REDUCED IF OUR HONG KONG SUBSIDIARY DOES NOT RECEIVE AN
EXEMPTION FOR OFFSHORE INCOME TAX

         Our Hong Kong subsidiary has applied for a Hong Kong "offshore claim"
income tax exemption based on the locality of the profits of the Hong Kong
subsidiary. Management believes that since the source of all profits of the Hong
Kong subsidiary are from exporting to customers outside of Hong Kong, it is
likely that the exemption will be approved. Accordingly, no provision for
foreign income taxes has been provided in the Company's financial statements. In
the event the exemption is not approved, the Hong Kong subsidiary's profits will
be taxed at a flat rate of 16% resulting in an income tax expense of
approximately $725,000 and $460,000 for fiscal 2001. As a result, our net income
for fiscal 2002 would be $7,340,282 and $3,704,701 for fiscal 2001.

OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF
OUR MANAGEMENT TEAM

         Our success depends to a significant degree upon the continued
contributions of our executive officers, both individually and as a group.
Although we have entered into employment contracts with Edward Steele, our Chief
Executive Officer; John Klecha, our President, Chief Operating Officer; and Jack
Dromgold, our Executive Vice President of Sales and Marketing, the loss of the
services of any of these individuals could prevent us from executing our
business strategy. We cannot assure you that we will be able to find appropriate
replacements for Edward Steele, John Klecha or Jack Dromgold, if the need should
arise, and any loss or interruption of Mr. Steele, Mr. Klecha or Mr. Dromgold's
services could adversely affect our business, financial condition and results of
operations. Mr. Steele will be retiring in February 2003; however, we expect to
retain him as a consultant on product development for a period of at least
one-year after his retirement.

OUR OBLIGATION TO MAKE SEVERANCE PAYMENTS COULD PREVENT OR DELAY TAKEOVERS.

         Our employment agreements with Eddie Steele, John Klecha, April Green
and Jack Dromgold require us, under certain conditions, to make substantial
severance payments to them if they resign after a change of control. These
provisions could delay or impede a merger, tender, offer or other transaction
resulting in a change in control of the Company, even if such a transaction
would have significant benefits to our shareholder. As a result, these
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock.


                                       17
<PAGE>

WE MAY BE SUBJECT TO CLAIMS FROM THIRD PARTIES FOR UNAUTHORIZED USE OF THEIR
PROPRIETARY TECHNOLOGY, COPYRIGHTS OR TRADE SECRETS

         We believe that we independently developed the technology used in our
electronic and audio software products and that it does not infringe on the
proprietary rights, copyrights or trade secrets of others. However, we cannot
assure you that we have not infringed on the proprietary rights of third parties
or those third parties will not make infringement violation claims against us.
Any infringement claims may have a negative effect on our ability to manufacture
our products.

YOUR INVESTMENT MAY BE DILUTED

         If additional funds are raised through the issuance of equity
securities, your percentage ownership in our equity will be reduced. Also, you
may experience additional dilution in net book value per share, and these equity
securities may have rights, preferences, or privileges senior to those of yours.

RISKS ASSOCIATED WITH OUR CAPITAL STRUCTURE

FUTURE SALES OF OUR COMMON STOCK HELD BY CURRENT STOCKHOLDERS MAY DEPRESS OUR
STOCK PRICE

         As of March 31 2002, there were 8,020,027 shares of our common stock
outstanding. We have filed two registration statements registering an aggregate
4,792,234 of shares of our common stock ( a registration statement on Form S-3
registering the resale of 2,947,984 shares or our common stock and a
registration statement on Form S-8 to registering the sale of 1,844,250 shares
underlying options granted under our 1994 Stock Option Plan). We also intend to
file a registration statement on Form S-8 to register 1,950,000 shares of our
common stock underlying options granted under our Year 2001 Stock Option Plan.
The market price of our common stock could drop due to the sale of large number
of shares of our common stock, such as the shares sold pursuant to the
registration statements or under Rule 144, or the perception that these sales
could occur.

ADVERSE EFFECT ON STOCK PRICE FROM FUTURE ISSUANCES OF ADDITIONAL SHARES

         Our Certificate of Incorporation authorizes the issuance of 18,900,000
million shares of common stock. As of March 31, 2002, we had 8,020,027 shares of
common stock issued and outstanding and an aggregate of 1,064,475 outstanding
options and warrants. As such, our Board of Directors has the power, without
stockholder approval, to issue up to 9,815,498 shares of common stock.

         Any issuance of additional shares of common stock, whether by us to new
stockholders or the exercise of outstanding warrants or options, may result in a
reduction of the book value or market price of our outstanding common stock.
Issuance of additional shares will reduce the proportionate ownership and voting
power of our then existing stockholders.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT DIFFICULT FOR A
THIRD PARTY TO ACQUIRE OUR COMPANY AND COULD DEPRESS THE PRICE OF OUR COMMON
STOCK.

         Delaware law and our certificate of incorporation and bylaws contain
provisions that could delay, defer or prevent a change in control of our company
or a change in our management. These provisions could also discourage proxy
contests and make it more difficult for you and other stockholders to elect
directors and take other corporate actions. These provisions of our restated
certificate of incorporation include: authorizing our board of directors to
issue additional preferred stock, limiting the persons who may call special
meetings of stockholders, and establishing advance notice requirements for
nominations for election to our board of directors or for proposing matters that
can be acted on by stockholders at stockholder meetings.

         We are also subject to certain provisions of Delaware law that could
delay, deter or prevent us from entering into an acquisition, including the
Delaware General Corporation Law, which prohibits a Delaware corporation from
engaging in a business combination with an interested stockholder unless
specific conditions are met. The existence of these provisions could limit the
price that investors are willing to pay in the future for shares of our common
stock and may deprive you of an opportunity to sell your shares at a premium
over prevailing prices.


                                       18
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
        --------------------

         The financial statements required pursuant to this Item 7 are included
in this Annual Report on Form 10-KSB, as amended, as a separate section
commencing on page F-1 and are incorporated herein by reference.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ------------------------------------------------
        ACCOUNTING AND FINANCIAL DISCLOSURE
        -----------------------------------

         No change or disagreement with Salberg & Company, P.A., the Company's
independent auditing firm, took place with respect to the preparation of the
Company's financial statements for the two (2) most recent fiscal years
contained in this Annual Report on Form 10-KSB, namely the fiscal years ended
March 31, 2002 and March 31, 2001. However, during fiscal 2001, the Company
changed accountants. Weinberg & Company, P.A. (the "Former Accountant"), was
replaced as independent certified public accountant and independent auditor for
the Company on November 28, 2000. The Company's decision to change accountants
was approved by its Board of Directors because Scott Salberg, the auditor who
has been responsible for the Company's account, left the Former Accountant to
start his own accounting firm.

         The report of the Former Accountant on the financial statements of the
Company for the year ended March 31, 2000, did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's fiscal year ended
March 31, 2000, and through November 28, 2000, there were no disagreements with
the Former Accountant on any matters of accounting principles or practices,
financial statement disclosure or auditing scope procedure, which, if not
resolved to the satisfaction of the Former Accountant would have caused it to
make reference to the subject matter of the disagreement in connection with its
report on these financial statements for those periods.

         On November 28, 2000, the Company engaged Salberg & Company, P.A., as
its independent auditor and independent certified public accountant. The Company
did not consult with Salberg and Company, P.A. regarding the application of
accounting principles to a specific transaction of the type of audit opinion
that might be rendered on the Company's financial statements, and no written or
oral advice was provided by Salberg & Company, P.A. that was a factor considered
by the Company in reaching a decision as to the accounting, auditing or
financial reporting issues.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        ----------------------------------------------------
        PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
        ----------------------------------------------------------

         The following table sets forth certain information with respect to our
executive officers and directors as of March 31, 2002.

            Name                     Age       Position
            ----                     ---       --------
            Edward Steele             72       Chief Executive Officer
                                               and Director
            John F. Klecha            51       President, Chief Operating
                                               Officer, Secretary, Treasurer,
                                               and Director
            Jack S. Dromgold          58       Senior Vice-President, Sales and
                                               Marketing
            April J. Green            38       Chief Financial Officer
            Josef A. Bauer            64       Director
            Howard W. Moore           71       Director
            Robert J. Weinberg        53       Director

                                       19
<PAGE>


         Edward Steele has served as the Chief Executive Officer and as a
director of the Singing Machine from September 1991 through the present date. He
also served as our President from September 1991 through March 2001. From
October 1988 to September 1991, Mr. Steele was our sales director and was
responsible for the development of our electronic hardware products in the Far
East. Prior to joining us, Mr. Steele served in executive capacities at a number
of companies in the toy and electronics fields, including as managing director
in charge of worldwide sales of Concept 2000, a manufacturer of consumer
electronics from 1971 to 1978; as President of Wicely Corp., a distributor of
electronic toys and consumer electronics from 1978 to 1983; and as President of
Justin Products Corp., an electronic toy manufacturer from 1983 to 1988.

         John Klecha has served as our Chief Financial Officer, Secretary,
Treasurer and Director from October 10, 1997 through the present date. Since
June 28, 1999 through the present date, Mr. Klecha has also served as our Chief
Operating Officer and since March 2001, Mr. Klecha has served as our President.
Mr. Klecha is in charge of all administrative, and operational functions of the
Singing Machine. Prior to joining us, Mr. Klecha served in executive and senior
management capacities at a number of companies in the toy and other consumer
products industries, including as a senior financial and administrative
executive of a privately held toy design, manufacturing and distribution company
from 1987 through 1997; as Vice President, Director and Chief Financial Officer
of Sussex Nautilus from 1984 to 1987; and Vice President of Finance and
Administration for Lazzaroni Sarrono, Ltd. from 1982 to 1984.

         Jack Dromgold has served as our Senior Vice President of Sales and
Marketing since April 16, 2002 through the present date. Prior to joining us,
Mr. Dromgold served as Vice President of Sales for Hasbro Games from 1993
through April 2002. Mr. Dromgold is a 35-year veteran of the toy and game
industry and has been involved in the development of sales programs to support
the launch of many new products over the years.

         April Green has served as our Chief Financial Officer since March 15,
2002. Ms. Green joined our company in June 1999 as our controller and was
promoted to the position of Director of Finance & Administration in January 1,
2000. Prior to joining us, Ms. Green held various positions of increasing
responsibility with Monogram International, a large, Florida-based novelty and
toy company from February 1993 to June 1999. At Monogram, Ms. Green rose from
Staff Accountant to Controller. Prior to June 1999, she served in a variety of
financial positions in the automotive industry in the Tampa area. Ms. Green is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants.

         Josef A. Bauer has served as a director from October 15, 1999 through
the present date. Mr. Bauer previously served as a director of the Singing
Machine from February 1990 until September 1991 and from February 1995 until May
1998. Mr. Bauer presently serves as the Chief Executive Officer of the following
three companies: Banisa Corporation, a privately owned investment company, since
1975; Trianon, a jewelry manufacturing and retail sales companies since 1978 and
Seamon Schepps, also a jewelry manufacturing and retail sales company since
1999.).

         Howard Moore has served as a director since August 2000 through the
present date. From 1984, when Mr. Moore joined Toys 'R' Us as executive vice
president and general merchandise manager, until 1990, when he retired, sales
increased from $480 million to $4.8 billion. Mr. Moore served on the Toys 'R' Us
board of directors from 1984 until June 2000. He is also founder and president
of Howard Moore Associates, a company, which provides marketing, product
licensing, packaging and merchandising consulting to the toy industry.
Previously, he was president and CEO of Toy Town, USA, Inc. after founding and
operating two other toy chain stores. Mr. Moore is currently serving as the
Chairman of the Advisory Board of Leapfrog Enterprises, Inc.

         Robert Weinberg has served as a director from March 9, 2001 through the
present date. Mr. Weinberg has considerable experience in toy products,
marketing, licensing, merchandising and packaging. He is currently the founder
and president of RJW & Associates, a marketing consulting firm based in Saddle
River, New Jersey. Previously, he served in various positions of increasing
responsibility with Toys `R Us, rising through the ranks from buyer trainee in
1971 to Senior Vice President - General Merchandise Manager in 1997. In these
later positions, he was responsible for purchasing advertising/marketing,
imports, product development, store planning and allocations. He retired from
Toys `R' Us in March 2000.

         Our directors serve for a term of one year, or until their successors
shall have been elected and qualified. Our executive officers are appointed and
serve at the discretion of the Board of Directors. There are no family
relationships among any of our directors and executive officers. However, one of
our key personnel, John Steele, our Director of Sales - International, is the
son of Edward Steele, our Chief Executive Officer and Director.


                                       20
<PAGE>

BOARD COMMITTEES

         We have an audit committee, an executive compensation/stock option
committee and a nominating committee. The audit committee consists of Messrs.
Bauer, Moore and Weinberg. The audit committee recommends the engagement of
independent auditors to the board, initiates and oversees investigations into
matters relating to audit functions, reviews the plans and results of audits
with our independent auditors, reviews our internal accounting controls, and
approves services to be performed by our independent auditors. The executive
compensation/stock option committee consists of Messrs. Bauer, Moore and
Weinberg. The executive compensation/stock option committee considers and
authorizes remuneration arrangements for senior management and grants options
under, and administers our employee stock option plan. The entire Board of
Directors operates as a nominating committee. The nominating committee is
responsible for reviewing the qualifications of potential nominees for election
to the Board of Directors and recommending the nominees to the Board of
Directors for such election.

DIRECTOR'S COMPENSATION

         During fiscal 2002, our non-employee directors received a $1,000 cash
stipend for serving on our Board and reimbursement for all reasonable expenses
incurred in attending meetings. During fiscal 2003, we are increasing our annual
cash stipend to non-employee directors to $10,000 per year. We also grant each
of our outside directors 10,000 options for each year of service on the Board.
Effective as of July 2, 2002, we granted each of our three outside directors
options to purchase 30,000 shares of the Company's common stock, with 10,000
options vesting each year on the day before our annual shareholder's meetings.
The exercise price of the options will be equal to the fair market value of the
Company's common stock on the date of grant. The options will be immediately
vested and are exercisable for a period of five years after the vesting date.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         To our knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that during the year ended March 31,
2002, its officers, directors and 10% shareholders complied with all Section
16(a) filing requirements, except that, as a result of administrative errors:
Mr. Steele filed a Form 4 reporting his exercise of two tranches of options in
September 2001 one month late, (2) Mr. Moore filed a Form 4 reporting his seven
separate purchases of the Company's common stock in September 2001 five days
late and (3) Mr. Bauer filed a Form 4 reporting his exercise of four tranches of
options and warrants in September 2001 one day late. Both of the Form 4's filed
by Mr. Bauer and Mr. Moore were signed before the filing date, but it appears
that the SEC did not receive the forms until after the filing date.

ITEM 10. EXECUTIVE COMPENSATION
         ----------------------

         The following table sets forth certain compensation information for the
fiscal years ended March 31, 2000, 2001 and 2002 with regard to Edward Steele,
our Chief Executive Officer, and each of our other executive officers whose
compensation exceeded $100,000 on an annual basis (the "Named Officers"):



                                       21
<PAGE>

<TABLE>
<CAPTION>

                                              SUMMARY COMPENSATION TABLE
                                              --------------------------

                                         Annual Compensation                        Long Term Compensation
                                ------------------------------------------------------------------------------------------
                                                                                Awards                   Payments
                                                                      ----------------------------------------------------
                                                                                    Securities
Name of Individual and                                Other Annual    Restricted    Underlying/  LTIP     All Other
- -----------------------                               -------------   -----------   ------------ -----    ---------
Principal Position       Year   Salary     Bonus(1)   Compensation    Stock Award(s)Options/ SARsPayouts  Compensation
- ------------------       ----   ------     --------   ------------    ----------------------------------  ------------
<S>                      <C>    <C>        <C>               <C>            <C>       <C>            <C>      <C>
Edward Steele            2002   $364,145   $192,133         -0-            -0-        15,000        -0-      -0-
   CEO                   2001   $320,865   $256,289         -0-            -0-       315,000        -0-      -0-
                         2000   $189,363   $ 54,570         -0-       $377,500 (2)    45,000        -0-      -0-

John Klecha              2002   $286,111   $157,200         -0-            -0-        15,000        -0-      -0-
   President,  Chief     2001   $255,777   $205,031         -0-            -0-       300,000        -0-      -0-
   Operating Officer     2000   $114,394   $ 43,656         -0-       $253,125 (3)    58,500        -0-      -0-



April Green
   Chief Financial
   Officer (4)           2002   $ 88,825  $  25,000         -0-            -0-        30,000        -0-      -0-
                         2001   $ 83,658  $  17,000         -0-            -0-         7,500        -0-      -0-
                         2000   $ 44,850  $   3,500         -0-            -0-           -0-        -0-      -0-
</TABLE>

(1)  The amounts disclosed in this column for fiscal 2002 and 2001 include the
     Company's contributions under its 401(k) savings plan and automobile
     allowances. The amounts disclosed for fiscal 2000 represent automobile
     allowances only.

(2)  As consideration for guaranteeing a loan, Mr. Steele received 200,000
     shares of our common stock on June 28, 1999. The fair market value of the
     stock on the date of grant was $1.6875.

(3)  As consideration for guaranteeing a loan, Mr. Klecha received 150,000
     shares of our common stock on June 28, 1999. The fair market value of the
     stock on the date of grant was $1.6875 per share.

(4)  Ms. Greene has served as our Chief Financial Officer since March 15, 2002.
     She served as the Director of Finance and Administration from January 1,
     2000 through March 14, 2002 and as our controller from June 1999 through
     December 2000.

OPTION GRANTS IN FISCAL 2002
- ----------------------------

         The following table sets forth information concerning all options
granted to our officers and directors during the year ended March 31, 2002. No
stock appreciation rights ("SAR's") were granted.
<TABLE>
<CAPTION>

                                                                                 Potential Realizable
                                                                                 Value at Assumed
                                                                                 Annual Rates of Stock
                                   Total Options                                 Price Appreciation
                  Shares           Granted to                                    for Option Term(2)
                Underlying         Employees in    Exercise Price  Expiration    ----------------------
Name           Options Granted(1)  Fiscal Year     Per Share       Date            5%        10%
- -------------------------------------------------------------------------------------------------------
<S>             <C>                  <C>             <C>           <C>           <C>       <C>
Edward Steele   15,000               50%             $4.23         8/15/06       $17,550   $38,700

John Klecha     15,000               50%             $4.23         8/15/06       $17,500   $38,700

April Green        -0-               -0-               -0-             -0-           -0-       -0-
</TABLE>

(1)  All options were granted pursuant to the Year 2001 Stock Option Plan.
     Option exercise prices were at the market when granted.

(2)  The dollar amounts under these columns are the result of calculations based
     on the market price on the date of grant at an assumed annual rate of
     appreciation over the maximum term of the option at 5% and 10% as required
     by applicable regulations of the SEC and, therefore, are not intended to
     forecast possible future appreciation, if any of the common stock price.
     Assumes all options are exercised at the end of their respective terms.
     Actual gains, if any, on stock option exercises depend on the future
     performance of the common stock.


                                       22
<PAGE>

AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED MARCH 31, 2002 AND OPTION
VALUES

         The following table sets forth information as to the exercise of stock
options during the fiscal year ended March 31, 2002 by our officers listed in
our Summary Compensation Table and the fiscal year-end value of unexercised
options.
<TABLE>
<CAPTION>
                                                                                                    Value of
                                                                        Number of                  Unexercised
                                                                       Unexercised                 In-the-Money
                                                                        Options at                  Options at
                                                                      Fiscal Year End             Fiscal Year End(2)
                                                                      ---------------             ------------------
                        Shares Acquired           Value                Exercisable/                 Exercisable/
Name of Individual       Upon Exercise          Realized(1)            Unexercisable                Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>                    <C>                     <C>
Edward Steele              604,500              $5,390,260             191,250/146,250         $2,259,637.50/$2,034,337.50

John Klecha                130,000              $  731,100             232,500/135,000         $2,961,390.00/$1,877,850.00

April Green                  6,000             $    41,283               13,500/13,500        $   187,785.00/$  187,785.00
</TABLE>

(1)  Value realized is based on the difference between the closing price of our
     common stock on the date of exercise and the option exercise prices times
     the number of outstanding options.

(2)  Value of unexercised options equals the closing price of $15.95 on March
     28, 2002, less the option exercise price multiplied by the number of shares
     exercisable or unexercisable.

EMPLOYMENT AND CONSULTING AGREEMENTS

         Edward Steele. In February 2002, Edward Steele announced that he would
be retiring as our Chief Executive Officer on March 1, 2003, and that he would
remain affiliated with our Company after his retirement as a product development
consultant. In June 2002, our Board of Directors approved the terms of
consulting agreement with Mr. Steele, which would commence on March 1, 2003
(subject to finalization of the terms of Mr. Steele's services in a definitive
consulting agreement). Under this agreement, Mr. Steele will provide the company
with consulting services related to product design, packaging, administration
and training his replacement for a period of one year after his retirement. Mr.
Steele will receive a consulting fee equal to $250,000 per year and will be
entitled to all benefits that he received while he was employed by the Company.
The consulting agreement will provide that Mr. Steele cannot directly or
indirectly compete with our company in the karaoke industry in the United States
during the term of the consulting agreement and for a period of one year after
its termination. Additionally, in recognition of Mr. Steele's fourteen years of
service with the company, the Board approved a $200,000 appreciation bonus to be
paid to Mr. Steele on his retirement date.

         Until February 28, 2003, Mr. Steele will continue to be employed as our
Chief Executive Officer under his current employment agreement with the company,
which consists of his employment agreement dated March 1, 1998 and an amendment
effective as of May 5, 2000. Under Mr. Steele's employment agreement, his annual
salary is $385,875 for the period from June 1, 2002 through May 31, 2003. The
agreement also provides for an annual bonus, as determined by the Board of
Directors in its sole discretion. In the event of a termination of Mr. Steele's
employment in the event of a change in control (as defined in the employment
agreement), Mr. Steele would be entitled to a lump sum payment of 300% of the
amount of his total compensation in the twelve months preceding such
termination. Additionally, if Mr. Steele is terminated without cause, he is
entitled to a lump sum payment equal to 300% of his annual compensation.

         John Klecha. In June 2002, we decided that Mr. Klecha would become our
Chief Executive Officer, when Mr. Steele retired on February 28, 2003 (subject
to finalization of the terms of Mr. Klecha's employment in a definitive
employment agreement). We agreed that Mr. Klecha's annual compensation as Chief
Executive Officer would be $367,500 per year and that Mr. Klecha would be
entitled to a bonus equal to 1/3 of the Company's bonus pool. The bonus pool
available to Mr. Klecha and all of the Company's other employees will be equal
to 10% of the growth in the Company's net income between two consecutive fiscal
years. Until we enter into a new employment agreement, Mr. Klecha will continue
to be employed under his current employment agreement, which expires on May 31,
2003.


                                       23
<PAGE>

         Under Mr. Klecha's current employment agreement, his annual
compensation is $303,187.50 for the period from June 1, 2002 through May 31,
2003. The employment agreement provides for an annual bonus, as determined by
the Board of Directors in its sole discretion. In the event of a termination of
his employment following a change-in-control (as defined in the employment
agreement), Mr. Klecha is entitled to a lump sum payment of 200% of the amount
of his total compensation in the twelve months preceding such termination.
Additionally, if Mr. Klecha is terminated without cause, he is entitled to a
lump sum payment equal to 300% of his annual compensation.

         Jack Dromgold. On April 15, 2002, we entered into a three-year
employment agreement with Jack Dromgold, our Senior Vice President of Sales and
Marketing, expiring on April 14, 2005. Mr. Dromgold's employment agreement will
be automatically be extended for an additional year, unless either party gives
written notice at least sixty days prior to the end of the three-year term.. It
is our intent that Mr. Dromgold will eventually become our Executive Vice
President and then our President. However, we did not guarantee Mr. Dromgold
that he would be promoted to those positions during his term of employment with
our company. Pursuant to Mr. Dromgold 's employment agreement, he is entitled to
receive an annual salary of $220,000 per year, which amount automatically
increases during the second and third fiscal years by not less than the greater
of 5% or the annual increase in the consumer price index.

         As a signing bonus, we agreed to pay Mr. Dromgold $50,000, with $25,000
payable within 10 days of employment and the remaining $25,000 payable after six
months of employment. If Mr. Dromgold completes one year of employment with the
Company, he does not have an obligation to repay the signing bonus. We also
agreed to grant Mr. Dromgold 50,000 options. After his first year of employment,
Mr. Dromgold can elect to return the 50,000 options to the Company or one of our
representatives for $100,000. As of July 14, 2002, we have not granted the
options to Mr. Dromgold. During his first year of employment, Mr. Dromgold's
bonus will be equal to 1% of new accounts shipped, but shall be a minimum of
$50,000. During the second year of his employment, Mr. Dromgold's bonus will be
switched to 10% of the Company's then current bonus plan, subject to Board
approval. We also agreed to pay Mr. Dromgold's certain moving and relocation
expenses in connection with his move from Massachusetts to Florida. As of July
8, 2002, we estimate that these moving expenses are approximately $39,000. In
the event of a termination of Mr. Dromgold's employment in the event of a change
in control (as defined in the employment agreement), Mr. Dromgold is entitled to
a lump sum payment of 50% of the amount of his total compensation in the twelve
months preceding such termination.

         April Green. On March 15, 2002, we entered into a three-year employment
agreement with April Green, our Chief Financial Officer, expiring on March 14,
2005. Ms. Green's employment agreement will be automatically be extended for an
additional year, unless either party gives written notice at least sixty days
prior to the end of the three-year term Pursuant to Ms. Green's employment
agreement, she is entitled to receive base compensation of $122,200 per year,
which amount automatically increases during the second and third fiscal years by
not less than the greater of 5% or the annual increase in the consumer price
index. The agreement also provides for an annual bonus, as determined by the
Board of Directors, in its sole discretion. During her second year of
employment, Ms. Green's bonus will be equal to 8% of the Company's then current
bonus plan, subject to Board approval. In the event of a termination of her
employment following a change of control (as defined in her employment
agreement), Ms. Green is entitled to a lump sum payment of 50% of the amount of
her total compensation in the twelve months preceding such termination.

EQUITY COMPENSATION PLANS AND 401(K) PLAN

     The Company has two stock option plans: the 1994 Amended and Restated Stock
Option Plan ("1994 Plan") and the 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 consultants As of March 31, 2001, we had 970,225 options
issued and outstanding under our 1994 Plan and 81,750 options are issued and
outstanding under our Year 2001 Plan. Furthermore, as of March 31, 2002, we had
52,500 warrants issued and outstanding to FRS Investments, Inc. a consulting
company, which were subsequently exercised by FRS in April 2002.

     The following table gives information about equity awards under our 1994
Plan, the Year 2001 Plan and FRS Investment's warrants.


                                       24
<PAGE>

<TABLE>
<CAPTION>


                        Number of securities to be    Weighted-average           Number of securities remaining
                        issued upon exercise          exercise price of          available for future issuance under
                        or outstanding options,       outstanding options,       equity compensation plans
Plan Category           warrants and rights           warrants and rights        (excluding securities in column (a))
- -------------           -------------------           -------------------        ------------------------------------
<S>                        <C>                            <C>                           <C>
Equity Compensation
Plans approved by
Security holders             1,011,975                      $ 2.17                        1,218,250


Equity Compensation
Plans not approved by
Security holders                52,500*                     $  .92                           52,500*
</TABLE>

*FRS Investments exercised these warrants in April 2002.

1994 PLAN

         Our 1994 Plan was originally adopted by our Board of Directors in May
1994 and it 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 share of our common stock
pursuant to the exercise of options granted under the Plan. As of March 31,
2002, we had granted all the options that are available for grant under our 1994
Plan. As of March 31, 2002, we have 970,225 options issued and outstanding under
the 1994 Plan, of which 494,362.5 of these options are vested. On December 1,
2002, all options granted under the 1994 Plan will become fully vested .

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 's common stock and 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, 2002, we had granted 81,750 options
under the Year 2001 Plan, all of which are fully vested.

         The Year 2001 Plan is administered by our Stock Option 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 nonstatutory 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 amounts exceeds
$100,000, our Board of the Committee may designate those shares that 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



                                       25
<PAGE>

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 option 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.

FRS INVESTMENTS, INC. CONSULTING AGREEMENT

         In July 1999, we entered into a financial consulting agreement with FRS
Investments, Inc. pursuant to which FRS agreed to provide certain consulting
services to our company. In connection with this agreement, we issued an
aggregate of 127,500 warrants to FRS at an exercise price of $0.92 per share and
an expiration date of June 8, 2002. As of June 8, 2002, all of these warrants
were exercised.

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. In fiscal 2002, we made 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.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         -----------------------------------------------
         AND MANAGEMENT
         --------------

         The following table sets forth, as of July 17, 2002, certain
information concerning beneficial ownership of our common stock by (i) each
person known to us to own 5% or more of our outstanding common stock, (ii) all
directors of the Singing Machine and (iii) all directors and officers of the
Singing Machine as a group. At July 17, 2002, we had 8,134,701 shares of our
common stock issued and outstanding. Unless otherwise indicated, the address for
each person is The Singing Machine Company, Inc., 6601 Lyons Road, Building A-7,
Coconut Creek, Florida 33073.

         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 consists of sole ownership, voting and investment rights.



                                       26
<PAGE>



                                    Shares Beneficially      Percent of
Name & Address                      Owned                      Class
- -----------------------------------------------------------------------

John Klecha                             934,611(1)             11.2%
Edward Steele                         1,158,546(2)             14.0%
Josef Bauer                             951,272(3)             11.7%
Howard Moore                            265,977(4)              3.3%
Robert Weinberg                          50,322(5)               *
April Green                              14,450(6)               *
Jack Dromgold                               600(7)               *

All Directors and Executive           3,375,778(8)             39.1%
Officers as a Group (5 persons)


(1) Includes 232,500 shares issuable upon the exercise of stock options that are
exercisable within 60 days of July 17, 2002.

(2) Includes 191,250 shares issuable upon the exercise of stock options that are
exercisable within 60 days of July 17, 2002 and 152,910 shares held by Mr.
Steele's wife. Mr. Steele disclaims beneficial ownership of any shares held by
his wife.

(3) Includes 360,000 shares held by Mr. Bauer's pension plan, 200,000 shares
held by Mr. Bauer's wife and 51,475 shares held jointly by Mr. Bauer and his
wife. Also includes 162,600 shares held by the Bauer Family Limited Partnership,
of which Mr. Bauer and his wife own a 98% interest. Includes 10,000 shares that
are issuable upon the exercise of stock options that are exercisable within
sixty days of July 17, 2002. Mr. Bauer disclaims beneficial ownership of any
shares held by his wife.

(4) Includes 189,400 shares held by Mr. Moore, as trustee for the Howard & Helen
Moore Living Trust, 30,750 shares held by Howard Moore Associates, Inc. Defined
Benefit Pension Plan and 2,077 shares held by the Howard & Helen Moore
Irrevocable Insurance Trust. Also include 10,000 shares issuable upon the
exercise of stock options that are exercisable within 60 days of July 17, 2002.

(5) Includes 4,500 shares held by a limited liability company, of which Mr.
Weinberg is a 50% owner, 372 shares held by Mr. Weinberg's IRA and 450 shares
held by Mr. Weinberg's spouse. Also includes 45,000 shares issuable upon the
exercise of stock options that are exercisable within 60 days of July 17, 2002.
Mr. Weinberg disclaims beneficial ownership of any shares held by his wife.

(6) Includes 13,500 shares issuable upon the exercise of stock options that are
exercisable within 60 days of July 17, 2002.

(7) Shares are held jointly by Mr. Dromgold and his wife.

(8) Includes 502,250 shares issuable upon the exercise of stock options that are
exercisable within 60 days of July 17, 2002.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

         On July 1, 1999, we loaned $55,000 to each of Eddie Steele and John
Klecha to purchase 2 units in our private placement. These loans bore interest
at the rate of 9% per annum and were due on June 28, 2001. Mr. Klecha and Mr.
Steele repaid these loans and all accrued interest in June 2001.

         In June 1999, we arranged a credit facility with Main Factors, whereby
Main Factors purchased certain of our accounts receivable. To secure the credit
facility, John Klecha, our Chief Operating Officer and Chief Financial Officer,
provided his personal payment guaranty. In July 1999, we entered into an
agreement with EPK Financial Corporation ("EPK") whereby EPK provided letters of
credit with our factories to import inventory for distribution to our customers.
To secure the EPK facility, Edward Steele and John Klecha provided their
personal guarantees. In consideration for providing their personal guarantees of
these credit facilities, we issued 200,000 shares of our common stock to Mr.
Steele and 150,000 shares of our common stock to Mr. Klecha in June 1999. Both
agreements with Main Factors and EPK were terminated in April 2001. We amortized
the value of these deferred guarantee fees over a two year period, which was
completed in the first quarter of fiscal 2002.


                                       27
<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
         ---------------------------------------------------------------

(A)      Exhibits

3.1      Certificate of Incorporation of the Singing Machine filed with the
         Delaware Secretary of State on February 15, 1994 (incorporated by
         reference to Exhibit 3.1 in the Company's registration statement on
         Form SB-2 filed with the SEC on March 7, 2000).
3.2      Certificate of Agreement of Merger between the Singing Machine Company,
         Inc., a California corporation, and the Singing Machine Company, Inc.,
         a Florida corporation, filed with the Delaware Secretary of State on
         May 3, 1994 (incorporated by reference to Exhibit 3.1 in the Company's
         registration statement on Form SB-2 filed with the SEC on March 7,
         2000).
3.3      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on July 19, 1994 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.4      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on July 26, 1994 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.5      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on November 4, 1994 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.6      Certificate of Renewal of the Singing Machine filed with the Delaware
         Secretary of State on April 2, 1998 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.7      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on April 20, 1998 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.8      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on May 7, 1998 (incorporated by reference to Exhibit
         3.1 in the Company's registration statement on Form SB-2 filed with the
         SEC on March 7, 2000).
3.9      Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on April 13, 1999 (incorporated by reference to
         Exhibit 3.1 in the Company's registration statement on Form SB-2 filed
         with the SEC on March 7, 2000).
3.10     Certificate of Designations, Preferences and Rights of Preferred Stock
         of the Singing Machine filed with the Delaware Secretary of State on
         April 15, 1999 (incorporated by reference to Exhibit 3.1 in the
         Company's registration statement on Form SB-2 filed with the SEC on
         March 7, 2000).
3.11     Certificate of Amendment of the Singing Machine filed with the Delaware
         Secretary of State on September 29, 2000 (incorporated by reference to
         Exhibit 3.1 in the Company's Quarterly Report on Form 10-QSB for the
         period ended September 30, 1999 filed with the SEC on November 14,
         2000).
3.12     Certificate of Correction filed with the Delaware Secretary of State on
         March 29, 2001 correcting the Amendment to our Certificate of
         Incorporation dated April 20, 1998 (incorporated by reference to
         Exhibit 3.11 in the Company's registration statement on Form SB-2 filed
         with the SEC on April 11, 2000).*
3.13     Certificate of Correction filed with the Delaware Secretary of State on
         March 30, 2001 correcting the Amendment to our Certificate of
         Incorporation dated May 7, 1998 (incorporated by reference to Exhibit
         3.11 in the Company's registration statement on Form SB-2 filed with
         the SEC on April 11, 2001).
3.14     Amended By-Laws of the Singing Machine Company (incorporated by
         reference to Exhibit 3.14 in the Company's Annual Report on Form 10-KSB
         for the year ended March 31, 2001 filed with the SEC on June 29, 2001).
4.1      Form of Certificate Evidencing Shares of Common Stock (incorporated by
         reference to Exhibit 3.3. of the Company's registration statement on
         Form SB-2 filed with the SEC on March 7, 2000)
4.2      Form of Warrant Certificate (incorporated by reference to Exhibit 3.4
         of the Company's registration statement on Form SB-2 filed with the SEC
         on March 7, 2000).
10.1     Lease Agreement dated April 10, 2000 between The Singing Machine
         Company, Inc. and Rocco Ferrera & Co., Inc. and Lee S. Lasser, trustee
         of the Lee Lasser Trust dated August 25, 1972, as amended d/b/a Lyons
         Corporate Park for Office and warehouse space in Coconut Creek, Florida
         (incorporated by reference to Exhibit 10.1. of the Company's
         registration statement on Form SB-2 filed with the SEC on March 28,
         2001).


                                       28
<PAGE>

10.2     Lease Agreement dated November 9, 2000 between the Singing Machine
         Company, Inc. and Marcel George & Joanne Marie George, trustees of
         Marcel George family trust of September 2, 1982 for warehouse space in
         Carson, California (incorporated by reference to Exhibit 10.2 of the
         Company's registration statement on Form SB-2 filed with the SEC on
         March 28, 2001.)
10.3     Lease Agreement dated August 2000 between Koon Wah Mirror Holdings
         Limited and International SMC (HK) Limited for office space in Hong
         Kong (incorporated by reference to Exhibit 10.3 of the Company's
         registration statement on Form SB-2 filed with the SEC on March 28,
         2001).
10.4     Lease Agreement dated March 12, 2002, by and between Lyons Corporate
         Park LLP and The Singing Machine Company, Inc. for office space in
         Coconut Creek, Florida.(incorporated by reference to Exhibit 10.4 of
         the Company's Form 10-KSB filed with the SEC on July 1, 2002)
10.5     Sublease dated May 28, 2002 by and between The Singing Machine Company,
         Inc. and Busung America Corp. for warehouse space in Carson City,
         California (incorporated by reference to Exhibit 10.5 of the Company's
         Form 10-KSB filed with the SEC on July 1, 2002).
10.6     Lease documents for Ocean Centre dated April and June 2002 by and
         between Harbour City Management Limited and International SMC (HK) Ltd.
         for office space in Hong Kong. (incorporated by reference to Exhibit
         10.6 of the Company's Form 10-KSB filed with the SEC on July 1, 2002).
10.7     Industrial Lease dated March 1, 2002, by and between AMP Properties,
         L.P. and The Singing Machine Company, Inc. for warehouse space in
         Compton, California (incorporated by reference to Exhibit 10.7 of the
         Company's Form 10-KSB filed with the SEC on July 1, 2002).
10.8     Employment Agreement dated May 1, 1998 between the Singing Machine and
         Edward Steele (incorporated by reference to Exhibit 10.1 of the
         Company's registration statement on Form SB-2 filed with SEC on March
         7, 2000).
10.9     Employment Agreement dated June 1, 2000 between the Singing Machine and
         John Klecha (incorporated by reference to Exhibit 10.5 of the Company's
         registration statement on Form SB-2 filed with the SEC March 28, 2001).
10.10    Loan and Security Agreement dated April 2000 between LaSalle Business
         Credit, Inc. and the Singing Machine Company (incorporated by reference
         to Exhibit 3.1 in the Company's Quarterly Report on Form 10-QSB for the
         period ended September 30, 1999 filed with the SEC on November 14,
         2000).
10.11    First Amendment to Loan and Security Agreement dated October 1, 2001
         between LaSalle Business Credit, Inc. and the Singing Machine Company
         (incorporated by reference to Exhibit 10.11 to the Company's Annual
         Report on Form 10-KSB for the year ended March 31, 2002 filed with the
         SEC on July 1, 2002).
10.12    Second Amendment to Loan and Security Agreement dated November 20, 2001
         between LaSalle Business Credit, Inc. and the Singing Machine Company
         (incorporated by reference to Exhibit 10.12 to the Company's Annual
         Report on Form 10-KSB for the year ended March 31, 2002 filed with the
         SEC on July 1, 2002).
10.13    Third Amendment to Loan and Security Agreement dated November 28, 2001
         between LaSalle Business Credit, Inc. and the Singing Machine Company
         (incorporated by reference to Exhibit 10.13 to the Company's Annual
         Report on Form 10-KSB for the year ended March 31, 2002 filed with the
         SEC on July 1, 2002).
10.14    Fourth Amendment to Loan and Security Agreement dated February 28, 2002
         between LaSalle Business Credit, Inc. and the Singing Machine Company,
         Inc. (incorporated by reference to Exhibit 10.14 to the Company's
         Annual Report on Form 10-KSB for the year ended March 31, 2002 filed
         with the SEC on July 1, 2002).
10.15    Amended and Restated 1994 Management Stock Option Plan (incorporated by
         reference to Exhibit 10.6 to the Company's registration statement on
         Form SB-2 filed with the SEC on March 28, 2001).
10.16    Factoring Agreement dated April 7, 2000 between the Singing Machine and
         Main Factors, Inc. (incorporated by reference to Exhibit 10.7 to the
         company's registration statement on Form SB-2 filed with the SEC on
         March 28, 2001).
10.17    Master Agreement dated July 31, 1999 between EPK Financial Corporation
         and the Singing Machine (incorporated by reference to Exhibit 10.4 of
         the Company's registration statement on Form SB-2 filed with the SEC on
         March 7, 2000).
10.18    Singing Machine's Amended Bankruptcy Plan of Reorganization dated
         December 17, 1997 (incorporated by reference to Exhibit 10.5 of the
         Company's registration statement on Form SB-2 filed with the SEC on
         March 7, 2000).
10.19    Bankruptcy Court's Order Confirming the Plan of Reorganization
         (incorporated by reference to Exhibit 10.5 of the Company's
         registration statement on Form SB-2 filed with the SEC on March 7,
         2000).

                                       29
<PAGE>

10.20    Employment Agreement between the Company and Jack Dromgold dated April
         14, 2002*
10.21    Employment Agreement between the Company and April Green dated March
         15, 2002.*
10.22    Lease Agreement dated March 31, 1999 between The Singing Machine
         Company, Inc. and Rocco Ferrera & Co., Inc. and Lee S. Lasser, trustee
         of the Lee S. Lasser Trust dated August 25, 1972, as amended d/b/a
         Lyons Corporate Park for office space in Coconut Creek, Florida.*
21.1     List of Subsidiaries*
23.1     Consent of Salberg & Company, P.A.*

         *Filed herewith

(B)      Reports on Form 8-K

         We did not file any reports on Form 8-K during the fourth quarter ended
March 31, 2002.


                                       30
<PAGE>



SIGNATURES


         In accordance with the requirements of Section 13 and 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                           THE SINGING MACHINE COMPANY, INC.


Dated: July 22, 2002       By:   /s/ John F. Klecha
                             ---------------------------------------------------
                             John F. Klecha, President, Chief Operating Officer,
                             Secretary, Treasurer and Director
                             (Principal Executive Officer)

In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                                  Capacity                                   Date
- ---------                                  --------                                   ----
<S>                                        <C>                                        <C>
/s/ Edward Steele                          Chief Executive Officer                    July 22, 2002
- ---------------------------                And Director
Edward Steele                              (Principal Executive Officer)


/s/ John F. Klecha                         President, Chief Operating                 July 22, 2002
- ---------------------------                Officer, Secretary, Treasurer
John F. Klecha                             and Director
                                           (Principal Executive Officer)


/s/ April Green                            Chief Financial Officer                    July 22, 2002
- --------------------                       (Principal Financial and
April Green                                Accounting Officer)


/s/ Josef A. Bauer                         Director                                   July 22, 2002
- ---------------------------
Josef A. Bauer

/s/ Howard W. Moore                        Director                                   July 22, 2002
- ---------------------------
Howard W. Moore

/s/ Robert J. Weinberg                     Director                                   July 22, 2002
- ---------------------------
Robert J. Weinberg
</TABLE>



                                       31
<PAGE>

<PAGE>


                        The Singing Machine Company, Inc.
                                 and Subsidiary

                        Consolidated Financial Statements

                                 March 31, 2002




<PAGE>




                        The Singing Machine Company, Inc.
                                 and Subsidiary


                                    Contents
                                    --------


                                                                    Page(s)
                                                                  -------------
Independent Auditors' Report                                         F-1

Consolidated Balance Sheet                                           F-2

Consolidated Statements of Income                                    F-3

Consolidated Statements of Changes in Stockholders' Equity           F-4

Consolidated Statements of Cash Flows                                F-5

Notes to Consolidated Financial Statements                        F-6 - F-22


<PAGE>

                          Independent Auditors' Report
                          ----------------------------


Board of Directors and Shareholders:
   The Singing Machine Company, Inc.
   and Subsidiary

We have audited the accompanying consolidated balance sheet of The Singing
Machine Company, Inc., and Subsidiary as of March 31, 2002, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for the years ended March 31, 2002 and 2001. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Singing Machine
Company, Inc. and Subsidiary as of March 31, 2002, and the results of their
operations and their cash flows for the years ended March 31, 2002 and 2001 in
conformity with accounting principles generally accepted in the United States of
America.



SALBERG & COMPANY, P.A.
Boca Raton, Florida
May 23, 2002



                                      F-1
<PAGE>


                The Singing Machine Company, Inc. and Subsidiary
                           Consolidated Balance Sheet
                                 March 31, 2002
                                 --------------

<TABLE>
<CAPTION>
                                     Assets
                                     ------

<S>                                                                                       <C>
Current Assets
Cash and cash equivalents                                                                 $ 5,520,147
Accounts receivable, net                                                                    3,536,903
Due from manufacturer                                                                         488,298
Inventories                                                                                 9,274,352
Prepaid expenses and other current assets                                                   1,118,321
Deposits                                                                                      513,684
                                                                                          -----------
Total Current Assets                                                                       20,451,705
                                                                                          -----------

Property and Equipment, Net                                                                   574,657
                                                                                          -----------

Other Assets
Reorganization intangible, net                                                                185,416
Deferred tax asset                                                                            452,673
                                                                                          -----------
Total Other Assets                                                                            638,089
                                                                                          -----------

Total Assets                                                                              $21,664,451
                                                                                          ===========


                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current Liabilities
Accounts payable                                                                          $ 1,846,238
Accrued payroll                                                                               519,714
Accrued royalties                                                                             301,873
Accrued advertising                                                                           136,551
Other accrued expenses                                                                        331,459
Income tax payable                                                                             58,542
                                                                                          -----------
Total Current Liabilities                                                                   3,194,377
                                                                                          -----------

Stockholders' 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, $0.01 par value, 18,900,000 shares authorized,
  8,020,027 shares issued and outstanding                                                      80,200
Additional paid-in capital                                                                  4,602,828
Retained earnings                                                                          13,787,046
                                                                                          -----------

Total Stockholders' Equity                                                                 18,470,074
                                                                                          -----------

Total Liabilities and Stockholders' Equity                                                $21,664,451
                                                                                          ===========
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-2
<PAGE>



                The Singing Machine Company, Inc. and Subsidiary
                        Consolidated Statements of Income
                       Years Ended March 31, 2002 and 2001
                       -----------------------------------

<TABLE>
<CAPTION>
                                                                        2002            2001
                                                                    ------------    ------------
<S>                                                                  <C>             <C>
Net Sales                                                            $61,828,894     $34,306,839

Cost of Sales                                                         41,448,891      22,473,149
                                                                    ------------    ------------

Gross Profit                                                          20,380,003      11,833,690
                                                                    ------------    ------------

Operating Expenses
Compensation                                                           2,486,547       1,916,612
Agency fees                                                                   --         647,908
Commissions                                                            1,294,543         837,222
Advertising                                                            2,377,638         921,359
Bad debt                                                                  45,078          85,302
Royalties                                                              1,862,116         148,643
Selling, general and administrative expenses                           4,078,701       2,249,051
                                                                    ------------    ------------
Total Operating Expenses                                              12,144,623       6,806,097
                                                                    ------------    ------------

Income from Operations                                                 8,235,380       5,027,593
                                                                    ------------    ------------

Other Income (Expenses)
Other income                                                             215,840          32,617
Interest income                                                           16,934          50,242
Interest expense                                                        (112,123)       (424,104)
Stock based guarantee fees                                              (171,472)       (267,029)
Factoring fees                                                                --        (231,298)
                                                                    ------------    ------------
Net Other Expenses                                                       (50,821)       (839,572)
                                                                    ------------    ------------

Income Before Income Taxes                                             8,184,559       4,188,021

Income Tax Expense                                                       119,277          23,320
                                                                    ------------    ------------

Net Income                                                           $ 8,065,282     $ 4,164,701
                                                                    ============    ============

Earnings per Share:
Basic                                                                $      1.13     $      0.66
                                                                    ============    ============
Diluted                                                              $      1.02     $      0.56
                                                                    ============    ============

Weighted Average Common and Common Equivalent
  Shares Outstanding:
Basic                                                                  7,159,142       6,291,792
                                                                    ============    ============
Diluted                                                                7,943,473       7,457,173
                                                                    ============    ============
</TABLE>

           See accompanying notes to consolidated financial statements


                                      F-3
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
           Consolidated Statements of Changes in Stockholders' Equity
                       Years Ended March 31, 2002 and 2001
                       -----------------------------------

<TABLE>
<CAPTION>
                                                                                 Common Stock and
                                                                                Common Stock to be
                                                     Preferred Shares                Issued
                                             ---------------------------   ----------------------------
                                               Shares          Amount          Shares          Amount
                                             -----------    ------------     ----------    ------------

<S>                                           <C>           <C>              <C>              <C>
Balance March 31, 2000                        1,000,000     $ 1,000,000      $4,541,430       $45,414

Conversion of preferred stock                (1,000,000)     (1,000,000)      1,500,000        15,000

Exercise of warrants                                 --              --         570,000         5,700

Exercise of employee stock options                   --              --           2,250            23

Cancellation of shares                               --              --         (75,000)         (750)

Warrants issued for services and as loan
  fees                                               --              --              --            --

Amortization of deferred guarantee fees              --              --              --            --

Net Income, 2001                                     --              --              --            --
                                             ----------     -----------    ------------    ------------

Balance March 31, 2001                               --              --       6,538,680        65,387

Amortization of deferred guaranteed fees             --              --              --            --

Exercise of warrants                                 --              --         581,100         5,811

Exercise of employee stock options                   --              --         900,525         9,005

Fractional share adjustment pursuant to
  3:2 stock split                                    --              --            (278)           (3)

Net Income, 2002                                     --              --              --            --
                                             ----------     -----------      ----------    ----------

Balance, March 31, 2002                              --     $        --       8,020,027       $80,200
                                             ----------     ===========      ==========    ==========
[restub]
<CAPTION>
                                              Additional                       Deferred
                                               Paid-in        Retained         Guarantee
                                               Capital        Earnings           Fees          Totals
                                              ----------     -----------       ---------     ----------

<S>                                           <C>            <C>               <C>          <C>
Balance March 31, 2000                        $1,703,910     $ 1,557,063       (400,101)    $ 3,906,286

Conversion of preferred stock                    985,000              --             --              --

Exercise of warrants                             574,300              --             --         580,000

Exercise of employee stock options                   622              --             --             645

Cancellation of shares                               750              --             --              --

Warrants issued for services and as loan
  fees                                            38,400              --             --          38,400

Amortization of deferred guarantee fees               --              --        228,629         228,629

Net Income, 2001                                      --       4,164,701             --       4,164,701
                                              ----------     -----------       --------      -----------

Balance March 31, 2001                         3,302,982       5,721,764       (171,472)      8,918,661

Amortization of deferred guaranteed fees              --              --        171,472         171,472

Exercise of warrants                             584,239              --             --         590,050

Exercise of employee stock options               720,135              --             --         729,140

Fractional share adjustment pursuant to
  3:2 stock split                                 (4,528)             --             --          (4,531)

Net Income, 2002                                      --       8,065,282             --       8,065,282
                                              ----------     -----------       --------     -----------

Balance, March 31, 2002                       $4,602,828     $13,787,046             --     $18,470,074
                                              ==========     ===========       ========     ===========
</TABLE>
           See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
                       Years Ended March 31, 2002 and 2001
                       -----------------------------------

<TABLE>
<CAPTION>
                                                                            2002            2001
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
Cash Flow from Operating Activities:
Net income                                                              $  8,065,282    $  4,164,701
Adjustments to reconcile net income to net cash provided by (used in)
  operating activities
Depreciation and amortization                                                394,456         301,064
Stock based expenses                                                         171,472         267,029
Bad debt                                                                      45,078          85,302
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable                                                       (2,626,329)       (312,916)
Due from manufacturer                                                        210,798        (699,096)
Inventories                                                               (4,460,891)     (3,326,255)
Prepaid expenses and other assets                                           (444,004)       (394,176)
Increase (decrease) in:
Accounts payable                                                           1,364,158         467,491
Accrued expenses                                                             199,445         672,342
Income taxes payable                                                          35,222          11,326
                                                                        ------------    ------------
Net Cash Provided by Operating Activities                                  2,954,687       1,236,812
                                                                        ------------    ------------

Cash Flow from Investing Activities
Purchase of property and equipment                                          (613,691)       (373,409)
Deposits                                                                    (513,684)             --
Proceeds from repayment of related parties loans                               7,692              --
Proceeds from repayment of officer loans                                     117,425              --
Proceeds from investment in factor                                           933,407              --
Investment in and advances to unconsolidated subsidiary                           --        (374,730)
Proceeds from sale of unconsolidated subsidiary                              298,900              --
Net proceeds from related parties                                                 --         386,261
                                                                        ------------    ------------
Net Cash Provided by (Used in) Investing Activities                          230,049        (361,878)
                                                                        ------------    ------------

Cash Flow from Financing Activities
Loan proceeds                                                             21,856,653         600,000
Loan repayments                                                          (21,856,653)       (600,000)
Proceeds from exercise of stock options and warrants                       1,319,190         580,645
Due from factor                                                                   --        (818,206)
                                                                        ------------    ------------
Net Cash Provided by (Used in) Financing Activities                        1,319,190        (237,561)
                                                                        ------------    ------------

Increase in Cash and Cash Equivalents                                      4,503,926         637,373

Cash and Cash Equivalents - Beginning of Year                              1,016,221         378,848
                                                                        ------------    ------------

Cash and Cash Equivalents - End of Year                                 $  5,520,147    $  1,016,221
                                                                        ============    ============

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest                                  $    112,123    $    424,104
                                                                        ============    ============
Cash paid during the year for income taxes                              $    102,415    $     11,994
                                                                        ============    ============
</TABLE>
           See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

Note 1  Nature of Operations and Summary of Significant Accounting Policies
- ---------------------------------------------------------------------------

         (A) Nature of Operations

         The Singing Machine Company, Inc., a Delaware corporation, and
         Subsidiary (the "Company") is primarily engaged in the production,
         marketing, and sale of consumer karaoke audio equipment, accessories,
         and recordings. The products are sold directly to distributors and
         retail customers.

         (B) Principles of Consolidation

         The consolidated financial statements include the accounts of The
         Singing Machine Company, Inc. and its wholly-owned Hong Kong
         Subsidiary, International SMC (HK) Limited ("Hong Kong Subsidiary").
         All significant intercompany accounts and transactions have been
         eliminated in consolidation.

         (C) Foreign Currency Translation

         The functional currency of the Company's Hong Kong Subsidiary is the
         local currency. The financial statements of the subsidiary are
         translated to United States dollars using year-end rates of exchange
         for assets and liabilities, and average rates of exchange for the year
         for revenues, costs, and expenses. Net gains and losses resulting from
         foreign exchange transactions are included in the consolidated
         statements of operations and were not material during the periods
         presented. The cumulative translation adjustment and effect of exchange
         rate changes on cash at March 31, 2002 was not material.

         (D) Use of Estimates

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

         (E) Cash and Cash Equivalents

         For purposes of the cash flow statement, the Company considers all
         highly liquid investments with maturities of three months or less at
         the time of purchase to be cash equivalents.

         (F) Concentration of Credit Risk

         The Company maintains its cash in bank deposit accounts, which, at
         times, exceed federally insured limits. At March 31, 2002, the Company
         had $213,940 in United States bank deposits, which exceed federally
         insured limits and $5,219,326 in commercial paper, which is not
         insured. The Company has not experienced any losses in such accounts
         through March 31, 2002.



                                      F-6
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         (G) Inventories

         Inventories primarily consist of finished goods, which are comprised of
         electronic karaoke audio equipment, accessories, and compact discs.
         Inventories are stated at the lower of cost or market, as determined
         using the first in, first out method. Inventory consigned to one
         customer at March 31, 2002 was $2,020,172. (See Note 13)

         (H) Property and Equipment

         Property and equipment are stated at cost, less accumulated
         depreciation and amortization. Expenditures for repairs and maintenance
         are charged to expense as incurred. Depreciation is provided using an
         accelerated method over the estimated useful lives of the related
         assets over 3 to 7 years.

         (I) Long-Lived Assets

         The Company reviews long-lived assets and certain identifiable assets
         related to those assets for impairment whenever circumstances and
         situations change such that there is an indication that the carrying
         amounts may not be recoverable. If the non-discounted future cash flows
         of the enterprise are less than their carrying amount, their carrying
         amounts are reduced to fair value and an impairment loss is recognized.

         (J) Stock-Based Compensation

         The Company accounts for stock options issued to employees in
         accordance with the provisions of Accounting Principles Board ("APB")
         Opinion No. 25, "Accounting for Stock Issued to Employees," and related
         interpretations. As such, compensation cost is measured on the date of
         grant as the excess of the current market price of the underlying stock
         over the exercise price. Such compensation amounts are amortized over
         the respective vesting periods of the option grant. The Company adopted
         the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
         Compensation," which permits entities to provide pro forma net income
         (loss) and pro forma earnings (loss) per share disclosures for employee
         stock option grants as if the fair-valued based method defined in SFAS
         No. 123 had been applied.

         The Company accounts for stock options and stock issued to
         non-employees for goods or services in accordance with SFAS 123.

         (K) Revenue Recognition

         Revenue from the sale of equipment, accessories, and recordings are
         recognized upon shipment and are reported net of actual and estimated
         future returns and allowances. Revenues from sales of consigned
         inventory is recognized upon sale of product by the consignee. The
         Company offers a consumer product warranty for returns up to 90 days
         after purchase.


                                      F-7
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         (L) Advertising

         In accordance with Accounting Standards Executive Committee Statement
         of Position 93-7, ("SOP 93-7") costs incurred for producing and
         communicating advertising of the Company, are charged to operations as
         incurred. The Company has cooperative advertising arrangements with its
         vendors and accrues the cost of advertising against the related
         revenues. Advertising expense for the years ended March 31, 2002 and
         2001 was $2,377,638 and $921,359, respectively.

         (M) Income Taxes

         Income taxes are accounted for under the asset and liability method of
         Statement of Financial Accounting Standards No. 109, "Accounting for
         Income Taxes" ("SFAS 109"). Under SFAS 109 deferred tax assets and
         liabilities are recognized for the future tax consequences attributable
         to differences between the financial statement carrying amounts of
         existing assets and liabilities and their respective tax bases.
         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
         SFAS 109, 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.

         (N) Earnings Per Share

         In accordance with, Statement of Financial Accounting Standards No. 128
         "Earnings per Share", basic earnings per share is computed by dividing
         the net income less preferred dividends for the period by the weighted
         average number of common shares outstanding. Diluted earnings per share
         is computed by dividing net income less preferred dividends by the
         weighted average number of common shares outstanding including the
         effect of common stock equivalents.

         The following table presents a reconciliation of basic and diluted
         earnings per share:

                                                   2002         2001
                                                ----------   ----------
Net income                                      $8,065,282   $4,164,701
                                                ----------   ----------
Income available to common shares                8,065,282    4,164,701
Weighted average shares outstanding - basic      7,159,142    6,291,792
EPS - Basic                                     $     1.13   $     0.66
                                                ==========   ==========

Income available to common shares               $8,065,282   $4,164,701
Weighted average shares outstanding - basic      7,159,142    6,291,792

Effect of dilutive securities:
Stock options                                      784,331    1,127,555
Warrants issued with preferred stock                    --       37,826
                                                ----------   ----------
Weighted average shares outstanding - diluted    7,943,473    7,457,173
EPS - Diluted                                   $     1.02   $     0.56
                                                ==========   ==========


                                      F-8
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         In 2001, the 2,484,000 public warrants and 45,000 common stock options
         (as restated for the 3 for 2 stock split) were not included in the
         computation of diluted earnings per share as their effect would have
         been anti-dilutive.

         (O) Reorganization under United States Bankruptcy Code and Fresh Start
             Reporting

         On April 11, 1997, the Company filed for protection under the
         provisions of the United States Bankruptcy Code. In March 1998, the
         United States Bankruptcy Court approved the Company's Plan of
         Reorganization, as Amended, and the Company emerged from Chapter 11
         Bankruptcy. At that time, the Company applied Fresh Start Reporting in
         accordance with the American Institute of Certified Public Accountants'
         Statement of Position 90-7, "Financial Reporting by Entities in
         Reorganization Under the Bankruptcy Code ("SOP 90-7")." As a result of
         the application of SOP 90-7, the Company restated its assets and
         liabilities to their fair values as necessary, and reclassified its
         accumulated deficit of $6,841,684 against available additional paid-in
         capital of $6,200,262 resulting in a reorganization intangible asset of
         $641,422, which was being amortized on a straight-line basis over a
         period of seven years. (See Note 5) Pursuant to SAS 142, effective on
         April 1, 2002, the Company no longer amortizes the remaining balance of
         the Reorganization Intangible.

         (P) Fair Value of Financial Instruments

         Statement of Financial Accounting Standards No. 107, "Disclosures about
         Fair Value of Financial Instruments," 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, and
         income taxes payable approximate fair value due to the relatively short
         period to maturity for these instruments.

         (Q) Recent Accounting Pronouncements

         Statement No. 141 "Business Combinations" establishes revised standards
         for accounting for business combinations. Specifically, the statement
         eliminates the pooling method, provides new guidance for recognizing
         intangible assets arising in a business combination, and calls for
         disclosure of considerably more information about a business
         combination. This statement is effective for business combinations
         initiated on or after July 1, 2001. The adoption of this pronouncement
         on July 1, 2001 did not have a material effect on the Company's
         financial position, results of operations or liquidity.

         Statement No. 142 "Goodwill and Other Intangible Assets" provides new
         guidance concerning the accounting for the acquisition of intangibles,
         except those acquired in a business combination, which is subject to
         SFAS 141, and the manner in which intangibles and goodwill should be
         accounted for subsequent to their initial recognition. Generally,
         intangible assets with indefinite lives, and goodwill, are no longer
         amortized; they are carried at lower of cost or market and subject to
         annual impairment evaluation, or interim impairment evaluation if an
         interim triggering


                                      F-9
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         event occurs, using a new fair market value method. Intangible assets
         with finite lives are amortized over those lives, with no stipulated
         maximum, and an impairment test is performed only when a triggering
         event occurs. This statement is effective for all fiscal years
         beginning after December 15, 2001. The Company believes that the
         implementation of SFAS 142 on April 1, 2002 will not have a material
         effect on the Company's financial position, results of operations or
         liquidity.

         Statement No. 143, "Accounting for Asset Retirement Obligations,"
         requires entities to record the fair value of a liability for an asset
         retirement obligation in the period in which it is incurred. When the
         liability is initially recorded, the entity capitalizes a cost by
         increasing the carrying amount of the related long-lived asset. Over
         time, the liability is accreted to its present value each period, and
         the capitalized cost is depreciated over the useful life of the related
         asset. Upon settlement of the liability, an entity either settles the
         obligation for its recorded amount or incurs a gain or loss upon
         settlement. The standard is effective for fiscal years beginning after
         June 15, 2002. The adoption of SFAS No. 143 is not expected to have a
         material impact on the Company's financial statements.

         Statement No. 144 "Accounting for the Impairment or Disposal of
         Long-Lived Assets" supercedes Statement No. 121 "Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed of" ("SFAS 121"). Though it retains the basic requirements of
         SFAS 121 regarding when and how to measure an impairment loss, SFAS 144
         provides additional implementation guidance. SFAS 144 excludes goodwill
         and intangibles not being amortized among other exclusions. SFAS 144
         also supercedes the provisions of APB 30, "Reporting the Results of
         Operations," pertaining to discontinued operations. Separate reporting
         of a discontinued operation is still required, but SFAS 144 expands the
         presentation to include a component of an entity, rather than strictly
         a business segment as defined in SFAS 131, Disclosures about Segments
         of an Enterprise and Related Information. SFAS 144 also eliminates the
         current exemption to consolidation when control over a subsidiary is
         likely to be temporary. This statement is effective for all fiscal
         years beginning after December 15, 2001. The Company believes that the
         future implementation of SFAS 144 on April 1, 2002 will not have a
         material effect on the Company's financial position, results of
         operations or liquidity.

         Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
         Amendment of FASB Statement No. 13, and Technical Corrections,"
         updates, clarifies, and simplifies existing accounting pronouncements.
         Statement No. 145 rescinds Statement 4, which required all gains and
         losses from extinguishment of debt to be aggregated and, if material,
         classified as an extraordinary item, net of related income tax effect.
         As a result, the criteria in Opinion 30 will now be used to classify
         those gains and losses. Statement 64 amended Statement 4, and is no
         longer necessary because Statement 4 has been rescinded. Statement 44
         was issued to establish accounting requirements for the effects of
         transition to the provisions of the motor Carrier Act of 1980. Because
         the transaction has been completed, Statement 44 is no longer
         necessary. Statement 145 amends Statement 13 to require that certain
         lease modifications that have economic effects similar to
         sale-leaseback transactions be accounted for in the same manner as
         sale-leaseback transactions. This amendment is consistent with FASB's
         goal requiring similar accounting treatment for transactions that have
         similar economic effects. The adoption of SFAS No. 145 is not expected
         to have a material impact on the Company's consolidated financial
         statements.


                                      F-10
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         (R) Reclassifications

         Certain amounts in the 2001 consolidated financial statements have been
         reclassified to conform to the 2002 presentation.

Note 2  Accounts Receivable and Factor Agreement
- ------------------------------------------------

Accounts receivable at March 31, 2002 was as follows:

Accounts receivable                        $3,548,925
Allowance for doubtful accounts               (12,022)
                                           ----------
                                           $3,536,903
                                           ==========

During 2001, the Company sold certain trade accounts receivable, primarily
without recourse, pursuant to a factoring agreement. The Company terminated the
factoring agreement in April 2001 upon obtaining a new Loan and Security
Agreement with a commercial lender. (See Note 7)

During 2000, two officers of the Company entered into guarantee agreements
related to the factor agreement resulting in deferred guarantee fees of
$400,101, which was being amortized over the term of the factor agreement. Upon
termination of the factor agreement, the remaining deferred guarantee fees of
$171,472 were charged to operations as amortization. For the year ending March
31, 2001, the Company incurred $429,509 in factoring fees and interest. The
portion representing factor interest expense was $198,208 of the $429,506.

Note 3  Sale of Unconsolidated Subsidiary
- -----------------------------------------

In November 2000, the Company closed on an acquisition of 60% of the ordinary
voting shares of a Hong Kong toy company for a total purchase price of $170,000.
The Company believed that the acquiree had agreed to extend the effective date
to June 2001, but a dispute arose and the Company committed to dispose of the
entire investment. Accordingly, pursuant to Statement of Financial Accounting
Standards No. 94 "Consolidation of All Majority-Owned Subsidiaries," the Company
treated the control of the subsidiary as temporary and recorded the investment
of $170,000 and advances of $220,661 at cost. The Company completed a contract
selling the 60% interest on September 11, 2001. The transaction resulted in a
net loss on investment of $48,912 included in selling, general, and
administrative expenses. The balance receivable at March 31, 2002 was $75,831
included in prepaids and other current assets.

Note 4  Property and Equipment
- ------------------------------

Property and equipment at March 31, 2002 is as follows:

Computer and office equipment                       $  230,025
Furniture and fixtures                                 106,164
Leasehold improvements                                  62,483
Molds and tooling                                    1,022,900
                                                    ----------
                                                     1,421,572
Less accumulated depreciation                         (846,915)
                                                    ----------
Total                                               $  574,657
                                                    ==========


                                      F-11
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

Depreciation expense for the years ended March 31, 2002 and 2001 was $302,824
and $209,432, respectively.

Note 5   Reorganization Intangible
- ----------------------------------

The reorganization intangible resulted from the application of Fresh Start
Accounting in March 1998 pursuant to the American Institute of Certified Public
Accountants Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code." (See Note 1(O)) The reorganization
intangible was being amortized over a period of seven years using a
straight-line basis. In accordance with SFAS 109, in 2001, the reorganization
intangible was reduced by $89,479 of an income tax benefit realized as a result
of an increase in deferred tax assets resulting from a reduced valuation
allowance. (See Note 12)

The reorganization intangible at March 31, 2002 consisted of the following:

Reorganization intangible                 $ 641,422
Less accumulated amortization              (366,527)
Less allocated income tax benefit           (89,479)
                                          ---------
                                          $ 185,416
                                          =========

Amortization expense on the reorganization intangible in each of the years ended
March 31, 2002 and 2001 was $91,632.

Note 6  Deposit for Letter of Credit Facility
- ---------------------------------------------

The Company, through its Hong Kong subsidiary, maintains a letter of credit
facility with a major international bank. The Company's subsidiary is required
to maintain a separate deposit account in the amount of $513,684. This amount is
included in deposits at March 31, 2002.

Note 7   Loans and Letters of Credit
- ------------------------------------

         (A) Credit Facility

         On May 19, 1999, as amended on February 14, 2000, the Company, through
         its Hong Kong Subsidiary, obtained a credit facility of $500,000 from a
         Hong Kong subsidiary of a Belgian bank. This facility is a revolving
         line of credit based upon drawing down a maximum of 15% of the value of
         export letters of credit lodged with Belgian Bank. There is no
         expiration date to this agreement, except that Belgian Bank reserves
         the right to revise the terms and conditions at the Bank's discretion.
         The cost of this credit facility is the U.S. Dollar prime rate plus
         1.25%. Repayment of principal plus interest shall be made upon
         negotiation of the export letters of credit, but not later than 90-days
         after the advance. As of March 31, 2002, there was no outstanding
         balance on this credit facility.


                                      F-12
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         (B)      Loan and Security Agreement

         On April 26, 2001, the Company executed a Loan and Security Agreement
         (the "Agreement") with a commercial lender (the "Lender").

         The Lender will advance up to 75% of the Company's eligible accounts
         receivable, plus up to 40% of the eligible inventory, plus up to 40% of
         the commercial letters of credit opened for the purchase of eligible
         inventory, less reserves of up to $1,200,000 as defined in the
         agreement.

         The outstanding loan limit varies between zero and $10,000,000
         depending on the time of year, as stipulated in the Agreement. The
         Lender also provides the Company the ability to issue commercial
         letters of credit up to $2,500,000, which shall reduce the loan limits
         above. The loans bear interest at the commercial lender's prime rate
         plus 0.5% and an annual fee equal to 1% of the maximum loan amount or
         $100,000 is payable. The term of the loan facility expires on April 26,
         2004 and is automatically renewable for one-year terms. All amounts
         under the loan facility are due within 90 days of demand. The loans are
         secured by a first lien on all present and future assets of the Company
         except for certain tooling located at a vendor in China.

         The Agreement contains a financial covenant stipulating a minimum
         tangible net worth of $7,200,000 as of March 31, 2002 with escalations
         as defined in the Agreement. There was no balance outstanding at March
         31, 2002.

Note 8   Commitments and Contingencies
- --------------------------------------

         (A) Leases

         On March 31, 1999 and April 10, 2000, the Company entered into lease
         agreements for office and warehouse facilities in Florida for a term of
         61 months and 52 months, respectively. The terms began on August 1,
         1999 and April 14, 2000. Pursuant to the terms of the leases, the
         Company must pay maintenance and real estate taxes of approximately
         $13,000 per year. On November 9, 2000, the Company leased a warehouse
         in California commencing January 1, 2001 for 37 months with base rent
         of $11,500 per month. This space has been subleased starting June 1,
         2002 through January 31, 2002 for $12,393 per month. The Company leases
         a showroom in New York commencing September 1, 2001 through August 31,
         2002 at a rate of $3,000 a month. The Company also leases office space
         in Hong Kong for $4,655 per month which lease expires October 31, 2002.
         In addition, the Company maintains various warehouse equipment and
         computer equipment leases. (See Note 16) Total rent expense was
         approximately $172,500 and $142,500 for 2002 and 2001, respectively.

         Future minimum lease payments under non-cancelable operating leases
         with terms exceeding one year as of March 31, 2002 are as follows:


                                      F-13
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

                  Year ending March 31:
                                                2003            $  578,449
                                                2004               604,015
                                                2005               412,460
                                                2006               407,640
                                                2007               407,640
                                                Thereafter         339,700
                                                                ----------
                                                                $2,749,904
                                                                ==========

         (B) Employment Agreements

         The Company has employment contracts with three key officers as of
         March 31, 2002 (See Note 16). The agreements call for base salaries,
         with annual cost of living adjustments and travel allowances. The
         agreements also call for aggregate Board approved performance bonuses
         of up to 10% of net income before those performance bonuses, interest,
         and taxes. Such bonus is allocated to the three key officers and
         certain other key employees. During 2002 and 2001, the bonus percentage
         was 5% and 10%, respectively.

         (C) Merchandise License Agreements

         On November 1, 2000, as amended on November 29, 2001, the Company
         entered into a merchandise license agreement to license a name,
         tradename, and logo of a music oriented television network. The term of
         the agreement is from November 1, 2000 to December 31, 2003. However,
         shipment of related products did not begin until after March 31, 2001.
         Accordingly, none of the minimum royalty was charged to operations as
         of March 31, 2001. The Company pays a royalty rate of a percentage of
         stipulated sales, as defined in the agreement, with $686,250 guaranteed
         minimum royalties for the term, payable on a scheduled basis as
         stipulated in the agreement. Through 2002, the royalties expense
         exceeded the minimum royalty for the entire contract. (See Note 11)

         On December 1, 2001, the Company entered into an additional agreement
         with a division of above licensor for additional license properties and
         products. The license term is January 1, 2002 to December 31, 2004 with
         an initial stipulated ship date of August 15, 2002. The agreement
         stipulates a royalty rate as a percentage of net sales (defined as
         gross sales less discounts, allowances and damaged goods returns not to
         exceed 8% of gross sales), payable quarterly, with a guaranteed minimum
         royalty for the license term of $450,000 payable as follows:

                  $25,000 on execution of agreement
                  $85,000 on or before September 1, 2002
                  $85,000 on or before December 1, 2002
                  $85,000 on or before March 1, 2003
                  $85,000 on or before June 1, 2003; and
                  $85,000 on or before September 1, 2003

         The guaranteed royalty is non-refundable and not recoupable against any
         other license agreements with the licensor.


                                      F-14
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         (D) Significant Estimates

         The Company records an accrual for product returns in the normal course
         of business. The accrual is estimated based on historical experience
         and is recorded as a liability equal to the gross profit on estimated
         returns. At March 31, 2002, the accrual was approximately $164,000.

         The Company estimates an allowance for doubtful accounts using the
         specific identification method since a majority of accounts receivable
         are concentrated with several customers. The allowance was $12,022 at
         March 31, 2002.

         (E) Legal Matters

         The Company is subject to litigation relating to claims arising in the
         normal course of business.

Note 9  Related Party Transactions
- ----------------------------------

The Company's Hong Kong Subsidiary operates as an intermediary to purchase
karaoke hardware from factories located in China on behalf of the Company. A
primary manufacturer affiliated with a former director of the Company credited
the Company for past purchases of approximately $799,000 as of March 31, 2001
for a portion of expenses incurred from product returns. The $799,000 amount was
credited to cost of goods sold in 2001. The balance including some new credits
as of March 31, 2002 was $488,298. The total goods purchased from this
manufacturer during 2002 and 2001 aggregated approximately 51% and 80% of the
total purchases, respectively.
(See Note 13)

Note 10 Stockholders' Equity
- ----------------------------

         (A) Amendment to Authorized Shares

         During September 2000, the Company filed an amendment to its Articles
         of Incorporation decreasing the authorized shares of the Company's
         common stock to 18,900,000 shares and 100,000 Class A common shares.

         (B) Stock Split

         On March 15, 2002, the Company affected a 3 for 2 stock split. All
         share and per share data have been retroactively restated in the
         accompanying consolidated financial statements to reflect the split.

         (C) Preferred Stock and Warrants

         During April 1999, the Company issued a private placement memorandum,
         pursuant to Rule 506 of Regulation D of the 1933 Securities Act, as
         amended, to offer a minimum of 40 units and a maximum of 50 units of
         stock and warrants. Each unit consisted of 30,000 shares of the
         Company's 9% non-voting convertible preferred stock and 6,000 common
         stock purchase warrants. The purchase price for each unit was $ 27,500.
         Each share of preferred stock was convertible, at the option of the
         holder, into one share of the Company's common stock at any time after
         issuance, and was to automatically convert into one share of common
         stock on April 1,


                                      F-15
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         2000. All preferred shares automatically converted on April 1, 2000.
         Each warrant entitles the holder to purchase one share of the Company's
         common stock at $2.00 per share. The warrants expire three years from
         the private placement memorandum date. Through June 1999, the maximum
         number of 50 units had been sold and $1,375,000 gross funds were raised
         ($1,331,017 after related costs), at which time the offer was closed.
         During 2000, 2001, and 2002, 24,000, 201,000, and 75,000 warrants were
         converted for $32,000, $268,000, and $100,000, respectively leaving no
         warrants outstanding at March 31, 2002.

         (D) Common Stock Warrants Expiration

         In November 2001, 2,484,000 public warrants expired unexercised.

         (E) Common Stock Issuances

         During 2002, the Company issued 1,418,625 common shares for cash
         proceeds of $1,319,190 upon exercise of options and warrants.

         (F) Guarantee Fees

         During the year ended March 31, 2000, the Company issued 525,000 shares
         of common stock to two officers of the Company in exchange for
         guarantees related to the Company's factor agreement (See Note 2), and
         letter of credit agreement. (See Note 7) These guarantee fees totaled
         $590,625 and are amortized over a period of 31 months. Accordingly, in
         2000, the Company recognized $190,524 as guarantee fees and recorded
         $400,101 as deferred guarantee fees, presented as a deduction from
         equity. In 2001, $228,629 of deferred fees were charged to operations.
         During June 2001, the Company terminated its letter of credit and
         factor agreements and recognized the remaining amortization at that
         time.

         During the year ended March 31, 2001, the Company issued 37,500 common
         stock options for services and 45,000 common stock warrants to two
         investors as loan fees. The fair market value of the options totaling
         $38,400 was charged to operations.

         (G) Stock Options

         On June 1, 2001, the Board of Directors approved the 2001 Stock Option
         Plan, which replaced the 1994 Stock Option Plan, as amended, (the
         "Plan"). The 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. As of March 31, 2002, the Plan
         authorizes options up to an aggregate of 1,950,000 shares of the
         Company's common stock and up to 300,000 shares for any one individual
         in any fiscal year.

         In accordance with SFAS 123, for options issued to employees, the
         Company applies APB Opinion No. 25 and related interpretations in
         accounting for its plan. On August 15, 2001, the Company issued options
         to purchase an aggregate 75,000 common shares to directors at an
         exercise price of $4.23, which equals the fair market value of the
         common stock at the grant date. Accordingly, no compensation cost has
         been recognized for options issued under the Plan in 2002


                                      F-16
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         or 2001. Had compensation cost for the Company's stock-based
         compensation plan been determined on the fair value at the grant dates
         for awards under that plan, consistent with Statement of Accounting
         Standards No 123, "Accounting for Stock Based Compensation" (Statement
         No. 123), the Company's net income for the year ended March 31, 2001
         would not have changed and the net income for the year ended March 31,
         2002 would have been decreased to the pro-forma amounts indicated
         below.

                                                                         2002
                                                                      ----------

         Net income                                  As reported      $8,065,282
                                                     Pro forma        $7,949,793
         Net income per share - basic                As reported      $     1.13
                                                     Pro forma        $     1.11
         Net income per share - diluted              As reported      $     1.02
                                                     Pro forma        $     1.00

         The effect of applying Statement No. 123 is not likely to be
         representative of the effects on reported net income for future years
         due to, among other things, the effects of vesting.

         For stock options and warrants issued to consultants, the Company
         applies SFAS 123. Accordingly, consulting expense of $38,400 was
         charged to operations in 2001. There was no consulting expense relating
         to grants in 2002.

         For financial statement disclosure purposes and for purposes of valuing
         stock options and warrants issued to consultants, the fair market value
         of each stock option granted was estimated on the date of grant using
         the Black-Scholes Option-Pricing Model in accordance with SFAS 123
         using the following weighted-average assumptions in 2001: expected
         dividend yield 0%, risk-free interest rate of 6.08% to 6.81%,
         volatility 42% and expected term of two years.

         A summary of the options issued under the employment and consulting
         agreements as of March 31, 2002 and 2001 and changes during the years
         is presented below:

<TABLE>
<CAPTION>
                                                    2002                                2001
                                        ----------------------------------------------------------------------------
                                         Number of       Weighted           Number of          Weighted
                                        Options and       Average          Options and          Average
                                          Warrants     Exercise Price        Warrants         Exercise Price
                                        -----------    --------------      -----------        --------------
<S>                                      <C>              <C>               <C>                 <C>
Stock Options
Balance at beginning of period           2,403,300        $1.31             1,593,300           $0.67
Granted                                     82,800        $3.92             1,215,750           $2.01
Exercised                               (1,406,625)       $0.87              (371,250)          $0.84
Forfeited                                  (15,000)       $2.04               (34,500)          $0.92
                                        ----------        -----             ---------           -----
Balance at end of period                 1,064,475        $2.11             2,403,300           $1.31
                                        ==========        =====             =========           =====

Options exercisable at end of period     1,064,475        $2.11             1,420,050           $0.70
Weighted average fair value of options
  granted during the period                               $1.54                                 $0.85
                                                          =====                                 =====
</TABLE>



                                      F-17
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

         The following table summarizes information about employee stock options
         and consultant warrants outstanding at March 31, 2002:

<TABLE>
<CAPTION>
                              Options and Warrants Outstanding                       Options and Warrants Exercisable
                 ----------------------------------------------------------------    --------------------------------

                                                       Weighted
                                                        Average          Weighted                            Weighted
                 Range of            Number            Remaining          Average           Number            Average
                 Exercise        Outstanding at       Contractual        Exercise       Exercisable at       Exercise
                   Price         March 31, 2002          Life             Price         March 31, 2002         Price
                 ---------       --------------       -----------        --------    ------------------      --------
                   <S>               <C>               <C>                <C>               <C>               <C>
                  $2.04              851,025           4.67 Years         $2.04             425,513           $2.04
                   4.23               60,000           4.38 Years          4.23              60,000            4.23
                   3.27               42,450           3.95 Years          3.27              21,225            3.27
                   1.11               58,500           2.24 Years          1.11              58,500            1.11
                   0.92               52,500           0.19 Years          0.92              52,500            0.92
                                   ---------                              -----             -------           -----
                                   1,064,475                              $2.11             617,738           $2.11
                                   =========                              =====             =======           =====
</TABLE>

Note 11 Royalty Expense
- -----------------------

The Company enters into licensing and royalty agreements with music publishers
(the "Licensors") in the normal course of business. In addition, the Company
pays royalties under a merchandise license agreement. (See Note 8(C)) Royalty
expense during 2002 and 2001 was $1,862,116 and $148,643, respectively.

Note 12 Income Taxes
- --------------------

The Company files separate tax returns for the parent and for the Hong Kong
Subsidiary. The income tax expense (benefit) for federal, foreign, and state
income taxes in the consolidated statement of income consisted of the following
components for 2002 and 2001:

                            2002        2001
                          --------    --------
Current:
U.S. Federal              $     --    $21,320
Foreign                         --         --
State                      119,277      2,000
                          --------    -------
                           119,277     23,320
                          --------    -------
Deferred:
U.S. Federal                    --         --
Foreign                         --         --
                          --------    -------
                                --         --
                          --------    -------
Total                     $119,277    $23,320
                          ========    =======

The Company's Hong Kong subsidiary has applied for a Hong Kong "offshore claim"
income tax exemption based on the locality of the profits of the Hong Kong
subsidiary. Management believes that since the source of all profits of the Hong
Kong subsidiary are from exporting to customers outside of



                                      F-18
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

Hong Kong; it is likely the exemption will be approved. Accordingly, no
provision for foreign income taxes on the profits of the Hong Kong subsidiary
have been provided in the accompanying consolidated financial statements.

In the event the exemption is not approved, the Hong Kong subsidiary profits
will be taxed at a flat rate of 16% resulting in an income tax expense of
approximately $725,000 and $460,000 for 2002 and 2001, respectively.

The actual tax expense differs from the "expected" tax expense for the years
ended March 31, 2002 and 2001 (computed by applying the U.S. Federal Corporate
tax rate of 34 percent to income before taxes) as follows:

<TABLE>
<CAPTION>
                                                               2002           2001
                                                           -----------     -----------
<S>                                                        <C>             <C>
Computed "expected" tax expense                            $ 2,782,750     $1,423,927
State income taxes, net of Federal income tax benefit           78,723             --
Indefinite deferral of foreign earnings                     (1,541,493)      (978,309)
Stock based guarantee fees                                      20,405         27,207
Disqualifying ISO dispositions                                 (26,926)            --
Non-qualified stock options exercised                               --        (51,185)
Meals and entertainment                                          6,999          2,982
Usage of United States net operating loss carryforwards     (1,201,181)      (424,622)
United States alternative minimum tax                               --         23,320
                                                           -----------     ----------
                                                           $   119,277     $   23,320
                                                           ===========     ==========
</TABLE>

The Company has not recognized a deferred tax liability for its foreign income
in 2002 and 2001 since the reversal of this temporary difference is indefinite.
Accordingly, the amounts of $1,541,493 and $978,309, respectively, which
represent 34% of the foreign net income, have been reflected as a permanent
difference at March 31, 2002 and 2001, respectively.

The actual tax expense may be significantly larger in future years as the net
operating loss is expected to be fully absorbed (except for the limited portion)
during the 2003 fiscal year. In addition, the indefinite deferral of future and
accumulated foreign earnings will depend on the Company's domestic versus
foreign strategic plans.

The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and liabilities at March 31, 2002 are as follows:


                                      F-19
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------


Deferred tax assets:
United States net operating loss carryforward    $261,255
State net operating loss carryforward              89,315
Bad debt reserve                                    4,087
Reserve for sales return                           55,886
Stock based expense                                13,056
Amortization of reorganization intangible          36,400
                                                 --------
Total Gross Deferred Assets                       459,999
Less valuation allowance                               --
                                                 --------
                                                  459,999
Deferred tax liability:
Depreciation                                       (7,326)
                                                 --------
Net Deferred Tax Asset                           $452,673
                                                 ========

On September 3, 1991, the Company underwent a change of ownership (as defined by
Internal Revenue Code Section 382). This change limits the Company's ability to
utilize it's approximately $4,057,000 of net operating loss carryforwards
(NOL's) to $54,240 at a rate of $13,560 per year (these NOL's expire from 2004
to 2007).

At March 31, 2002, the Company had useable net operating loss carryforwards of
approximately $714,159 for federal income tax purposes, (which are not subject
to the above limitations) which is immediately available to offset future
taxable income of the United States entity expiring through 2019.

The valuation allowance at April 1, 2001 was $1,059,089. The net change in the
valuation allowance during the year ended March 31, 2002 was a decrease of
$1,059,089.

In accordance with SFAS 109, the year 2001 income tax benefit of $89,479 arising
from the net increase in deferred tax assets has been allocated at March 31,
2001 to reduce the reorganization intangible. (See Note 5)

Note 13 Concentrations of Credit Risk, Customers, Suppliers, and Financing
- --------------------------------------------------------------------------

The Company derives primarily all of its revenues from retailers of products in
the United States. Financial instruments, which potentially subject the Company
to concentrations of credit risk, consist of accounts receivable. 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 whose credit worthiness have been
evaluated be management. At March 31, 2002, 65% of accounts receivable were due
from five U.S. customers and accounts receivable from two customers that
individually owed over 10% of accounts receivable at March 31, 2002 was 36% and
35%. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral.

Revenues derived from five customers in 2002 and 2001 were 87% and 78% of
revenues, respectively. Revenues derived from three customers in 2002 and two
customers in 2001, respectively, which individually purchased greater than 10%
of the Company's total revenues, were 37%, 28%, and 10% in 2002 and 32% and 23%
in 2001.


                                      F-20
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

In the fourth quarter of the fiscal 2002, a major customer that provided 37% of
the Company's revenue in 2002 converted its purchase method to a consignee
basis. The Company recorded approximately $2,875,000 of sales returns and
reversal of related cost of sales of $2,112,000 in February and the customer
retained the inventory on a consignment basis. (See Note 1(G)) From that date of
sales returns, through March 31, 2002 the Company recorded $2,442,384 of sales
from consignment inventory.

The Company is dependent upon foreign companies for manufacture of all of its
electronic products. The Company's arrangements with manufacturers are subject
to the risk of doing business abroad, such as import duties, trade restrictions,
work stoppages, foreign currency fluctuations, political instability, and other
factors, which could have an adverse impact on its business. The Company
believes that the loss of any one or more of their suppliers would not have a
long-term material adverse effect because other manufacturers with whom the
Company does business would be able to increase production to fulfill their
requirements. However, the loss of certain suppliers in the short-term could
adversely affect business until alternative supply arrangements are secured.

During fiscal 2002 and 2001, manufacturers in the People's Republic of China
(China) accounted for in excess of 95% and 94%, respectively of the Company's
total product purchases, including virtually all of the Company's hardware
purchases. The Company expects purchasing for 2003 to fall within the above
range as well.

Purchases of products derived from three vendors based in China during 2002 were
51%, 39%, and 5% and from two manufacturers based in China during 2001 were 80%
and 14%, respectively. (See Note 9)

The Company finances its sales primarily through a loan facility with one
lender. (See Note 7) Although management believes there are other sources
available, a loss of the current credit facility could be in the short term,
adversely affect operations until an alternate lending arrangement is secured.

Net sales derived from the Company's Hong Kong based subsidiary aggregated
approximately $27,176,000 in 2002 and $12,595,800 in 2001. The carrying value of
net assets held by the Company's Hong Kong based subsidiary was approximately
$1,488,160 at March 31, 2002.

Note 14 Segment Information
- ---------------------------

The Company operates in one segment and maintains its records accordingly. Sales
by customer geographic region were as follows:

                       2002           2001
                   -----------    -----------
United States      $61,686,942    $33,823,028
Asia                    49,314             --
Canada                  47,565         11,420
Central America          5,756             --
Europe                      --        433,821
South America           39,317         38,570
                   -----------    -----------
                   $61,828,894    $34,306,839
                   ===========    ===========


                                      F-21
<PAGE>

                The Singing Machine Company, Inc. and Subsidiary
                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                 --------------

Note 15 Defined Contribution Benefit Plan
- -----------------------------------------

The Company maintains a 401-K plan for the benefit of its employees. Employer
contributions to the plan and administrative costs during 2002 and 2001 were
$41,733 and $8,682, respectively.

Note 16 Subsequent Events
- -------------------------

In April 2002, 10,000 common shares were issued upon exercise of warrants for
gross proceeds of $0.92 per share or $9,200 and 16,500 common shares were issued
upon exercise of employee options at a price of $2.04 per share or $33,660.

On April 15, 2002, the Company entered into a three-year employment agreement
with a new Executive Vice President of Sales and Marketing. The agreement
stipulates a salary and bonuses and a 50% of annual pay severance clause. The
agreement grants 50,000 options for each year of employment. The employee may
elect to return the first year options to the Company for $100,000. As of the
date of the accompanying audit report, the options have not been issued.

In June 2002, the Board of Directors approved the terms of a consulting
agreement effective on February 28, 2003 with the current CEO when he retires on
that day. The CEO will receive $250,000 per year and will also receive an
appreciation bonus of $200,000 on February 28, 2003.

In May and June 2002, the Company's subsidiary entered into new office leases in
Hong Kong, each for 36 months at an aggregate $13,364 per month.

Effective May 1, 2002, the Company signed a 5-year warehouse lease in California
for $33,970 per month. The Company also subleased out its space in the other
California warehouse for rent income of $12,393 per month through January 31,
2004.

Effective June 1, 2002, the Company signed an additional 27-month lease to
expand its corporate headquarters. The additional rent is $1,987 per month.

The company's Hong Kong subsidiary opened a letter of credit at April 16, 2002
with an international bank for up to $1,000,000.


                                      F-22





<PAGE>


                                INDEX TO EXHIBITS


EXHIBIT
NUMBER                   DESCRIPTION
- ------                   -----------


10.20    Employment Agreement between the Company and Jack Dromgold
         dated April 14, 2002

10.21    Employment Agreement between the Company and April Green
         dated March 15, 2002

10.22    Lease Agreement dated March 31, 1999 between The Singing Machine
         Company, Inc. and Rocco Ferrera & Co., Inc. and Lee S. Lasser, trustee
         of the Lee S. Lasser Trust dated August 25, 1972, as amended d/b/a
         Lyons Corporate Park for office space in Coconut Creek, Florida.

21.1     List of Subsidiaries

23.1     Consent of Salberg & Company, P.A.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>3
<FILENAME>dromgold-employment.txt
<DESCRIPTION>DROMGOLD EMPLOYMENT AGREEMENT
<TEXT>
                              EMPLOYMENT AGREEMENT


         EMPLOYMENT AGREEMENT ("Agreement") made as of the 15th day of April
2002 by and between THE SINGING MACHINE COMPANY, INC., a Delaware corporation
with its principal office at 6601 Lyons Road, Coconut Creek, FL 33073 (The
"Company") and Jack Dromgold whose residence address is 44 Brookside Drive,
Longmeadow, MA 01106 (the "Employee").

         The Company and the Employee hereby agree as follows with respect to
the Employee's relationship with the Company:

1.       Relationship; Term. The Company shall retain the Employee and the
         employee shall be retained by the Company, on the terms and conditions
         hereinafter set forth, as an Employee for a period (the "Employment
         Period") commencing on April 15, 2002 (the "Commencement Date"), and
         ending on April 14, 2005 (the "Termination Date"), unless terminated
         sooner pursuant to the provisions hereof. Such period of employment
         shall be automatically extended for a one (1) one-year term unless
         either the Company or the Employee notifies the other in writing at
         least sixty (60) days prior to the end of the then current term that it
         or he does not intend to renew such employment, in which case such
         employment will expire at the end of the then current term. During the
         entire term of this Agreement, the Employee shall be the Company's Sr.
         Vice President - Sales and Marketing.

2.       Efforts on Company's Behalf. The Employee shall devote all of his time
         and his best efforts, skills and attention to the business and affairs
         of the Company, shall serve the Company faithfully and competently and
         shall at all times act in the Company's best interest. The services to
         be rendered by Executive during the term hereof shall be as Sr. Vice
         President Sales and Marketing subject at all times to the direction and
         control of the President. Nothing herein shall be construed to prevent
         Employee from investing in or participating in the management of
         companies or other entities, which do not compete with the Company or
         from serving on the board of directors of any other company.

         a)       Succession Plan. It is the desire but not the obligation of
                  the Singing Machine Company that over the period of this
                  contract, the Executive, based upon performance, will rise
                  within the company to Executive Vice President and eventually
                  President.

3.       Base Compensation.
         ------------------

a)       The Company shall pay to the Executive, and the Executive agrees to
         accept, minimum base compensation of two hundred twenty thousand
         ($220,000) per year (the "Base Compensation"), payable in accordance
         with normal payroll policies of the


<PAGE>


         Company and shall be subject to all usual and customary payroll
         deductions including all applicable withholding taxes.

b)       Employee's Base Compensation shall automatically increase over the
         period year's Base Compensation each year during the term hereof by not
         less than the greater of:

         i.       Five percent (5%); or

         ii.      An amount calculated by multiplying the prior year's Base
                  Compensation by a fraction, the numerator of which shall be
                  the consumer price index ("Consumer Price Index"), as
                  hereafter defined, for the month of January in the year of
                  adjustment and the denominator of which shall be the Consumer
                  Price Index for All Urban Consumers, U.S. City Average
                  (1982-84=100) All Items, Bureau of Labor Statistics of the
                  United States Department of Labor.

4.       Bonus Compensation.
         -------------------

         A.       The Executive shall be entitled to receive a bonus (the
                  "Profit Bonus") for each fiscal year of the Company ("Fiscal
                  Year") during the employment period.

         B.       Employee's Bonus, for the first year of this contract, shall
                  be based upon 1% of the Employee's new account sales shipped,
                  but shall be a minimum of $50,000. During the second year of
                  this contract, the Employee's bonus plan shall switch to 10%
                  share of the total company wide bonus pool for each successive
                  year of the contract. All bonuses shall be paid in accordance
                  with the Company's cash bonus incentive plan.

         C.       In consideration of Employee's services hereunder, the
                  Executive shall be granted the option to purchase a minimum of
                  50,000 shares of common stock of the Company in accordance
                  with the terms of a stock option agreement to be executed
                  between the Company and Employee after the effective date of
                  this agreement. In addition, a minimum amount of at least
                  50,000 shares of common stock options will be granted the
                  Executive for each subsequent year a distribution is granted
                  by the company's Board of Directors. Additionally, after one
                  year if the Executive would so decide, the company or
                  Company's representative will buy back the original 50,000
                  shares from the Executive for $100,000.

         D.       The Company will reimburse the employee monthly for an
                  Allowance of Auto expenses not to exceed $500 monthly or
                  $6.000 annually plus the cost of auto insurance.

         E.       The Company will pay for all moving related expenses to move
                  and relocate the executive to the Company's Florida location.
                  The Company and the


<PAGE>


                  executive will have a separate agreement to aid the executive
                  with sale of his existing home in Massachusetts. The company
                  and the Employee will execute a separate agreement to cover
                  the Employee's relocation.

         F.       In consideration and as an incentive for the Executive to join
                  the Singing Machine Company, a signing bonus of $50,000 will
                  be provided to the Executive. This bonus will be payable as
                  follows: 1/2 ($25,000) within 10 (ten) days of employment
                  commencement and 1/2 ($25,000) payable after six months of
                  service. There will be no obligation to pay back this signing
                  bonus if the Employee completes one year of continuous service
                  with the Company.

5.       Benefit Plans.
         --------------

         a)       The executive shall be entitled to participation in all
                  Company-sponsored benefit plans in accordance with terms,
                  conditions and costs with usual or customary Company policy
                  and will cover his entire family.

         b)       In the event that the Company purchases insurance on the life
                  of the Executive, Executive shall be entitled to purchase said
                  policy from the Company in the event of his termination,
                  pursuant to the terms hereof, for an amount equal to the cash
                  surrender value thereof.

6.       Business Expenses. The Employee shall be reimbursed for all usual and
         customary expenses incurred on behalf of the company, in accordance
         with Company practices and procedures; provided that each such expense
         is of a nature qualifying it as a proper deduction on the Federal
         income tax returns of the Company, exclusive of any limitation rules as
         a business expense of the Company and not as compensation to Employee,
         and Employee furnishes the Company with adequate documentary evidence
         to substantiate such expenses.

7.       Vacation. Employee shall be entitled to a paid vacation of three (3)
         weeks per each year of this agreement. Such vacation time allowance
         shall cumulatively accrue, and any unused vacation time for each year
         can be used in the following year or paid to the Employee at the
         Employee's sole discretion. The Company shall make all reasonable
         efforts to enable Employee to use his vacation leave each year.
         Employee shall also be entitled to all paid holidays made generally
         available by the company to its employees.

8.       Death or Disability.
         --------------------

         a)       Notwithstanding anything to the contrary contained in
                  Paragraph 1 above if, during the term hereof, the Employee
                  suffers a disability (as defined below) the Company shall,
                  subject to the provisions of Paragraph 8 hereof, continue to
                  pay



<PAGE>

                  Employee the compensation provided in Paragraph 3 hereof
                  during the period of his disability; provided, however, that
                  in the event Employee is disabled for a continuous period of
                  ninety (90) consecutive days or for shorter periods
                  aggregating ninety (90) days in any twelve-month period that
                  the employee is incapable of substantially fulfilling the
                  duties set forth in Section 2 or hereafter assigned to him by
                  the President or Board of Directors because of physical,
                  mental or emotional incapacity resulting from injury, sickness
                  or disease as determined by an independent physician agreed
                  upon by both the Company and the Employee, the Company may, at
                  its election, terminate this Agreement. In the event of such
                  termination, the Company shall continue to be obligated to pay
                  Employee his compensation earned up to the date of
                  termination.

         b)       As used in this Agreement, the term "disability" shall mean
                  the substantial inability of Employee to perform his duties
                  under this Agreement as determined by an independent physician
                  agreed upon by both the Company and the Employee.

         c)       In the event that employment ceases prior to the end of a
                  calendar month as a result of his death or disability or in
                  the event of a termination described in Paragraph 10 below,
                  the Company shall pay Employee or his legal representatives,
                  as the case may be, in addition to any other amounts payable
                  by the Company hereunder, a lump cash sum which shall in no
                  event be less than the salary plus any bonus to which Employee
                  would have been entitled had he continued to be affiliated
                  with the Company until the end of the calendar month during
                  which his affiliation terminates.

9.       Change of Control.
         ------------------

         a)       For the purposes of this Agreement a "Change of Control" shall
                  be deemed to have taken place if: (i) any person, including a
                  "group" as defined in Section 13 (d)(3) of the Securities
                  Exchange Act of 1934, as amended, becomes the owner or
                  beneficial owner of Company securities, after the date of this
                  Agreement, having 50% or more of the combined voting power of
                  the then outstanding securities of the Company that may be
                  case for the election of directors of the Company (other than
                  as a result of an issuance of securities initiated by the
                  Company, or open market purchases approved by the Board, as
                  long as the majority of the Board approving the purchases is
                  the majority at the time the purchases are made), or (ii) the
                  persons who were directors of the Company before such
                  transactions shall cease to constitute a majority of the Board
                  of the Company, or any successor to the Company, as the direct
                  or indirect result of, or in connection with, any cash tender
                  or exchange offer, merger or other business combination, sale
                  of assets or contested election, or any combination of the
                  foregoing transactions.


<PAGE>


         b)       The Company and Employee hereby agree that, if Employee is
                  affiliated with the Company on the date on which a Change of
                  Control occurs (the "Change of Control Date") the Company (or,
                  if Executive is affiliated with a subsidiary, the subsidiary)
                  will continue to retain Executive, and Executive will remain
                  affiliated with the Company (or subsidiary), for the period
                  commencing on the Change of Control date and ending on the
                  first anniversary of such a date, to exercise such authority
                  and perform such Employee duties as are commensurate with the
                  authority being exercised and duties being performed by the
                  Employee immediately prior to the Change of Control Date.

         c)       During the remaining term hereof after the Change of Control
                  Date, the Company (or subsidiary) will (i) continue to pay
                  Employee a salary at not less than the level applicable to
                  Employee on the Change of Control Date, (ii) pay Employee
                  Bonuses in amounts not less in amount than those paid during
                  the twelve month period preceding the Change of Control Date,
                  and (iii) continue employee benefit programs as to Employee at
                  levels in effect on the Change of Control Date (but subject to
                  such reductions as may be required to maintain such plans in
                  compliance with applicable federal law regulating employee
                  benefit programs).

         d)       If during the remaining term hereof after the Change of
                  Control Date (i) Employee's employment is terminated by the
                  Company (or subsidiary), or (ii) there shall have occurred a
                  material reduction in Employee's compensation or employment
                  related benefits, or a material change in Employee's status,
                  working conditions, management responsibilities or titles, and
                  Employee voluntarily terminates his relationship with the
                  company within sixty (60) days of any such occurrence, or the
                  last in a series of occurrences, then Employee shall be
                  entitled to receive, subject to the provisions of
                  subparagraphs (e) and (f) below, a lump sum payment equal to
                  50% of Employee's "base period income" as determined under (e)
                  below. Such amount will be paid to Employee within thirty (30)
                  business days after his termination of affiliation with the
                  Company.

         e)       The Employee's "base period income" shall be his base salary
                  and annual incentive bonuses paid or payable to him during or
                  with respect to the twelve month period preceding the date of
                  his termination of affiliation.

         f)       The amounts payable to Employee under any other compensation
                  arrangement maintained by the Company (or a subsidiary) which
                  became payable after payment of the lump sum provided for in
                  (a), upon or as a result of the exercise by Employee of rights
                  which are contingent on a Change of Control (and would be
                  considered a "parachute payment" under Internal Revenue Code &
                  280G and regulations thereunder), shall be increased by an
                  additional amount representing a gross-up of any federal
                  income tax liability arising from an excess parachute payment
                  or otherwise.


<PAGE>


10.       Termination.
          ------------

         a)       Termination for Cause. This agreement may be immediately
                  terminated by the Company at any time during the Employment
                  Period for "cause". In such an event of termination, the
                  Company shall be obligated only to continue to pay to Employee
                  his Base Salary earned up to the effective date of
                  termination. "Cause" for purposes hereof shall mean a breach
                  of any of the provisions of this Agreement by Employee,
                  unsatisfactory performance of Employee's duties hereunder as
                  reasonably determined by the Company's Board of Directors,
                  willful misconduct or neglect of duties, conviction of any
                  criminal offense involving a felony, gross negligence,
                  malfeasance or a crime of moral turpitude.

         b)       Continuing Effect. Notwithstanding any termination of the
                  Employee as provided in this Section 10 or otherwise, the
                  provisions of Section 12 and 13 shall remain in full force and
                  effect and shall be binding on the Employee and his legal
                  representatives, a successors and assigns.

11.       Consolidation, Merger or Sale of Assets. Nothing in this Agreement
         shall preclude the Company from consolidating or merging into or with,
         or transferring all or substantially all of its assets to, another
         corporation, which assumes this Agreement and all obligations of the
         Company hereunder, in writing. Upon such consolidation, merger, or
         transfer of assets and assumption, the term "the Company" as used
         herein, shall mean such other corporation and this Agreement shall
         continue in full force and effect.

12.      Restrictive Covenants.
         ----------------------

         a)       The Employee acknowledges that his services and
                  responsibilities are unique in character and are of particular
                  significance to the Company, that the Company is a competitive
                  business and that the Employee's continued and exclusive
                  service to the Company under this Agreement is of a high
                  degree of importance to the Company. Therefore, during the
                  Employment Period and for the applicable periods specified
                  below (each, the "Noncompete Period"), the Employee shall not,
                  directly or indirectly, as owner, partner, joint venture,
                  Employee, broker, agent, corporate, officer, principal,
                  licensor, shareholder (unless as owner of no more than five
                  percent (5%) of the issued and outstanding capital stock of
                  such entity if such stock is traded on a major securities
                  exchange, or in any other capacity whatsoever, engage in or
                  have any connection with any business which is competitive
                  with the Company, and which operates anywhere in the {World]
                  on the effective date of termination of this Agreement.

                  Reason for Termination                      Noncompete Period
                  Termination without cause                   1 year


<PAGE>


                  Termination for cause                       2 years

                  For purposes of this Agreement a business will be deemed to be
                  competitive with The Company if it is an importer/re-seller of
                  Karaoke hardware and/or software specializing in the United
                  States mass merchant marketplace.

         b)       In addition to the restrictions set forth in Section 12(a),
                  during the Noncompete period, the Employee shall not:

                  i.       directly or indirectly, by initiating contact or
                           otherwise, induce influence, combine or conspire
                           with, or attempt to induce, influence, combine or
                           conspire with any of the officers, Employees or
                           agents of the Company to terminate his, her or its
                           employment or relationship with or to compete against
                           the company; or

                  ii.      directly or indirectly, by initiating contact or
                           otherwise, divert or attempt to divert any or all of
                           any customers' or suppliers business with the
                           Company.

         c)       If, in any judicial proceedings, a court shall refuse to
                  enforce any of the covenants included in this Section 12 due
                  to extent, geographic scope or duration thereof, or otherwise,
                  then such unenforceable covenant shall be amended to relate to
                  such lesser extent, geographic scope or duration and this
                  Section 12 shall be enforceable, as amended. In the event the
                  Company should bring any legal action or other proceeding
                  against Employee for enforcement of this Agreement, the
                  calculation of the Noncompete Period shall not include the
                  period of time commencing with the filing or legal action or
                  other proceeding to enforce this Agreement through the date of
                  final judgment or final resolution, including all appeals, if
                  any of such legal action or other proceeding unless the
                  Company is receiving the practical benefits of this Section 12
                  during such time. The existence of any claim or cause of
                  action by the Employee against the Company predicted on this
                  Agreement or otherwise shall not constitute a defense to the
                  enforcement by the Company of these covenants.

         d)       The Employee has carefully considered the nature and extent of
                  the restrictions upon the Employee and the rights and remedies
                  conferred upon the Company under this Section 12, and the
                  Employee hereby acknowledges that the restrictions on his
                  activity as contained herein are reasonably required for the
                  Company's protection, would not operate as a bar to the
                  Employee's sole means of support, are fully required to
                  protect the legitimate interests of the Company, do not confer
                  a benefit on the Company disproportionate to the detriment of
                  the Employee and are material inducements to the Company to
                  enter into this Agreement. The Employee hereby agrees that in
                  the event of a violation by him of



<PAGE>


                  any of the provisions of this Agreement, the Company will be
                  entitled to institute and prosecute proceedings at law or in
                  equity to obtain damages with respect to such violation or to
                  enforce the specific performance of this Agreement by the
                  Employee or to enjoin the Employee from engaging in any
                  activity in violation hereof.

13.      Treatment and Ownership of Confidential Information. The Employee
         acknowledges that during his employment he will learn and will have
         access to Confidential Information regarding the Company. For purposes
         of this Agreement, the term "Confidential" acquires or develops or has
         made use of, in whole or in part in connection with Employee's
         employment with the Company (whether before or after the date of this
         Agreement), including any financial data, client names and addresses,
         employee data, discoveries, processes, formulas, inventions, know-how,
         techniques and any other materials or information related to the
         business or activities of the Company which are not generally known to
         others engaged in similar businesses or activities. The Employee
         acknowledges that such Confidential Information as is acquired and used
         by the Company or its affiliates is a special, valuable and unique
         asset. The Employee will not, except in connection with and as required
         by his performance of his duties under this Agreement, for any reason
         use for his own benefit, or the benefit of any person or entity with
         which he may be associated, or disclose any such Confidential
         Information to any person, firm, corporation, association or other
         entity for any reason or purpose whatsoever without the prior written
         consent of the Company's Board of Directors, unless such Confidential
         Information previously shall be and shall remain the exclusive property
         of the Company. The Employee agrees to promptly disclose to the Company
         all Confidential Information developed in whole or in part by the
         Employee within the scope of this Agreement and to assign to the
         Company and right title, or interest the Employee may have in such
         Confidential Information. The Employee agrees to turn over to the
         Company all physical manifestations of the Confidential Information in
         his possession or under his control at the request of the Company.

14.      Employee Representations and Warranties. The Employee represents and
         warrants that he is not a party to, or bound by, any other employment
         agreements. The Employee further represents and warrants to the Company
         that he is free of known physical and mental disabilities that would,
         with or without reasonable accommodations that would create an undue
         hardship for the Company, impair his performance hereunder and he is
         fully empowered to enter and perform his obligations under this
         Agreement. Without limiting the generality of the foregoing, the
         Employee represents and warrants that he is under no restrictive
         covenants to any person or entity that will be violated by his entering
         into and performing this Agreement.



<PAGE>


15.      Arbitration. Except as provided in sections 12 and 25 hereof, any
         dispute, controversy or claim arising under, out of, in connection
         with, or in relation to this Agreement, or the breach, termination,
         validity or enforceability of any provision of this Agreement, will be
         settled by an arbitrator (the "Arbitrator") chosen according to the
         rules of the American Arbitration Association's National Rules for
         Resolution of Employment Disputes, with the additional proviso that all
         steps necessary to insure the confidentiality of the proceedings will
         be added to the basic rules. Unless otherwise mutually agreed upon by
         the parties, the arbitration hearings shall be held in the Broward
         County, Florida. The parties hereby agree that the Arbitrator has full
         power and authority to hear and determine the controversy and make an
         award in writing in the form of a reasoned judicial opinion. The
         parties hereby stipulate in advance that the award is binding and
         final. The parties hereto also agree that judgment upon the arbitration
         award may be entered in any federal or state court having jurisdiction
         thereof. Each party is responsible for their own legal fees and
         out-of-pocket expenses.

16.      Binding Effect. Except as herein otherwise provided, this Agreement
         shall inure to the benefit of and shall be binding upon the parties
         hereto, their personal representatives, successors, heirs and assigns.

17.      Severability. Invalidity or unenforceability of any provision hereof
         shall in no way affect the validity or enforce4ability of any other
         provision.

18.      Terminology. All personal pronouns used in this Agreement, whether used
         in the masculine, feminine or neuter gender, shall include all other
         genders, the singular shall include the plural and vice versa. Titles
         of Paragraphs are for convenience only, and neither limit nor amplify
         the provisions of the Agreement itself.

19.      Governing Law. This Agreement shall be governed and construed in
         accordance with the laws of the State of Florida.

20.      Entire Agreement. This Agreement contains the entire understanding
         between the parties and may not be changed or modified except by an
         Agreement in writing signed by all the parties.

21.      Notice. Any notice required or permitted to be delivered hereunder
         shall be deemed to be delivered when deposited in the United States
         mail, postage prepaid, registered or certified mail, return receipt
         required, addressed to the parties at the addresses first stated
         herein, or to such other address as either party


<PAGE>


         hereto shall from time to time designate to the other party by notice
         in writing as provided herein.

22.      No Publicity. The Employee agrees that he will not engage in any
         conduct that is injurious to the Company's reputation and interests,
         including but not limited to, publicly disparaging (or inducing or
         encouraging others to publicly disparage) the Company or any of the
         Company's directors, officers, employees or agents.

23.      Cooperation. Employee agrees to cooperate fully with the Company by
         providing information to the Company and its representatives, agents or
         advisors regarding any business matters with which the Employee may
         become involved during the term of this Agreement and to cooperate
         fully in the event of any litigation or legal, administrative or
         regulatory proceeding by providing information, including but not
         limited to, providing truthful testimony at any legal administrative or
         regulatory proceeding, regarding any facts or information of which
         Employee has knowledge and/or any business matters of which Employee
         has or had knowledge.

24.      Assignability. The rights and obligations of the Company under this
         Agreement shall inure to the benefit of and be binding upon the
         successors and assigns of the Company, provided that such successor or
         assign shall acquire all or substantially all of the assets and
         business of the Company and, further provided that any such assignment
         shall not release the Company from its obligations to the Employee
         thereunder. The Employee's rights and obligations hereunder may not be
         assigned or alienated without the prior written consent of the Company
         and any attempt to do so by the Employee will be void.

25.      Attorney's Fees. If any legal action or other proceeding is brought by
         the Company for the enforcement of Section 12 of this Agreement, or
         because of an alleged dispute, breach, default or misrepresentation by
         the Employee in connection with any provision of this Agreement, the
         Company or the Employee in such legal action or other proceeding, shall
         be responsible for its own attorneys' fees, sales and use taxes, court
         costs and other expenses incurred in that action or proceeding.

26.      Injunctive Relief. The Employee acknowledges and agrees that in the
         event Employee violates any term, covenant or provision of Section 12
         of this Agreement, the Company will suffer irreparable harm for which
         the Company will have no adequate remedy at law. The Employee agrees
         that the Company shall be entitled to injunctive relief for any breach
         or violation of Section 12 of this Agreement, including but not limited
         to the issuance of an ex parte preliminary



<PAGE>


         injunction, in addition to and not in limitation of any and all other
         remedies available to the Company at law or in equity.

27.      No Offsets. The existence of any claim or cause of action of the
         Employee against the Company, whether predicated on this Agreement or
         otherwise, shall not constitute a defense to the enforcement by the
         Company of this Agreement.

28.      Employee Acknowledgement. The Employee acknowledges and agrees that
         Employee has read and understands the terms set forth in this Agreement
         and has been given a reasonable opportunity to consult with an attorney
         prior to execution of this Agreement.

29.      Other Instruments. The parties hereby covenant and agree that they will
         execute such other and further instruments and documents as are or may
         become necessary or convenient to effectuate and carry out the terms of
         this Agreement.

30.      Counterparts. This Agreement may be executed in any number of
         counterparts and each such counterpart shall for all purposes be deemed
         an original.

31.      Assignability. This Agreement shall not be assigned by either party,
         except with the written consent of the other.

                          [SIGNATURE PAGE ON NEXT PAGE]


<PAGE>


IN WITNESS WHEREOF, this Agreement has been duly signed by the Employee and on
behalf of the Company on the day and year first above written.

THE SINGING MACHINE COMPANY, INC.

By:

/s/ John Klecha                     /s/  Jack Dromgold
- ----------------------              ----------------------
John Klecha                         Jack Dromgold
President C.O.O.                    Employee




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>4
<FILENAME>greem-employment.txt
<DESCRIPTION>GREEN EMPLOYMENT AGREEMENT
<TEXT>
THE
SINGING
MACHINE


                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT ("Agreement") made as of the 5th day of March 2002
by and between THE SINGING MACHINE COMPANY, INC., a Delaware corporation with
its principal office at 6601 Lyons Road, Coconut Creek, FL 33073 (The "Company"
and April Green whose residence address is 259 NW 95 Terrace Coral Springs,
Florida 33071 (the "Employer").

         The Company and the Employee hereby agree as follows with respect to
the Employee's relationship with the Company:

1.       Relationship; Term. The Company shall retain the Employee and the
         Employee shall be retained by the Company, on the terms and conditions
         hereinafter set forth, as an Employee for a period (the "Employment
         Period") commencing on March 15, 2002 (the "Commencement Date"), and
         ending on March 14, 2005 (the "Termination Date"), unless terminated
         sooner pursuant to the provisions hereof. Such period of employment
         shall be automatically extended for one (1) one-year term unless either
         the Company or the Employee notifies the other in writing at least
         sixty (60) days prior to the end of the then current term that it or he
         does not intend to renew such employment, in which case such employment
         will expire at the end of the then current term. During the entire term
         of this Agreement, the Employee shall be the Company's Chief Financial
         Officer.

2.       Efforts on Company's Behalf. The Employee shall devote all of his time
         and his best efforts, skills and attention to the business and affairs
         of the Company, shall serve the Company faithfully and competently and
         shall at all times act in the Company's best interest. The services to
         be rendered by Executive during the term hereof shall be as Chief
         Financial Officer, subject at all times to the direction and control of
         the President. Nothing herein shall be construed to prevent other
         entities, which do not compete with the Company, from serving on the
         board of directors of any other company.

3.       Base Compensation

a)       The Company shall pay to the Executive, and the Executive agrees to
         accept, minimum base compensation of one hundred twenty-two thousand
         two hundred dollars ($122,200) per year (the "Base Compensation"),
         payable in accordance

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>


         with normal payroll policies of the Company and shall be subject to all
         usual and customary payroll deductions including all applicable
         withholding taxes.

b)       Employee's Base Compensation shall automatically increase over the
         prior year's Base Compensation each year during the term hereof by not
         less than the greater of:

         i.       Five percent (5%); or

         ii.      An amount calculated by multiplying the prior year's Base
                  Compensation by a fraction, the numerator of which shall be
                  the consumer price index ("Consumer Price Index"), as
                  hereafter defined, for the month of January in the year of
                  adjustment and the denominator of which shall be the Consumer
                  Price Index for All Urban Consumers, U.S. City Average (1982-
                  84=100) All Items, Bureau of Labor Statistics of the United
                  States Department of Labor.

4.       Bonus Compensation.
         -------------------

         A.       The Executive shall be entitled to receive a bonus (the "
                  Profit Bonus") for each fiscal year of the Company ("Fiscal
                  Year") during the employment period.

         B.       Employee's Bonus, for the first year of this contract, shall
                  be based upon a discretionary amount based solely upon company
                  performance. During the second year of this contract, the
                  Employee's bonus plan shall switch to: 8% share of the total
                  company wide bonus pool for each successive year of the
                  contract. All bonuses shall be paid in accordance with the
                  Company's cash bonus incentive plan.

         C.       In consideration of Employee's services hereunder, the
                  Executive shall be granted the option to purchase shares of
                  common stock of the Company in accordance with the terms of a
                  stock option agreement to be executed between the Company and
                  Employee after the effective date of this agreement.

         D.       The Company will reimburse the employee monthly for an
                  Allowance of Auto expenses not to exceed $300.

5.       Benefit Plans.

a.       The Executive shall be entitled to participation in all
         Company-sponsored benefit plans in accordance with terms, conditions
         and costs with usual or customary Company policy and will cover his
         entire family.

b.       In the event that the Company purchases insurance on the life of the
         Executive. Executive shall be entitled to purchase said policy from the
         Company in the event of his termination, pursuant to the terms hereof,
         for an amount equal to the cash surrender value thereof.

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>



6.       Business Expenses. The Employee shall be reimbursed for all usual
         and customary expenses incurred on behalf of the company, in accordance
         with Company practices and procedures; provided that each such expense
         is of a nature qualifying it as a proper deduction on the Federal
         income tax returns of the Company, exclusive of any limitation rules as
         a business expense of the Company and not as compensation to Employee,
         and Employee furnishes the Company with adequate documentary evidence
         to substantiate such expenses.

7.       Vacation. Employee shall be entitled to a paid vacation of three (3)
         weeks per each year of this agreement. Such vacation time allowance
         shall cumulatively accrue, and any unused vacation time for each year
         can be used in the following year or paid to the Employee at the
         Employee's sole discretion. The Company shall make all reasonable
         efforts to enable Employee to use his vacation leave each year.
         Employee shall also be entitled to all paid holidays made generally
         available by the company to its employees.

8.       Death or Disability

         a)       Notwithstanding anything to the contrary contained in
                  Paragraph 1 above if, during the term hereof, the Employee
                  suffers a disability (as defined below) the Company shall,
                  subject to the provisions of Paragraph 8 () hereof, continue
                  to pay Employee the compensation provided in Paragraph 3
                  hereof during the period of his disability; provided, however,
                  that in the event Employee is disabled for a continuous period
                  of ninety (90) days in any twelve- month period that the
                  employee is incapable of substantially fulfilling the duties
                  set forth in Section 2 or hereafter assigned to him by the
                  President or Board of Directors because of physical, mental or
                  emotional incapacity resulting from injury, sickness or
                  disease as determined by an independent physician agreed upon
                  by both the Company and the Employee, the Company may, at its
                  election, terminate this Agreement. In the event of such
                  termination, the Company shall continue to be obligated to pay
                  Employee his compensation earned up to the date of
                  termination.

         b)       As used in this Agreement, the term "disability" shall mea the
                  substantial inability of Employee to perform his duties under
                  this Agreement as determined by an independent physician
                  agreed upon by both the Company and the Employee.

         c)       In the event that employment ceases prior to the end of a
                  calendar month as a result of his death or disability or in
                  the event of a termination described in Paragraph 10 below,
                  the Company shall pay Employee or his legal representatives,
                  as the case may be, in addition to any other amounts payable
                  by the Company hereunder, a lump cash sum which shall in no
                  event be less than the salary plus any bonus to which Employee
                  would have been entitled had he continued to be affiliated
                  with the Company until the end of the calendar month during
                  which his affiliation terminates.

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>




9.       Change of Control.

         a)       For the purposes of this Agreement, a "Change of Control"
                  shall be deemed to have taken place if: (i) any person,
                  including a "group" as defined in Section 13 (d)(3) of the
                  Securities Exchange Act of 1934, as amended, becomes the owner
                  or beneficial owner of Company securities, after the date of
                  this Agreement, having 50% or more of the combined voting
                  power of the then outstanding securities of the Company that
                  may be cast for the election of directors of the Company
                  (other than as a result of an issuance of securities initiated
                  by the Company, or open market purchases approved by the
                  Board, as long as the majority of the Board approving the
                  purchases is the majority at the time the purchases are made),
                  or (ii) the persons who were directors of the Company before
                  such transactions shall cease to constitute a majority of the
                  Board of the Company, or any successor to the Company, as the
                  direct or indirect result of, or in connection with, any cash
                  tender or exchange offer, merger or other business
                  combination, sale of assets or contested election, or any
                  combination of the foregoing transactions.

         b)       The Company and Employee hereby agree that, if Employee is
                  affiliated with the Company on the date on which a Change of
                  Control occurs (the "Change of Control Date") the Company (or,
                  if Executive is affiliated with a subsidiary, the subsidiary)
                  will continue to retain Executive, and Executive will remain
                  affiliated with the Company (or subsidiary), for the period
                  commencing on the Change of Control Date and ending on the
                  first anniversary of such a date, to exercise such authority
                  and perform such Employee duties as are commensurate with the
                  authority being exercised and duties being performed by the
                  Employee immediately prior to the Change of Control Date.

         c)       During the remaining term hereof after the Change of Control
                  Date, the Company (or subsidiary) will (i) continue to pay
                  Employee a salary at not less than the level applicable to
                  Employee on the Change of Control Date, (ii) pay Employee
                  Bonuses in amounts not less in amount than those paid during
                  the twelve month period preceding the Change of Control Date,
                  and (iii) continue employee benefit programs as to Employee at
                  levels in effect on the Change of Control Date (but subject to
                  such reductions as may be required to maintain such plans in
                  compliance with applicable federal law regulating employee
                  benefit programs).

         d)       If during the remaining term hereof after the Change of
                  Control Date (i) Employee's employment is terminated by the
                  Company (or subsidiary), or (ii) there shall have occurred a
                  material reduction in Employee's compensation or employment
                  related benefits, or a material change in Employee's status,
                  working conditions, management responsibilities or titles, and

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>



         Employee voluntarily terminates his relationship with the company
         within sixty (60) days of any such occurrence, or the last in a series
         of occurrences, then Employee shall be entitled to receive, subject to
         the provisions of subparagraphs (e) and (f) below, a lump sum payment
         equal to 50% of Employee's "base period income" as determined under (e)
         below. Such amount will be paid to Employee within thirty (30) business
         days after his termination of affiliation with the Company.

         e)       The Employee's "base period income" shall be his base salary
                  and annual incentive bonuses paid or payable to him during or
                  with respect to the twelve month period preceding the date of
                  his termination of affiliation.

         f)       The amounts payable to Employee under any other compensation
                  arrangement maintained by the Company (or a subsidiary) which
                  became payable after payment of the lump sum provided for in
                  (a), upon or as a result of the exercise by Employee of rights
                  which are contingent on a Change of Control (and would be
                  considered a "parachute payment" under Internal Revenue Code &
                  280G and regulations thereunder), shall be increased by an
                  additional amount representing a gross-up of any federal
                  income tax liability arising from an excess parachute payment
                  or otherwise.

10.       Termination.
         ------------

         a)       Termination for Cause. This agreement may be immediately
                  terminated by the Company at any time during the Employment
                  Period for "cause". In such an event of termination, the
                  Company shall be obligated only to continue to pay to Employee
                  his Base Salary earned up to the effective date of
                  termination. "Cause" for purposes hereof shall mean a breach
                  of any of the provisions of this Agreement by Employee,
                  unsatisfactory performance of Employee's duties hereunder as
                  reasonably determined by the Company's Board of Directors,
                  willful misconduct or neglect of duties, conviction of any
                  criminal offense involving a felony, gross negligence,
                  malfeasance or a crime of moral turpitude.

         b)       Continuing Effect. Notwithstanding any termination of the
                  Employee as provided in this Section 10 or otherwise, the
                  provisions of Section 12 and 13 shall remain in full force and
                  effect and shall be binding on the Employee and his legal
                  representatives, successors and assigns.

11.       Consolidation, Merger or Sale of Assets. Nothing in this Agreement
         shall preclude the Company from consolidating or merging into or with,
         or transferring all or substantially all of its assets to, another
         corporation, which assumes this Agreement, and all obligations of the
         Company hereunder, in writing. Upon such consolidation, merger, or
         transfer of assets and assumption, the term "the Company" as used
         herein, shall mean such other corporation and this Agreement shall
         continue in full force and effect.

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>

12.      Restrictive Covenants

         a)       The Employee acknowledges that his services and
                  responsibilities are unique in character and are of particular
                  significance to the Company, that the Company is a competitive
                  business and that the Employee's continued and exclusive
                  service to the Company under this Agreement is of a high
                  degree of importance to the Company. Therefore, during the
                  Employment Period and for the applicable periods specified
                  below (each, the "Noncompete Period"), the Employee shall,
                  not, directly or indirectly, as owner, partner, joint venture,
                  Employee, broker, agent, corporate officer, principal,
                  licensor, shareholder (unless as owner of no more than five
                  percent (5%) of the issued and outstanding capital stock of
                  such entity if such stock is traded on a major securities
                  exchange, or in any other capacity whatsoever, engage in or
                  have any connection with any business which is competitive
                  with the Company, and which operates anywhere in the (World)
                  on the effective date of termination of this Agreement:

                  Reason for Termination                 Noncompete Period
                  Termination without cause                     1 year
                  Termination with cause                        2 years

                  For purposes of this Agreement, a business will be deemed to
                  be competitive with the Company if it is an importer/re-seller
                  of Karaoke hardware and/or software specializing in the United
                  States mass merchant marketplace.

         b)       In addition to the restrictions set fort in Section 12(a),
                  during the Noncompete period, the Employee shall not:

                  i.       directly or indirectly, by initiating contact or
                           otherwise induce, influence, combine or conspire
                           with, any of the officers, Employees or agents of the
                           Company to terminate his, her or its employment or
                           relationship with or to compete against the company;
                           or

                  ii.      directly or indirectly, by initiating contact or
                           otherwise, divert or attempt to divert any or all of
                           any customers' or suppliers' business with the
                           Company.

         a)       If, in any judicial proceedings, a court shall refuse to
                  enforce any of the covenants included in this Section 12 due
                  to extent, geographic scope or duration thereof, or otherwise,
                  then such unenforceable covenant shall be amended to relate to
                  such lesser extent, geographic scope or duration and this
                  Section 12 shall be enforceable, as amended. In the event the
                  Company should bring any legal action or other proceeding
                  against Employee for enforcement of this Agreement,

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>


                  the calculation of the Noncompete Period shall not include the
                  period of time commencing with the filing of legal action or
                  other proceeding to enforce this Agreement through the date of
                  final judgment or final resolution, including all appeals, of
                  any of such legal action or other proceeding unless the
                  Company is receiving the practical benefits of this Section 12
                  during such time. The existence of any claim or cause of
                  action by the Employee against the Company predicated on this
                  Agreement or otherwise shall not constitute a defense to the
                  enforcement by the Company of these covenants.

         b)       The Employee has carefully considered the nature and extent of
                  the restrictions upon the Employee and the rights and remedies
                  conferred upon the Company under this Section 12, and the
                  Employee hereby acknowledges that the restrictions on his
                  activity as contained herein are reasonably required for the
                  Company's protection, would not operate as a bar to the
                  Employee's sole means of support, are fully required to
                  protect the legitimate interests of the Company, do not confer
                  a benefit on the Company disproportionate to the detriment of
                  the Employee and are material inducements to the Company to
                  enter into this Agreement. The Employee hereby agrees that in
                  the event of a violation by him of any of the provisions of
                  this Agreement, the Company will be entitled to institute and
                  prosecute proceedings at law or in equity to obtain damages
                  with respect to such violation or to enforce the specific
                  performance of this Agreement by the Employee or to enjoin the
                  Employee from engaging in any activity in violation hereof.

13.      Treatment and Ownership of Confidential Information. The Employee
         acknowledges that during his employment he will learn and will have
         access to Confidential Information regarding the Company. For purposes
         of this Agreement, the term "Confidential" acquires or develops or has
         made use of, in whole or in part in connection with Employee's
         employment with the Company (whether before of after the date of this
         Agreement), including any financial data, client names and addresses,
         employee data, discoveries, processes, formulas, inventions, know- how,
         techniques and any other materials or information related to the
         business or activities of the Company which are not generally known to
         others engaged in similar businesses or activities. The Employee
         acknowledges that such Confidential Information as is required and used
         by the Company or its affiliates is a special, valuable and unique
         asset. The Employee will not, except in connection with and as required
         by his performance of his duties under this Agreement, for any reason
         use for his own benefit, or the benefit of any person or other entity
         for any reason or purpose whatsoever without the prior written consent
         of the Company's Board of Directors, unless such Confidential
         Information previously shall be and shall remain the exclusive property
         of the Company. The Employee agrees to promptly disclose to the Company
         all Confidential Information. The Employee agrees to turn over to the
         Company all physical manifestations of the Confidential Information in
         his possession or under his control at the request of the Company.


- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>


14.      Employee Representations and Warranties. The Employee represents and
         warrants that he is not a party to, or bound by, any other employment
         agreements. The Employee further represents and warrants to the Company
         that his is free of known physical and mental disabilities that would,
         with or without reasonable accommodations that would create an undue
         hardship for the Company, impair his performance hereunder and he is
         fully empowered to enter and perform his obligations under this
         Agreement. Without limiting the generality of the foregoing, the
         Employee represents and warrants that he is under no restrictive
         covenants to any person or entity that will be violated by his entering
         into and performing this Agreement.

15.      Arbitration. Except as provided in sections 12 and 25 hereof, any
         dispute, controversy or claim arising under, out of, in connection
         with, or in relation to this Agreement, or the breach, termination,
         validity or enforceability of any provision of this Agreement, will be
         settled by an arbitrator (the "Arbitrator") chosen according to the
         rules of the American Arbitration Association's National Rules for
         Resolution of Employment Disputes, with the additional proviso that all
         steps necessary to insure the confidentiality of the proceedings will
         be added to the basic rules. Unless otherwise mutually agreed upon by
         the parties, the arbitration hearings shall be held in the Broward
         County, Florida. The parties hereby agree that the Arbitrator has full
         power and authority to hear and determine the controversy and make an
         award in writing in the form of a reasoned judicial opinion. The
         parties hereby stipulate in advance that the award is binding and
         final. The parties hereto also agree that judgment upon the arbitration
         award may be entered in any federal or state court having jurisdiction
         thereof. Each party is responsible for their own legal fees and
         out-of-pocket expenses.

16.      Binding Effect. Except as herein otherwise provided, this Agreement
         shall inure to the benefit of and shall be binding upon the parties
         hereto, their personal representatives, successors, heirs and assigns.

17.      Severability. Invalidity or unenforceability of any provisions hereof
         shall in no way affect the validity or enforceability of any other
         provisions.

18.      Terminology. All personal pronouns used in this Agreement, whether used
         in the masculine, feminine or neuter gender, shall include all other
         genders; the singular shall include the plural and vice versa. Titles
         of Paragraphs are for convenience only, and neither limit nor amplify
         the provisions of the Agreement itself.

19.      Governing Law. This Agreement shall be governed and construed in
         accordance with the laws of the State of Florida.

20.      Entire Agreement. This Agreement contains the entire understanding
         between the parties

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>



         and may not be changed or modified except by an Agreement in writing
         signed by all the parties.

21.      Notice. Any notice required or permitted to be delivered hereunder
         shall be deemed to be delivered when deposited in the United States
         mail, postage prepaid, registered or certified mail, return receipt
         required, addressed to the parties at the addresses first stated
         herein, or to such other addresses as either party hereto shall from
         time to time designate to the other party by notice in writing as
         provided herein.

22.      No Publicity. The Employee agrees that he will not engage in any
         conduct that is injurious to the Company's reputation and interests,
         including but not limited to, publicly disparaging (or inducing or
         encouraging other to publicly disparage) the Company or any of the
         Company's directors, officers, employees or agents.

23.      Cooperation. Employee agrees to cooperate fully with the Company by
         providing information to the Company and its representatives, agents or
         advisors regarding any business matters with which the Employee may
         become involved during the term of this Agreement and to cooperate
         fully in the event of any litigation or legal, administrative or
         regulatory proceedings by providing information, including but not
         limited to, providing truthful testimony at any legal, administrative
         or regulatory proceeding, regarding any facts or information of which
         Employee has knowledge and/or any business matters of which Employee
         has or had knowledge.

24.      Assignability. The rights and obligations of the Company under this
         Agreement shall inure to the benefit of and be binding upon the
         successors and assigns of the Company, provided that such successor or
         assign shall acquire all or substantially all of the assets and
         business of the Company and, further provided that any such assignment
         shall not release the Company from its obligations to the Employee
         hereunder. The Employee's rights and obligations hereunder may not be
         assigned or alienated without the prior written consent of the Company
         and any attempt to do so by the Employee will be void.

25.      Attorney's Fees. If any legal action or other proceeding is brought by
         the Company for the enforcement of Section 12 of this Agreement, or
         because of an alleged dispute, breach, default or misrepresentation by
         the Employee in connection with any provision of this Agreement, the
         Company or the Employee in such legal action or other proceeding, shall
         be responsible for its own attorneys' fees, sales and use taxes, court
         costs and other expenses incurred in that action or proceeding.

26.      Injunctive Relief. The Employee acknowledges and agrees that in the
         event Employee violates any term, covenant or provision of Section 12
         of this Agreement, the Company will

- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>


         suffer irreparable harm for which the Company will have no adequate
         remedy at law. The Employee agrees that the Company shall be entitled
         to injunctive relief for any breach or violation of Section 12 of this
         Agreement, including but not limited to the issuance of an ex parte
         preliminary injunction, in addition to and not in limitation of any and
         all other remedies available to the Company at law or in equity.

27.      No Offsets. The existence of any claim or cause of action of the
         Employee against the Company, whether predicated on this Agreement or
         otherwise, shall not constitute a defense to the enforcement by the
         Company of this Agreement.

28.      Employee Acknowledgement. The Employee acknowledges and agrees that
         Employee has read and understands the terms set forth in this Agreement
         and has been given a reasonable opportunity to consult with an attorney
         prior to execution of this Agreement.

29.      Other Instruments. The parties hereby covenant and agree that they will
         execute such other and further instruments and documents as are or may
         become necessary or convenient to effectuate and carry out the terms of
         this Agreement.

30.      Counterparts. This Agreement may be executed in any number of
         counterparts and each such counterpart shall for all purposes be deemed
         an original.

31.      Assignability. This Agreement shall not be assigned by either party,
         except with the written consent of the other.

                         (SIGNATURE PAGE ON NEXT PAGE)





- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000

<PAGE>


IN WITNESS WHEREOF, this Agreement has been duly signed by the Employee and on
behalf of the Company on the day and year first above written.



                                   THE SINGING MACHINE COMPANY, INC.





/s/ John Klecha                            /s/ April Green
- -----------------------------              ------------------------------
John Klecha                                    April Green
President, C.O.O.                              Employee








- ------------------------------------------------------------------------------
                        THE SINGING MACHINE COMPANY, INC.
                          6601 Lyons Road, Building A-7
                          Coconut Creek, FL 33073g A-7
                     Tel: (954) 596-1000 Fax: (954) 596-2000


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>5
<FILENAME>lyons-suite7lease.txt
<DESCRIPTION>LEASE AGREEMENT - ROCCO - LASSER
<TEXT>
                                 Exhibit 10.22

LYONS CORPORATE PARK
6601 Lyons Road
Suite C-1
Coconut Creek, Florida 88073
Telephone (954) 486-6600
FAX (954) 488-5718

DATE: March 31, 1999

The Singing Machine Co., Inc. (A Florida Corporation)
3101 N.W. 25th Avenue
Pompano Beach, FL 33069

RE: 6601 Lyons Road Suite A, 7 & 8

Dear Mr. Klecha:

Please be advised that notwithstanding anything in the lease to the contrary,
Landland and Tenant agree that there shall be no minimum rent pursuant to the
lease pursuant to section 2.02 for the first one month of the lease, but the
Tenant will be responsible for the payment of maintenance, insurance and
property taxes and sales tax and for all other items in the lease during this
period. If Tenant defaults under the terms of the Lease, and the defaults is not
cured within the time limits specified in the lease, then it is agreed that
Tenant will be liable to Landlord for all of the minimum rent, and maintenance,
insurance and property taxes not paid by Tenant during the free rental period
specified in this letter.


                         Yours truly,
                         LYONS CORPORATE PARK

                         /s/ Lee S. Lasser
                         -----------------
                         LEE S. LASSER

                         /s/ Augustine Ferrera
                         ---------------------
                         AUGUSTINE FERRERA

The Singing Machine Co., Inc.
BY /s/ John Klecha
   ---------------

<PAGE>


                                 LEASE AGREEMENT

LANDLORD: ROCCO FERRERA & CO. INC. (A MICHIGAN CORPORATION) AND LEE S. LASSER,
TRUSTEE OF THE LEE S. LASSER TRUST DATED AUGUST 25, 1972 AS AMENDED d/b/a LYONS
CORPORATE PARK..

TENANT: The Singing Machine Co., Inc. (A Florida Corporationi)


BLDG.          A
     ------------------------

SUITE          7 & 8
     ------------------------

DATE   March 31, 1999
    -------------------


<PAGE>

<TABLE>
<CAPTION>


                                                       INDEX
<S>          <C>         <C>     <C>                                                                      <C>
                                                                                                          Page
ARTICLE I             GRANT AND TERM
             Section     1.01    Leased Premises                                                            1
             Section     1.02    Length of Term                                                             1
             Section     1.03    Construction of Lease Premises                                             1
             Section     1.04    Possession After Completion of Construction                                1
             Section     1.05    Determination of Availability of Demised Premises                          1

ARTICLE II            RENT
             Section     2.01    Payment                                                                    1
             Section     2.02    Minimum Rent                                                               2
             Section     2.03    Adjustment of Fixed Minimum Rent                                           2
             Section     2.04    Real Estate Taxes                                                          2
             Section     2.05    Additional Rent                                                            2
             Section     2.06    Past Due Rent                                                              3

ARTICLE III           OPERATION AND MAINTENANCE OF COMMON AREAS
             Section     3.01    Designation of Common Areas                                                3
             Section     3.02    Construction of Common Areas                                               3
             Section     3.03    Tenant's Pro Rata Share of Expenses                                        3

ARTICLE IV            USE OF PREMISES
             Section     4.01    Use of Premises                                                            3
             Section     4.02    Care of Premises                                                           3

ARTICLE V             UTILITY SERVICES
             Section     5.01    Landlord's Obligation to Make Utility Services Available and Option
                                 To Supply Such Services                                                    4
             Section     5.02    Tenant's Obligation for Payment                                            4

ARTICLE VI            MAINTENANCE OF LEASE PREMISES
             Section     6.01    Landlord's and Tenant's Obligations for Maintenance                        4
             Section     6.02    Abuse of Plumbing, Walls, Etc.                                             4

ARTICLE VII           SIGNS
             Section     7.01                                                                               4

ARTICLE VIII          ALTERATIONS
             Section     8.01                                                                               5

ARTICLE IX            INSURANCE AND INDEMNITY
             Section     9.01    Covenant to Hold Harmless                                                  5
             Section     9.02    Fire Insurance Premium                                                     5
             Section     9.03    Tenant's Obligation to Carry Public Liability Insurance                    5
             Section     9.04    Insurance Costs                                                            5

ARTICLE X             ASSIGNMENT AND SUBLETTING
             Section     10.01                                                                              6

ARTICLE XI            ACCESS TO PREMISES
             Section     11.01   Right of Entry by Landlord                                                 6
             Section     11.02   Landlord's Right to Exhibit Premises                                       6

ARTICLE XII           EMINENT DOMAIN
             Section     12.01   Total Condemnation                                                         6
             Section     12.02   Partial Condemnation                                                       6
             Section     12.03   Landlord's and Tenant's Damages                                            6

ARTICLE XIII          DESTRUCTION OR DAMAGE TO DEMISED PREMISES
             Section     13.01   Reconstruction of Damaged Premises                                         6
             Section     13.02                                                                              6
             Section     13.03                                                                              7
             Section     13.04                                                                              7
             Section     13.05                                                                              7
             Section     13.06   Subrogation                                                                7

ARTICLE XIV           BANKRUPTCY OR INSOLVENCY
             Section     14.01   Landlord's Option to Terminate Upon Insolvency of Tenant or
                                 Guarantor Under State Insolvency Law or Upon Insolvency of
                                 Tenant or Guarantor Under Federal Bankruptcy Act                           7

ARTICLE XV            DEFAULT OF TENANT
             Section     15.01   Right to Re-Enter                                                          7
             Section     15.02   Legal Expenses                                                             8
             Section     15.03   Waiver of Jury Trial and Counterclaims                                     8
             Section     15.04   Curing of Tenant's Default                                                 8

ARTICLE XVI           TENANT'S PROPERTY
             Section     16.01   Taxes on Leasehold                                                         8
             Section     16.02   Notice by Tenant                                                           8

ARTICLE XVII          QUIET ENJOYMENT
             Section     17.01   Landlord's Covenant                                                        8

ARTICLE XVIII         HOLDING OVER, SUCCESSORS
             Section     18.01   Holding Over                                                               8
             Section     18.02   Successors                                                                 8

                                                     -i-
<PAGE>

ARTICLE XIX           CERTAIN RIGHTS OF LESSOR WITH RESPECT TO LAND
             Section     19.01   Easements and Utilities                                                    8

ARTICLE XX            MISCELLANEOUS
             Section     20.01   Waiver                                                                     9
             Section     20.02   Subordination                                                              9
             Section     20.03   Notices                                                                    9
             Section     20.04   Construction                                                               9
             Section     20.05   Non-Liability                                                              9
             Section     20.06   Net Lease                                                                  9
             Section     20.07   Financing and Tenant's Acknowledgment of Acceptance of Premises            9
             Section     20.08   Accord and Satisfaction                                                    10
             Section     20.09   Captions and Section Numbers                                               10
             Section     20.10   Partial Invalidity                                                         10
             Section     20.11   No Option                                                                  10
             Section     20.12   Recording                                                                  10
             Section     20.13   Sale or Transfer of the Demised Premises                                   10
             Section     20.14   Liens                                                                      10
             Section     20.15   Attornment                                                                 10
             Section     20.16   Set-Off Statement                                                          10
             Section     20.17   Entire Agreement                                                           10
             Section     20.18   Brokerage                                                                  11
             Section     20.19   No Oral Changes                                                            11
             Section     20.20   No Representations by Landlord                                             11
             Section     20.21   Corporate or Partnership Tenant                                            11
             Section     20.22   Damage From Roof Leaks                                                     11
             Section     20.23   Security Deposit                                                           11
             Section     20.24   Administrative Charge                                                      11
             Section     20.25   Laws of the State of Florida                                               11
             Section     20.26   Counterparts                                                               11
             Section     20.27   Right to Plat                                                              11
             Section     20.28   Radon Gas                                                                  12
             Section     20.29   Tenant's Time to Sue                                                       12
             Section     20.30   Rider                                                                      12

SIGNATURES                                                                                                  12

JURAT                                                                                                       13

RIDER                                                                                                       14

EXHIBIT "A" - LEGAL DESCRIPTION

EXHIBIT "B" - SITE PLAN

EXHIBIT "C" - TENANT'S CONFIRMATION LETTER

EXHIBIT "D" - DESCRIPTION OF LANDLORD'S WORK

EXHIBIT "E" - SIGN CRITERIA

GUARANTY

</TABLE>

                                     - ii -

<PAGE>



         THIS LEASE made and entered into this 31st day of March, 1999 by and
between ROCCO FERRERA & CO., INC. (A MICHIGAN CORPORATION) AND LEE S. LASSER,
TRUSTEE OF THE LEE S. LASSER TRUST DATED AUGUST 25, 1972, AS AMENDED d/b/a LYONS
CORPORATE PARK, whose address is 6601 N. Lyons Road, Coconut Creek, Florida
33073, Party of the First Part (hereinafter sometimes designated as "Landlord")
and The Singing Machine Co., Inc. whose address is 3101 N.W. 25th Avenue,
Pompano Beach, FL 33069 Party of the Second Part, (sometimes hereinafter
designated as "Tenant").

                                   WITNESSETH:

ARTICLE I         GRANT AND TERM

Section 1.01      Leased Premises

         In consideration of the mutual premises, covenants and agreements
herein contained, the adequacy of which consideration is by both parties
confessed and acknowledged, and in further consideration of the rents, covenants
and agreements hereinafter reserved and contained on the part of the Tenant to
be observed and performed, the Landlord leases to the Tenant, and the Tenant
rents from the Landlord, those certain premises now or hereafter to be erected
on the property hereafter described, located in Broward County, Florida,
described as containing 80 feet of frontage (measured from outside of exterior
wall or center of common partition, as the case may be) and have an overall
depth of 100 feet (measured from outside of exterior wall to outside of exterior
wall) for a total of 8,000 square feet of ground floor area, which would include
a portion of the truck well area, designated "Leased or Demised Premises", and
the same being located within the Industrial Park property known and described
as:

         EXHIBIT "A" attached hereto and made a part hereof, and as more
         particularly shown on Exhibit "B", together with the right to use the
         areas outlined around said Leased or Demised Premises.

         Landlord and Tenant agree that Exhibit "B" shows only the approximate
shape and dimensions of the proposed buildings in the Industrial Park, and
further agree that Tenant's consent shall not be required for any additions,
reductions or modifications thereto.

Section 1.02      Length of Term

         To have and to hold, together with appurtenances, for a term of five
years and one month, upon the terms and conditions as herein set forth.

Section 1.03      Construction of Leased Premises

         Landlord agrees prior to the commencement of the term of this Lease, at
Landlord's sole cost and expense, to construct on the site a building in which
the Demised Premises are to be located. In accordance with the outline
specificatin, where applicable, entitled "Description of Landlord's Work"
(Exhibit D) annexed hereto and made a part hereof, and it is understood and
signed by Tenant that no minor changes from the plans that have been agreed upon
by and between the parties hereto, which may be necessary during the preparation
of the Demised Premises for Tenant or during construction, will affect or change
the Lease or Invalidate same.


Section 1.04      Possession After Completion of Construction

         Solely for the purpose of computing the term of this Lease, the
commencement date shall be deemed to be the first day of the month next
following the date when the premises are ready for occupancy. It is agreed that
by occupying said premises as a Tenant, Tenant formally accepts the same and
acknowledges that the Demised Premises are in the condition called for
hereunder. The rentals herein reserved shall commence on the date when the
premises are ready for occupancy.

         Tenant, prior to delivery of possession, shall be permitted to install
fixtures and other equipment so long as such activities do not interfere with
construction work, and it is agreed by Tenant that Landlord shall have no
responsibility or liability whatsoever for any loss of, or damage to, any
fixtures or other equipment so installed or left on the premises.

Section 1.05      Determination of Availability of Demised Premises

         The Demised Premises shall be deemed as ready for occupancy when
Landlord shall have substantially completed construction of the said premises in
accordance with the Description of Landlord's Work as referred to in Section
1.03 of this Article, in accordance with all lawful statutes or ordinances and
regulations affecting said premises. However, it shall not be required for
Landlord and/or Tenant to have obtained a Certificate of Occupancy for the
leased premises for the premises to be cleaned, substantially completed and
ready for Tenant's occupancy. If any disputes shall arise as to the premises
being ready for Tenant's occupancy, a certificate furnished by the architect in
charge so certifying shall be conclusive and binding of the fact and date upon
the parties.

ARTICLE II        RENT

Section 2.01      Payment

         All rent and other charges payable to the Landlord under any provision
of this Lease shall be paid to the Landlord, or as the Landlord may otherwise
designate, in lawful money of the United States at the address of the Landlord
or at such other place as the Landlord in writing may designate, without any
set-off or deduction whatsoever, and without any prior demand therefor. In
addition to the payment of the Rent and other charges, the Tenant shall also pay
to the Landlord at the time of payment of such Rent and other charges, all
sales, use or occupancy taxes payable by virtue of any of such payments. Rent
for the first period during the term hereof which is for less than one (1) month
shall be a prorated portion of the monthly installment.


                                       1
<PAGE>


Section 2.02      Minimum Rent

         The fixed minimum annual rent during the term of this Lease shall be
payable by the Tenant in equal monthly installments on or before the first day
of each month in advance without any prior demand therefor and without any
deduction and set-off whatsoever, and shall be as follows:

1.       The minimum rent for the first thirteen months shall be Four thousand
         eight hundred eighty six and 67/100 ($4,886.67) Dollars per month for a
         total of Fifty three thousand eight hundred forty and 04/100
         ($53,840.04) Dollars for the twelve month period.

2.       The minimum rent for the next twelve months shall be Four thousand
         eight hundred twenty and 00/100 ($4,820.00) Dollars per month for a
         total of Fifty seven thousand eight hundred forty and 00/100
         ($57,840.00) Dollars.

3.       The minimum rent for the next thirty six months shall be determined by
         section 2.03 of the Lease Agreement adjusted annually and using the
         prior period as the base period.

Section 2.03      Adjustment of Fixed Minimum Rent

         The annual Fixed Minimum Rent shall be subject to periodical adjustment
(but never below the amount specified in the previous lease year) on the first
day of each Lease Period and on each anniversary thereafter. Landlord shall
notify Tenant of the adjustment upon Landlord's calculation of same but the
failure to do so within any specific time shall not be a waiver or release of
Landlord's right to collect/charge the increased minimum rent. The term "index"
means the South Consumer Price Index, All Items, For All Urban Consumers
(1982-84-100) published by the Bureau of Labor Statistics or other governmental
agency then publishing the Index (or if such index is no longer published, the
Index of Consumer Prices in Miami most closely comparable to the Index). The
term "Base Number" means the index number immediately preceding the month in
which falls the first day of the prior lease period, for which the rent is being
calculated. The term "Current Number" means the index number immediately
preceding the month in which falls the date of commencement of the particular
Lease Period. If the latest Current Number exceeds the Base Number, then the
Fixed Minimum Rent for the next Lease Period shall be increased to an amount
which is the product obtained by multiplying the Fixed Minimum Rent set forth in
Section 2.02 of this lease by a fraction, the numerator of which fraction is
such latest Current Number and the denominator of which fraction is the Base
Number. Such increased Fixed Minimum Rent shall be effective throughout the
Lease Period next following such latest Current Number. The basic or minimum
rental for each year of the extended time shall not be less than the amount of
rent being paid during the prior lease year. As used herein, the term "Lease
Period" means the First Lease Period which is 13 months and each consecutive
period, except that if the commencement date of the Lease Term is a day other
than the first day of a calendar month, then the first lease Period shall
include the number of days beginning with such commencement date and ending on
the last day of such month. This Section 2.03 shall apply to the Item #3 of
section 2.02 The minimum annual increase shall not be less than 4 percent.

Section 2.04      Real Estate Taxes

         For the purposes of this Section, the term "taxes" shall include all
real estate taxes, assessment (general and special) and other governmental
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen and unforeseen, and each and every installment
thereof which shall or may during the lease term be levied, assessed, imposed,
become due and payable, or liens upon, or arise in connection with the use,
occupancy or possession of, or grow due or payable out of, or for, the building
or any part thereof, or the land (the "Parcel") upon which the building is
situated or any other improvements thereon. Tenant agrees to pay to Landlord
Tenant's share of taxes, as herein provided. Tenant's proportionate share of
taxes assessed with respect to all buildings in the industrial Park shall be
determined by multiplying the amount of such taxes by a fraction, the
denominator of which shall be the rentable square foot area of all buildings
constructed in the Industrial Park upon which any such taxes are assessed and
the numerator of which shall be the total number of square feet of ground floor
area contained in the demised premises as set forth in Section 1.01 hereof.
Taxes shall be prorated as of the commencement date of the Lease upon the due
date basis of the appropriate taxing authorities.

         In addition to the foregoing, should the State of Florida or any
political subdivision thereof or any governmental authority having jurisdiction
thereover, impose a tax and/or assessment (other than a franchise tax) upon or
against the rentals payable hereunder by Tenant or Landlord, either by way of
substitution for the taxes and assessments levied or assessed against such land
and such buildings, or in addition hereto, such tax and/or assessments shall be
paid by Tenant.

         Landlord will estimate the obligations anticipated to be required to be
paid by Tenant to Landlord as provided in this Section 2.04 and Tenant shall pay
1/12 thereof in equal monthly installments together with the payment of minimum
annual rent. In the event that the aggregate of Tenant's installments during the
year shall be less than the amount of the obligations due from Tenant, such
deficiency shall be paid to Landlord within fifteen (15) days after demand
therefor. If there shall have been an overpayment by Tenant, Tenant shall be
given a credit towards the next due payment of its share of taxes.

         Notwithstanding any thing in this Section 2.04 to the contrary, all
costs and expenses incurred by Landlord during negotiations for or contests of
the amount of the taxes shall be included with the term "Taxes". In the event a
refund is obtained, Landlord shall credit a portion thereto the next installment
of rent due from Tenant in proportion to the share of such taxes originally paid
by Tenant from which the refund was derived.

         In addition to the foregoing, Tenant at all times shall be responsible
for and shall pay, before delinquency, all taxes levied, assessed or unpaid on
any leasehold interest, any right of occupancy, any investment of Tenant in the
Demised Premises, or any personal property of any kind owned, installed or used
by Tenant, including Tenant's leasehold improvements or on Tenant's right to
occupy the Demised Premises.

Section 2.05      Additional Rent

         The Tenant shall pay as additional rent any money and charges required
to be paid pursuant to the terms of this Lease Agreement, whether or not the
same may be designated "additional rent". If such amounts or charges are not
paid at the time provided in the Lease, they shall nevertheless, if not paid
when due, be collectible as rent thereafter falling due hereunder, but nothing
herein contained shall be deemed to suspend or delay the payment of any amount
of money or charge at the time the same becomes due and payable hereunder, or
limit any other remedy of the Landlord.

                                       2
<PAGE>

Section 2.06      Past Due Rent

         If Tenant shall fail to pay any rent or additional rent when the same
shall be due and payable, such unpaid amounts shall bear interest from the date
thereof to the date of payment at the rate of eighteen percent (18%) per annum.

ARTICLE III       OPERATION AND MAINTENANCE OF COMMON AREAS

Section 3.01      Designation of Common Areas

         For the purpose of this Article and wherever else used in this Lease,
the common area shall be defined as to include, by way of illustration and not
limitation, all parking areas, access roads and facilities which may be
furnished by Landlord in or near the Industrial Park, including the truckway, or
ways, driveways, pedestrian sidewalks, landscaped and planting areas, retaining
walls, fences, storm sewer systems, lighting facilities, and all other areas and
improvements which may be provided by the Landlord for the general use in common
of the other Tenants, their officers, agents, employees and customers.

Section 3.02      Construction of Common Areas

         Landlord agrees, at Landlord's sole cost and expense, to hardsurface,
properly drain, adequately light and landscape a parking area, or parking areas,
together with the necessary access roads within the limits of the Industrial
Park. Landlord hereby grants to Tenant and Tenant's employees, agents,
customers, and invitees the right, during the term hereof, to use, in common
with others entitled to the use thereof, the parking area or areas and access
roads within the limits of the Industrial Park. Landlord further agrees to
operate, manage and maintain, during the term of this Lease, all parking areas,
roads, sidewalks, landscaping, drainage and lighting facilities within the
Industrial Park property. The manner in which such areas and facilities shall be
maintained and the expenditures thereof shall be at the sole discretion of the
Landlord, and the use of such areas and facilities shall be subject to such
reasonable regulations as Landlord shall make from time to time.

Section 3.03      Tenant's Pro Rata Share of Expenses

         Tenant agrees to pay, in addition to the rental set forth in Article II
of this Lease, a proportionate share of the costs, expenses, and other charges
incurred in connection with the operation, maintenance and repair of the Common
Areas of the Industrial Park and shall include, but not be limited to, the costs
and expenses of the following: maintenance of the common areas including
policing and security protection: repair and replacement of paving, line
painting, sidewalks, planter boxes and entrance canopies, curbs, walkways,
landscaping, sprinkler systems, sanitary and storm drainage systems, including
retention ponds, water systems, dumpster enclosures and lighting systems
(including bulbs and poles); painting of the building; maintenance and repair of
the roof, to the sum of which shall be added an amount equal to ten (10%)
percent thereof in payment of all of Landlord's administrative costs. The
proportionate share to be paid by Tenant shall be computed on the basis that the
total floor area of the herein Demised Premises bears to the total floor area of
the Industrial Park as determined at the beginning of each calendar quarter.

         Landlord will estimate the obligations anticipated to be required to be
paid by Tenant to Landlord as provided in this Section 3.03, and Tenant shall
pay 1/12 thereof in equal monthly installments, together with the payment of
minimum annual rent. If requested by Tenant, Landlord shall submit a statement
showing in reasonable detail for the period in question, all disbursements made
in connection with the operation and maintenance herein described. In the event
that the aggregate of Tenant's installments during the calendar year shall be
less than the amount of the obligations due from Tenant, such deficiency shall
be paid to Landlord within fifteen (15) days after demand therefor. If there
shall have been an overpayment by Tenant, Tenant shall be given credit toward
the next due payment of its share of expenses.

ARTICLE IV        USE OF PREMISES

Section 4.01      Use of Premises

         It is understood and agreed between the parties hereto that said
premises during the continuance of the Lease may be used and occupied only for

         office and warehouse for the manufacturing and distribution of singing
machines,

and for no other purpose or purposes without the written consent of Landlord.

         Tenant shall promptly comply with all laws, ordinances and lawful
orders and regulations affecting the premises hereby leased, and the
cleanliness, safety, occupation and use of same.

Section 4.02      Care of Premises.

         A. Tenant shall not perform any acts or carry on any practices which
may injure the building or be a nuisance or menace to other tenants in the
Industrial Park and shall keep the premises under its control, including
sidewalks, and landscaped areas adjacent to the premises clean and free from
rubbish and dirt at all times, and shall store all trash and garbage within the
leased premises and arrange for the regular pickup of such trash and garbage at
Tenant's expense. Tenant shall not burn any trash or garbage of any kind in or
about the building. Tenant shall install beige or gray levelors in the Demised
Premises.

         B. Tenant shall not keep or display any merchandise or signs on or
otherwise obstruct the sidewalks or areaways adjacent to the premises without
the written consent of the Landlord. Tenant shall not use or permit the use of
any portion of said premises as sleeping apartments, lodging rooms, or for any
unlawful purpose or purposes. Tenant shall maintain the windows in a net and
clean condition. Tenant shall not make any structural changes in the Demised
Premises without the written consent of Landlord. No animals shall be kept in
the leased premises. Tenant shall conduct business within the leased premises
and the Tenant cannot store any items outside the leased premises. Tenant can
only use the Truckwells for Tractor-Trailers, as the Truckwells may retain some
water during a storm.

         C.       Environmental Responsibilities

         (1) Tenant and Landlord shall each comply with all applicable
environmental laws concerning the proper storage, handling and disposal of any
hazardous substances in on or about the Premises. Tenant shall not use, store,
generate, treat, or dispose of any hazardous substance on the Premises, or
cause, suffer or permit the same to be done by any person without the prior
written consent of the Landlord, which consent may be granted or withheld in


                                       3
<PAGE>

Landlord's sole discretion. For purposes of this Lease, the term "hazardous
substance" means any substance, the manufacture, use, treatment, storage,
transportation, or disposal of which is regulated by any law having as its
object the protection of public health, natural resources, or the environment,
including, by way of illustration only and not as a limitation, the following:
the Resources Conservation and Recovery Act; the Comprehensive Environmental
Response, Compensation, and Liability Act; the Toxic Substances Control Act; the
Federal Water Pollution Control Act; the Clean Air Act; as each such acts shall
be amended from time to time.

         (2) Tenant shall promptly supply to Landlord a copy of the reports of
any environmental audit or investigation at any time undertaken on the Premises
or adjacent property, all notices, demands, inquiries, or claims received from
any person or entity as a result of hazardous substances alleged to be on or
emanating from the Premises or adjacent property, and any notices, reports, or
applications for licenses, permits, or approvals submitted by or on behalf of
Tenant to any environmental regulatory agency affecting the Premises or adjacent
property.

         (3) Landlord reserves the right (but shall not have the obligation) to
enter upon and inspect the Premises at any time, and from time to time, during
Tenant's business hours and, on reasonable notice, at other times. Such
inspection may include, without limitations, the taking and analysis of soil
borings, samples of ground water or surface water, installation of observation
wells, and investigation of the surface or subsurface of the Premises by
geophysical means ("Tests"). Tenant shall promptly furnish to Landlord any
information requested by or on behalf of Landlord concerning Tenant's operations
on the Premises and or adjacent property, whether or not such information of the
proprietary nature. Landlord's inspection and testing rights are for Landlord's
own protection only and Landlord has not, and shall not be deemed to have
assumed any responsibility to Tenant or any other party for compliance with
environmental laws, as a result of the exercise, or non-exercise of such rights.

         (4) In the event that any hazardous substance is discovered to have
been released upon or from the Premises during the term of this Lease, whether
such discovery is made during the term of this Lease or at any time thereafter,
Tenant shall, at its sole cost and expense, take all steps necessary to remove
and properly dispose of such hazardous substance and cleanup or repair any
contamination or damage resulting therefrom, in full compliance with all
applicable laws and regulations and to the reasonable satisfaction of Landlord.
Tenant agrees to defend, indemnify and hold Landlord harmless from and against
(i) any liabilities, including judgment, court costs, and actual attorney fees
claimed or asserted against or sustained by Landlord resulting from Tenant's
failure to fully comply with the provisions of this Section 4.02 and (ii) any
costs for inspections, tests or studies referenced in Section 4.02 (c) (3) which
are incurred by Landlord.

ARTICLE V         UTILITY SERVICES

Section 5.01      Landlord's Obligation to Make Utility Services Available and
                  Option to Supply Such Services

         Landlord agrees to provide and maintain the necessary mains and
conduits in order that water and sewer facilities, gas (if available) and
electricity may be available to the Demised Premises, and Tenant agrees to
promptly pay for its use of the same.

Section 5.02      Tenant's Obligation for Payment

         The obligation of Tenant to pay for water, gas, if available, and
electricity, as herein provided, shall commence as of the date on which
possession of the Premises is delivered to Tenant as provided for in Article I,
Section 1.04 of this Lease, without regard to the formal commencement date of
this Lease, Landlord shall not be liable for damages or otherwise should the
furnishing of any services supplied by others to the Demised Premises be
interrupted by fire, accident, riot, strike, act of God, or the making of
necessary repairs or improvements or other cause beyond the control of Landlord.
To the extent said utilities in whole or in part are not furnished by Landlord.
Tenant covenants that it will maintain and pay for when due all utility
services.

ARTICLE VI        MAINTENANCE OF LEASED PREMISES

Section 6.01      Landlord's and Tenant's Obligations for Maintenance

         Landlord shall keep the four outer walls and roof of the Demised
Premises in good repair, except that Landlord shall not be called to make any
such repairs occasioned by the act of negligence of Tenant, its agents, or
employees, except to the extent that Landlord is reimbursed therefor under any
policy of insurance permitting waiver of subrogation in advance of loss.
Landlord shall be reimbursed for all roof repairs except replacement costs of
the roof pursuant to Section 3.03. Tenant shall notify Landlord of any repairs
which are the responsibility of the Landlord to perform. Landlord shall not be
called upon to make any other improvements or repairs of any kind upon said
premises and appurtenances, and said premises and appurtenances shall at all
times be kept in good order, condition and repair by Tenant, and shall also be
kept in a clean, sanitary, and safe condition in accordance with the laws of the
State of Florida, and in accordance with all directions, rules and regulations
of the health officer, fire marshal, building inspector or other proper officers
of the governmental agencies having jurisdiction, at the sole cost and expense
of Tenant, and Tenant shall comply with all requirements of law, ordinances and
otherwise touching said premises. Tenant shall permit no waste, damage or injury
to said premises, and Tenant shall at its own cost and expense will maintain and
replace any glass windows, skylight, roof exhaust fans, interior electrical
systems, heating, ventilating, and air conditioning systems, interior above
ground plumbing, ventilating fans, overhead doors, and front doors, door
hardware and frames; dock, levelers, if provided, in the premises, which may be
broken. At the expiration of the tenancy created hereunder, Tenant shall
surrender the premises in good condition and free from vermin, reasonable wear
and tear, loss by fire or other unavoidable casualty excepted. Notwithstanding
any in this Article contained, there shall be no obligation on the part of
Tenant to comply with any of the laws, directions, rules and regulations
referred to which may require structural alterations, structural changes,
structural repairs, or structural additions, unless made necessary by act of
work performed by Tenant, in which event Tenant shall comply at its sole
expense. Tenants shall perform normal maintenance on a timely schedule which
would include changing the HVAC filters.

Section 6.02      Abuse of Plumbing, Walls, Etc.

         The plumbing facilities and adjoining or connecting sewer lines or
mains shall not be used for any other purpose than that for which they are
constructed, and no foreign substance of any kind shall be thrown therein, and
the expense of any breakage, stoppage or damage resulting from a violation of
this provision shall be borne by Tenant, who shall or whose employees, agents,
invitees, or licensees shall have caused it. The Tenant, its employees or
agents, shall not paint, alter or deface any walls, ceilings, partitions,
floors, wood, stone or iron work with the Landlord's written consent being first
obtained.


                                       4
<PAGE>

ARTICLE VII       SIGNS

Section 7.01

         Tenant shall not erect or install any exterior or interior window or
door signs or advertising media or window or door lettering, or placards without
the previous written consent or Landlord. Any signs erected by the Tenant shall
be in conformance with any governmental laws. Tenant agrees not to use any
advertising media that shall be deemed objectionable to Landlord or other
tenants, such as loud speakers, phonographs, or radio broadcast in a manner to
be heard outside the leased premises. Tenant shall not install any exterior
lighting or plumbing fixtures, shades or awnings, or any exterior decorations or
painting, or build any fences or make any changes to the building exterior
without the previous written consent of Landlord. Notwithstanding anything
herein or elsewhere to the contrary contained, any sign)s) which Tenant may
install in or about the demised premises with the approval of Landlord either
simultaneously with the execution of this Lease Agreement or subsequently shall
be removed at the termination of this Lease and the Tenant shall restore the
area when the sign was mounted to its original condition.

ARTICLE VIII      ALTERATIONS

Section 8.01

         All alterations, additions, improvements and fixtures (other than trade
fixtures) which may be made or installed by either of the parties hereto upon
the premises and which in any manner are attached to the floors, walls or
ceilings or any extension thereof shall be the property of Landlord, and at the
termination of this Lease shall remain upon and be surrendered with the premises
as a part thereof, without disturbance, molestation or injury. Any floor
covering, irrespective as to manner affixed, shall be and become the property of
the Landlord absolutely; provided, however, that Landlord may designate by
written notice to Tenant those alterations, additions, improvements and
fixtures, which shall be removed by Tenant at the expiration or termination of
the Lease, and Tenant shall promptly remove the same and repair any damage to
the leased premises caused by such removal of any of the foregoing, to the
condition as when originally received by Tenant, reasonable wear and tear
excepted. Further, Tenant shall likewise remove its machinery and equipment at
the expiration or termination of this Lease and repair any damage to the leased
premises caused by such removal, restoring the premises to the condition as when
originally received by Tenant, reasonable wear and tear excepted.

ARTICLE IX        INSURANCE AND INDEMNITY

Section 9.01      Covenant to Hold Harmless

         Landlord shall be defended and held harmless by Tenant from any
liability for damages to any person or any property in or upon said premises and
the sidewalks, driveways and landscaped areas adjoining same, including the
person and property of the Tenant, and its employees and all persons in the
building at its or their invitation or with their consent. It is understood and
agreed that all property kept, stored or maintained in the Demised Premises
shall be so kept, stored or maintained at the risk of Tenant only. Tenant shall
not suffer or give cause for the filing of any lien against the Demised
Premises.

Section 9.02      Fire Insurance Premium

         Tenant shall not carry any stock of goods or do anything in or about
said premises which will in any way tend to increase the insurance rates of said
premises and in the buildings of which they are a part. Tenant agrees to pay, in
addition to its prorata share of all insurance costs as described in this Lease
Agreement, the total of any increase in premiums for insurance against loss by
fire that may be charged during the terms of this Lease on the amount of
insurance to be carried by Landlord on said premises and the buildings of which
they are a part, resulting from the business carried on in the leased premises
by Tenant, whether or not Landlord has consented to the same. If Tenant installs
any electrical equipment that overloads the lines in the herein leased premises.
Tenant shall at its own expense make whatever changes are necessary to comply
with the requirements of the Insurance Underwriters and governmental authorities
having jurisdiction.

Section 9.03      Tenant's Obligation to Carry Public Liability Insurance

         Tenant shall, during the entire term hereof, keep in full force and
effect a policy of public liability insurance with respect to the Demised
Premises and the business operated by Tenant and/or any sub-tenants of Tenant in
the Demised Premises, in which both Landlord and Tenant shall be named as
parties covered thereby, or which provides equivalent protection to and is
approved by Landlord, and in which the limits of liability shall be not less
than Five Hundred Thousand Dollars ($500,000) per person and One Million Dollars
($1,000,000) for each accident or occurrence for bodily injury and Two Hundred
Fifty Thousand Dollars ($250,000) for property damages.

         Tenant shall furnish Landlord with a certificate or certificates of
insurance, or other acceptable evidence that such insurance is in force at all
times during the term hereof.

Section 9.04      Insurance Costs

         A. Tenant shall pay to Landlord as additional rent during each lease
year, the cost of all insurance policies including, by way of illustration and
not limitation, the cost of covering all risks of loss to all of the buildings
and improvements on or about the Industrial Park on the full replacement value
of the buildings and all improvements thereon, and rental income protection
coverage, and public liability insurance including umbrella coverage as Landlord
shall deem necessary and desirable during the term of the Lease, payable by
Landlord, in any lease year or portion thereof following the Commencement Date
of the Lease. Insurance costs shall be prorated as of the Commencement Date and
the Termination Date of the Lease. For the purposes of this Section, Insurance
costs shall include any deductible required to be paid as a result of any
insurance claim by any insurance policy in force for the leased premises. Tenant
hereby acknowledges and agrees to pay such deductibles upon request by Landlord
after any loss or damage to the leased premises.

         B. Tenant's proportionate share shall be computed on the basis that the
first floor area of the Demised Premises bears to the total first floor area of
the Industrial Park as determined at the beginning of each calendar quarter.

         C. Landlord will estimate the obligations anticipated to be required to
be paid by Tenant to Landlord as provided in Section 9.04 and Tenant shall pay
1/12 thereof in equal monthly installments, together with the payment of minimum
annual rent. In the event that the aggregate of Tenant's installments during the
year shall be less than the amount of the obligations due from Tenant, such
deficiency shall be paid to Landlord within fifteen (15) days after billing is
presented therefor by Landlord. If there shall have been an overpayment by
Tenant, Tenant shall be given a credit towards the next due payment of its share
of the insurance costs.


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<PAGE>

ARTICLE X         ASSIGNMENT AND SUBLETTING

Section 10.01

         Tenant agrees not to assign or in any manner transfer this Lease or any
estate or interest therein without the previous written consent of Landlord, and
not to sublet said premises or any part or parts thereof, and Consent by
Landlord to one or more assignments of this Lease or to one or more sublettings
of said premises shall not operate to exhaust Landlord's rights under this
Article. In the event of any assignment or sublease of all or any portion of the
Premises where the rental or other consideration reserved in the sublease or by
the assignment exceeds the rental or prorata portion of the rental as the case
may be, for such space reserved in the Lease, Tenant agrees to pay Landlord
monthly, as additional rent, on the first day of each month, the excess of the
rental or other consideration reserved in the sublease or assignment over the
rental reserved in this Lease applicable to the subleased/assigned space. Tenant
acknowledges that Landlord selected Tenant in part on the basis of Tenant's
proposed use and occupation of the Premises, and agrees that Landlord may
withhold consent to any proposed sublease or assignment if the sub-tenant's or
assignee's business or proposed use of the premises would be physically
injurious to the Building or would detract from the reputation of the Industrial
Park, if any, within which the Premises are located.

ARTICLE XI        ACCESS TO PREMISES

Section 11.01     Right of Entry by Landlord

         Landlord shall have the right to enter upon the leased premises at all
reasonable hours for the purpose of inspecting the same, or of making repairs,
additions or alterations to the Demised Premises or any property owned or
controlled by Landlord. If Landlord deems any repairs required to be made by
Tenant necessary, it may demand that Tenant make the same forthwith, and if
Tenant refuses or neglects to commence such repairs and complete the same with
reasonable dispatch, Landlord may make or cause such repairs to be made and
shall not be responsible to Tenant for any loss or damage that may accrue to its
stock or business by reason thereof, and if Landlord makes or causes such
repairs to be made, Tenant agrees that it will forthwith, on demand, pay to
Landlord the cost thereof with interest at eighteen percent (18%), and if it
shall default in such payment, Landlord shall have the remedies provided in
Article XV.

Section 11.02     Landlord's Right to Exhibit Premises

         For a period commencing ninety (90) days prior to the termination of
this Lease, Landlord may have reasonable access to the premises herein demised
for the purpose of exhibiting the same to prospective tenants.

ARTICLE XII       EMINENT DOMAIN

Section 12.01     Total Condemnation

         If the whole of the premises hereby leased shall be taken by any public
authority under the power of eminent domain, then the term of this Lease shall
cease as of the day possession shall be taken by such public authority and the
rent shall be paid up to that day with a proportionate refund by Landlord of
such rent as may have been paid in advance.

Section 12.02     Partial Condemnation

         If less than the whole, but more than 25% of the leased premises shall
be taken under eminent domain, Tenant shall have the right either to terminate
this Lease and declare the same null and void, or, continue in the possession of
the remainder of the leased premises, and shall notify Landlord in writing prior
to any such taking or Tenant's intention. In the event Tenant elects to remain
in possession, all of the terms herein provided shall continue in effect, except
that the minimum rent shall be reduced in proportion to the amount of the
premises taken and Landlord shall, at its own cost and expense, make all
necessary repairs or alterations to the basic building, front and interior work
as covered by Description of Landlord's Work attached hereto so as to constitute
the remaining premises a complete architectural unit.

Section 12.03     Landlord's and Tenant's Damages

         All damages awarded for such taking under the power of eminent domain,
whether for the whole or a part of the leased premises, shall belong to and be
the property of Landlord whether such damages shall be awarded as compensation
for diminution in value to the leasehold or to the fee of the premises;
provided, however, that Landlord shall not be entitled to the award made to
Tenant for loss of business, depreciation to, and cost of removal of stock and
fixtures.

ARTICLE XIII      DESTRUCTION OR DAMAGE TO DEMISED PREMISES

Section 13.01     Reconstruction of Damaged Premises

         In the event the Demised Premises shall be partially or totally
destroyed by fire or other casualty insurable under full standard extended
coverage insurance, as to become partially or totally untenable, the same shall
be repaired as speedily as possible at the expense of Landlord, unless Landlord
shall elect not to rebuild as hereinafter provided, and a just and proportionate
part of the rent shall be abated until so repaired. The obligation of Landlord
hereunder shall be limited to the basic building and interior work as covered by
Description of Landlord's Work attached hereto. In no event shall Landlord be
required to repair or replace Tenant's merchandise, trade fixtures, furnishings
or equipment or any alterations or additions to the leased premises accomplished
by or on behalf of the Tenant. The obligations of Landlord hereunder shall be
conditioned upon Tenant's payment of any deductible required by the insurance
policy in force for the leased premises.

Section 13.02

         If (i) either the Demised Premises or the building in which it is
located containing floor space (taken in the aggregate) shall be damaged to the
extent of more than 25% of the cost of replacement thereof, respectively, or
(ii) the proceeds of Landlord's insurance recovered or recoverable as a result
of the damage shall be insufficient to pay fully for the cost of replacement of
so much of the Demised Premises and/or the building in which they are located as
was included in the Landlord's Work provided in Section 1.03 hereof or (iii) the
Demised Premises or the building shall be damaged as a result of a risk which is
not covered by Landlord's in insurance or (iv) the Demised Premises shall be
damaged in whole or in part during the last two years of the Lease Term or (v)
the building in which the Demised Premises as a part shall be damaged to the
extent of 50% or more of the cost of replacement thereof, whether or not the
Demised Premises shall be damaged; then, and in any of such events, Landlord may
terminate this Lease by notice given within ninety (90) days after such event,
and upon the date specified in such notice, which shall not be less than thirty



                                       6
<PAGE>

(30) days nor more than sixty (60) days after the giving of said notice, this
Lease shall terminate and come to an end and Tenant shall vacate and surrender
the Demised Premises. If the casualty, repairing or rebuilding shall render the
Demised Premises untenable in whole or in part, an equitable abatement of the
Fixed Minimum Rent and Additional Rent shall be allowed from the date when the
damage occurred until completion of the Landlord's repairs or rebuilding or, in
the event Landlord elects to terminate this lease, until said date of
termination taking into account, among other things, the amount and location of
the floor space of the Demised Premises rendered untenable.

Section 13.03

         If this Lease shall not be terminated as provided above, Landlord
shall, at its expense, proceed with the repair or restoration of the Demised
Premises and the building. All repairs and restoration of the Demised Premises
not involved in Landlord's Work shall be performed by Tenant at its expense. All
salvage from repair or restoration work done at any time pursuant to this
Section shall belong to Landlord, who shall not be accountable therefor to
Tenant.

Section 13.04

         The "cost of replacement" as such term is used in Section 13.02 above
shall be determined by the company or companies s Selected by the Landlord
insuring Landlord against the casualty In question, or, if there shall be no
Insurance, then as the parties hereto shall agree, or, in the absence of an
insurance company determination or an agreement, as shall be determined by
arbitration in Broward County, Florida, in accordance with the provisions of
Section 682, Florida Statutes.

Section 13.05

         If the Demised Premises and/or the building shall be damaged or
destroyed due to the fault and/or negligence of Tenant, its agents, employees or
Invitees. Tenant shall at its expense, repair or restore the Demised Premises or
building and the Fixed Minimum Rent, Tax Rent and all other additional rents and
charges herein shall not abate.

Section 13.06     Subrogation

         The Tenant shall be release from any liability resulting from damage by
fire or casualty (irrespective of the cause of such fire or casualty) upon the
express proviso that if at any time Landlord's insurance shall refuse waivers of
subrogation, Landland may in each instance revoke said waiver of subrogation
effective thirty (30) days from date of notices, unless within such thirty (30)
days prior. Tenant is able to ensure and furnish to the Landlord insurance in
other companies with such waivered subrogation. If Tenant can secure such other
insurance, then the Landlord shall pay so much of the cost thereof as Landlord
was paying for its own insurance, and the Tenant shall pay the remainder.


ARTICLE XIV       BANKRUPTCY OR INSOLVENCY

Section 14.01     Landlord's Option to Terminate Upon Insolvency of Tenant or
                  Guarantor Under State Insolvency Law of Upon Insolvency of
                  Tenant or Guarantor Under Federal Bankruptcy Act.

         In the event the estate of Tenant created hereby shall be taken in
execution or by other process of law, or if Tenant or and guarantor of Tenant's
obligations hereunder ("guarantor") shall be adjudicated insolvent pursuant to
the provisions of any present or future Insolvency law under the laws of any
state having jurisdiction ("state law"), or if any proceedings are filed by or
against such guarantor or tenant under the Bankruptcy Code, or any similar
provisions of any future federal bankruptcy law, or if a receiver or trustee of
the property of Tenant or guarantor shall be appointed under state law by reason
of Tenant's or guarantor's insolvency or inability to pay its debts as they
become due or otherwise, or if any assignment shall be made of Tenant's or
guarantor's property for the benefit of creditors under state law, then and in
such event Landlord may at its option terminate this Lease and all rights of
Tenant hereunder by giving Tenant written notice of the election to so terminate
within thirty (30) days after occurrence of such event. I n a reorganization
under Chapter 11 of the Federal Bankruptcy Code, the debtor or trustee must
assume this Lease or assign it within sixty (60) days from the filing of the
proceeding, or he shall be deemed to have rejected and terminated this Lease.

ARTICLE XV        DEFAULT OF THE TENANT


Section 15.01     Right to Re-enter

         In the event of any failure of Tenant to pay any rental due hereunder
within five (5) days after the same shall be due, or any failure to perform any
other of the terms, conditions or covenants of this Lease to be observed or
performed by Tenant or Guarantor for more than thirty (30) days after written
notice of such default shall have been mailed to Tenant, or if Tenant or
Guarantor shall become bankrupt or insolvent, or file any debtor proceedings, or
take or have taken against Tenant or Guarantor in any Court pursuant to any
statute either of the United States of any State, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of all or a portion of Tenant's or Guarantor's property, or if Tenant or
Guarantor makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, or if Tenant or Guarantor shall abandon said
premises, or suffer this Lease to be taken under any writ of execution, then
Landlord, besides other rights and remedies it may have, shall have the right of
reentry provided by Florida law which provides for notice to Tenant and a
judicial hearing. After notice and a final judgment, Landlord may remove all
persons and property from the leased premises and such property may be removed
and stored in a public warehouse or elsewhere at the cost of, and for the
account: of Tenant, and all without liability to Landlord for any loss or damage
which may be occasioned thereby.

         Should Landlord elect to re-enter, as herein provided, or should it
take possession pursuant to legal proceedings or pursuant to any notice provided
for by law, it may either terminate this Lease or it may from time to time
without terminating this Lease make such alterations and repairs as may be
necessary in order to relet the premises, and relet said premises or any part
thereof for such term or terms which may be for a term extending beyond the
term of this Lease) and at such rental or rentals and upon such other terms and
conditions of Landlord in its sole discretion may doom advisable; upon each such
reletting all rentals received by Landlord from such relening shall be applied,
first to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any costs and expenses of such
reletting, including brokerage fees and attorney's fees and of cost of such
alterations and repairs; third, to the payment of rent due and unpaid hereunder,
and the residue, if any, shall be held by Landlord and applied in payment of
future rent as the same may become due and payable hereunder.  If such rentals
received from such reletting during any month be less than that to be paid
during that month by Tenant hereunder Tenant shall pay any such deficiency to
Landlord.  Such deficiency shall be calculated and paid monthly.  If such
rentals received from such reletting during any month be more than that to be
paid during that month by Tenant hereunder, then such excess shall not benefit
Tenant by reducing the amount of any of Tenant's obligations due Landlord.  Any
amounts obtained by reletting shall be for the sole benefit of Landlord.  No
such re-entry or taking possession of said premises by Landlord shall be
construed as an election on its part


                                       7
<PAGE>
to terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such previous
breach. Should Landlord at any time terminate this Lease for any breach, in
addition to any other remedies it may have, it may recover from Tenant all
damages it may incur by reason of such breach, including the cost of recovering
the leased premises, reasonable attorney's fees, and including the worth at the
time of such termination of the excess, it any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the remainder of the
stated term over the amount, if any, actually received by Landlord from the
reletting of the leased premises, all of which amount shall be immediately due
and payable from Tenant to Landlord. (n determining the rent which would be
payable by Tenant hereunder, subsequent to default, the annual rent for each
year of the unexpired term shall be equal to the average annual minimum rent
paid by Tenant from the commencement of the term to the time of default, or
during the proceeding three full calendar years, whichever period is shorter.
Whether or not forfeiture has been declared, Landlord will not be obligated or
responsible, in any way, for failure to release the Premises or, in the event
that the Premises are released, for failure to collect the rent under such re
leasing. The failure of Landlord to re-lease all or any part of the Premises
will not release or affect Tenant's liability for rent or damages,

Section 15.02     Legal Expenses

         In case suit shall be brought for recovery of possession of the leased
premises, for the recovery of rant or any other amount due under the provisions
of this Lease, or because of the breach of any other covenant herein contained
on the part of Tenant to be kept or performed, and a breach shall be
established, Tenant shall pay to Landlord all expenses incurred therefor,
including reasonable attorney's fee.

Section 15.03     Waiver of Jury Trial and Counterclaims

         The parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties any way
connected with this Lease relating to any monetary defaults.

Section 15.04     Curing of Tenant's Default

         Notwithstanding anything herein contained to the contrary, if Tenant
shall be in default in the performance of any of the terms or provisions of this
Lease and if Landlord shall give to Tenant notice in writing of such default
specifying the nature thereof, and if Tenant shall fail to cure such default
within the time provided in Section 15.01 hereof, or immediately if such default
requires emergency action, Landlord may, in addition to its other legal and
equitable remedies, cure such default for the account of and at the cost and
expense of' tenant and the sums so expended by Landlord, together with an
administrative fee equal to twenty-five percent (25 percent) of the sum
expended by Landlord, shall be deemed to be additional rent and shall be paid by
Tenant on the day when rent shall next become due and payable.

ARTICLE XVI       TENANT'S PROPERTY

Section 16.01     Taxes on Leasehold

         Tenant shall be responsible for and shall pay before delinquency all
municipal, county or state taxes assessed during the term of this Lease against
any leasehold interest or personal property of any kind, owned by or placed in,
upon or about the leased premises by the Tenant.

Section 16.02     Notice by Tenant

         Tenant shall give immediate notice to Landlord in case of fire or
accidents in the leased premises or in the building of which the premises are a
part, or of defects therein any fixtures or equipment.

ARTICLE XVII      QUIET ENJOYMENT


Section 17.01      Landlord's Covenant

         Upon payment by the Tenant of the rents herein provided, and upon the
observance and performance of all the covenant:., terms and conditions on
Tenant's part to be observed and performed, Tenant shall peaceably and quietly
hold and enjoy the leased premises for the term hereby demised without hindrance
or interruption by Landlord or any other person or persons lawfully or equitably
claiming by, through or under the Landlord, subject, nevertheless, to the terms
and conditions of this Lease.

ARTICLE XVIII     HOLDING OVER, SUCCESSORS

Section 18.01     Holding Over

         If Tenant remains in possession of the leased premises after the
expiration of this Lease without executing a new lease, it will be deemed to be
occupying the leased premises as a tenant from month to month, and Tenant will
be responsible for the rent and all other charges on a monthly basis with no
prorations, subject to all the provisions of this Lease to the extent that they
can be applicable to a month to month tenancy, except that the minimum rental
for each month will be increased to an amount established by Landlord. The new
monthly amount will be established by written notice from Landlord to Tenant.

Section 18.02     Successors

         All rights and liabilities herein given to, or imposed upon, the
respective parties hereto shall extend to and bind the respective heirs,
executors, administrators, successors, and assigns of the said parties; and if
there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants, and agreements herein. No rights, however,
shall inure to the benefit of any assignee of Tenant unless the assignment to
such assignee has been approved by Landlord In writing as provided in Section
10.01 hereof.

ARTICLE XIX       CERTAIN RIGHTS OF LESSOR WITH RESPECT TO THE LAND

Section 19.01     Easements and Utilities

         The Landlord shall have the right, without the consent of Lessee, to
grant to adjacent land owners, purchasers, Tenants or occupants or any
governmental agency or public or private utility company, including Tenant, at
any time and from time to time during the term of the Lease, as extended
easements and rights of ingress, egress and common use and enjoyment with
respect to the roads, walks, unimproved portions of the land, water, sewage,
telephone, gas and electricity lines, and Landlord may at anytime and from time
to time grant easements, public and private, for such purposes to itself and to
others, and relocate any easements now or hereafter affecting the land.


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ARTICLE XX        MISCELLANEOUS

Section 20.01     Waiver

         One or more waivers of any covenant or condition by Landlord shall not
be construed as a waiver of a subsequent breach of the same covenant or
condition. and the consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent similar act
by Tenant.

Section 20.02     Subordination

         Tenant hereby grants the right to Landlord to. and Landlord hereby
reserves the right to, subject and subordinate this Lease (at all times) to any
mortgage(s) or deeds) of trust that may hereafter be placed upon the Demised
Premises and to any and all advances to be made thereunder and to the interest
thereon and all renewals, replacements and extensions thereof. Landlord may
execute and deliver any instrument or instruments subordinating this Lease to
any such mortgage or deed of trust without any further action or consent by
Tenant. and Tenant hereby irrevocably appoints the Landlord the attorney-in-fact
of the Tenant to execute and deliver any such instrument or instruments for and
in the name of the Tenant. Tenant additionally hereby grants to any first
mortgagee of the leased premises the right to subject and subordinate this Lease
(at all times) to any such first mortgage and to any and all advances to be made
thereunder, and to the interest thereon and all renewals, replacements and
extensions thereof. Any such first mortgages may execute and deliver any
instrument or instruments subordinating this Lease to any such first mortgage
without any further action or consent by Tenant, and Tenant hereby irrevocably
appoints such first mortgagee the attorney-in-fact of the Tenant to execute and
deliver any such instrument or instruments for and in the name of the Tenant. In
confirmation of any such subordination, the Tenant shall promptly execute any
certificate that the the Landlord or such first mortgagee may request.

Section 20.03     Notices

         Whenever under this Lease a provision is made for notice of any kind,
it shall be deemed sufficient notice and service thereof if such notice to
Tenant is in writing, addressed to Tenant at the last known post office address
or office address of Tenant or at the leased premises, and sent by registered or
certified mail with postage prepaid, and if such notice to Landlord is in
writing, addressed to the last mown post office address of Landlord and sent by
registered or certified mail with postage prepaid. Notice must be sent to but
one Tenant or Landlord where Tenant or Landlord is more than one person.

Section 20.04     Construction

         Nothing contained herein shall be deemed or construed by the parties
hereto, nor by any third party, as creating the relationship of principal and
agent or of partnership or of joint venture between the parties hereto, it being
understood and agreed that neither the method of computation of rent, nor any
other provision contained herein, nor any acts of the parties herein, shall be
deemed to create any relationship between the parties hereto other than the
relationship of Landlord and Tenant, Wherever herein the singular number is
used, the same shall include the plural, and the masculine gender shall include
the feminine and neuter genders. In the event any language is deleted from this
Lease said language shall be deemed to have never appeared and no other
implication shall be drawn therefrom.

Section 20.05     Non-Liability

         Landlord shall not be responsible or liable to Tenant for any loss or
damage that may be occasioned by or through the acts or omissions of persons
occupying adjoining premises, if any, or any part of the premises adjacent to or
connected with the premises hereby leased or any loss or damage resulting to
Tenant or his property from burst, stopped or leaking water, gas, sewer or steam
pipes, or for any damage or loss or property within the Demised Premises from
any cause whatsoever

         Notwithstanding any provisions of this Lease to the contrary, Tenant
acknowledges and agrees that no personal liability of any kind under any of the
terms, conditions or provisions of this Lease shall attach to the Landlord
(including any joint venturer of the joint venture which is the Landlord
hereunder or any leasing agent, broker or other agent or representative of
Landlord) for the payment of any amounts payable under this Lease or for the
performance of any terms, conditions or provisions required to be performed by
Landlord under this Lease. If Landlord shall fail to perform any term, condition
or provision of this Lease required to be performed by Landlord and if as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution and levy of such judgment against the right, title and
interest of the Landlord in the building of which the Tenant's Demised Premises
are a part, and neither Landlord nor any of the joint venturers of the joint
venture which is the Landlord hereunder shall be personally liable for any Such
judgment or monetary deficiency.

Section 20.06     Net Lease

         It is the intent of the parties that the within Lease be a net, not,
net Lease.

Section 20.07     Financing and Tenant's Acknowledgment of Acceptance
                  of Premises

         Notwithstanding anything herein or elsewhere to the contrary contained.

         A. The Landlord shall not be obligated to proceed with the construction
of the leased promises unless and until financing; acceptable to Landlord is
obtained. Should such financing not be obtainable within six (6) months after
completion of final plans and specifications, Landlord may so notify Tenant in
writing, and this Lease shall thereupon cease and terminate, and each of the
parties hereto shall be released and discharged from any and all liability and
responsibility hereunder. If Landlord can obtain financing only upon the basis
of modification of the terms and provisions of this Lease, the Landlord shall
have the right to cancel this Lease if the Tenant refuses to approve in writing
any such modifications within thirty (30) days after Landlord's request
therefor. If such right to cancel is exercised, this Lease shall thereafter be
null and void, any money or security deposited hereunder shall be returned to
the Tenant, and neither party shall have any liability to the other by reason of
such cancellation.

         B. Tenant agrees to furnish Landlord, upon request and after Tenant has
taken possession of the Demised Premises, a letter addessed to Landlord's
mortgagee or financial institution, giving the information, as described in the
attached Exhibit "C".

         Failure of Tenant to provide Landlord such a letter at the request of
Landlord, Landlord's mortgagee or financial institution at any time during the
lease term as above described, shall give Landlord the right to cancel this
Lease at that time upon five (5) days written notice to Tenant of such
cancellation, and the Tenant shall remain liabile to the Landlord for any
damages sustained by the Landlord because of such failure by the Tenant.


                                       9
<PAGE>

Section 20.08     Accord and Satisfaction

         No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly rental herein stipulated shall be deemed t:) be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this Lease provided.

Section 20.09     Captions and Section Numbers

         The captions, section numbers, article numbers and index appearing in
this Lease are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or intent of such sections or articles of
this Lease nor in any way affect this Lease.

Section 20.10     Partial Invalidity

         If any term, covenant or condition of this Lease or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term,
covenant or condition to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby and each term,
covenant or condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.

Section 20.11     No Option

         The submission of this Lease for examination does not constitute a
reservation of or option for the leased premises, and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord and
Tenant.

Section 20.12     Recording

         This Lease shall not be recorded by the Tenant. However, it may be
recorded by Landlord at Landlord's option. If this Lease is recorded by Tenant
without the written consent of the Landlord, then this Lease may, at any time,
without notice and whenever the Landlord so elects, be declared by Landlord null
and void,

Section 20.13     Sale or Transfer of the Demised Premises

         Upon any sale or transfer, including any transfer by operation of law,
of the Demised Premises, or the Industrial Park, Landlord shall be relieved from
all subsequent obligations and liabilities under this Lease as long as successor
Landlord assumes all of the obligations of the lease

Section 20.14     Liens

         In the event a mechanic's lien shall be filed against the Demised
Premises or Tenant's interest (herein as a result of the work undertaken by
Tenant to ready the Demised Premises for the opening of Tenant's business or as
a result of any repairs or alterations made by Tenant, Tenant shall, within ten
(10) days after receiving notice of such lien, discharge such lien, either by
payment of the indebtedness due the mechanic's lien claimant or by filing a bond
(as provided by statute) as security therefore. If Tenant shall fail to cause
such lien to be discharged upon demand, then, in addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated to, discharge the
same by paying the amount claimed to be due or by bonding or other proceeding
deemed appropriate by Landlord and the amount so paid by Landlord and/or all
costs and expenses, including reasonable attorney's fees, incurred by Landlord
in procuring the discharge of such lien shall be deemed to be additional rent.
Nothing in this Lease contained shall be construed as a consent on the part of
the Landlord to subject Landlord's estate in the Demised Premises to any lien or
liability under the Lien Law of the State of Florida.

         Tenant shall never, under any circumstances, have the power to subject
the interest of Landlord in the Demised Premises to any mechanics or
materialmen's liens or liens of any kind. In accordance with the applicable
provisions of the Florida Lien Law, it is specifically provided that neither
Tenant or anyone claiming by, through or under Tenant, including, but not
limited to, contractors, subcontractors, materialmen, mechanics, and laborers
shall have any right to file or place any mechanics and laborers, mechanics or
material men's liens of any kind whatsoever upon the Demised Premise nor upon
any building or improvements thereof, and any such liens are hereby prohibited.
All parties with whom Tenant may deal are put on notice that Tenant has no power
to subject Landlord's interest to any claim or lien of any kind or character,
and all persons so dealing with Tenant must look solely to the credit of Tenant
and not to Landlord's interest or assets. Further, Tenant acknowledges that
Tenant, with respect to improvements or alterations made by Tenant or caused to
be made by Tenant hereunder shall promptly notify the contractor making such
improvements to the Demised Premises of this provision exculpating Landlord's
liability for such liens,

Section 20.15     Attornment

         In the event any proceedings are brought for foreclosure or in the
event of exercise of the power of sale under any mortgage made by Landlord
covering the leased premises, or areas surrounding same, Tenant shall, at the
option and request of purchaser, attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease,

Section 20.16     Set-Off Statement

         Tenant agrees within ten (10) days after any request therefor by the
Landlord to execute in recordable form and deliver to Landlord a statement, in
writing, certifying (a) that this Lease is in full force and effect, (b) the
date of commencement of the term of this Lease, (c) that rent is paid currently
without set-off or defense thereto, (d) the amount of rent, if any, paid in
advance, and (e) that there are no uncured defaults by Landlord or stating those
claimed by Tenant.

 Section 20.17    Entire Agreement

         This Lease shall constitute the entire agreement of the parties hereto.
All prior agreements, statements or representations between the parties and
their agents and/or employees, whether written or oral, are expressly merged
herein and if not contained in this Lease agreement shall be of no force or
effect. This Lease agreement shall not be modified, changed, altered, or
discharged whatsoever, excepting only by an agreement in writing and executed by
both Landlord and Tenant.


                                       10
<PAGE>

Section 20.18     Brokerage

         Tenant warrants that it has had no dealings with any broker or agent in
connection with this Lease, and Tenant covenant's pay, hold harmless and
indemnify Landlord from and against any and all costs, expense or liability for
any compensation, commissions and charges claimed by any broker or agent with
respect to this Lease or the negotiation thereof based upon or arising out of
any acts or dealings which Tenant or any representative of Tenant has had or is
claimed to have had with such broker or agent.

Section 20.19     No Oral Changes

          This Lease may not be changed or terminated orally but only upon an
agreement In writing signed by the parties hereto.

Section 20.20     No Representations by Landlord

         Landlord or landlord's agents have made no representations, warranties
or promises with respect to the Demised Premises or the building except as
herein expressly set forth.

Section 20.21     Corporate or Partnership Tenant

         If Tenant is or will be a corporation, partnership, or other entity,
the persons executing this Lease on behalf of Tenant hereby covenant and warrant
that Tenant has been duly organized and is qualified or authorized to do
business in the State of Florida; and that the person(s) executing this Lease on
behalf of Tenant is (are) duly authorized to sign and execute this Lease.
Furthermore, prior to the Commencement Date, Tenant shall provide Landlord with
evidence of the foregoing which, where applicable, will include a certificate
from the State of Florida that Tenant is qualified to do business in that state,
and a certified resolution of the Board of Directors or partners of Tenant that
the person(s) executing this Lease on behalf of Tenant was (were) duly
authorized to do so. Furthermore, Tenant agrees to take any and ail necessary
action to keep its existence as an entity in good standing throughout the term
of this Lease in the state in which Tenant has been organized and, If such state
is other that the State of Florida, to continue to be qualified to do business
in the State of Florida.

Section 20.22     Damage From Roof Leaks

         As to Tenant's machinery, equipment and Inventory:

         Tenant understands and agrees that the Landlord shall have no liability
for any resultant damage from any leaks as a result of excessive rain, roofing
defects or hurricane damage, and that it shall be the responsibility of the
Tenant to protect itself as it sees fit concerning any leakage of water
whatsoever, either from the roof, leaking or burst pipes or from any other
source.

Section 20.23     Security Deposit

         The Tenant has, simultaneously herewith, deposited with Landlord, the
Sum of Five thousand four hundred twelve and 00/100 Dollars ($5,512.00).
Said deposit shall be held by Landlord as security for the faithful performance
by Tenant of the terms, covenants, provisions and conditions of this Lease. It
is agreed that in the event Tenant defaults in respect to any of the terms,
covenants, provisions and conditions of this Lease, including but not limited to
the payment of rental, Landlord may, but in no event shall Landlord be required
to, use, apply or retain the whole or any part of the security so deposited to
the extent required for the payment of any rental or any other sum as to which
Tenant is in default or any sum which Landlord may expend or may be required to
expend, including attorney's fees, by reason of Tenant's default, in respect to
any of the terms ,covenants, provisions and conditlons of this Lease, including
but not limited to any damages or deficiencies in the reletting of the premises,
whether such damages or deficiencies accrued before or after summary proceedings
or other reentry by Landlord. Should the entire deposit, or any portion thereof,
be appropriated and applied by Landlord for the payment of overdue rental or
other sums due and payable to Landlord by Tenant hereunder, then Tenant shall,
upon the written demand of Landlord, forthwith remit to Landlord a sufficient
amount in cash to restore said security to the original sum deposited, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute a breach of this Lease. Said security deposit if not applied
toward the payment of rent in arrears or toward the payment of damages suffered
by the Landlord by reason of the Tenant's breach of the covenants, conditions
and agreements of this Lease, is to be returned to the Tenant when this Lease is
terminated, according to these terms and in no event is said security deposit to
be returned until the Tenant has vacated the premises and delivered possession
to the Landlord upon the terms and conditions as provided and required under
this Lease. In the event of a sale of the land and building or leasing of the
same of which the premises form a part, Landlord stall have the right to
transfer the security to the vendee or the lessee, and Landlord shall thereupon
be released by Tenant from all liability for the return of such security, and it
is agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new Landlord. Tenant further covenants that it will
not assign or encumber or attempt to assign or encumber the security deposited
hereunder and that neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance. Landlord shall not be required to segregate Tenant's security
deposit, nor shall Tenant be entitled to any interest on the aforesaid deposit
or security. It is expressly understood and agreed that the issuance of a writ
or restitution and the reentering of the premises by Landlord for any default on
the part of Tenant prior to the expiration of the term, shall not be deemed such
a termination of this Lease as to entitle Tenant to the recovery of the said
security and that the said deposit shall be retained and remain in the
possession of Landlord until the end of the term as hereinbefore stated.

Section 20.24     Administrative Charge

         All rent is due on the first of the month. Any rent paid after the
tenth of any month will be subject to a service charge of 10% of the minimum
rent due, which will be for administrative expenses.

Section 20.25     Laws of the State of Florida

         This Lease shall be governed by and construed !n accordance with the
laws of the State of Florida.

Section 20.26     Counterparts

         This Lease shall be executed by Landlord and Tenant in two
counterparts, each of which shall be deemed to be an original but both of which
shall constitute one and the same agreement. If requested by Landlord or any
mortgagee holding any mortgage encumbering the leased premises or any part
thereof, Tenant agrees to execute and deliver to Landlord or any such mortgagee
within five (5) days of such request a duplicate original of this Lease together
with all exhibits, drawings, riders or amendments thereto.


                                       11
<PAGE>


Section 20.27     Right to Plat

         Landlord reserves the right to plat or otherwise subdivide the property
during the term of the Lease and Tenant agrees to cooperate with Landlord.

Section 2028      Radon Gas

         Florida State Law requires that every lease contain the following
statement:

         "RADON GAS: Radon is a naturally occurring radioactive gas that, when
         it has accumulated in a building in sufficient quantities, may present
         health risks to persons who are exposed to it over time. Levels of
         radon that exceed federal and state guideline:, have been found in
         buildings in Florida. Additional information regarding radon and radon
         testing may be obtained from your county public health unit."

         Section 20.29 Tenant's Time to Sue

         A. Commencement of Action. Any claim, demand, right or, defense by
Tenant that arises out of this Lease or the negotiations that preceded this
Lease shall be barred unless Tenant commences an action thereon, or interposes a
defense by reason thereof, within six (6) months after the date of the inaction,
omission, event, or action that gave rise to such claim, demand, right or
defense.

         B. Tenant Acknowledgment. Tenant acknowledges and understands, after
having consulted with its legal counsel, that the purpose of Paragraph A is to
shorten the period within which Tenant would otherwise have to raise such
claims, demands, rights, or defenses under applicable laws.

Section 20.30     Rider

         A Rider is attached hereto and made part hereof.

         IN WITNESS WHEREOF, Landlord and Tenant have signed their names and
affixed their seals the day and year first above written.


SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF:

                                       LANDLORD:
                                       LYONS CORPORATE PARK



/s/  Vicki Buzzell                     By: /s/ Augustine Ferrera
- -------------------------------        --------------------------------------
                                       Augustine Ferrera
/s/ [ILLEGIBLE]                        Secretary/Treasurer for
- -------------------------------        Rocco Ferrera & Co., Inc.




                                       By: /s/ Lee S. Lasser
                                       --------------------------------------
                                       Lee S. Lasser, Trustee


                                      TENANT: The Singing Machine Co., Inc.
                                              (A Florida Corporaton)


/s/  Melody Schwab                    By: /s/ John Klecha
- -------------------------------       --------------------------------------

/s/ Teresa Marco                      Title: CFO
- -------------------------------              -------------------------------


                                       12
<PAGE>


                                   INDIVIDUAL

STATE OF          )
COUNTY OF         ) ss

On this day of ____________________, 20___________________, before me personally

appeared ______________________________________________________________________
who did acknowledge before me that he/she executed the within and foregoing
instrument by his free act and deed for the purpose therein expressed.


            (SEAL)                 --------------------------------------------
                                      Print, Type or Stamp Name of Notary


                         PERSONALLY KNOWN ______________________________________

        OR PRODUCED IDENTIFICATION______________________________________________

TYPE OF IDENTIFICATION PRODUCED_________________________________________________


                           PARTNERSHIP OR CORPORATION

STATE OF FLORIDA    )
                    )ss
COUNTY OF BROWARD   )


The foregoing instrument was acknowledged before me this 8th day of April, 1999
by John Klecha, as CFO for The Singing Marchine


                                 /s/ Vickie Buzzell
         (SEAL)                -------------------------------------------------
                                Print, Type or Stamp Name of Notary


                         PERSONALLY KNOWN
                                          --------------------------------------

              OR PRODUCED IDENTIFICATION
                                          --------------------------------------

         TYPE OF IDENTIFICATION PRODUCED
                                          --------------------------------------



STATE OF FLORIDA    )
                    )ss
COUNTY OF BROWARD   )


The foregoing instrument was acknowledged before me this 12th day of April, 1999
by AUGUSTINE FERRERA,SECRETARY/TREASURER FOR ROCCO FERRERA & CO., INC.
He is personally known to me.

My Commission Expires:

                                 /s/ Vickie Buzzell
         (SEAL)                -------------------------------------------------
                                Print, Type or Stamp Name of Notary


                         PERSONALLY KNOWN
                                          --------------------------------------

              OR PRODUCED IDENTIFICATION
                                          --------------------------------------

         TYPE OF IDENTIFICATION PRODUCED
                                          --------------------------------------

STATE OF FLORIDA    )
                    )ss
COUNTY OF BROWARD   )


The foregoing instrument was acknowledged before me this 12th day of April, 1999
by LEE S. LASSER, TRUSTEE. He is personally known to me.


                                 /s/ Vickie Buzzell
         (SEAL)                -------------------------------------------------
                                Print, Type or Stamp Name of Notary





                                       13
<PAGE>



RIDER NO. 1 ATTACHED TO AND MADE A PART OF LEASE AGREEMENT DATED March 31, 1999
BETWEEN ROCCO FERRERA & CO. INC. (A MICHIGAN CORPORATION) AND LEE S. LASSER,
TRUSTEE OF THE LEE S. LASSER TRUST DATED AUGUST 25, 1972, AS AMENDED, d/b/a
LYONS CORPORATE PARK, LANDLORD AND THE SINGING MACHINE CO., INC. (A FLORIDA
CORPORATION)

AS TENANT, DATED THE 31ST DAY OF MARCH, 1999.

1.       Landlord and Tenant agree that Landlord has supplied and placed in the
         demised premises, storm shutters and bolts to cover all of the glass in
         front of the bay and the front door. Tenant agrees that it is the sole
         responsibility of Tenant to install the storm shutters should the need
         arise. At the termination of the occupancy, the Tenant agrees to return
         the shutters and bolts to the Landlord in good condition.


                                       LANDLORD:
                                       LYONS CORPORATE PARK

Witnesses:

/s/  Vicki Buzzell                     By: /s/ Augustine Ferrera
- -------------------------------        --------------------------------------
                                       Augustine Ferrera, Secretary for
/s/ Frank [ILLEGIBLE]                  Rocco Ferrera & Co., Inc.
- -------------------------------        (A Michigan Corporation)



                                      TENANT: The Singing Machine Co., Inc.
                                              (A Florida Corporaton)


/s/ Melody Schwab                     By: /s/ John Klecha
- -----------------                      --------------------------------------
                                          Chief Financial Officer
/s/ Teresa A. Marco
- -------------------

<PAGE>

                                  EXHIBIT "A"
                                  -----------


                               LEGAL DESCRIPTION
                               -----------------


         Lot 1 & 2 of Lyons Business Park according to the Plat thereof as
recorded in Plat Book 137, Page 47, of the Public Records of Broward County.



<PAGE>



                                  EXHIBIT "B"
                                  -----------





                                   SITE PLAN






                               [GRAPHIC OMMITTED]


<PAGE>


                                  EXHIBIT "C"
                                  -----------

LEASE DATE:
- -----------

LANDLORD:
- ---------

TENANT:
- -------

PREMISES:
- ---------

AREA:                _____________________________ Sq. Ft.
- -----


                  The undersigned Landlord and Tenant of the above lease hereby
certify to _____________________ as mortgages, the following:

                  1. That the term of the lease commenced on ______________,
         19__ and the Tenant is in full and complete possession of the premises
         demised under the lease and has commenced full occupancy and use of the
         premises, such possession having been delivered by the Landlord and
         having been accepted by the Tenant. (May be omitted where term has not
         commenced and Tenant is not yet in occupancy.)

         2. That the lease calls for and Tenant is paying monthly rental
installments of $___________ which commenced to accrue on the ____ day of
____________, 19__.

         3. That no advance rental or other payment has been made in connection
with the Lease, except rental for the current month and the last month of the
lease term (if applicable) and the rent has been paid to and including
_____________, 19__.

         4. That a security deposit in the amount of $___________ is being held
by Landlord, which amount if not subject to any set off or reduction or to any
increase for Interest or other credit due to Tenant.

         5. That all obligations and conditions under said Lease to be performed
to date by Landlord or Tenant have been satisfied, free of defenses and set-offs
including all construction work in the demised premises.

         6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of the Landlord or the Tenant in any of the terms and
conditions thereof and no event has occured which, with the passing of time or
giving of notice or both, would constitute an event of default; and that said
Lease has: (initial one)

         ( ) not been amended, modified, supplemented, extended, renewal or
assigned.

         ( ) been amended, modified, supplemented, extended, renewed or assigned
as follows by the following described agreements:
_______________________________________________________________________________


         7. That the Lease provides for a primary term of ___________________,
19__; and that: (initial one)

         ( ) neither the Lease nor any of the documents listed in Paragraph 6,
(if any), contain an option for any additional term or terms.

         ( ) the Lease and/or documents listed under Paragraph 6, above, contain
an option for _________________ additional term(s) of __________________ year(s)
and _________ month(s) (each) at a rent to be determined as follows:
_______________________________________________________________________________


         8. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.

         9. That this certification is made knowing that ___________ is relying
upon the repreentations herein made.

                                             TENANT:

DATED___________________________             BY:________________________

                                             TITLE:_____________________


<PAGE>

                                                                     Page 1 of 2


                                   Exhibit "D"
                                   -----------

                          RIDER - LEASE SPECIFICATIONS
                          ----------------------------

                        (Description of Landlord's Work)

                                FOR LOT 1 & 2 OF

LYONS CORPORATE PARK


Building Construction

1.       Building Fill - compacted to a density of 98 percent at optimum
         moisture contact.

2.       Foundations: Reinforced concrete (3,000 p.s.i.) spread footings. Soil
         bearing capacity assumed to be 2,500 psf.

3.       Exterior Walls: 8" concrete masonry units with tie columns and tie
         beams with painted stucco exterior finish, interior finish not painted.


4.       Structural Frame: A-36 steel roof framing made up of open web steel
         bar joists bearing on steel girder joists supported by steel pipe
         columns. minimum clear height to be 18'-0" from finish floor slab to
         underside of roof structure.

5.       Floor slab: 4" concrete slab reinforced with 6" x 6" - 1.4/1.4 welded
         wire mesh on 6 mil. visqueen vapor barrier.

6.       Roof Construction:

         a)       22 ga. corrigated metal deck with 1" rigid insulation board
                  fastened to metal deck.

         b)       4 ply built-up tar and gravel roof.

7.       Doors:

         a)       Overhead doors: 12'w x 14'h at bays and 8'w x 8'h at truck
                  dock. Metal overhead rolling door with manual drive surface
                  mounted inside space.

         b)       Entrance Doors: 3'0" x 7'0" Gray tinted tempered glass set in
                  Satin aluminum frames.

         c)       Rear Doors" 3'0" x 7'0" metal doors in hollow metal frames.

         d)       Interior Doors: Wood hollow core stain grade door set in wood
                  jamb. 3'0" x 6'8" x 1-3/8" at office and 2'8" x 6'8" x 1-3/8"
                  at toilets.'

8.       Interior Partitions: Building A-B-E-L 10% finish = 8'0" high
         constructed from 3-5/8" galvanized metal studs with top and bottom cap
         gauge thickness. Building A-B-E-L 20% or over finish = 9" high
         constructed from 3-5/8" galvanized meetal studs with top and bottom
         cap gauge thickness. Studs to be placed 24" o.c. Finish on walls will
         be 1/2" gypsum wallboard, joints to be finished with 2" joint tape
         covered with 3 coats of spackling compound sanded smooth. 3-/2" batt
         insulation at perimeter interior partitions and in offices # 1 and # 7
         pursuant to Exhibit D-1 attached.

9.       Toilet Facilities Each toilet facility shall have 1 water closet, 1
         lavatory. 1-18" x 24" plate glass mirror, 1 paper holder. Floor finish
         shall be vinyl tile, walls to be painted dry wall and coiling to be
         acoustical tile.

         1 toilet facility per bay shall conform to the American National
         Standards "Specifications for Making Buildings and Facilities
         Accessible to, and Usable by, the Physically Handicapped" ANSI A 117.1.
         Each bathroom will have an exhaust fan.


<PAGE>


                                                                     Page 2 of 2


                                   Exhibit "D"
                                   -----------

                          RIDER - LEASE SPECIFICATIONS
                          ----------------------------

                        (Description of Landlord's Work)

                                FOR LOT 1 & 2 OF

                           LYONS CORPORATE PARK, LLLP
                           --------------------------



10.      Office Area Finishes:

         a)       Walls, 2 coats of interior type flat latex paint.

         b)       Doors and Frames: 2 coats semi-gloss paint or stain.

         c)       Flooring: carpet allowance of $9.00 s.y.

         d)       Base: 4" vinyl or rubber.

         e)       Ceiling: 2' x 4' x 5/8" mineral fiber board White flush type,
                  with fissured face. Runners and edge moldings to be 5/8" x 6"
                  fiberglass batt insulation above ceiling. Ceiling height at
                  Building C is 9' and at Building F and G is 8'.

11.      Hardware:

         a)       Entrance Doors to have double cylinder dead bolt lockset with
                  interior thumb turn, push/pull bar. automatic closer and
                  offset pivot hinges. All finishes to match finish of door
                  frame.

         b)       Interior Door - 1 pr. at 3-1/2" x 3-1/2" antique brass finish
                  mortise type butte with one Schlage or equal f series tulip
                  antique brass finish passage hardware per door and one door
                  stop.

         c)       Rear Door - 1-1/2" pr. at 4-1/2" x 4-1/2" paint grade mortise
                  type butts. with double cyllnder dead bolt with 1" throw.

         d)       Washroom Doors with privacy HDW.

12.      Plumbing - Exterior lines all to be polyvinyl chloride type (PVC).
         Interior waste and vent lines to be PVC. Interior water distribution to
         be copper pipe.

13.      HVAC - Air conditioning to be provided by split package with the
         compressor mounted on steel curbs set on the roof, andthe air handler
         suspended from the roof, above the office area. A/C supplied at 1
         ton/400 s.f. of office space. Heating will be accomplished by heat
         strips in air handling unit. Ductwork to be standard fiberglass
         foil-clad. One 1/3 h.p. ventilator exhaust fan in shop area.

14.      Electrical Service - Individual meters, 200 amp 3 phase service for
         each bay. Lighting is to be provided in the office space by 2' x 4' lay
         in 4 lamp florescent fixtures and in warehouse area by 1' x 8' lamp
         florescent fixtures mounted to underside of roof structures.

15.      Water Service - 3/4' supply with 5/8' meter - each bay in individually
         metered.

16.      Accessories - Shop area 3' x 3' white translucent skylights.

17.      Kitchen - to include 6' of base and upper cabinets, 1 double sink and
         appropriate fixtures. (Tenant to pay for this on a Work Order No. 001).

18.      Permits: All permits to obtain and complete construction are the
         responsibility of the Landlord.

19.      The plans for this premises are Job No. 9912, dated 3/31/99, drawn by
         perez and Associates.

<PAGE>




                                   SITE PLAN

                                Suite A-7 and A-8




                               [GRAPHIC OMMITTED]









<PAGE>
                                 SIGN CRITERIA
                                 -------------



LOCATION :             Lyons Corporate Park I.LLP
                       6601 Lyons Road
                       Coconut Creek, Florida 33073

 EXTERIOR  BUILDING SIGNS: All signs shall be fabricated identically using the
                           following construction specifications:

                           1)       All sign layouts must be approved by
                                    landlord before installation. Sketch and
                                    specifications must be submitted.

                           2)       All live sign areas are restricted in size
                                    to allow perimeter air space where no sign
                                    element can be placed.

                           3)       All signs to consist of individual molded 3
                                    dimensional (not flat) plastic letters
                                    outfitted with etude and perforated mental
                                    pads for cementing onto steel sign band. A
                                    silicone adhesive and sticky back tape roust
                                    be used to allow for removal of letters when
                                    necessary. Perforated pads must be adjusted
                                    to allow a minimum of 1/B" projection from
                                    back of letters to wall (See Diagram B).

                           4)       Tenant may choose from a variety of letter
                                    styles available and the color must be
                                    white.

                           5)       Logos and company emblems may be used as
                                    long as they conform to these general
                                    construction specifications and do not
                                    exceed sign "size" regulations.


<PAGE>


                                 EXHIBIT "E-1"


                                SIGN ELEVATIONS
                                ---------------



                               [GRAPHIC OMMITTED]

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>6
<FILENAME>subsidiaries.txt
<DESCRIPTION>SUBSIDIARIES LIST
<TEXT>
                                  EXHIBIT 21.1

                              LIST OF SUBSIDIARIES


                                            Country of              Percentage
         Name                              Incorporation              Owned
         ----                              -------------              -----

International SMC (HK) Limited.              Hong Kong                 100%


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>salberg-consent.txt
<DESCRIPTION>SALBERG CONSENT
<TEXT>


                                  EXHIBIT 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

         We hereby consent to the incorporation by reference in the registration
statement of The Singing Machine Company, Inc. on Form S-8 (File No. 333-59684)
filed with the Securities and Exchange Commission ("SEC") on April 27, 2001 and
the registration statement on Form S-3 (File No. 333-70142) filed with the SEC
on September 27, 2001 of our report dated May 23, 2002, with respect to the
consolidated financial statements of The Singing Machine Company, Inc. and
subsidiary, for the years ended March 31, 2002 and 2001, included in this Annual
Report, as amended, on the Form 10-KSB for the year ended March 31, 2002.



/s/ SALBERG & COMPANY, P.A.
Boca Raton, Florida
July 22, 2002



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
