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<SEC-DOCUMENT>0001116502-03-000172.txt : 20030214
<SEC-HEADER>0001116502-03-000172.hdr.sgml : 20030214
<ACCEPTANCE-DATETIME>20030214091645
ACCESSION NUMBER:		0001116502-03-000172
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20021231
FILED AS OF DATE:		20030214

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24968
		FILM NUMBER:		03562766

	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>10-Q
<SEQUENCE>1
<FILENAME>singingmachine10q.txt
<DESCRIPTION>THE SINGING MACHINE COMPANY, INC.
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2002

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

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

        Delaware                                              95-3795478
        --------                                              ----------
(State of Incorporation)                                (IRS Employer I.D. No.)

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

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]

         APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS

Indicate whether the registrant has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes [X} No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

There were 8,125,178 shares of Common Stock, $.01 par value, issued and
outstanding at December 31, 2002.

<PAGE>
                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY

                                      INDEX

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements
                                                                        Page No.
                                                                        --------

         Consolidated Balance Sheets - December 31, 2002 (Unaudited)
         and March 31, 2002 ..............................................  3

         Consolidated Statement of Operations - Three and nine months
         ended December 31, 2002 and 2001 (Unaudited).....................  4

         Consolidated Statement of Cash Flows - Nine months ended
         December 31, 2002 and 2001 (Unaudited) ..........................  5

         Notes to Consolidated Financial Statements ......................  6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ............................. 11

Item 3.  Quantitative and Qualitative Disclosure About Market Risk........ 19

Item 4.  Controls and Procedures.......................................... 19

PART II.                   OTHER INFORMATION

Item 1.  Legal Proceedings ............................................... 21

Item 2.  Changes in Securities and Use of Proceeds........................ 21

Item 3.  Defaults Upon Senior Securities ................................. 22

Item 4.  Submission of Matters to a Vote of Security Holders ............. 22

Item 5.  Other Information ............................................... 22

Item 6.  Exhibits and Reports on Form 8-K ................................ 22

SIGNATURES ............................................................... 24

CERTIFICATIONS ............................................................25

EXHIBIT INDEX..............................................................27

                                       2

<PAGE>
                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
                         PART I - FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 2002  MARCH 31, 2002
                                                                 -----------------  --------------
                                                                    (unaudited)
                             ASSETS
<S>                                                                 <C>              <C>
CURRENT ASSETS
Cash and cash equivalents                                           $   362,927      $ 5,520,147
Accounts receivable, net                                             19,535,201        3,536,903
Due from manufacturer                                                   753,206          488,298
Inventories                                                          30,016,924        9,274,352
Prepaid expenses and other current assets                             2,155,879          982,697
Deposits                                                                517,324          513,684
                                                                    -----------      -----------
TOTAL CURRENT ASSETS                                                 53,341,461       20,316,081
                                                                    -----------      -----------

PROPERTY AND EQUIPMENT, NET                                           1,232,227          574,657
                                                                    -----------      -----------

OTHER ASSETS
Security deposits                                                       180,532          135,624
Reorganization intangible, net                                          185,416          185,416
Deferred tax asset                                                           --          452,673
                                                                    -----------      -----------
TOTAL OTHER ASSETS                                                      365,948          773,713
                                                                    -----------      -----------

TOTAL ASSETS                                                        $54,939,636      $21,664,451
                                                                    ===========      ===========

              LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                                    $13,049,506      $ 1,846,238
Accrued expenses                                                      4,173,368        1,289,597
Deferred Revenue                                                        822,106
Loan payable                                                         10,163,088               --
Income tax payable                                                      630,796           58,542
                                                                    -----------      -----------
TOTAL CURRENT LIABILITIES                                            28,838,864        3,194,377
                                                                    -----------      -----------

STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value, 1,000,000 shares authorized,
no shares issues 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,
8,125,178 and 8,020,027 shares issued and outstanding                    81,252           80,200
Additional paid-in capital                                            4,757,355        4,602,828
Retained earnings                                                    21,262,165       13,787,046
                                                                    -----------      -----------
TOTAL STOCKHOLDERS' EQUITY                                           26,100,772       18,470,074
                                                                    -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $54,939,636      $21,664,451
                                                                    ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements

                                       3
<PAGE>
                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                              Three Months Ended                   Nine Months Ended
                                        December 31,       December 31,       December 31,       December 31,
                                            2002              2001                2002               2001
                                        ------------       ------------       ------------       ------------
<S>                                     <C>                <C>                <C>                <C>
NET SALES                               $ 48,869,776       $ 34,158,513       $ 85,998,383       $ 55,431,595

COST OF SALES                             35,438,420         22,719,929         62,090,759         36,821,615
                                        ------------       ------------       ------------       ------------

GROSS PROFIT                              13,431,356         11,438,584         23,907,624         18,609,980
                                        ------------       ------------       ------------       ------------

OPERATING EXPENSES
Compensation                               1,257,519          1,090,838          2,827,823          2,361,797
Commissions                                  581,800            777,209          1,127,221          1,266,016
Advertising                                3,210,330          1,038,056          4,082,940          1,942,442
Royalty expense                            1,189,706          1,191,169          2,064,336          1,596,800
Selling, general,
    and administrative expenses            2,110,769          1,413,371          5,153,503          3,248,749
                                        ------------       ------------       ------------       ------------
TOTAL OPERATING EXPENSES                   8,350,124          5,510,643         15,255,823         10,415,804
                                        ------------       ------------       ------------       ------------

INCOME FROM OPERATIONS                     5,081,232          5,927,941          8,651,801          8,194,176
                                        ------------       ------------       ------------       ------------

OTHER INCOME (EXPENSES)
Other Income                                  38,628             53,600            196,648            195,741
Interest Expense                            (117,704)          (104,877)          (228,597)          (143,034)
Interest Income                                   --             17,471             11,943             40,564
                                        ------------       ------------       ------------       ------------
NET OTHER EXPENSES                           (79,096)           (33,806)           (20,006)            93,271
                                        ------------       ------------       ------------       ------------

INCOME BEFORE INCOME TAX PROVISION         5,002,156          5,894,135          8,631,795          8,287,447

INCOME TAX PROVISION                      (1,105,569)            (6,000)        (1,156,676)           (18,000)
                                        ------------       ------------       ------------       ------------

NET INCOME                              $  3,896,587       $  5,888,135       $  7,475,119       $  8,269,447
                                        ============       ============       ============       ============

EARNINGS PER SHARE:
Basic                                   $        .48       $        .80       $        .92       $       1.20
                                        ============       ============       ============       ============
Diluted                                 $        .44       $        .69       $        .84       $       1.04
                                        ============       ============       ============       ============

WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic                                      8,123,548          7,335,758          8,101,441          6,900,918
                                        ============       ============       ============       ============
Diluted                                    8,944,027          8,565,861          8,947,897          7,973,514
                                        ============       ============       ============       ============
</TABLE>

See accompanying notes to financial statements

                                       4
<PAGE>
                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                                     December 31,
                                                                               2002               2001
                                                                           ------------       ------------
<S>                                                                        <C>                <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income                                                                 $  7,475,119       $  8,269,447
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Depreciation and amortization                                                   454,806            209,334
Stock based expenses                                                                 --            171,472
Bad debt                                                                          3,356                 --
Deferred tax benefit                                                            452,673            (73,574)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable                                                         (16,001,654)       (26,104,253)
Due from manufacturer                                                          (264,908)         1,379,901
Inventories                                                                 (20,742,572)        (1,900,092)
Prepaid expenses and other assets                                            (1,218,091)           261,287
Increase (decrease) in:
Accounts payable                                                             11,203,268          5,554,717
Accrued expenses                                                              2,883,772          4,157,472
Deferred Revenue                                                                822,106                 --
Income taxes payable                                                            572,254            (23,320)
                                                                           ------------       ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                         (14,359,871)        (8,097,609)
                                                                           ------------       ------------

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment                                           (1,112,376)          (593,823)
Deposit for credit line                                                          (3,640)          (256,807)
Proceeds from investment in factor                                                   --            933,407
Proceeds from repayment of officer loans                                             --            117,425
Investment in and advances to unconsolidated subsidiary                              --            274,702
                                                                           ------------       ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                          (1,116,016)           474,904
                                                                           ------------       ------------

CASH FLOW FROM FINANCING ACTIVITIES
Loan proceeds                                                                37,612,713         19,211,494
Loan repayments                                                             (27,449,625)       (11,644,383)
Proceeds from exercise of stock options and warrants                            155,579            956,078
                                                                           ------------       ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                          10,318,667          8,523,189
                                                                           ------------       ------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                             (5,157,220)           900,484

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                               5,520,147          1,016,221
                                                                           ------------       ------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                    $    362,927       $  1,916,705
                                                                           ============       ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest                                   $    228,597       $    143,034
                                                                           ============       ============
Cash paid during the year for income taxes                                 $     73,207       $     18,000
                                                                           ============       ============
</TABLE>

See accompanying notes to consolidated financial statements

                                       5
<PAGE>
                THE SINGING MACHINE COMPANY, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002

                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying consolidated financial statements of the Company have been
prepared in accordance with the instructions to Form 10-Q and, therefore, omit
or condense certain footnotes and other information normally included in
financial statements prepared in accordance with generally accepted accounting
principles. It is suggested that these consolidated condensed financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's audited
financial statements on the Company's Annual Report on Form 10-KSB for the
fiscal year ended March 31, 2002.

The accounting policies followed for interim financial reporting are the same as
those disclosed in Note 1 of the Notes to Financial Statements included in the
Company's audited consolidated financial statements for the fiscal year ended
March 31, 2002, which are included in Form 10- KSB.

The Financial Accounting Standards Board has recently issued several new
accounting pronouncements which may apply to the Company.

The following statements have been adopted by the Company.

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 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 adopted SFAS 142 on April 1, 2002 liquidity and
accordingly has stopped amortizing the reorganization intangible, which had a
net balance of $185,412 at March 31, 2002.

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 implementation of SFAS 144 on April 1, 2002 did 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,


                                       6
<PAGE>

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 did not have a material impact on
the Company's consolidated financial statements.


Statement No. 148, "Accounting for Stock-Based Compensation--Transition and
Disclosure", amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation". In response to a growing number of companies announcing plans to
record expenses for the fair value of stock options, Statement 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition,
Statement 148 amends the disclosure requirements of Statement 123 to require
more prominent and more frequent disclosures in financial statements about the
effects of stock-based compensation. The Statement also improves the timeliness
of those disclosures by requiring that this information be included in interim
as well as annual financial statements. In the past, companies were required to
make pro forma disclosures only in annual financial statements. The transition
guidance and annual disclosure provisions of Statement 148 are effective for
fiscal years ending after December 15, 2002, with earlier application permitted
in certain circumstances. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods beginning
after December 15, 2002. The Company adopted the disclosure provisions of
Statement 148 for the quarter ended December 31, 2002, but will continue to use
the method under APB 25 in accounting for stock options. The adoption of the
disclosure provisions of Statement 148 did not have a material impact on the
Company's financial position, results of operations or liquidity.


The following statements will be adopted by the Company as they become
effective.

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. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146")
addresses the recognition, measurement, and reporting of cost that are
associated with exit and disposal activities that are currently accounted for
pursuant to the guidelines set forth in EITF 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to exit an Activity
(including Certain Cost Incurred in a Restructuring)," cost related to
terminating a contract that is not a capital lease and one-time benefit
arrangements received by employees who are involuntarily terminated - nullifying
the guidance under EITF 94-3. Under SFAS 146, the cost associated with an exit
or disposal activity is recognized in the periods in which it is incurred rather
than at the date the Company committed to the exit plan. This statement is
effective for exit or disposal activities initiated after December 31, 2002 with
earlier application encouraged. The adoption of SFAS 146 is not expected to have
a material impact on the Company's financial position or result of operations.

Certain amounts in the December 31, 2001 interim consolidated financial
statements have been reclassified to conform to the December 31, 2002
presentation.

In the opinion of management, all adjustments, which are of a normal recurring
nature and considered necessary to present fairly the financial positions,
results of operations, and cash flows for all periods presented have been made.

The results of operations for the three-month period ended December 31, 2002 are
not necessarily indicative of the results that may be expected for the entire
fiscal year ending March 31, 2003.

The accompanying consolidated condensed financial statements include the
accounts of the Company and its wholly owned subsidiary. All significant
inter-company balances and transactions have been eliminated. Assets and
liabilities of the foreign subsidiary are translated at the rate of exchange in
effect at the balance sheet date; income and expenses are translated at the
average rates of exchange prevailing during the year. The related translation
adjustment is not material.

NOTE 2 - DEPOSIT FOR LETTER OF CREDIT FACILITY

The Company, through its Hong Kong subsidiary, maintains letter of credit
facilities with three major international


                                       7
<PAGE>

banks. The Company's subsidiary is required to maintain separate deposit
accounts at these banks in the amount of $517,324. This amount is included in
deposits at December 31, 2002.

NOTE 3 - LOANS AND LETTERS OF CREDIT

In December 2002, the Company amended its Loan and Security Agreement (the
"Agreement") with a commercial lender (the "Lender").

The Lender will advance up to 70% 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 $1,000,000 as defined in the agreement.

The outstanding loan limit varies between zero and $25,000,000 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 $250,000 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 $20,000,000 from October 31, 2002 to December 31, 2002 with escalations
after this point as defined in the Agreement.

The outstanding balance at December 31, 2002, was $10,163,088.

NOTE 4 - EQUITY

Stock options and warrants were exercised during the third quarter of fiscal
year 2003. 1,875 shares of common stock were issued with proceeds to the Company
of $3,825. The total of stock options and warrants exercised for the nine month
period ended December 31, 2002 were 105,151 shares with a total proceeds to the
Company of $155,684.

On December 31, 2002, 187,000 stock options were granted to various employees of
the Company under the Stock Option Plan of 2001 at the then current stock price
of $9.00 per share. Pursuant to APB no. 25, no compensation expense will be
recognized.

NOTE 5 - COMMITMENTS

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 to the employee. The employee may elect to
return the first year options to the Company for $100,000.

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.

Effective September 1, 2002, the Company signed an additional 24 - month lease
to expand its corporate headquarters. The additional rent is $1,980 per month.

As of November 13, 2002, the Company amended its merchandise license agreement
to license a name, trade name, and logo of a music oriented television network.
The term of the agreement remained unchanged, expiring on December 31, 2003. The
Company pays a royalty rate of a percentage of sales of the licensed or branded
merchandise, as defined in the amended agreement. The original agreement
required a minimum royalty of $686,250, which minimum was met with sales and was
paid by the Company as of March 31, 2002. The current amendment places a new
guaranteed minimum royalty of $1,500,000. This guaranteed minimum is recoupable


                                       8
<PAGE>

against royalties of sales for the period January 1, 2003 through December 31,
2003 only. The guarantee is payable as follows:
         $500,000 on or before December 27, 2002;
         $333,334 on or before June 1, 2003;
         $333,333 on or before September 1, 2003; and
         $333,333 on or before December 1, 2003
As of December 31, 2002, the initial $500,000 had been paid and is included in
prepaid expenses.

Effective December 23, 2002, the Company signed a 30-month lease for additional
warehouse space in California for $44,947 per month commencing January 1, 2003.

NOTE 6 - CONCENTRATIONS

The Company derives the majority 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 by management. At December 31, 2002, approximately 50% of accounts
receivable were due from two U.S. customers. Accounts receivable from two
customers that individually owed over 10% of accounts receivable at December 31,
2002 was 25% and 25%. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral.

Revenues derived from five customers for the nine months ended September 30,
2002 and 2001 were 73.1% and 98%. Revenues derived from three customers for the
nine months ended December 31, 2002, which individually purchased greater than
10% of the Company's total revenues, were 23.1%, 17.9% and 17.6% for the nine
months ended December 31, 2002 and two customers 66% and 36% for the nine months
ended December 31, 2001.

In the fourth quarter of 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 the fourth quarter of fiscal 2002 and the
customer retained the inventory on a consignment basis. As of December 31, 2002
this customer was still on a consignment basis with all but two products.

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 factories based in China during fiscal
2002 were 51%, 39%, and 5% and from two manufacturers based in China during
fiscal 2001 were 80% and 14%, respectively. For the nine months ended December
31, 2002, purchases of product were derived from seven factories based in China.

The Company finances its sales primarily through a loan facility with one
lender. 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 $45,415,402 for the nine months ended December 31, 2002 and
$27,485,628 for the same period in 2001. The carrying value of net assets held
by the Company's Hong Kong based subsidiary, net of inter-company balances, was
approximately ($6,270,855) at December 31, 2002.

NOTE 7 - EARNINGS PER SHARE

Basic net income (loss) per common share (Basic EPS) excludes dilution and is
computed by dividing net income (loss) available to common stockholder by the
weighted-average number of common shares outstanding for the


                                       9
<PAGE>

period. Diluted net income per share (Diluted EPS) reflects the potential
dilution that could occur if stock options or other contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the Company. At December 31,
2002 there were 1,286,250 common stock equivalents outstanding which may dilute
future earnings per share.

NOTE 8 - SEGMENTS

The Company operates in one segment and maintains its records accordingly. Sales
by customer geographic region for the nine months ended December 31, 2002, were
as follows:

                                           December 31,
                                        2002           2001
                                    -----------    -----------
                 United States      $70,809,392    $55,300,710
                 Asia                    21,310         49,314
                 Australia              529,020             --
                 Canada                 696,073         37,344
                 Central America         61,046          4,789
                 Europe              12,978,811             --
                 Mexico                 902,731            122
                 South America               --         39,316
                                    -----------    -----------
                                    $85,998,383    $55,431,595
                                    ===========    ===========

NOTE 9 - SUBSEQUENT EVENTS

The Company entered into an agreement with a retail customer whereby they
guaranteed the customer a minimum gross margin of $3,573,000 from the sale of
the Company's products during the period from September 1, 2002 through January
15, 2003. Under the agreement, the Company will reimburse the customer for the
difference between the customer's gross margin on sales and the minimum
guarantee. The Company would have a total exposure of $3,537,000, in the event
that there were no sales of the Company's products made by the retail customer
during this period. In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin 101, "Revenue Recognition", the Company has not
recognized any revenues or related cost of sales at December 31, 2002. Any
revenues or related cost of sales will be recognized at January 15, 2003
("settlement date"), since the ultimate net sales are not determinable until
that date. In accordance with the Emerging Issues Task Force ("EITF") Issue
01-9, the guarantee is considered a reduction of sales. As of the settlement
date of the contract, the decrease in sales is $2,570,047, bringing net sales
under this agreement to ($167,737) and net loss on the agreement to
($1,594,113). As of this date, an initial amount of $1,500,000 has been paid
against the amount due under the settlement. The remaining amount is payable in
four equal payments of $267,511 on April 25, July 25 and October 25, 2003 and
January 25, 2004.

                                       10
<PAGE>

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

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10- Q, including
without limitation, statements containing the words believes, anticipates,
estimates, expects, and words of similar import, constitute forward-looking
statements. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
these forward-looking statements for many reasons, including the risks faced by
us described below and elsewhere in this Quarterly Report, and in other
documents we file with the Securities and Exchange Commission.

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

GENERAL

The Singing Machine Company, Inc. and its wholly owned subsidiary, International
(SMC) HK, Ltd.(the "Company", "we" or "us") engages in the production,
distribution, marketing and sale of consumer karaoke audio equipment,
accessories and music. Our electronic karaoke machines and audio software
products are marketed under The Singing Machine(C) trademark.

Our products are sold throughout the United States, primarily through department
stores, lifestyle merchants, mass merchandisers, direct mail catalogs and
showrooms, music and record stores, national chains, specialty stores and
warehouse clubs.

Our karaoke machines and karaoke software are currently sold in such retail
outlets as Best Buy, Toys R Us, Target, J.C. Penney and Circuit City.

We had a net income before tax of $8,631,795 for the nine-month period ended
December 31, 2002.

RESULTS OF OPERATIONS

REVENUES

Revenues for the three months ended December 31, 2002 were $48,869,776, compared
to revenues of $34,158,513 for the three months ended December 31, 2001.
Revenues for the nine months ended December 31, 2002 and 2001 were $85,998,383
and $55,431,595, respectively. Our revenue increase for the nine months of 55.1%
is due to increased sales and the introduction of new products and services. We
also obtained several significant new national retail customers in our third
quarter ended December 31, 2002.

GROSS PROFIT

Gross profit for the three-month period ended December 31, 2002 was $13,431,356
or 27.5% of sales compared with $11,438,584 or 33.7% of sales for the second
quarter of the prior year. Gross profit for the nine months ended December 31,
2002 was $23,907,624 or 27.8% of sales compared with $18,609,980 or 33.6% of
sales for the nine months ended December 31, 2001. The decrease in gross profit
is primarily due to increased sales from our subsidiary and sales to
international customers. Our international sales were primarily in Europe,
Canada and Australia. Sales to international customers historically maintain a
lower gross profit because there are no other variable expenses from these
sales. Other variable expenses that are normally included with sales are
advertising allowances, returns and commissions.

OPERATING EXPENSES

Operating expenses were $8,350,124 or 17.1% of total revenues, in the third
quarter, up from $5,510,643 or 16.1% of total revenues, in the third quarter of
the prior year. For the nine months ended December 31, 2002 and 2001, operating
expenses were $15,255,823 or 17.7% of total revenues and $10,415,804 or 18.8%of
total revenues, respectively.

The primary factors that contributed to the increase of approximately $1,532,132
in operating expenses for the nine months ended December 31, 2002 are:

                                       11
<PAGE>

         (i)      the increase in depreciation in the amount of $188,713 due to
                  the addition of molds for new product additions for fiscal
                  year 2003,
         (ii)     compensation expense in the amount of $466,026 due to the
                  addition of key personnel in Florida, in our California
                  facility and at our Hong Kong subsidiary,
         (iii)    expansion of the California warehouse and its associated
                  expenses in the amount of $701,789,
         (iv)     expansion of the Hong Kong subsidiary and its related
                  expenses, in the amount of $340,710.
         (v)      increases in product development fees for development of
                  future product $300,454.

Other increases in operating expenses were to selling expenses, which are
considered variable. These expenses are based directly on the level of sales and
include commissions, direct and co-operative advertising, and royalty expenses.
These areas alone contributed $2,469,239 to the increase in operating expenses.

DEPRECIATION AND AMORTIZATION EXPENSES

The Company's depreciation and amortization expenses were $466,561 or .6 % of
total revenues for the nine months ended December 31, 2002, up from $236,032 or
..7% for the nine months ended December 31, 2001. The increase in depreciation
and amortization expenses can be attributed to the Company's acquisition of new
molds and tooling for our expanded product line, as well as minimal costs for
additional computer equipment and furniture for additional personnel.

OTHER INCOME AND EXPENSES

Other expense net of other income was $79,076, for the third quarter of fiscal
2003 compared to other expenses net of other income of $33,806 for the third
quarter of fiscal 2002. Other expenses net of other income for the nine months
ended December 31, 2003 were $20,006 compared to income of $93,271 for the nine
months ended December 31, 2001. Our interest expense increased during the nine
months ended December 31, 2002 compared to the same period of the prior year
primarily due to our increased use of our credit facility with LaSalle during
this period. Prior to August 2002, the Company had cash reserves to fund
operations and did not need to borrow on the line. Our interest income increased
from $2,475 during the nine months ended December 31, 2001, to $11,943 during
the first nine months of fiscal 2003 because we earned income on our cash
balances held by our lender by investing in 24 hour commercial paper
investments.

INCOME BEFORE INCOME TAX EXPENSE

The Company's net income before income taxes was $8,631,795 for the nine months
ended December 31, 2002 compared with $8,287,447 for the same period of the
prior year.

INCOME TAX EXPENSE

The Company files separate tax returns for the parent and for the Hong Kong
Subsidiary.

During the first three quarters of fiscal 2003, the Company showed a profit in
both the U.S. parent company and in International SMC (HK) Ltd., its
wholly-owned Hong Kong subsidiary.

As a result of the annualization of this profit, the U.S. parent company has
used up its net operating loss carryforwards. The Company had a deferred tax
benefit at March 31, 2002 of $452,673 that had been taken in prior years. Now
that the net operating losses have been depleted, the Company must expense this
benefit. The computed provision for income taxes at December 31, 2002 was
$704,003. This includes accruals for both federal and state income taxes. This
provision plus the expense of the tax benefit make up the income tax expense of
$1,156,676.

The Hong Kong subsidiary has applied for an income tax exclusion based on the
nature of its income. The claim for this exemption is still pending with Inland
Revenue of Hong Kong; therefore, no accrual is made for Hong Kong income taxes.

NET INCOME

As a result of the foregoing, the Company's net income was $7,475,119 for the
first nine months of fiscal 2003 compared with $8,269,447 for the first nine
months of the prior year.

                                       12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2002, the Company had cash on hand of $362,927 compared
to $5,520,147 at March 31, 2002. The decreased cash is a direct result of
increased inventory levels and accounts receivables. At December 31, 2002, the
Company had current assets of $53,341,462 and total assets of $54,939,636
compared to current assets of $20,316,081 and total assets of $21,664,451 at
March 31, 2002. The increase in current assets is the result of increased
accounts receivable from sales of the third quarter and increased inventory
levels. Increases in accounts receivable are common for this quarter of our
fiscal year, due to the high volume of sales. The receivables created in the
fiscal third quarter are subsequently collected in the fiscal fourth quarter.
Due to overall economic conditions, sales in the third quarter were not as high
as expected. Although sales of the Company's product on a retail level were
high, anticipated reorders from customers were not received during the third
quarter. The lack of reorders decreased the Company's liquidity, as the Company
now has a higher than expected level of inventory. This inventory is new,
saleable inventory that the Company expects will sell within the next six to
nine months. The increase in total assets is due to the increase in accounts
receivable, inventory and fixed assets.

         Current liabilities increased to $28,838,865 as of December 31, 2002,
compared to $3,194,377 at March 31, 2002. This increase in current liabilities
is primarily due to increased accounts payable for inventory purchases and usage
of the credit facility with LaSalle Business Credit. At December 31, 2002, the
balance of the credit facility with LaSalle Business Credit was $10,163,088.

         The Company's stockholders' equity increased to $26,100,772 as of
December 31, 2002 from $18,470,074 as of March 31, 2002, due primarily to the
net income for the first three fiscal quarters.

         Cash flows used in operating activities were $14,359,871 during the
nine months ended December 31, 2002. Cash flows were used in operating
activities primarily due to the increase in inventory in the amount of
$20,742,572, accounts receivable in the amount of $16,001,654 and an income tax
payable accrual of $572,254 The increased inventory was partially offset by the
increase in accounts payable, which funded this inventory.

         Cash used in investing activities during the nine months ended December
31, 2002 was $1,116,016. Cash used in investing activities resulted primarily
from the purchase of fixed assets in the amount of $1,112,376. The purchase of
fixed assets consists primarily of the tooling and molds required for production
of new machines for this fiscal year. Tooling and molds are depreciated over
three years.

         Cash flows provided by financing activities were $10,318,667 during the
nine months ended December 31, 2002. This consisted of proceeds from the
exercise of warrants and options in the amount of $155,579. The remainder of
cash provided from financing activities was provided by net borrowings on the
credit line at LaSalle National Bank in the amount of $10,163,088.

         Due to the increased level of inventory and accounts payable as of
December 31, 2002, the Company has an increased need for working capital. As of
December 31, 2002, the Company had current assets of $53.3, which consisted
primarily of accounts receivable and inventory; and current liabilities of
approximately $28.8 million. The most significant current liabilities include
(i) approximately $13 million in accounts payable, of which approximately $9
million is amounts payable to the Company's factories in China and (ii) $10
million outstanding under the Company's credit facility with LaSalle Bank. Over
the past few months, the Company has had discussions with its factories in China
and they have indicated that they are willing to extend the payment dates for
the Company's obligations. The Company also has been negotiating with LaSalle
Bank to increase the credit available to the Company. Under the Company's credit
facility with LaSalle Bank, the Company has a 45-day clean-up period between
March 15, 2003 and April 30, 2003 in which the Company is required to have a
zero balance (i.e., the Company can not borrow any money under its credit
facility during this time period). Given the Company's current liquidity
situation, the Company is requesting that LaSalle change this clean-up period to
a later time period, such as May 15, 2003 - June 30, 2003.

         The Company's primary credit facility is with LaSalle Bank., which the
Company entered into in April 2001. Under this credit facility, LaSalle Bank
will advance up to 75% of the Company's eligible accounts receivable, plus up to
40% of eligible inventory, plus us up to 40% of commercial letters of credit
issue by LaSalle minus reserves as set forth in the loan documents. The credit
facility is subject to loan limits from zero to $25 million, depending on the
time of the year, as stipulated in the loan documents. 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 tooling located in China.

                                       13
<PAGE>

         Our Hong Kong subsidiary, International SMC, has three letters of
credit facilities available to finance its inventory purchases. These facilities
are (1) a $2 million facility at Hang Sang Bank, (ii) a $2.5 million facility at
Hong Kong Shanghai Banking Corporation and (ii) a $1 million facility at Fortis
Bank

         The Company intends to satisfy its capital and liquidity requirements
over the next ninety (90) days by (i) relying on credit extended to it from its
factories in China, (ii) working with LaSalle Bank to increase the credit
available to the Company under its credit facility, (iii) drawing on letters of
credit with banks in Hong Kong to finance purchases of inventory, (iv) using
cash collected from accounts receivable and (v) securing a $2 million credit
facility with a financial institution in the Far East within the next two weeks.
The Company's long-term plans for its capital and liquidity requirements are the
same as its short-term plan. Additionally, the Company believes that it will
have decreased levels of inventory purchases during the next six to nine months,
utilizing inventory already on hand. The Company believes that its cash, cash
equivalents, combined with financing obtained from LaSalle, its Hong Kong
lenders and/or another financial institution, will be adequate to meet its
capital need for at least the next 9 to 12 months.

         As of January 31, 2003, the Company's material commitments for capital
expenditures are its obligations to (i) repay $4.3 under its credit facility
with LaSalle Bank by March 15, 2003, (ii) pay $2,570,047 under a guaranteed
sales contract with a retail customer (as described below), (iii) make certain
guaranteed minimum royalty payments in the amount of (a) $1.5 million over the
next year under its licensing agreement with MTV, which expires on December 31,
2003 and $450,000 under its licensing agreement with Nickelodeon, which expires
on December 31, 2004, and (iv) make lease payments totaling approximately
$85,000 per month for warehouse space in California until June 2005 and (v)
capital expenditures in the amount of approximately $1.2 million for mold,
furniture and fixtures during fiscal 2004. The Company has other contractual
obligations under its real estates leases in Florida and Hong Kong.

         In April 2002, the Company entered into an agreement with a retail
customer whereby it guaranteed the customer a minimum gross margin of $3,573,000
from the sale of the Company's products during the period from September 1, 2002
through January 15, 2003. Under the agreement, the Company will reimburse the
customer for the difference between the customer's gross margin on sales and the
minimum guarantee. The Company would have a total exposure of $3,537,000, in the
event that there were no sales of the Company's products made by the retail
customer during this period. In accordance with the Securities and Exchange
Commission Staff Accounting Bulletin 101, "Revenue Recognition", the Company has
not recognized any revenues or related cost of sales at December 31, 2002. Any
revenues or related cost of sales will be recognized at January 15, 2003
("settlement date"), since the ultimate net sales are not determinable until
that date. In accordance with the Emerging Issues Task Force ("EITF") Issue
01-9, the guarantee is considered a reduction of sales. As of the settlement
date of the contract, the decrease in sales is $2,570,047, bringing net sales
under this agreement to ($167,737) and net loss on the agreement to
($1,594,113). As of this date, an initial amount of $1,500,000 has been paid
against the amount due under the settlement. The remaining amount is payable in
four equal payments of $267,511 on April 25, July 25 and October 25, 2003 and
January 25, 2004.

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.

         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


                                       14
<PAGE>

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
December 31, 2002, the accrual was approximately $1,253,104.

         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 $3,356 at December 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.

RISK FACTORS

         Set forth below and elsewhere in this Quarterly Report on Form 10-Q 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 Quarterlyl Report.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

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

         As of December 31, 2002, we had current assets of $53.3 million,
consisting primarily of inventory and accounts receivable and current
liabilities of $28,838,864. We have developed a plan to satisfy our short-term
and long-term capital needs. See "Management Discussion and Analysis of
Financial Condition - Liquidity" on page 14 of this Quarterly Report. We believe
that we will be able to secure adequate financing pursuant to this plan.
However, if we do not obtain sufficient financing, our business operations and
financial condition will be adversely affected. If the Company does not have
adequate financing, it may not be able to purchase sufficient inventory for
fiscal 2004 and this may reduce sales and net income during fiscal 2004.
Furthermore, the Company may have to scale back its business operations in
Florida, California and the Far East if it does not have adequate financing.

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 period ended December 31, 2002 and 2001 were
approximately 73.1% and 98% respectively. In the third quarter of fiscal 2003,
two major customers accounted for 32.5% and 23.5% 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. The Company has
significantly broadened its base of customers, decreasing the amount of reliance
on their largest customers. 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.

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.

                                       15
<PAGE>

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 fail 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. Our licensing agreement with MTV
expires on December 31, 2003.

INVENTORY MANAGEMENT AND CONSIGNMENT ARRANGEMENTS

         Because of our reliance on manufacturers in the Far East for our
machine production, 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. As of December 31, 2002, we had $30 million in
inventory. We will attempt to liquidate this excess inventory during fiscal
2004. We believe that all of this inventory is highly marketable and saleable;
however, there can be no assurances that we will be able to liquidate this
inventory during our upcoming fiscal year.

         As of December 31, 2002, we had consignment agreements with three of
our customers. It is more difficult to manage our inventory when our products
are sold on consignment. Two of these consignment agreements expired on February
1, 2003. We expect that our remaining consignment agreement will expire on
February 28, 2003 for most of the products sold by this retail customer (our
music sales with this customer will still remain on consignment). 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 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.

         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

         Sales of consumer electronics and toy products in the retail channel
are highly seasonal, causing the substantial majority of our sales to occur
during the second quarter ended September 30 and the third quarter ended
December 31. Sales in our second and third quarter, combined, accounted for
approximately 81% of net sales in fiscal 2002 and 75% of net sales in fiscal
2001.

         The seasonal pattern of sales in the retail channel requires
significant use of our working capital to manufacture and carry inventory in
anticipation of the holiday season, as well as early and accurate forecasting of
holiday sales. Failure to predict accurately and respond appropriately to
consumer demand on a timely basis to meet seasonal fluctuations, or any
disruption of consumer buying habits during their key period, would harm our
business and operating results.

         As economic conditions fluctuate, retail environments adjust their
buying patterns accordingly in order to


                                       16
<PAGE>

decrease their position in inventory on hand. Although the sales of the
Company's product were high, on a retail level, for the nine months ended
December 31, 2002, the sales of other product lines not affiliated with consumer
electronics were not. This had a direct effect on the decreased amount of
reorders received by the Company in the fiscal third quarter of 2003.

         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.


A DISRUPTION IN THE OPERATION OF OUR WAREHOUSE CENTERS IN CALIFORNIA AND FLORIDA
WOULD IMPACT OUR ABILITY TO DELIVERY MERCHANDISE TO OUR STORES, WHICH COULD
ADVERSELY IMPACT OUR REVENUES AND HARM OUR BUSINESS AND FINANCIAL RESULTS

         A significant amount of our merchandise is shipped to our customers
from one of our two warehouses, which are located in Compton, California and
Coconut Creek, Florida. Events such as fire or other catastrophic events, any
malfunction or disruption of our centralized information systems or shipping
problems may result in delays or disruptions in the timely distribution of
merchandise to our customers, which could adversely impact our revenues and our
business and financial results.

OUR BUSINESS OPERATIONS COULD BE DISRUPTED IF THERE ARE LABOR PROBLEMS ON THE
WEST COAST

         During fiscal 2002, approximately 55% of our sales were domestic sales,
which were made from our warehouses in California and Florida. During the third
quarter of fiscal 2003, the dock strike on the West Coast affected sales of two
of our karaoke products and we lost approximately $3 million in orders because
we couldn't get these product off the pier. If another strike or work slow-down
were to occur and we do not have a sufficient level of inventory, a strike or
work slow-down would result in increased costs to our company and may reduce our
profitability.

OUR PRODUCTS ARE SHIPPED FROM CHINA AND ANY DISRUPTION OF SHIPPING COULD HARM
OUR BUSINESS

         We rely principally on four contract ocean carriers to ship virtually
all of the products that we import to our warehouse facility in Compton,
California. Retailers that take delivery of our products in China rely on a
variety of carriers to import those products. Any disruptions in shipping,
whether in California or China, caused by labor strikes, other labor disputes,
terrorism, and international incidents or otherwise could significantly harm our
business and reputation.

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.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE

                                       17
<PAGE>

         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:

         -unpredictable consumer preferences and spending trends;

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

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

         - changes in our pricing policies, the pricing policies of our
           competitors and general pricing trends in the consumer and
           electronics and toy markets;

         -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, and 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 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.
We, however, have anticipated this shortage and have made commitments to our
factories to purchase chips in advance. If we are unable to anticipate any
shortages of parts and materials in the future, we may experience severe
production problems, which would impact our sales.

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.

                                       18
<PAGE>

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 and
that our suppliers have complied with these 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 2002 and 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. Mr. Klecha's employment agreement expires on May 31, 2003. We
are currently in negotiations with Mr. Klecha regarding his employment with our
company after May 31, 2003. 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.

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.

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


                                       19
<PAGE>

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 December 31, 2002, there were 8,125,178 shares of our common
stock outstanding. We have filed three registration statements registering an
aggregate 6,742,234 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, 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 and 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 December 31, 2002, we had 8,125,178 shares
of common stock issued and outstanding and an aggregate of 1,336,250 outstanding
options and warrants. As such, our Board of Directors has the power, without
stockholder approval, to issue up to 9,438,572 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.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         The Company does not hold any investments in market risk sensitive
instruments. Accordingly, the Company believes that it is not subject to any
material risks arising from changes in interest rates, foreign currency exchange
rates, commodity prices, equity prices or other market changes that affect
market risk instruments

ITEM 4.   CONTROLS AND PROCEDURES

         Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC reports. It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.

                                       20
<PAGE>

         In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 2. CHANGES IN SECURITIES

(a) Not Applicable.

(b) Not Applicable.

(c) On December 31, 2002, we issued an aggregate of 187,000 options to our
employees, as consideration for services they had rendered to us. We issued
these options to our employees in reliance upon Section 4(2) of the Securities
Act, because our employees were knowledgeable, sophisticated and had access to
comprehensive information about us.

Name                                      Number of Options  Exercise Price
- ----                                      -----------------  --------------
Frank Abell                                           6,000  $9.00
Jennifer Barnes                                       5,000  $9.00
Dan Becherer                                         10,000  $9.00
Almina Brady-Dykes                                    6,000  $9.00
Elizabeth Canela                                      3,000  $9.00
Tammy Chestnut                                        1,000  $9.00
Belinda Cheung                                          500  $9.00
Danny Cheung                                          1,000  $9.00
Jeffrey Chiu                                          1,000  $9.00
Brian Cino                                            3,000  $9.00
John DeNovi                                          10,000  $9.00
Teresa Garcia                                        15,000  $9.00
April Green                                          20,000  $9.00
Alicia Haskamp                                       18,000  $9.00
Michelle Ho                                           3,000  $9.00
Wilson Ho                                             1,000  $9.00
Dale Hopkins                                         10,000  $9.00
Irene Ko                                              3,000  $9.00
Bill Lau                                              4,500  $9.00
Dora Lee                                              3,000  $9.00
Nataly Lessard                                        6,000  $9.00
Gigi Leung                                              500  $9.00
Marian McElligott                                    15,000  $9.00
Adolph Nelson                                         2,000  $9.00
Rick Ng                                                 500  $9.00
Cathy Novello                                         4,000  $9.00
Jennifer O'Kuhn                                       2,000  $9.00
Jorge Otaegui                                         2,000  $9.00
Terri Phillips                                        3,000  $9.00
Melody Rawski                                         5,000  $9.00
Asante Sellers                                        1,000  $9.00
Stacy Sethman                                         5,000  $9.00
John Steele                                          10,000  $9.00
Richard Torrelli                                      1,000  $9.00
Nicolas Venegas                                       2,000  $9.00
Vicky Xavier                                          2,500  $9.00
Ho Man Yeung                                            500  $9.00
Yen Yu                                                1,000  $9.00

                                       21
<PAGE>

         For each employee, twenty percent (20%) of their options are
exercisable on January 1, 2004 and 20% exercisable each January 1st thereafter
with the last 20% becoming exercisable on January 1, 2008. The options expire 5
years after they become exercisable with varying expiration dates from December
31, 2009 through December 31, 2013.

         During the three month period ended December 31, 2002, one employee
exercised stock options issued under our 1994 Amended and Restated Management
Stock Option Plan. The employee exercised options to acquire an aggregate of
1,875 shares of our common stock. The name of the option holder, the date of
exercise, the number of shares purchased, the exercise price and the proceeds
received by the Company are listed below.

                    Date of           No. of       Exercise
Name                Exercise          Shares       Price        Proceeds
- -------------       --------          -------      --------     --------
Adolph Nelson       12/19/02           1,875        $2.04       $ 3,825


Mr. Nelson paid for his shares with cash. Mr. Nelson exercised his options in
reliance upon Section 4(2) of the Securities Act of 1933, because he is are
knowledgeable, sophisticated and had access to comprehensive information about
the Company. 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 of Mr. Nelson.

(d) Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

         In February 2003, the Board requested that Mr. Steele remain as Chief
Executive Officer and Chairman of the Board for another year, until February 28,
2004. Mr. Steele will be employed under the terms of his employment agreement
dated March 1, 1998 and an amendment effective as of May 5, 2000. In a press
release dated February 1, 2002 and in subsequent SEC filings, the Company had
announced that Mr. Steele would be retiring as the Chief Executive Officer on
February 28, 2003. John Klecha will remain employed as the Chief Operating
Officer and President of the Company until May 31, 2003, which is the expiration
date of his employment agreement with the Company. The Board is currently in
negotiations with Mr. Klecha regarding his employment with the Company after May
31, 2003. Further, in January 2003, the Board commenced a search process to
identify talented senior level executives to join the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

         10.1     Sixth Amendment dated December 27, 2002 to Loan and Security
                  Agreement dated April 26, 2001 by and between LaSalle Business
                  Credit, Inc. and the Company.

         10.2     Sublease dated December 2002 between Nakamichi America
                  Corporation and the Company for warehouse space in Rancho
                  Dominguez, California.

         10.3     Domestic Merchandise License Agreement dated November 1, 2000
                  between MTV Networks, a division of Viacom International, Inc.
                  and the Company (portions of this Exhibit 10.3 have been
                  omitted pursuant to a request for confidential treatment filed
                  with the Securities and Exchange Commission).

         10.4     Amendment dated January 1, 2002 to Domestic Merchandise
                  License Agreement between MTV Networks, a division of Viacom
                  International, Inc. and the Company (portions of this Exhibit
                  10.4



                                       22
<PAGE>

                  have been omitted pursuant to a request for confidential
                  treatment filed with the Securities and Exchange Commission).

         10.5     Second Amendment as of November 13, 2002 to Domestic
                  Merchandise License Agreement between MTV Networks, a division
                  of Viacom International, Inc. and the Company (portions of
                  this Exhibit 10.5 have been omitted pursuant to a request for
                  confidential treatment filed with the Securities and Exchange
                  Commission).

         99.1     Certifying Statement of the Chief Executive Officer pursuant
                  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
                  of the Sarbanes-Oxley Act of 2002

         99.2     Certifying Statement of the Chief Financial Officer pursuant
                  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
                  of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

The Company did not file any Report on Form 8-K during the three months ended
December 31, 2002.

                                       23
<PAGE>

                                   SIGNATURES

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

                       THE SINGING MACHINE COMPANY, INC.

                                    Dated February 14, 2003

                                    By: /s/ April J. Green
                                    --------------------------------------------
                                    April J. Green
                                    Chief Financial Officer
                                    (On behalf of Registrant and
                                    Chief Accounting Officer)

                                       24
<PAGE>
                                 CERTIFICATIONS

I, Edward  Steele, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Singing Machine
Company, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date:    February 14, 2003       / S /    Edward Steele

                                 Edward Steele
                                 Chief Executive Officer

                                       25
<PAGE>
                                 CERTIFICATIONS


I, April J Green, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Singing Machine
Company, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date:    February 14, 2003       / S /    April J Green

                                 April J Green
                                 Chief Financial Officer
                                 (Principal Financial Officer)

                                       26

<PAGE>
                                  EXHIBIT INDEX

EXHIBIT NO.                   DESCRIPTION
- -----------                   -----------

10.1     Sixth Amendment dated December 27, 2002 to Loan and Security
         Agreement dated April 26, 2001 by and between
         LaSalle Business Credit, Inc. and the Company.

10.2     Sublease dated December 27, 2002 between Nakamichi American
         Corporation and the Company for warehouse space in Rancho Dominguez,
         California.


10.3     Domestic Merchandise License Agreement dated November 1, 2000 between
         MTV Networks, a division of Viacom International, Inc. and the
         Company (portions of this Exhibit 10.3 have been omitted pursuant to
         a request for confidential treatment filed with the Securities and
         Exchange Commission).

10.4     Amendment dated January 1, 2002 to Domestic Merchandise License
         Agreement between MTV Networks, a division of Viacom International,
         Inc. and the Company (portions of this Exhibit 10.4 have been omitted
         pursuant to a request for confidential treatment filed with the
         Securities and Exchange Commission).

10.5     Amendment dated November 13, 2002 to Domestic Merchandise License
         Agreement between MTV Networks, a division of Viacom International,
         Inc. and the Company (portions of this Exhibit 10.5 have been omitted
         pursuant to a request for confidential treatment filed with the
         Securities and Exchange Commission).

99.1     Certifying Statement of the Chief Executive Officer pursuant to 18
         U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the Sarbanes-
         Oxley Act of 2002

99.2     Certifying Statement of the Chief Financial Officer pursuant to 18
         U.S.C. Section 1350, as adopted
         pursuant to Section 906 of the
         Sarbanes Oxley Act of 2002

                                       27

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>loanamendment-101.txt
<DESCRIPTION>AMENDMENT 6 TO LOAN AGREEMENT
<TEXT>
                                                                    EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP



135 South LaSalle Street
Suite 425                                    December 27, 2002
Chicago, Illinois 60603
(312) 904-8490

The Singing Machine Company, Inc.
6601 Lyons Road
Suite A-7
Coconut Creek, Florida 33073

         RE:  SIXTH AMENDMENT

Gentlemen:

     THE SINGING MACHINE COMPANY, INC., a Delaware corporation ("BORROWER") and
LASALLE BUSINESS CREDIT, INC., a Delaware corporation ("LENDER") have entered
into that certain Loan and Security Agreement dated April 26, 2001 (the
"SECURITY AGREEMENT"). From time to time thereafter, Borrower and Bank may have
executed various amendments (each an "AMENDMENT" and collectively the
"AMENDMENTS") to the Security Agreement (the Security Agreement and the
Amendments hereinafter are referred to, collectively, as the "AGREEMENT").
Borrower and Lender now desire to further amend the Agreement as provided
herein, subject to the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

     1.   The Agreement hereby is amended as follows:

          (a) Paragraph (1) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:

               (i)  LOANS: Subject to the terms and conditions of the Agreement
                    and the Other Agreements, Lender shall, absent the
                    occurrence of an Event of Default, advance an amount up to
                    the sum of the following sublimits (the "LOAN LIMIT"):

                    (a)  Up to seventy percent (70%), or such lesser percentage
                         as determined by Lender in its sole discretion
                         exercised in good faith, of the face amount (less
                         maximum discounts,


<PAGE>

                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

The Singing Machine Company, Inc.
December 27, 2002
Page 2

                         credits and allowances which may be taken by or granted
                         to Account Debtors in connection therewith in the
                         ordinary course of Borrower's business) of Borrower's
                         Eligible Accounts; plus

                    (b)  Subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: up to forty percent (40%), or such lesser
                         percentage as determined by Lender in its sole
                         discretion exercised in good faith, of the lower of the
                         cost or market value of Borrower's Eligible Inventory
                         or (I) Two Million Five Hundred Thousand and No/100
                         Dollars ($2,500,000.00) during the period of May 1st
                         through July 31st of each calendar year; (II) Five
                         Million and No/100 Dollars ($5,000,000.00) during the
                         period of August 1st through November 30th of each
                         calendar year; provided, that commencing on December
                         1st of each calendar year, said sublimit shall reduce
                         by One Million Five Hundred Thousand and No/100 Dollars
                         ($1,500,000.00) per week and shall continue to reduce
                         on the same day of each week until December 15th of
                         each calendar year, on which date said advance rate
                         shall reduce to zero percent (0%) during the period of
                         December 15th of each calendar year through April 30th
                         of each following calendar year;

                         provided, however the following advance rates and
                         amounts shall apply during the following periods:
                         subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: A) up to twenty percent (20%), or such
                         lesser percentage as determined by Lender in its sole
                         discretion exercised in good faith, of the lower of
                         the cost or market value of Borrower's Eligible
                         Inventory or Two Million Five Hundred Thousand and
                         No/100 Dollars ($2,500,00000) during the period of
                         December 16, 2002 through January 15, 2003; and B) up
                         to ten percent (10%), or such lesser percentage as
                         determined by Lender in its sole discretion exercised
                         in good faith, of the lower of the cost or market
                         value of Borrower's Eligible Inventory or Two Million
                         and No/100 Dollars ($2,000,000.00) during the period
                         of January 16, 2003 through February 10, 2003; and


<PAGE>


                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP



The Singing Machine Company, Inc.
December 27, 2002
Page 3

                         commencing on February 11, 2003 through April 30,
                         2003, said sublimit shall reduce to Zero and No/100
                         Dollars ($0.00), and during which time said advance
                         rate shall reduce to zero percent (0%); plus

                    (c)  Subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: up to forty percent (40%), or such lesser
                         percentage as determined by Lender in its sole
                         discretion exercised in good faith, against the face
                         amount of commercial Letters of Credit issued or
                         guaranteed by Lender for the purpose of purchasing
                         Eligible Inventory; provided, that such commercial
                         Letters of Credit are in form and substance
                         satisfactory to Lender or Two Million Five Hundred
                         Thousand and No/100 Dollars ($2,500,000.00); provided,
                         that said advance rate shall reduce to zero percent
                         (0%) during the period of December 1st of each calendar
                         year through April 30th of each following calendar
                         year; minus

                    (d)  Such reserves, as Lender elects, in its sole discretion
                         exercised in good faith, to establish from time to
                         time, including without limitation, (I) a seasonal
                         dilution reserve in the amount of One Million and
                         No/100 Dollars ($1,000,000.00) against Borrower's
                         "Eligible Accounts" during the periods of October 1,
                         2002 until March 15, 2003 and October 1st of each
                         subsequent calendar year until the "Clean Up Period"
                         (as defined below), and (II) to the extent that the
                         ratio of Free on Board sales to domestic sales
                         increases, Lender in its sole discretion may create a
                         reserve to account for the additional dilution;

                         provided, that the Loan Limit shall in no event
                         exceed (I) Twenty-Five Million and No/100 Dollars
                         ($25,000,000.00) during the period of August 1st
                         through December 15th of each calendar year; (II)
                         Twenty Million and No/100 Dollars ($20,000,000.00)
                         during the period of December 16th through December
                         31st of each calendar year; and (III) Ten Million and
                         No/100 Dollars ($10,000,000.00) during the period of
                         January 1st through July 31st of each calendar year;
                         and (IV) zero ($0) during any consecutive ninety (90)
                         day


<PAGE>


                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP



The Singing Machine Company, Inc.
December 27, 2002
Page 4

                         period between December 15th of each year through
                         April 30th of each following year (the "Clean Up
                         Period") as determined by Borrower (the "Maximum Loan
                         Limit"), except as such amount may be increased or,
                         following the occurrence of an Event of Default,
                         decreased by Lender, in its sole discretion,
                         exercised in good faith, from time to time;

                         provided further, however, that the following Maximum
                         Loan Limits shall apply during the following time
                         periods: the Loan Limit shall in no event exceed (I)
                         Fifteen Million and No/100 Dollars ($15,000,000.00)
                         during the period of December 16, 2002 through
                         December 31, 2002; (III) Twelve Million Five Hundred
                         Thousand and No/100 Dollars ($12,500,000.00) during
                         the period of January 1, 2003 through January 14,
                         2003; (IV) Ten Million and No/100 Dollars
                         ($10,000,000.00) during the period of January 15,
                         2003 through July 31, 2003; and (V) zero ($0) during
                         the consecutive forty-five (45) day period between
                         March 15, 2003 through April 30, 2003, except as such
                         amount may be increased or, following the occurrence
                         of an Event of Default, decreased by Lender, in its
                         sole discretion, exercised in good faith, from time
                         to time.

          (a) Paragraph (5)(c) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:

                    (c)  ONE-TIME AMENDMENT FEES: Borrower shall pay to Bank a
                         one-time amendment fee of Twenty-five Thousand and
                         No/100 Dollars ($25,000.00), which fee shall be deemed
                         fully earned on the date of this Amendment and payable
                         on January 31, 2003.

     2. This Amendment shall not become effective until fully executed by all
parties hereto.

     3. Except as expressly amended hereby and by any other supplemental
documents or instruments executed by either party hereto in order to effectuate
the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby
are ratified and confirmed by the parties hereto and remain in full force and
effect in accordance with the terms thereof.


<PAGE>


                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP


The Singing Machine Company, Inc.
December 27, 2002
Page 5

                                               LASALLE BUSINESS CREDIT, INC.

                                               By /s/ Casey Orlowski
                                                  ---------------------------

                                               Title Vice President
                                                  ---------------------------

ACKNOWLEDGED AND AGREED TO
this 27th day of December, 2002.


THE SINGING MACHINE COMPANY, INC.

By /s/ John F. Klecha
   -------------------------------
         JOHN F. KLECHA
Title    PRESIDENT/SECRETARY



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>nakamichisublease.txt
<DESCRIPTION>NAKAMICHI SUBLEASE
<TEXT>
                                                                    EXHIBIT 10.2

                               STANDARD SUBLEASE

                                     DRAFT
              (Short-form to be used with post 1995 AIREA leases)

(NOTE: DO NOT USE IF LESS THAN ENTIRE PREMISES ARE BEING SUBLET. FOR SITUATIONS
 WHERE THE PREMISES ARE TO BE OCCUPIED BY MORE THAN ONE TENANT OR SUBTENANT USE
                  THE "STANDARD SUBLEASE--MULTI-TENANT" FORM)

1. Basic Provisions ("Basic Provisions").

     1.1 Parties: This Sublease ("Sublease"), dated for reference purposes only
December 17 , 2002, is made by and between Nakamichi America Corporation
("Sublessor") and The Singing Machine Company, Inc. ("Sublessee"), (collectively
the "Parties", or individually a "Party").

     1.2 Premises: That certain real property, including all improvements
therein, and commonly known by the street address of 1975 Charles Willard
Street, Rancho Dominguez located in the County of Los Angeles , State of
California and generally described as (describe briefly the nature of the
property) that approximate 93,850 square foot industrial building including
approximately 13,000 square feet of office space ("Premises").

     1.3 Term: Thirty (30) months ___________years and _______________months
commencing January 1, 2003 ("Commencement Date") and ending June 30, 2005
("Expiration Date").

     1.4 Early Possession: December 2002, upon execution of Sublease Agreement
("Early Possession Date").

     1.5 Base Rent: $ 37,540.00 per month ("Base Rent"), payable on the first
(1st) day of each month commencing.

[ ] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.

     1.6 Base Rent and Other Monies Paid Upon Execution:

          (a) Base Rent: $___________________ for the period.

          (b) Security Deposit: $37,540.00 ("Security Deposit").

          (c) Association Fees: $-0- for the period.

          (d) Other: $-0- _____________________ for _________________________

          (e) Total Due Upon Execution of this Lease: $75,080.00.

     1.7 Agreed Use: administrative offices and warehousing of singing machines
and any legally related uses thereto.

     1.8 Real Estate Brokers:

          (a) Representation: The following real estate brokers (the "Brokers")
and brokerage relationships exist in this transaction (check applicable boxes):

[ ] represents Sublessor exclusively ("Sublessor's Broker");

[ ] represents Sublessee exclusively ("Sublessee's Broker"); or

[x] Colliers Seeley International, Inc. represents both Sublessor and Sublessee
("Dual Agency").

          (b) Payment to Brokers: Upon execution and delivery of this Sublease
by both Parties, Sublessor shall pay to the Brokers the brokerage fee agreed to
in a separate written agreement (or if there is no such agreement, the sum of or
% of the total Base Rent) for the brokerage services rendered by the Brokers.

     1.9 Guarantor. The obligations of the Sublessee under this Sublease shall
be guaranteed by ("Guarantor").

     1.10 Attachments. Attached hereto are the following, all of which
constitute a part of this Sublease:

[ ] an Addendum consisting of Paragraphs through ;

[ ] a plot plan depicting the Premises;

[ ] a Work Letter;

[x] a copy of the Master Lease;

[x] other (specify): Sublessor to leave fence in warehouse. Sublessor and
Sublessee will walk through the Premises to confirm area that has to be
repaired. After any repairs, Sublessee shall be responsible for repairs and
maintenance of the Premises. Sublessee shall provide Sublessor with Certificate
of Insurance showing Sublessor and Carson Dominguez as "additional insured."
Sublessee shall pay the common area maintenance expense, property taxes,
property insurance additionally every month.

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<PAGE>


2. Premises.

     2.1 Letting. Sublessor hereby subleases to Sublessee, and Sublessee hereby
subleases from Sublessor, the Premises, for the term, at the rental, and upon
all of the terms, covenants and conditions set forth in this Sublease. Unless
otherwise provided herein, any statement of size set forth in this Sublease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less. Note: Sublessee is
advised to verify the actual size prior to executing this Sublease.

     2.2 Condition. Sublessor shall deliver the Premises to Sublessee broom
clean and free of debris on the Commencement Date or the Early Possession Date,
whichever first occurs ("Start Date"), and warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems ("HVAC"), and any items which the Sublessor is obligated to
construct pursuant to the Work Letter attached hereto, if any, other than those
constructed by Sublessee, shall be in good operating condition on said date. If
a non-compliance with such warranty exists as of the Start Date, or if one of
such systems or elements should malfunction or fail within the appropriate
warranty period, Sublessor shall, as Sublessor's sole obligation with respect to
such matter, except as otherwise provided in this Sublease, promptly after
receipt of written notice from Sublessee setting forth with specificity the
nature and extent of such non-compliance, malfunction or failure, rectify same
at Sublessor's expense. The warranty periods shall be as follows: (i) 6 months
as to the HVAC systems, and (ii) 30 days as to the remaining systems and other
elements. If Sublessee does not give Sublessor the required notice within the
appropriate warranty period, correction of any such non-compliance, malfunction
or failure shall be the obligation of Sublessee at Sublessee's sole cost and
expense.

     2.3 Compliance. Sublessor warrants that any improvements, alterations or
utility installations made or installed by or on behalf of Sublessor to or on
the Premises comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ("Applicable
Requirements") in effect on the date that they were made or installed. Sublessor
makes no warranty as to the use to which Sublessee will put the Premises or to
modifications which may be required by the Americans with Disabilities Act or
any similar laws as a result of Sublessee's use. NOTE: Sublessee is responsible
for determining whether or not the zoning and other Applicable Requirements are
appropriate for Sublessee's intended use, and acknowledges that past uses of the
Premises may no longer be allowed. If the Premises do not comply with said
warranty, Sublessor shall, except as otherwise provided, promptly after receipt
of written notice from Sublessee setting forth with specificity the nature and
extent of such non-compliance, rectify the same.

     2.4 Acknowledgements. Sublessee acknowledges that: (a) it has been advised
by Sublessor and/or Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements and the Americans with Disabilities Act), and their
suitability for Sublessee's intended use, (b) Sublessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to its occupancy of the Premises,
and (c) neither Sublessor, Sublessor's agents, nor Brokers have made any oral or
written representations or warranties with respect to said matters other than as
set forth in this Sublease. In addition, Sublessor acknowledges that: (i)
Brokers have made no representations, promises or warranties concerning
Sublessee's ability to honor the Sublease or suitability to occupy the Premises,
and (ii) it is Sublessor's sole responsibility to investigate the financial
capability and/or suitability of all proposed tenants.

     2.5 Americans with Disabilities Act. In the event that as a result of
Sublessee's use, or intended use, of the Premises the Americans with
Disabilities Act or any similar law requires modifications or the construction
or installation of improvements in or to the Premises, Building, Project and/or
Common Areas, the Parties agree that such modifications, construction or
improvements shall be made at: o Sublessor's expense o Sublessee's expense.

3. Possession.

     3.1 Early Possession. If Sublessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Sublease (including but not limited to the obligations to pay Sublessee's Share
of Common Area Operating Expenses, Real Property Taxes and insurance premiums
and to maintain the Premises) shall, however, be in effect during such period.
Any such early possession shall not affect the Expiration Date.

     3.2 Delay in Commencement. Sublessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises by the Commencement
Date. If, despite said efforts, Sublessor is unable to deliver possession as
agreed, the rights and obligations of Sublessor and Sublessee shall be as set
forth in Paragraph 3.3 of the Master Lease (as modified by Paragraph 7.3 of this
Sublease).

     3.3 Sublessee Compliance. Sublessor shall not be required to tender
possession of the Premises to Sublessee until Sublessee complies with its
obligation to provide evidence of insurance. Pending delivery of such evidence,
Sublessee shall be required to perform all of its obligations under this
Sublease from and after the Start Date, including the payment of Rent,
notwithstanding Sublessor's election to withhold possession pending receipt of
such evidence of insurance. Further, if Sublessee is required to perform any
other conditions prior to or concurrent with the Start Date, the Start Date
shall occur but Sublessor may elect to withhold possession until such conditions
are satisfied.

4. Rent and Other Charges.

     4.1 Rent Defined. All monetary obligations of Sublessee to Sublessor under
the terms of this Sublease (except for the Security Deposit) are deemed to be
rent ("Rent"). Rent shall be payable in lawful money of the United States to
Sublessor at the address stated herein or to such other persons or at such other
places as Sublessor may designate in writing. 4.2 Utilities. Sublessee shall pay
for all water, gas, heat, light, power, telephone, trash disposal and other
utilities and services supplied to the Premises, together with any taxes
thereon.

5. Security Deposit. The rights and obligations of Sublessor and Sublessee as to
said Security Deposit shall be as set forth in Paragraph 5 of the Master Lease
(as modified by Paragraph 7.3 of this Sublease).

6. Agreed Use. The Premises shall be used and occupied only for Specified in
Paragraph 1.7 above and for no other purpose.

7. Master Lease.

     7.1 Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "Master Lease", wherein Carson Dominguez Properties, LP is the
lessor, hereinafter the "Master Lessor".

     7.2 This Sublease is and shall be at all times subject and subordinate to
the Master Lease.

     7.3 The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this Sublease
document shall control over the Master Lease. Therefore, for the purposes of
this Sublease, wherever in the Master Lease the word "Lessor" is used it shall
be deemed to mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.

     7.4 During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease,
Sublessee does hereby expressly assume and agree to perform and comply with, for
the benefit of Sublessor and Master Lessor, each and every obligation of
Sublessor under the Master Lease except for the following paragraphs which are
excluded therefrom: 1.3, 1.4, 1.5, 1.6, 1.7, 1.8, 1.10, 1.11, 1.12

  ORL                                                                   AJG
- ----------                                                           ----------
- -----------                                                          ----------
Initials                         Page 2 of 5                          Initials



<PAGE>

     7.5 The obligations that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sublessee's Assumed Obligations". The
obligations that sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remaining Obligations".

     7.6 Sublessee shall hold Sublessor free and harmless from all liability,
judgments, costs, damages, claims or demands, including reasonable attorneys
fees, arising out of Sublessee's failure to comply with or perform Sublessee's
Assumed Obligations.

     7.7 Sublessor agrees to maintain the Master Lease during the entire term of
this Sublease, subject, however, to any earlier termination of the Master Lease
without the fault of the Sublessor, and to comply with or perform Sublessor's
Remaining Obligations and to hold Sublessee free and harmless from all
liability, judgments, costs, damages, claims or demands arising out of
Sublessor's failure to comply with or perform Sublessor's Remaining Obligations.

     7.8 Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any Party to the
Master Lease.

8. Assignment of Sublease and Default.

     8.1 Sublessor hereby assigns and transfers to Master Lessor Sublessor's
interest in this Sublease, subject however to the provisions of Paragraph 8.2
hereof.

     8.2 Master Lessor, by executing this document, agrees that until a Default
shall occur in the performance of Sublessor's Obligations under the Master
Lease, that Sublessor may receive, collect and enjoy the Rent accruing under
this Sublease. However, if Sublessor shall Default in the performance of its
obligations to Master Lessor then Master Lessor may, at its option, receive and
collect, directly from Sublessee, all Rent owing and to be owed under this
Sublease. In the event, however, that the amount collected by Master Lessor
exceeds Sublessor's obligations any such excess shall be refunded to Sublessor.
Master Lessor shall not, by reason of this assignment of the Sublease nor by
reason of the collection of the Rent from the Sublessee, be deemed liable to
Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.

     8.3 Sublessor hereby irrevocably authorizes and directs Sublessee upon
receipt of any written notice from the Master Lessor stating that a Default
exists in the performance of Sublessor's obligations under the Master Lease, to
pay to Master Lessor the Rent due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request from Master Lessor, and that Sublessee shall pay such Rent
to Master Lessor without any obligation or right to inquire as to whether such
Default exists and notwithstanding any notice from or claim from Sublessor to
the contrary and Sublessor shall have no right or claim against Sublessee for
any such Rent so paid by Sublessee.

     8.4 No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.

9. Consent of Master Lessor.

     9.1 In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within 10 days of the date hereof, Master Lessor
signs this Sublease thereby giving its consent to this Subletting.

     9.2 In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then neither this Sublease, nor the
Master Lessor's consent, shall be effective unless, within 10 days of the date
hereof, said guarantors sign this Sublease thereby giving their consent to this
Sublease.

     9.3 In the event that Master Lessor does give such consent then:

          (a) Such consent shall not release Sublessor of its obligations or
alter the primary liability of Sublessor to pay the Rent and perform and comply
with all of the obligations of Sublessor to be performed under the Master Lease.

          (b) The acceptance of Rent by Master Lessor from Sublessee or any one
else liable under the Master Lease shall not be deemed a waiver by Master Lessor
of any provisions of the Master Lease.

          (c) The consent to this Sublease shall not constitute a consent to any
subsequent subletting or assignment.

          (d) In the event of any Default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors or any one
else liable under the Master Lease or this Sublease without first exhausting
Master Lessor's remedies against any other person or entity liable thereon to
Master Lessor.

          (e) Master Lessor may consent to subsequent sublettings and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or any one else liable under
the Master Lease and without obtaining their consent and such action shall not
relieve such persons from liability.

          (f) In the event that Sublessor shall Default in its obligations under
the Master Lease, then Master Lessor, at its option and without being obligated
to do so, may require Sublessee to attorn to Master Lessor in which event Master
Lessor shall undertake the obligations of Sublessor under this Sublease from the
time of the exercise of said option to termination of this Sublease but Master
Lessor shall not be liable for any prepaid Rent nor any Security Deposit paid by
Sublessee, nor shall Master Lessor be liable for any other Defaults of the
Sublessor under the Sublease.

          (g) Unless directly contradicted by other provisions of this Sublease,
the consent of Master Lessor to this Sublease shall not constitute an agreement
to allow Sublessee to exercise any options which may have been granted to
Sublessor in the Master Lease (see Paragraph 39.2 of the Master Lease).

     9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms of this
Sublease.

     9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no Default presently exists under the Master Lease of obligations to
be performed by Sublessor and that the Master Lease is in full force and effect.

     9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to deliver
to Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any Default of Sublessor described in any notice of default within
ten days after service of such notice of default on Sublessee. If such Default
is cured by Sublessee then Sublessee shall have the right of reimbursement and
offset from and against Sublessor.

10. Additional Brokers Commissions.

     10.1 Sublessor agrees that if Sublessee exercises any option or right of
first refusal as granted by Sublessor herein, or any option or right
substantially similar thereto, either to extend the term of this Sublease, to
renew this Sublease, to purchase the Premises, or to lease or purchase adjacent
property which Sublessor may own or in which Sublessor has an interest, then
Sublessor shall pay to Broker a fee in accordance with the schedule of Broker in
effect at the time of the execution of this Sublease. Notwithstanding the
foregoing, Sublessor's obligation under this Paragraph is limited to a
transaction in which Sublessor is acting as a Sublessor, lessor or seller.

     10.2 Master Lessor agrees that if Sublessee shall exercise any option or
right of first refusal granted to Sublessee by Master Lessor in connection with
this Sublease, or any option or right substantially similar thereto, either to
extend or renew the Master Lease, to purchase the Premises or any part thereof,
or to lease or purchase adjacent property which Master Lessor may own or in
which Master Lessor has an interest, or if Broker is the procuring cause of any
other lease or sale entered into between Sublessee and Master Lessor pertaining
to the Premises, any part thereof, or any adjacent property which Master Lessor
owns or in which it has an interest, then as to any of said transactions, Master
Lessor shall pay to Broker a fee, in cash, in accordance with the schedule of
Broker in effect at the time of the execution of this Sublease.

     10.3 Any fee due from Sublessor or Master Lessor hereunder shall be due and
payable upon the exercise of any option to extend or renew, upon the execution
of any new lease, or, in the event of a purchase, at the close of escrow.

     10.4 Any transferee of Sublessor's interest in this Sublease, or of Master
Lessor's interest in the Master Lease, by accepting an assignment thereof, shall
be deemed to have assumed the respective obligations of Sublessor or Master
Lessor under this Paragraph 10. Broker shall be deemed to be a third-party
beneficiary of this paragraph 10.

  ORL                                                                   AJG
- ----------                                                           ----------
- -----------                                                          ----------
Initials                         Page 3 of 5                          Initials

<PAGE>


11. Representations and Indemnities of Broker Relationships. The Parties each
represent and warrant to the other that it has had no dealings with any person,
firm, broker or finder (other than the Brokers, if any) in connection with this
Sublease, and that no one other than said named Brokers is entitled to any
commission or finder's fee in connection herewith. Sublessee and Sublessor do
each hereby agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, attorneys'
fees reasonably incurred with respect thereto.

12. Attorney's fees. If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys' fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Sublessor shall be entitled to attorneys' fees, costs and expenses incurred in
the preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach ($200 is a reasonable minimum
per occurrence for such services and consultation).

13. No Prior or Other Agreements; Broker Disclaimer. This Sublease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Sublessor and Sublessee each represents and warrants to the Brokers that it has
made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this
Sublease and as to the use, nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. The liability (including court costs
and attorneys' fees), of any Broker with respect to negotiation, execution,
delivery or performance by either Sublessor or Sublessee under this Sublease or
any amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Sublease; provided, however, that the
foregoing limitation on each Broker's liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.


ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS SUBLEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY
OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.

WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH LAWS OF
THE STATE IN WHICH THE PROPERTY IS LOCATED


Executed at: Irvine, CA                 Executed at:  Coconut Creek, FL
            --------------------------               ---------------------------

on:  December 30, 2002                  on:  23 December 2002
    ----------------------------------     -------------------------------------


By Sublessor:                           By Sublessee:

Nakamichi America Corporation           The Singing Machine Company, Inc.
- --------------------------------------  ----------------------------------------

By:  /s/ Orlando R. Lopez               By: /s/ April J. Green
    ----------------------------------     -------------------------------------

Name Printed: Orlando R. Lopez          Name Printed: April J. Green
             -------------------------               ---------------------------

Title: Chief Financial Office           Title: Chief Financial Officer
      --------------------------------        ----------------------------------

By:                                     By:
    ----------------------------------     -------------------------------------

Name Printed:                           Name Printed:
             -------------------------               ---------------------------

Title:                                  Title:
      --------------------------------        ----------------------------------

Address:                                Address:
      --------------------------------        ----------------------------------

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

Telephone/Facsimile:                    Telephone/Facsimile:
                    ------------------                      --------------------

Federal ID No.                          Federal ID No. 95-3795478
              ------------------------                --------------------------

BROKER:                                 BROKER:

Colliers Seeley International, Inc.     Colliers Seeley International, Inc.
- --------------------------------------- ----------------------------------------

Attn: Ken Yoshimoto                     Attn: Ken Yoshimoto
      ---------------------------------       ----------------------------------
Title: Senior Vice President            Title: Senior Vice President
       --------------------------------        ---------------------------------

Address: 2050 W. 190th Street,          Address: 2050 W. 190th Street,
Suite 101, Torrance, California 90504   Suite 101, Torrance, California 90504
- --------------------------------------- ----------------------------------------

Telephone/Facsimile: (310) 787-1000     Telephone/Facsimile: (310) 787-1000
                     ------------------                     --------------------

Federal ID No.                          Federal ID No.
              ------------------------                --------------------------

Consent to the above Sublease is hereby given.

  ORL                                                                   AJG
- ----------                                                           ----------
- -----------                                                          ----------
Initials                         Page 4 of 5                         Initials


<PAGE>

Executed at:                            Executed at:
            --------------------------               ---------------------------

on:                                     on:
    ----------------------------------     -------------------------------------


By Master Lessor                        By Guarantor(s)

Carson Dominguez
- --------------------------------------  ----------------------------------------

By:                                     By:
    ----------------------------------     -------------------------------------

Name Printed:                           Name Printed:
             -------------------------               ---------------------------

Title:                                  Address:
      --------------------------------          --------------------------------

By:
    ----------------------------------

Name Printed:                           Name Printed:
             -------------------------               ---------------------------

Title:                                  Address:
      --------------------------------          --------------------------------

Address:
      --------------------------------

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

Telephone/Facsimile:
                    ------------------

Federal ID No.
              ------------------------



NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower
St., Suite 600, Los Angeles, CA 90017. (213) 687-8777.

(C)Copyright 1997 By American Industrial Real Estate Association. All rights
reserved. No part of these works may be reproduced in any form without
permission in writing.

Lessor's Consent Form to Sublease attached.
ORL


  ORL                                                                   AJG
- ----------                                                           ----------
- -----------                                                          ----------
Initials                         Page 5 of 5                         Initials

<PAGE>

                          LESSOR'S CONSENT TO SUBLEASE


     Carson Dominguez Properties ("Lessor") hereby consents to the Sublease by
and between Nakamichi America Corporation (Sublessor) and The Singing Machine
Company, Inc. (Sublessee) without release Sublessor of any liability under the
Lease and without waiver of Lessor's rights set forth in the Lease to approve
any future subleases.

     The Assignment shall be construed in accordance with the laws of the State
of California.

     This Lessor's Consent to the Sublease in no event modifies or changes the
Lease or the obligations of the Lessee hereunder.

EXECUTED as of   12/23/2002.
               ----------------



                                        CARSON DOMINGUEZ PROPERTIES



                                        By: [ILLEGIBLE]
                                           ------------------------------------

                                        Title:  Sr. V.P.
                                              ---------------------------------


                                        By: [ILLEGIBLE]
                                           ------------------------------------

                                        Title:  V.P.
                                              ---------------------------------

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>mtvn-domesticlicense103.txt
<DESCRIPTION>DOMESTIC LICENSE AGREEMENT - MTVN
<TEXT>
                                                                    EXHIBIT 10.3

                                  MTVN DOMESTIC
                          MERCHANDISE LICENSE AGREEMENT

         Agreement made as of November 1, 2000, by and between MTV NETWORKS, a
division of Viacom International Inc., a Delaware corporation, with offices at
1515 Broadway, New York, New York 10036 ("MTVN"), and TIE SINGING MACHINE
COMPANY, INC., a Delaware corporation, with offices at 6601 Lyons Road, Bldg.
A-7, Coconut Creek, FL 33073 ("Licensee") (this "Agreement").


                                BASIC PROVISIONS



The "LICENSED     The "MTV: MUSIC TELEVISION" name, trademark and logo.
PROPERTY"

"KARAOKE"         A leisure activity whereby individuals sing the words to a
                  song as such words appear on a television screen or viewing
                  monitor and are displayed in sync with the audio track of such
                  song.

The "LICENSED     (1) At least two but no more than twelve compilation of song
                  titles of compact discs or cassettes which are branded with
                  the Licensed Property and comprised of a compilation of music
                  tracks and the technology necessary for the end-user to
                  participate in Karaoke activities (the "Music Product(s)"). In
                  addition to the provisions set forth in Article 4, MTVN shall
                  have final approval rights regarding the identity of the music
                  tracks and any performances contained on the Music Products.
                  The content contained in the Music Products may only be
                  provided to the end-user via the Music Products as packaged
                  goods and may not be provided on any other technical platform
                  now known or hereafter devised. The Music Products shall be
                  sold separately from the Advanced Karaoke Machine (as
                  hereafter defined) and the Karaoke Machine (as hereafter
                  defined).




* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission

<PAGE>


                  (2) No more than one title per year of the Term (as hereafter
                  defined) for a total maximum of three titles of a compact disc
                  which are branded with the Licensed Property and comprised of
                  a compilation of no more than three music tracks and the `
                  technology necessary for the end-user to participate in
                  Karaoke activities which shall be packaged with the Advanced
                  Karaoke Machine (as hereafter defined) and the Karaoke Machine
                  as hereafter defined) (the" Sampler Music Products"). In
                  addition to the provisions set forth in Article 4, MTVN shall
                  have final approval rights regarding the identity of the music
                  tracks and any performances contained on the Sampler Music
                  Products. For the avoidance of doubt, the content contained in
                  the Sampler Music Products may only be provided to the
                  end-user via the Sampler Music Products as packaged goods and
                  may not be provided on any other technical platform now known
                  or hereafter devised. No royalties shall be paid for Sampler
                  Music Products.

                  (3) One version of a Karaoke hardware machine branded with the
                  Licensed Property which (a) enables the end-user to play the
                  Music Products and the Sampler Music Products and participate
                  in Karaoke activities, (b) does not include a viewing monitor
                  and (c) must be used with a separate television set in order
                  to be functional (the "Karaoke Machine").

                  (4) One version of a Karaoke hardware machine branded with the
                  Licensed Property which (a) enables the end-user to play the
                  Music Products and the Sampler Music Products and participate
                  in Karaoke activities and (b) includes (i) a television set,
                  (ii) a single cassette deck for recording Karaoke performances
                  and (iii) an AM/FM terrestrial radio receiver (the "Advanced
                  Karaoke Machine").

                  ((1) through (4) each a "Licensed Pro of collectively the
                  "Licensed Products".)

The "LICENSED     The United States of America, its territories and possessions.
TERRITORY"


                                        2


<PAGE>


The "LICENSED     (1) Mid tier stores (e.g., JC Penny and Sears), department
CHANNELS OF       stores (e.g., May Company and Macy's), book stores whether
DISTRIBUTION"     independent or chain (e.g., Barnes & Noble), college
                  bookstores whether independent or chain, specialty/trend
                  stores (e.g., Spencer's and Gadzooks), music stores whether
                  independent or chain (e.g., Musicland), video stores whether
                  independent or chain, computer/ electronics stores (e.g.,
                  Software Etc. and Electronic Boutique), discount retailers and
                  warehouse store chains (e.g., Best Buy, Costco, Sam's Club),
                  and upon MTVN's approval in each instance, catalog retailers
                  and direct mail. MTVN acknowledges and agrees that retailers
                  in the Licensed Channels of Distribution may advertise and
                  sell the Licensed Products via their catalogs and direct mail
                  which are branded with their retail store names (e.g., JC
                  Penny catalog).

                  (2) Upon MTVN's prior approval, Licensee shall have the
                  non-exclusive right to distribute the Licensed Products
                  through Licensee's wholly owned and operated website; and
                  through (a) online only retailers (e.g,, amazon.com and
                  etoys.com) and (b) the wholly owned and operated websites of
                  retailers in the Licensed Channels of Distribution (the (a)
                  and (b) collectively, the "LCD Retailers") provide _d,
                  however, that the websites owned by Licensee and the LCD
                  Retailers shall be in compliance with MTVN's website operating
                  guidelines and the an-line Privacy Alliance Guidelines. In
                  addition, Licensee acknowledges and agrees on behalf of
                  itself, and the LCD Retailers, that (i) MTVN shall have
                  approval over all content used on the websites used by
                  Licensee and the LCD Retailers incorporating the Licensed
                  Products and the Licensed Property, (ii) in no event shall
                  Licensee or the LCD Retailer develop a MTVN branded online
                  boutique or website, (iii) in no event shall Licensee or the
                  LCD Retailer use any MTVN content (i.e., video clips, sound
                  bytes and copies of book pages, etc.) on their respective
                  websites, (iv) there shall be a one-way link from the websites
                  used by Licensee and the LCD Retailer incorporating the
                  Licensed Products and the Licensed Property to the appropriate
                  MTVN website, (v) on-line orders for the Licensed Products
                  shall only be fulfilled for orders placed within the Licensed
                  Territory and 3


                                       3
<PAGE>



                  (vi) MTVN may at any time during the Term of this Agreement
                  revoke Licensee's right to distribute the Licensed Products
                  on-line upon 15 days prior notice. Licensee covenants and
                  agrees that it will use best efforts to ensure that the LCD
                  Retailers are in compliance with the terms and conditions set
                  forth above.


The "TERM"        The term of this Agreement shall commence on November 1, 2000
                  and continue through December 31, 2003.

The "ROYALTY      *% of Net Sales (as defined in the annexed Additional Terms
RATE"             and Conditions) for the Music Products. *% of Net Sales (as
                  defined in the annexed Additional Terms and Conditions) for
                  the Karaoke Machine and the Advanced Karaoke Machine.


The "GUARANTEED   The Guaranteed Minimum Royalty for the Term is $686,250.00 and
MINIMUM ROYALTY"  shall be payable as follows:

                  $50,000.00 on January 5, 2001;
                  $40,000.00 on or before September 30, 2001;
                  $40,000.00 on or before November 30, 2001;
                  $64,375.00 on or before January 31, 2002;
                  $64,375.00 on or before April 30, 2002;
                  $64,375.00 on or before July 31, 2002;
                  $64,375.00 on or before October 31, 2002;
                  $75,000.00 on or before January 31, 2003;
                  $75,000.00 on or before April 30, 2003;
                  $75,000.00 on or before July 31, 2003; and
                  $73,750.00 on or before October 31, 2003.


"PRESENTATION     (1) The Presentation Date to Licensee's Retailer's shall be
DATE TO           January 6, 2001 for (a) the Karaoke Machine, (b) the Advanced
LICENSEE'S        Karaohe Machine and (c) at least two Music Products, the
RETAILERS"        titles of such Music Products to be mutually agreed upon by
                  MTVN and Licensee.

                  (2) The Presentation Date to Licensee's Retailer's for the
                  remaining Compact Disks shall be determined in accordance with
                  a mutually acceptable presentation schedule to be agreed upon
                  by MTVN and Licensee.


* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission

                                        4


<PAGE>
"INITIAL SHIP     (1) The Initial Ship to Licensee's Retailers shall be June 30,
DATE TO           2001 for (a) the Karaoke Machine, (b) the Advanced Karaoke
LICENSEE'S        Machine and (c) at least two Music Products, the titles of
RETAILERS"        such Music Products to be mutually agreed upon b MTVN and
                  Licensee.


                  (2) The Initial Ship to Licensee's Retailers for the remaining
                  Compact Disks shall be determined in accordance with a
                  mutually acceptable initial schedule to be agreed upon by MTVN
                  and Licensee.


"COPYRIGHT NOTICE""(C)____ Licensee to fill in year of publication] MTV
                  Networks, a division of Viacom International Inc. All Rights
                  Reserved."

"TRADEMARK        "MTV: MUSIC TELEVISION(TM)". Licensee shall also include the
NOTICE"           following notice on all materials set forth in Section 5(b) of
                  The Additional Terms And Conditions in proximity to the
                  Licensed Property. "MTV: MUSIC TELEVISION" and all related
                  titles and logos are trademarks of MTV Networks, a division of
                  Viacom International Inc.

"ADDITIONAL       Licensee shall be solely responsible for all costs and
INFORMATION"      expenses related to the Licensed Products including, but not
                  limited to, third party clearances, in connection with the
                  development, manufacture, packaging, duplication, advertising,
                  marketing, promotion, distribution and sale of the Licensed
                  Products. Licensee shall be solely responsible for obtaining
                  all licenses, clearances and permissions (including, without
                  limitation, all master use mechanical license agreements) for
                  all content to be included on or in connection with the
                  Licensed Products that may be necessary for the manufacture,
                  advertising, marketing, promotion, distribution and
                  exploitation of the Licensed Products. All applicable fees,
                  payments and royalties for talent and music relating to the
                  Licensed Products and the advertising, marketing and promotion
                  thereof (including, any guild, union and residual obligations,
                  music synchronization fees and other audio and art costs
                  including materials requested by Licensee that MTVN must
                  create) shall be paid by Licensee.

                                        5


<PAGE>


         This Agreement includes the Additional Terms and Conditions and the
Exhibits annexed hereto and made a part hereof. All capitalized terms in the
Additional Terms and Conditions shall have the respective definitions as set
forth in the Basic Provisions herein.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

THE SINGING MACHINE COMPANY, INC.            MTV NETWORKS, a division of
                                             Viacom International Inc.



By: /s/ John Klecha                          By: /s/ Heidi Eskenazi
- --------------------------------             ----------------------------------
Name:  John Klecha                           Name:  Heidi Eskenazi
Title: Chief Operating Officer               Title: Vice president, Licensing



                                        6

<PAGE>


                         ADDITIONAL TERMS AND CONDITIONS
                         -------------------------------

ARTICLE 1. LICENSE. MTVN hereby grants to Licensee, and Licensee hereby accepts,
the nonexclusive right to incorporate the Licensed Property on the Licensed
Products solely for the purpose of the manufacture, distribution, sale and
advertisement of the Licensed Products through the Licensed Channels of
Distribution in the Licensed Territory during the Term (the "License") as
specified in the Basic Provisions. Licensee shall not have the right to
sublicense the rights granted hereunder.

ARTICLE 2. RESERVATION OF RIGHTS. MTVN retains all rights not expressly granted
hereunder including, but not limited to, the right to distribute and sell the
Licensed Products through premium offers, combination and give-away Sales,
direct response, direct mail, home shopping type of networks, the on-line medium
or any other non-traditional medium now known or hereafter invented, sales
clubs, incentive programs, theme parks/ recreational attractions and activities,
any MTVN or its affiliated companies' retail outlets and the rights to the
Licensed Property, and all names, trademarks and likenesses of characters which
are used in connection with a motion picture or other theatrical or live stage
presentation for all products, including the Licensed Products.

ARTICLE 3. ROYALTIES, ACCOUNTING AND AUDIT.
- ---------  -------------------------------

         (a) COMPUTATION:
             ------------

                  (i) Royalties shall be payable by Licensee at the Royalty Rate
set forth in the Basic Provisions on Net Sales of all Licensed Products. "Net
Sales" shall mean gross sales less customary trade quantity discounts and
allowances, actual returns and returns for damaged goods only, the aggregate of
which shall not exceed eight percent of gross sales. Except for those expressly
provided for in this Section 3(a)(i), there shall be no deductions of any sort
or kind including, but not limited to, deductions for returns, cash discounts,
costs or expenses incurred in the manufacture, distribution, sale or
advertisement of the Licensed Products, or for uncollected bills.

                  (ii) Licensee shall not have the right to sell one or more of
the Licensed Products packaged together with a non-"MTV: Music Television"
branded product (the "Bundle" or "Bundling").

                  (iii) Royalty obligations shall accrue upon the sale of the
Licensed Products. A Licensed Product is considered "sold" when it is invoiced,
shipped, or paid for, whichever event occurs first. Subject to the provisions o
f Section (3)(a)(i), Licensee shall be entitled to credit MTVN's royalty account
for any payment of royalties made to MTVN for Licensed Products sold and
subsequently returned for credit.


<PAGE>

                  (iv) In the event that Licensed Products are sold to any party
affiliated, controlled, or in any way related to Licensee at a special price
lower than the average price charged to other parties, the royalty payable to
MTVN shall be based upon said average price.

         (b) PAYMENTS:
             ---------

                  (i) Royalties shall be payable on a quarterly basis throughout
the Term, within 45 days after the close of each respective quarter. Quarters
shall be based on a standard calendar year.

                  (ii) Licensee shall pay to MTVN a non-refundable Guaranteed
Minimum Royalty as set forth in the Basic Provisions.


                  (iii) All payments and Quarterly Reports to MTVN hereunder
shall be sent to the following address: MTV Networks, Ancillary Sales, P.O. Box
13801, Newark, NJ 07188.0801 with a copy of such Quarterly Report to the Vice
President, Licensing, MTV: Music Television at the address specified in Article
16.


                  (iv) All payments past due shall be subject to a late charge
of one percent per month (or the highest rate allowed by law if lower), from the
date such payments were due.

                  (v) The Guaranteed Minimum Royalty shall be non-refundable but
recoupable against the royalties due hereunder. Royalty payments made for any
period of the Term shall be credited against the Guaranteed Minimum Royalty for
such period of the Term.

         (c) ACCOUNTING:
             -----------

                  Within 45 days after the close of each quarter, Licensee shall
furnish to MTVN complete and accurate statements of its sales of Licensed
Products and royalties due MT VN, in the form annexed hereto as Exhibit A and
Exhibit B (the "Quarterly Reports"). Quarterly Reports shall be furnished
whether or not Licensee has actual royalties to report for any quarter. All
Quarterly Reports shall be signed and certified as correct by an officer of
Licensee. Acceptance by MTVN of royalty payments and Quarterly Reports shall not
preclude MTVN from questioning the accuracy thereof.

         (d) AUDIT:
             ------

                  (i) Licensee shall keep accurate books of account and records
at its principal place of business of all transactions relating to, or
affecting, this Agreement, during the Term and fox a period of three years
thereafter. MTVN, or its representative, shall have the right during reasonable
business hours to examine and verify Licensee's physical inventory of the
Licensed Products as well as Licensee's books of accounts and records, and to
make copies and extracts thereof; provided, however, that all such audits shall
be kept confidential between the parties and relates solely to the performance
of the parties under this Agreement. No accounts or records not rationally
relating to Licensee's performance under this Agreement shall be available to
MTVN.


                                        8


<PAGE>


                  (ii) In the event that an audit by MTVN discloses an
underpayment in royalties due MTVN, Licensee shall promptly pay MTV'N such
discrepancy plus a late charge of one percent per month (or the highest rate
allowed by law if lower), from the day such payments were due. If such audit
discloses a discrepancy of seven percent or more in favor of Licensee for any
quarter, Licensee shall also reimburse MTVN for all costs, fees and expenses,
incurred by MTVN in connection with the audit. If such audit discloses a
discrepancy in favor of MTVN, such overpayments shall be deducted from future
payments due MTVN under-this Agreement.


ARTICLE 4. QUALITY, SAMPLES, APPROVALS AND MANUFACTURES.
- ---------  --------------------------------------------

         (a) The quality and style of all Licensed Products, and the manner in
which the License Property may appear on the Licensed Products and on or in any
packaging, promotional materials, labels, advertising, publicity and display
materials of any kind and in any medium which are used in connection with the
Licensed Products are subject to MTVN's prior approval and shall be in full
conformity with all applicable laws and regulations.

         (b) At each stage of development or production and prior to
manufacture, Licensee shall promptly provide MTVN with two samples in the form
of proofs and/or prototypes for each Licensed Product and all related materials
for MTVN's approval, which may be withheld in MTVN's sole discretion. MTVN shall
advise Licensee in writing of its approval. or disapproval of such samples
within 10 business days. No samples shall be deemed approved unless and until
MTVN has given its approval. Licensee shall not proceed beyond any development
or production stage where approval is required without first securing such
approval. - In connection with the submission of samples by Licensee for MTVN's
approval, Licensee shall submit to MTVN a completed copy of the Licensed Product
Approval Form provided by MTVN as Exhibit _C. Once a sample has been approved,
Licensee shall not depart therefrom. Approval by MTVN shall not relieve Licensee
of any of its agreements, indemnities and warranties hereunder.

         (c) Licensee shall promptly reimburse MTVN for any and all costs of
artwork and other creative materials prepared by MTVN exclusively for the
Licensed Products at Licensee's request.

         (d) Concurrently with the initial shipment of each Licensed Product,
Licensee shall furnish to MTVN, at no cost to MTVN, (i) 50 samples of each Music
Product and each subsequent-year of the Term, 25 samples of each Music Product
and (ii) 8 samples of each Karaoke Machine and each Advanced Karaoke Machine and
each subsequent year of the Term, 5 samples of each of the Karaoke Machine and
each Advanced Karaoke Machine. Any Licensed Products requested by MTVN in excess
of the foregoing amounts shall be made available to MTVN at Licensee's cost. No
samples provided to MTVN shall be reproduced by MTVN nor shall MTVN authorize
any entity affiliated with or having a contractual relationship with MTVN to
reproduce such samples. In addition, samples provided to MTVN shall not be made
available I for retail distribution by MTVN nor shall MTVN authorize any entity
affiliated with or having a contractual relationship with MTVN to sell any
samples for retail distribution. No royalties shall be due under this Agreement
to MTVN for any sample provided to MTVN. Licensed Products


                                        9



<PAGE>

request by MTVN for resale shall be made available to MTVN at Licensee's best
wholesale price.

         (e) During the Term, Licensee shall permit representatives selected by
MTVN access to Licensee's floor stock for sampling purposes at any tune during
normal business hours upon reasonable notice.

         (f) At any time during the Term, and for a period of one year
thereafter, upon MTVN's request therefor, Licensee shall provide MTVN with a
listing of the names and addresses of Licensee's third party manufacturers on
the Approval of Manufacturer Form attached hereto as Exhibit D, and, if
additionally requested by MTVN, a copy of Licensee's agreement with any such
manufacturer. If such manufacturer utilizes the Licensed Property for any
unauthorized purpose, Licensee shall use best efforts to ensure that such
utilization is immediately halted. MTVN acknowledges and agrees that it shall
not engage Licensee's third party manufacturers, as identified by Licensee, to
manufacture the Licensed Products itself.

         (g) From time to time, upon MTVN's request, Licensee shall include
certain materials provided by MTVN relating to MTVN's programs, programming
services, or ancillary businesses, which materials are not in direct competition
with the Licensed Products of Licensee, in the packaging of the Licensed
Products.

ARTICLE 5. MARKINGS.
- --------- ---------

         (a) Licensee shall affix the Copyright and Trademark Notices set forth
in the Basic Provisions to all Licensed Products and to all packaging, labels,
promotional, advertising, publicity, and display materials used in connection
therewith, in accordance with instructions from MTVN. No Licensed Products, or
related materials, shall contain any other copyright, trademark or trade name
unless Licensee has obtained MTVN's prior consent. MTVN consents to the use of
"The Singing Machine" on the Licensed Products. The inclusion of any other
trademark or trade name shall be subject to MTVN's approval, such approval to be
at MTVN's sole discretion. MTVN may at any time require an addition to or change
of the Copyright and Trademark Notices, effective not less than 30 days after
receipt by Licensee of notice thereof; provided however, that Licensee shall
have the right to continue to distribute any inventory already manufactured at
the time of such notice, Licensee shall fully cooperate with MTVN in connection
with MTVN's obtaining or maintaining copyright and/or trademark protection for
the Licensed Property in MTVN's name.

         (b) Licensee shall affix to the Licensed Products and all packaging,
labels, promotional materials, advertising, publicity, and display materials
used in connection therewith, any other legends, markings and notices required
by any law or regulation in the Licensed Territory or which MTVN reasonably may
request. .

         (c) Licensee acknowledges and agrees that it shall provide a credit to
any third party creators of any Licensed Properties, as directed by MTVN, on the
Licensed Products or packaging or other materials related thereto.


                                       10


<PAGE>

ARTICLE 6. OWNERSHIP.
- ---------  ----------

         (a) As between MTVN and Licensee, all right, title and interest in and
to the Licensed Property shall be and remain the sole and complete property of
MTVN. Licensee recognizes the value of the goodwill associated with the Licensed
Property, that the Licensed Property may have secondary meaning in the mind of
the public, and that the trademarks and copyrights in the Licensed Property, and
any registrations therefor, are good and valid. All use by Licensee of the
Licensed Property shall inure to the benefit of MTVN. Licensee shall not, during
the Term or thereafter, contest or assist others to contest, MTVN's rights or
interests in the Licensed Property or the validity of this License. Licensee
shall not seek any copyright or trademark registration for the Licensed
Property.

         (b) With respect to the intellectual property owned or controlled by
Licensee not by virtue of this Agreement ("Licensee's Intellectual Property"),
any copyright, trademark, or other proprietary rights owned by Licensee and
heretofore used by it which are used in connection with the Licensed Products as
approved by MTVN pursuant to Section S(a) above, shall continue to be owned by
Licensee and shall not become the property of MTVN.


         (c) Except for Licensee's Intellectual Property, all right, title, or
interest in or to any copyright, trademark, or other proprietary rights that
come into existence during the Term as a result of the exercise by Licensee of
any right granted to it hereunder, shall immediately and automatically vest in
MTVN.

         (d) Except as otherwise provided, all materials that come into
existence during the Term, including, but not limited to, art work and designs,
packaging, labels, and promotional, advertising, publicity, and display
materials used in connection with the Licensed Products shall be deemed "works
made for hire" fox MTVN within the meaning of the U.S. Copyright Law. To the
extent that any such work does not so qualify, for the consideration set forth
herein, Licensee hereby irrevocably and absolutely assigns to MTVN all rights
throughout the universe in perpetuity in all media now known or hereafter
developed including, but not limited to, the copyright and any extensions and
renewals thereof and the trademarks and the goodwill associated therewith.

         (e) Licensee agrees to execute and deliver to MTVN any documents which
MTVN may reasonably request to confirm MTVN's ownership of its rights hereunder,
Licensee hereby irrevocably appoints MTVN as its attorney-in-fact coupled with
an interest to sign any such documents in Licensee's name.

         (f) Licensee shall be obligated to obtain written assignments of
copyright in favor of MTVN in respect of any artwork or other copyrightable
subject matter developed in connection with the Licensed Property on the
Licensed Products, in the form attached hereto as Exhibit E.

ARTICLE 7. INFRINGEMENTS. Licensee shall promptly notify MTVN of any apparently
unauthorized use or infringement by third parties of any rights granted to
Licensee herein, and shall cooperate fully in any action at law or in equity
undertaken by MTW with respect to such


                                       11


<PAGE>

unauthorized use or infringement. Licensee shall not institute any suit in
connection with any apparently unauthorized use or infringement without first
obtaining the consent of MTVN to do so, and MTVN shall have the sole right to
determine whether or not any action shall be taken on account of any such
unauthorized uses or infringements.

ARTICLE 8. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.
- ---------  ---------------------------------------------

         (a) Licensee represents, warrants, and undertakes as follows:

                  (i) It is free to enter into and fully perform this Agreement;

                  (ii) All ideas, creations, designs, materials and intellectual
property furnished by Licensee in connection with the Licensed Products shall be
Licensee's own and original creation and shall not infringe upon the rights of
any person or entity or shall be fully licensed by Licensee;

                  (iii) The Licensed Products and all materials used in,
connection therewith shall be of the highest standard reasonably suitable for
goods of the type of the Licensed Products. The Licensed Products will be safe
for use by consumers and will comply with all applicable governmental rules,
guidelines, codes, regulations, and warranties (express or implied) including,
without limitation, those contained in the Child Safety Protection Act and/or
adopted by the Consumer Product Safety Commission;

                  (iv) The Licensed Products shall be manufactured, distributed,
sold and advertised in accordance with all applicable federal, state and local
laws including but not limite to all applicable labor laws and regulations and
in a manner that will not reflect adversely upon MTVN, and shall not infringe
upon or violate any rights of any third parties;

                  (v) Licensee shall use its best efforts to obtain maximum
sales of the Licensed Products in the Licensed Territory during the Term;

                  (vi) Licensee has obtained or shall obtain all required
authorizations, approvals, licenses, or permits from all government authorities
in order for it to enter into and perform its obligations pursuant to this
Agreement;

                  (vii) Licensee shall not pledge this Agreement, or the rights
provided hereunder, as security or collateral to any third party; and

                  (viii) Licensee shall not initially sell, distribute, market
or permit any third party to sell, distribute or market any Licensed Products
which are damaged, defective, "seconds" or otherwise fail to meet the
specifications quality or notice approval requirements contained hereunder.
Notwithstanding anything to the contrary contained above, Licensee may resell
any "B goods" Licensed Products which are returned for credit due to minor
cosmetic damage only (e.g., small dents or minor scratches); pro vided, however,
that (y) MTVN shall have approval in


                                       12


<PAGE>

its sole discretion over any such sales, including without limitation, the
proposed retailers and (z) such Licensed Products are clearly identified to the
consumer as "B" goods".

         (b) MTVN represents, warrants, and undertakes as follows:

                  (i) It is free to enter into and fully perform this Agreement;
and

                  (ii) The Licensed Property is original to and the sole
property of MTVN, and does not infringe upon or violate any copyright, trademark
or proprietary right of any third party.

ARTICLE 9. INDEMNITIES
- ---------  ------------

         (a) Licensee shall at all times indemnify and hold MTVN, its officers,
directors and employees harmless from and against any and all claims, damages,
liabilities, costs and expenses, including reasonable counsel fees, arising out
of or relating to any breach or alleged breach by Licensee of any
representation, warranty or undertaking made herein, or out of any defect
(latent or patent) in the Licensed Products; provided, however, that MTVN shall
give prompt notice, cooperation and assistance to Licensee relative to any such
claim or suit, and provided further that no settlement of any such claim or suit
shall be made without the prior consent of MTVN.

         (b) *

ARTICLE 10. INSURANCE.  Licensee shall obtain and maintain at its own costs and
expense from a qualified insurance company licensed to do business in New York,
separate polices for (a) standard Product Liability Insurance and (b) standard
Errors and Omissions Insurance, both naming MTVN as an additional named insured,
with respect to all Licensed Products manufactured hereunder, whether sold
during the License Term or thereafter.  The Product Liability Insurance shall
provide protection against any and all claims, demands and causes of action
arising out of any defects or failure to perform, alleged or otherwise, of the
Licensed Products or any material used in connection therewith or any use
thereof during the License Term and thereafter.  The amount of coverage for each
policy shall be $5,000,000 per occurrence.  The policies shall provide for 10
days notice to MTVN from the insurer  pursuant to Article 16, in the event of
any modification, cancellation or termination thereof.  Licensee agrees to
furnish MTVN a Certificate of Insurance evidencing same prior to the final
execution of the Agreement which shall be attached hereto as Exhibit F.  In no
event shall Licensee manufacture, distribute or sell the Licensed Products prior
to receipt by MTVN of such evidence of insurance.

* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission

                                       13
<PAGE>



ARTICLE 11. DEFAULT.
- ----------  -------

         (a) Upon the occurrence of any of the following events (each of which
is a "Default"), then in addition and without prejudice to any rights which it
may have at law, in equity or otherwise, MTVN shall have the right to terminate
this Agreement, to delete from this Agreement any elements of the Licensed
Property or any Licensed Products and/or to require the immediate payment of any
Guaranteed Minimum Royalty and royalties due or to become due hereunder:

                  (i) Licensee fails to meet the Presentation Date To Licensee's
Retailers or the initial Ship Date To Licensee's Retailers of the Licensed
Products;

                  (ii) Licensee fails to actively manufacture, advertise,
distribute or sell the Licensed Products;


                  (iii) Licensee fails to make a payment or famish a Quarterly
Report in accordance herewith and does not cure such failure within 45 days
after notice thereof;

                  (iv) Licensee fails to comply with. the approval, quality, and
safety requirements hereunder and/or the Licensed Products do not comply with
such requirement and/or the Licensed Products are the subject matter of adverse
or negative publicity due to such failure and does not cure such failure within
45 days after notice thereof;

                  (v) Licensee fails to comply with any other of Licensee's
material obligations hereunder or breaches any warranty or representation made
by it hereunder and does not cure such failure or breach within 45 days after
notice thereof;

                  (vi) Licensee sells or otherwise disposes of all or
substantially all of its business or assets to a third party, or control or
ownership of Licensee is changed or transferred;

                  (vii) Licensee sells or causes others to sell the Licensed
Products outside the Licensed Channels of Distribution or outside the Licensed
Territory and does not cure such failure or breach within 45 days after notice
thereof;

                  (viii) Licensee fails to obtain or maintain insurance in the
amount of the type provided for herein and does not cure such failure or breach
within 45 days after notice thereof;

                  (ix) Licensee contests or assists others to contest MTVN's
rights or interests in the Licensed Property or the validity of this License; or

                  (x) Licensee fails to comply with any provision of any other
agreement between Licensee and MTVN and does not cure such failure or breach
within 45 days after notice thereof.


                                       14


<PAGE>

         (b) In the event that the Licensed Products pose a safety threat to the
consumer, or are the subject of a claim or inquiry by the Consumer Product
Safety Commission or the Child Safety Protection Act or any other person, agency
or commission because of quality and/or safety concerns, and/or labeling or are
the subject of negative publicity due to poor quality and/or safety of the
Licensed Products, Licensee shall, upon MTVWs reasonable request, immediately
recall such Licensed Products from the market place, and take any other measures
MTVN may reasonably demand.

         (c) If a petition in bankruptcy is filed by or against Licensee, or
Licensee is adjudicated bankrupt, which is not dismissed within 30 days, or
Licensee makes any assignment for the benefit of creditors or becomes insolvent,
is placed in the hands of a trustee or receiver, fails to satisfy any judgment
against it or is unable to pay its debts as they become due, whichever is
sooner, this License shall automatically terminate forthwith without any notice
whatsoever. Upon such termination for any reason under this Section 11 (c)
Licensee, its receiver, representatives, trustees, agents, administrators,
successors and assigns shall have no further rights hereunder, and neither this
License nor any right or interest herein shall be deemed an asset in any
insolvency, receivership or bankruptcy.


         (d) Licensee may terminate this Agreement if MTVN fails to comply with
any of its material obligations hereunder or breaches any warranty or
representation made by it hereunder and does not cure such failure or breach 45
days after notice thereof.


ARTICLE 12. FORCE MAJEURE. In the event that Licensee is prevented from
manufacturing, distributing or selling the Licensed Products because of any act
of God; unavoidable accident; fire; epidemic; strike, lockout, or other labor
dispute; war, riot or civil commotion; act of public enemy; enactment of any
rule, law, order or act of government or governmental instrumentality (whether
federal, state, local or foreign); or other cause of a similar or different
nature beyond Licensee's control, and such condition continues for a period of
45 days or more, either party hereto shall have the right to terminate this
Agreement effective at any time during the continuation of such condition by
giving the other party at least 10 days notice to such effect. In such event,
the Guaranteed Minimum Royalty and royalties on sales theretofore made shall
become immediately due and payable and this Agreement shall be automatically
terminated.

ARTICLE 13. EFFECT OF EXPIRATION OR TERMINATION.
- ----------  ------------------------------------

         Upon the expiration or termination of this Agreement for any reason,
all rights granted to Licensee herein shall forthwith revert to MTVN, with the
following consequences:

                  (a) No portion of any prior payments shall be refundable to
Licensee, and any and all payments due or to become due, including any royalties
and the Guaranteed Minimum Royalty shall be immediately due and payable. If, at
such time, the total amount of royalties paid by Licensee during the Term is
less than the Guaranteed Minimum Royalty, Licensee shall immediately pay such
difference to MTVN.


                                       15
i


<PAGE>

         (b) After the expiration or termination of this Agreement, Licensee
shall not manufacture, advertise, distribute or sell the Licensed products
containing or including the Licensed Property or any product which may infringe
upon MTVN's proprietary rights, or use any name, logo or design which is
substantially or confusingly similar to the Licensed Property on any product in
any place whatsoever. Except for those Licensed Products distributed to the
Licensed Channels of Distribution prior to the expiration or termination of this
Agreement, Licensee shall promptly deliver to MTVN a statement indicating the
number of Licensed Products then currently on hand or in the process of being
manufactured. MTVN shall have the right to conduct a physical inventory in order
to ascertain or verify such inventory and statement. Except as provided in
Section 13(c), such inventory shall at MTVN's option, be destroyed by Licensee
or purchased by MTVN at Licensee's cost of manufacture. Disposition of any
plates, molds, forms, lithographs and other material relating to the Licensed
Products then remaining on hand shall be subject to notice from MTVN to Licensee
either to destroy the Licensed Products or to deliver the same to MTVN or its
designee. In the event that MTVN requests Licensee to destroy its inventory, the
Licensed Property or materials relating thereto, MTVN may require Licensee to
deliver to MTVN an affidavit by an officer of Licensee, attesting to such
destruction in such form as MTVN may in its sole discretion require.

         (c) Upon the expiration of this Agreement, so long as Licensee is not
in default at the time of expiration, Licensee may continue to sell the Licensed
Products, previously manufactured and on hand, on a non-exclusive basis during a
period of 90 days thereafter, subject to all of the terms and conditions
contained in this Agreement; provided, however, that: (i) the Licensed Products
shall be sold in the ordinary course of business at prices not lower than the
prevailing wholesale price or prices charged by Licensee during the 90 day
period immediately preceding the expiration of this Agreement, (ii) no new
Licensed products are manufactured during such sell-off period and (iii) MTVN is
paid its then existing Royalty Rate on all Licensed Products sold during the
sell-off period.

ARTICLE 14. CONFIDENTIALITY. Each of Licensee and MTVN may, from time to time,
be exposed to and will be furnished with certain information, relating to the
other's plans for certain productions and businesses, which are confidential.
Each of Licensee and MTVN shall keep confidential and not reveal or disclose any
of said information, material or data to any third party or the terms of this
Agreement, or any agreement Licensee enters into pursuant to this Agreement
during the Term or thereafter. Neither Licensee nor MTVN shall disclose or make
known to anyone outside of Licensee or MTVN, as applicable, directly or
indirectly, the interest of the other in this Agreement or the terms of this
Agreement. The provisions of this Article 1414 shall not apply to information
which is (a) or becomes publicly available, (b) required to be disclosed
pursuant to a court order or applicable law, rules or regulations or (c)
independently developed by the disclosing party.

ARTICLE 15. PRESS RELEASES/PUBLYC STATEMENTS. Licensee shall make no public
statements or issue any press releases regarding this Agreement, or the Licensed
Products, without the prior consent of MTVN. Notwithstanding anything to the
contrary, MTVN acknowledges that Licensee shall make all legally required United
States Securities and Exchange Commission filings.

                                       16


<PAGE>

ARTICLE 16. NOTICES. A11 notices, requests, approvals, consents and other
communications required or permitted under this Agreement, except for payments,
shall be in writing and shall be sent by facsimile to the facsimile number
specified below. A copy of any such notice shall also be personally delivered,
sent by mail or overnight courier delivery service with the capacity to verify
receipt of delivery on the date such notice is transmitted by telecopy to the
addresses specified below.

If to MTVN:
- -----------
MTV Networks, a division of Viacom International Inc.
Attention: Ms. Heidi Eskenazi, Vice President, Licensing
1515 Broadway New York, Never York 10036-5797
Telephone: (212) 846-7145
Telecopy: (212) 846-7908

With a copies:
- ------------
MTV Networks, a division of Viacom International Inc.
Attention: Ms. Elizabeth Matthews, Vice President, Law & Business Affairs
1515 Broadway New York, New York 10036-5797
Telephone: (212) 258-7122
Telecopy: (212) 258-1992

If to Licensee:
- ---------------
The Singing Machine Company, Inc.
Attention; Ms. Terry Marco, Director of Marketing
6601 Lyons Road, Bldg. A-7
Coconut Creek, FL 33073
Telephone: 954-596-1000
Telecopy: 954-596-2000

Receipt of such notice, request, approval, consent or other communication shall
be deemed conclusively made (a) if personally delivered, at the time of delivery
or (b) if mailed or sent by overnight courier service, upon receipt thereof. In
any event, action or proceeding, service of process upon Licensee may be
accomplished by sending such process in the manner specified herein for the
giving of notice to Licensee. Either party may change its address or facsimile
number for notification purposes by giving the other party notice of the new
address or facsimile number and the date upon which it will become effective.

ARTICLE 17. GOVERNING LAW. This Agreement and all questions arising hereunder
shall be governed by, and construed in accordance with, the laws and decisions
of the State of New


                                       17


<PAGE>


York without giving effect to the principles thereof relating to conflicts of
law.  Each of the parties hereto (a) irrevocably agrees that the federal courts
of the Southern District of New York and the New York State courts shall have
sole and exclusive jurisdiction over any suit or other proceeding arising out of
or based upon this Agreement, (b) submits to the venue and jurisdiction of such
courts and (c) irrevocably consents to personal jurisdiction by such courts.

ARTICLE 18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one single agreement
between the parties.

ARTICLE 19. RELATIONSHIP. Nothing herein contained shall be construed to
constitute a partnership or joint venture between the parties hereto, and
neither Licensee nor MTVN shall be bound by any representation, act or omission
of the other.

ARTICLE 20. SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be contrary to law, then the remaining provisions
of this Agreement shall remain in full force and effect.

ARTICLE 21. WAIVER. No delay or omission by either party to exercise any right
or power it has under this Agreement shall impair or be construed as a waiver of
such right or power.  A waiver by either party of any breach or covenant shall
not be construed to be a waiver of any succeeding breach or any other covenant.
All waivers must be in writing and signed by the party waiving its rights.

ARTICLE 22. ENTIRE AGREEMENT. This Agreement, and any Exhibits attached hereto,
is the entire agreement between the parties with respect to its subject matter,
and there are no other representations, understandings, or agreements between
the parties relative to such subject matter.

ARTICLE 23. AMENDMENTS. No amendment to, or change, waiver or discharge of, any
provision of this Agreement shall be valid unless made in writing and signed by
an authorized representative of the party against which such amendment, change,
waiver or discharge is sought to be enforced.

ARTICLE 24. SURVIVAL. The terms of Article 3, Section 4(f), Article 6, Article
8, Article 9, Article 10, Article 13, Article 14, Article 15, Article 17, this
Article 24, Article 25, and Article 27 shall survive the expiration or
termination of this Agreement for any reason.

ASSIGNMENT. Any attempted or purported assignment or other transfer,
sublicense, mortgage or other encumbrance of this Agreement and the rights
granted herein by Licensee without the prior approval of MTVN, which approval
may be granted by MTVN in its sole and absolute discretion, shall be void and of
no effect.

ARTICLE 26. CONSENTS, APPROVALS AND REQUESTS. Except as specifically set forth
in this Agreement, all consents, requests and approvals to be given by either
party under this

                                       18
<PAGE>


Agreement shall be (a) in writing and (b) not be unreasonably withheld. Each
party shall make only reasonable requests under this Agreement.

ARTICLE 27. THIRD PARTY BENEFICIARIES. Each party intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person or entity other than MTVN and Licensee.

                     END OF ADDITIONAL TERMS AND CONDITIONS

                                       19


<PAGE>

                                   SCHEDULES

Schedule A     Actual Quarterly Sales and Royalty Report
Schedule B     Projected Quarterly Sales and Royalty Report
Schedule C     Music Television Product Approval Form
Schedule D     Approval of Manufacturer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>amend-domesticlicense104.txt
<DESCRIPTION>AMENDED-MTVN
<TEXT>
                                                                    EXHIBIT 10.4


                                                           As of January 1, 2002

Ms. Terry Marco, Director of Marketing
The Singing Machine Company, Inc.
6601 Lyons Road, Bldg. A-7.
Coconut Creek, FL 33073

Re: Amendment to MTVN Domestic Merchandise License Agreement.
    --------------------------------------------------------

Dear Terry:

Reference is made to the agreement dated the 1st day of November, 2000, by and
between MTV Networks, a division of Viacom International Inc., ("MTVN") and The
Singing Machine Company, Inc. ("Licensee") with respect to the "MTV: Music
Television" name, trademark and logo (the "Licensed Property") (the
"Agreement"). Capitalized terms used without definition herein shall have the
respective definitions set forth in the Agreement.

Effective as of the date hereof, MTVN and Licensee hereby agree that the
Agreement shall be amended as follows:

1. Section 1 of the definition of Licensed Products contained in the Basic
Provisions shall be amended by (a) deleting in its entirety the phrase "but no
more than twelve" in the first sentence and (b) adding the following after the
first sentence: "The number of Music Products to be released by Licensee is and
shall remain subject to MTVN's prior approval in its sole discretion."

2. The phrase "Advance Karaoke Machine (as hereafter defined) and the Karaoke
Machine (as hereafter defined)" contained in Section l and Section 2 of the
definition of Licensed Products contained in the Basic Provisions shall be
deleted in its entirety and replaced with the "MTV Karaoke Machines (as
hereafter defined)".

3. The phrase "((1)-(4) each a "Licensed Product," collectively the "Licensed
Products".)" at the end of the definition of Licensed Products contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:

         "(5) One version of a Karaoke hardware machine branded with the
Licensed Property which (a) enables the end-user to play the Music Products and
the Sampler Music Products and participate in Karaoke activities, (b) does not
include a viewing monitor, (c) must be used with a separate television set or
viewing monitor in order to be functional and (d) includes (i) dual cassette
decks for recording and playing back Karaoke performances, (ii) 2 microphone
inputs, (iii) AC power operation, (iv) a Microphone (as hereafter defined), (v)
a patch cord and (vi) 12 watt RMS Power Output (Model No. SMG-328).

         (6) One version of a Karaoke hardware machine branded with the Licensed
Property which (a) enables the end user to play the Music Products and the
Sampler Music Products and participate in Karaoke activities, (b) does not
include a viewing monitor, (c) must be used with a separate television set or
viewing monitor in order to be functional and (d) includes (i) a handle (ii) 2
microphone inputs,




* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission

<PAGE>

(iii) AC/DC power operation, (iv) a Microphone, (v) a patch cord and (vi)
built-in speaker system (Model No. SMG-128).

         (7) One version of a Karaoke hardware machine branded with the Licensed
Property which (a) will be sold exclusively at Toys R Us retail stores, (b)
enables the end-user to play the Music Products and the Sampler Music Products
and participate in Karaoke activities, (c) does not include a viewing monitor,
(d) must be used with a separate television set or viewing monitor in order to
be functional and (e) includes (i) a single cassette deck, (ii) 2 microphone
inputs, (iii) AC power operation, (iv) a Microphone and (v) a patch cord (Model
No. SMG-138).

         (8) One version of a Karaoke hardware machine branded with the Licensed
Property which (a) enables the end user to play the Music Products and the
Sampler Music Products and participate in Karaoke activities, (b) allows the end
user to plug the Karaoke machine into a separate television set and video
cassette recorder which allows the end user to view and record their Karaoke
performance, (c) includes a viewing monitor, (d) includes a video camera feature
that (i) is permanently attached to the top of the Karaoke machine and
manufactured as part of the Karaoke machine hardware as a whole, (ii) needs to
be manually adjusted by the end user to record their Karaoke performance, (iii)
is not an individual piece of hardware separate and apart from the Karaoke
machine and is not able to be detached from the Karaoke Machine for use
independent of the Karaoke machine, (iv) does not contain the technical
functionality to allow it to operate as a stand alone video camera and (e)
includes (i) 2 microphone inputs, (ii) AC power operation, (iii) a Microphone
and (iv) a patch cord (Model No. SMVG-600). For the avoidance of doubt, in no
event shall the video camera be Internet compatible or contain any technology
that would allow it to broadcast or otherwise distribute any content. MTVN shall
have approval rights regarding all technical components of the video camera
feature.

         ((3)-(8) each a "MTV Karaoke Machine" and collectively, the "MTV
Karaoke Machines")

         (9) One version of a uni-directional, handheld microphone which (a)
weighs approximately 10 ounces, with a frequency response of 100-12,000 Hz,
Sensitivity of-76B+/-3dB at 1 KHz and Impedance of 600 ohm+/-15%, (b) is
approximately 2-1/6" X 10-1/2" in size, (c) is branded with the Licensed
Property, (d) must use a wire that plugs into the MTV Karaoke Machines to be
operational and (e) may be sold individually (the "Duet Microphones") or
packaged together with the MTV Karaoke Machines (the "Microphone Sold With MTV
Karaoke Machines") (the Duet Microphone and the Microphone Sold With MTV Karaoke
Machines, collectively, the "Microphone(s)") (Model No. 222). For the avoidance
of doubt, a Microphone shall be used by plugging it into an MTV Karaoke Machine
and singing into it for an amplified voice effect.

         ((1)-(9) each a "Licensed Product" and collectively, the "Licensed
Products").

The parties acknowledge and agree that, any device or item that does not meet
all of the specifications and include all of the capabilities set forth in the
definitions above shall not constitute a "Licensed Product" hereunder. In no
event shall any of the Licensed Products include any other components or
technical functionality nor' known or hereafter devised or developed which is
not specified herein including, but not limited to, wireless, cellular,
satellite or any mobile telephone functionality. If Licensee intends to create,
develop, sell, distribute or manufacture a product that varies from the Licensed
Products to the extent that it modifies, enhances or otherwise alters one or
more of the stated features or adds an unstated feature, then Licensee shall
give MTVN prior notice describing such requested alteration, and MTVN then may
elect in its sole discretion to include such altered product as


                                        2


<PAGE>

 Part of the definition of "Licensed Products" by giving notice to Licensee and
 amending this Agreement to such effect."

4. Subject to Paragraph 8 below, the phrase "Specialty toy stores (e.g., FAO
Schwarz) and Toys R Us and KayBee Toys and upon MTVN's approval other Mass
market toy stores ("Toy Store Retailers")" shall be added to the definition of
Licensed Channels of Distribution contained in the Basic Provisions of the
Agreement.

5. The definition of Royalty Rate contained in the Basic Provisions of the
Agreement shall be deleted in its entirety and replaced with the following:

         "(1) *% of Net Sales (as defined in the annexed Additional Terms and
Conditions) for the Music Products and the Duet Microphones.

         (2) Except for the Licensed Products defined in Section 8 of the
definition of Licensed Products (SMVG-600), *% of Net Sales (as defined in the
annexed Additional Terms and Conditions) for the MTV Karaoke Machines."

         (3) *% of Net Sales (as defined in the annexed Additional Terms and
Conditions) for the Licensed Products defined in Section 8 of the definition of
Licensed Products (SMVG-600).

6. The definition of Presentation Date To Licensee's Retailers contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:

         "(1) The Presentation Date to Licensee's Retailer's shall be:

         (a)      January 6, 2001 for (i) the Karaoke Machine, (ii) the Advanced
                  Karaoke Machine and (iii) at least two Music Products, the
                  titles of such Music Products to be mutually agreed upon by
                  MTVN and Licensee;

         (b)      January 6, 2002 for the four remaining MTV Karaoke Machines;
                  and

         (c)      Mutually agreed upon for the Duet Microphones.

       (2) The Presentation Date to Licensee's Retailer's for any other Music
Products approved by MTVN shall be determined in accordance with a mutually
acceptable presentation schedule to be agreed upon by MTVN and Licensee."

7. The definition of Initial Ship Date To Licensee's Retailers contained in the
Basic Provisions of the Agreement shall be deleted in its entirety and replaced
with the following:

         "(1) The Initial Ship to Licensee's Retailers shall be:

         (a)      June, 2001 for (i) the Karaoke Machine, (ii) the Advanced
                  Karaoke Machine and (iii) at least two Music Products, the
                  titles of such Music Products to be mutually agreed upon by
                  MTVN and Licensee;

         (b)      No later than June 30, 2002 for the MTV Karaoke Machines in
                  parts (5) through (7) of the definition of Licensed Products;

         (c)      No later than September 30, 2002 for the MTV Karaoke in part
                  (8) of the definition of Licensed Products; and


                                        3



* The confidential portion has been so omitted pursuant to a request for
confidential treatment and has been filed separately with the Securities and
Exchange Commission


<PAGE>



         (c)      No later than September 30, 2002 for the MTV Karaoke in part
                  (8) of the definition of Licensed Products; and

         (d)      Mutually agreed upon by MTVN and Licensee for the Duet
                  Microphones.

         (2) The Initial Ship to Licensee's Retailers for any other Music
Products approved by MTVN shall be determined in accordance with a mutually
acceptable initial schedule to be agreed upon by MTVN and Licensee."

8. (a) Licensee acknowledges that the placement of the Licensed Products in
retail toy stores, is of the utmost importance to MTVN and, therefore, Licensee
shall use best efforts to ensure that (i) all Toy Store Retailers display,
place, market and makes available for sale the Licensed Products solely in the
music/karaoke/electronics section of each store during the Term and (ii) the
Duet Microphones are only sold with the other Licensed Products and not with any
microphones or music related products marketed to or intended for children
and/or pre-teens (e.g., Barbie branded microphones).

         (b) If at any time during the Term (i) any Licensed Products are sold
in any sections, aisles or areas other than the music/karaoke/electronics
section of a Toy Store Retailer or (ii) the Duet Microphones are sold in an area
or section apart from the Licensed Products ((i) and (ii), the "Prohibited
Areas"), then (y) the party hereto with knowledge of such marketing, placement,
display or sales activities in the Prohibited Areas shall promptly notify the
other and (z) Licensee shall have fourteen days from the time it is made aware
of such activities to have the Toy Store Retailers terminate such activities. If
the Toy Store Retailers do not remove the Licensed Products and any marketing
and sales materials related thereto from the Prohibited Areas and display,
market, place and sell the Licensed Products solely as described in Section 8(a)
above, then MTVN shall have the right, in its sole discretion, upon notice to
Licensee, to automatically revoke Toy Stores Retailers from the Licensed
Channels of Distribution.

Except as otherwise herein amended, the Agreement is hereby ratified and
confirmed in all respects.

Please indicate your acceptance of the foregoing by signing in the space
provided below.


                                        Very truly yours,


                                        MTV Networks, a division of
                                        Viacom International Inc.

                                        By: /s/ Heidi Eskenazi
                                            ------------------------
                                        Name:  Heidi Esken
                                        Title:   V.P. Licensing, Merchandising
                                                 & Interactive; MTV

ACCEPTED AND AGREED TO:

THE SINGING MACHINE COMPANY, INC.



By: /s/ John Klecha
    -------------------------
Name: John Klecha
Title: Chief Operating Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>secondamend-mtvn.txt
<DESCRIPTION>SECOND AMENDMENT TO MTVN
<TEXT>
                                                                    EXHIBIT 10.5

                                                         As of November 13, 2002


Mr. Eddie Steele, CEO
The Singing Machine Company, Inc.
6601 Lyons Road, Bldg. A-7
Coconut Creek, FL 33073

Re:      Second Amendment to MTVN Domestic Merchandise License Agreement

Dear Eddie:

Reference is made to the agreement dated the 1st day of November, 2000, as
amended January 1, 2002, by and between MTV Networks, a division of Viacom
International Inc. ("MTVN"), and The Singing Machine Company, Inc. ("Licensee")
with respect to the "MTV: Music Television" name, trademark and logo (the
"Licensed Property") (the "Agreement"). Capitalized terms used without
definition herein shall have the respective definitions set forth in the
Agreement.

Effective as of the date hereof, MTVN and Licensee hereby agree that the
Agreement shall be amended as follows:

1. The definition of "Term" contained in the Basic Provisions of the Agreement
shall be deleted in its entirety and replaced with the following:

         "The Term of this Agreement shall commence on November 1. 2000 and
continue through December 31, 2003."

2. In addition to (and not in lieu of) the Guaranteed Minimum Royalty of
$686,250 payable pursuant to the Agreement, Licensee shall pay MTVN an
additional Guaranteed Minimum Royalty of $1,500,000, payable as follows:

         $500,000 on or before December 27, 2002; $333,334 on or before June 1,
         2003; $333,333 on or before September 1, 2003; and $333,333 on or
         before December 1, 2003.

3. Notwithstanding anything to the contrary contained in the Agreement, the
additional Guaranteed Minimum Royalty due pursuant to Paragraph 2 hereinabove
shall (a) not be recoupable against any royalties due for sales of Licensed
Products sold through December 31, 2002 and (b) be recoupable solely against
royalties due for sales of Licensed Products sold on or after January 1, 2003.

4. The following shall be added to the definition of Royalty Rate contained in
the Basic Provisions of the Agreement:


- -------
*    The confidential portion has been so omitted pursuant to a request for
     confidential treatment and has been filed separately with the Securities
     and Exchange Commission.

                                        1



<PAGE>

"The Royalty Rate on sales of all Licensed Products sold on or after January 1,
2003 shall be * of Net Sales (as defined in the Additional Terms and Conditions
of the Agreement)."

5. The definition of Licensed Products contained in the Basic Provisions of the
Agreement shall be deleted in its entirety and replaced with the following:

The "LICENSED       (1)  Each year of the Term, Licensee shall release at least
PRODUCTS"                eight compact discs or cassettes in at least four
                         different musical genres consisting of a compilation of
                         music tracks, which shall be branded with the Licensed
                         Property and contain the technology necessary for the
                         end-user to participate in Karaoke activities (the
                         "Music Product(s)"). The number of Music Products to be
                         released by Licensee shall be subject to MTVN's prior
                         approval in its sole discretion. In addition to the
                         provisions set forth in Article 4, MTVN shall have
                         prior and final approval rights regarding the identity
                         of the music tracks and any performances contained on
                         the Music Products. The content contained in the Music
                         Products may only be provided to the end-user via the
                         Music Products as packaged goods and may not be
                         provided on any other technical platform now known or
                         hereafter devised. The Music Products shall be sold
                         separately from the MTV Karaoke Machines (as hereafter
                         defined).

                    (2)  Each year of the Term, Licensee shall release no more
                         than three compact discs of a compilation of no more
                         than eight music tracks which shall be branded with the
                         Licensed Property and contain the technology necessary
                         for the end- user to participate in Karaoke activities
                         which shall be packaged with the MTV Karaoke Machines
                         (the "Sampler Music Products"). In addition to the
                         provisions set forth in Article 4, MTVN shall have
                         prior and final approval rights regarding the identity
                         of the music tracks and any performances contained on
                         the Sampler Music Products. For the avoidance of doubt,
                         the content contained in the Sampler Music Products may
                         only be provided to the end-user via the Sampler Music
                         Products as packaged goods and may not be provided on
                         any other technical platform now known or hereafter
                         devised. No royalties shall be paid by Licensee to MTVN
                         for Sampler Music Products.

                    (3)  (a) One version of a uni-directional, handheld
                         microphone which (i) weighs approximately 10 ounces,
                         with

- -------
*    The confidential portion has been so omitted pursuant to a request for
     confidential treatment and has been filed separately with the Securities
     and Exchange Commission.

                                       2

<PAGE>

                         a frequency response of 100-12,000 Hz, Sensitivity
                         of-76B+/- 3dB at 1 1000Hz and Impedance of 600
                         ohm+/-15%, (ii) is approximately 2-1/6" X 10-1/2"
                         in size, (iii) is branded with the Licensed
                         Property, (iv) must use a wire that plugs into the
                         MTV Karaoke Machines to be operational and (v) may
                         be sold individually (a "Duet Microphone") or
                         packaged together with the MTV Karaoke Machines (a
                         "Microphone Sold With MTV Karaoke Machines")
                         (Model No. SMM 300).

                         (b) One version of a uni-directional, handheld
                         microphone which (i) weighs approximately 10
                         ounces, with a frequency response of 100-10,000
                         Hz, Sensitivity of-72dB +1- 3dB at 1000Hz and
                         Impedance of 600 ohm +1-30% (ii) is approximately
                         1.8" by 11.1" in size, (iii) is branded with the
                         Licensed Property, (iv) may be sold as a Duet
                         Microphone or a Microphone Sold With MTV Karaoke
                         Machines, (v) includes a cord to plug the
                         microphone into an MTV Karaoke Machine and two AA
                         batteries for use without the cord as a wireless
                         microphone (Model No. SMM 106).

                         (Section 3(a) and Section 3(b), individually and
                         collectively, the "Microphone(s)").

                         For the avoidance of doubt, a Microphone shall be
                         used by either plugging it into an MTV Karaoke
                         Machine or using "AA" batteries and singing into
                         it for an amplified voice effect accomplished by
                         the end-user singing into such Microphone.

                    (4)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities and (b) includes
                         (i) a television set, (ii) a single cassette deck for
                         recording Karaoke performances and (iii) an AM/FM
                         terrestrial radio receiver (Model No. STVG-700).

                    (5)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs

                                        3

<PAGE>

                         and (d) includes (i) a handle (ii) two microphone
                         inputs, (iii) AC/DC power operation, (iv) a
                         Microphone, (v) a patch cord and (vi) built-in
                         speaker system (Model No. SMG-128).

                    (6)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) will be sold
                         exclusively at Toys R Us retail stores from the
                         beginning of the Term through December 31, 2002, and in
                         any of the Licensed Channels of Distribution
                         thereafter, (b) enables the end-user to play the Music
                         Products and the Sampler Music Products and participate
                         in Karaoke activities, (c) does not include a viewing
                         monitor, (d) must be used with a separate television
                         set or viewing monitor in order to view the lyrics of
                         the songs and (e) includes (i) a single cassette deck,
                         (ii) two microphone inputs, (iii) AC power operation,
                         (iv) a Microphone and (v) a patch cord (Model No.
                         SMG-138).

                    (7)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) allows the
                         end-users to plug the Karaoke machine into a separate
                         television set and video cassette recorder which allows
                         the end-user to view and record their Karaoke
                         performance, (c) includes a viewing monitor, (d)
                         includes a video camera feature that (i) is permanently
                         attached to the top of the Karaoke machine and
                         manufactured as part of the Karaoke machine hardware as
                         a whole, (ii) needs to be manually adjusted by the
                         end-user to record the end-user's Karaoke performance,
                         (iii) is not an individual piece of hardware separate
                         and apart from the Karaoke machine and is not able to
                         be detached from the Karaoke Machine for use
                         independent of the Karaoke machine, (iv) does not
                         contain the technical functionality to allow it to
                         operate as a stand alone video camera and (e) includes
                         (i) two Microphone inputs, (ii) AC power operation,
                         (iii) a Microphone and (iv) a patch cord (Model No.
                         SMVG 600).

                    (8)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a tray load,

                                        4

<PAGE>

                         three CD&G changer, (e) has a top load, single cassette
                         deck for recording and playing back Karaoke
                         performances and (f) includes a (i) remote control
                         which is solely operational with the SMG-282, (ii)
                         Microphone and (iii) built-in speaker system (Model No.
                         SMG-282).

                    (9)  One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a tray load,
                         three CD&G changer, (e) has a front load, single
                         cassette deck for recording and playing back Karaoke
                         performances and (f) includes a (i) remote control
                         which is solely operational with the SMG-270, (ii)
                         Microphone and (iii) built-in speaker system (Model No.
                         SMG-270).

                    (10) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a tray load,
                         three CD&G changer, (e) has a top (load, single
                         cassette deck for recording and playing back Karaoke
                         performances and (f) includes a (i) remote control
                         solely operational with the SMG-280, (ii) Microphone
                         and (iii) built-in speaker system (Model No. SMG-280).

                    (11) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) includes a
                         built-in 5.5 inch black and white viewing monitor, (c)
                         has a top load, single CD&G player and (d) includes a
                         (i) Microphone and (ii) built-in speaker system (Model
                         No. STVG-50l).

                    (12) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) includes a

                                        5

<PAGE>

                         built-in 5.5 inch black and white viewing monitor, (c)
                         has a front load, single cassette deck for recording
                         and playing back Karaoke performances, (d) has a top
                         load, single CD&G player and (e) includes a (i)
                         Microphone and (ii) built-in speaker system (Model No.
                         STVG-505).

                    (13) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a top load,
                         single CD&G player, (e) includes a video camera feature
                         that (i) is permanently attached to the top of the
                         Karaoke machine and manufactured as part of the machine
                         hardware as a whole, (ii) needs to be manually adjusted
                         by the end-user to record the end-user's performance,
                         (iii) is not an individual piece of hardware separate
                         and apart from the Karaoke machine and is not able to
                         be detached from the Karaoke machine for use
                         independent of the Karaoke machine, (iv) does not
                         contain the technical functionality to allow it to
                         operate as a stand alone video camera and (f) includes
                         (i) headphone plug in capability, (ii) a device that
                         allows the Karaoke machine to be mounted to the top of
                         a television set and (iii) a Microphone (Model No.
                         SMVG-608).

                    (14) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) includes a
                         built-in 13- inch color television set (i) manufactured
                         as part of the Karaoke machine hardware as a whole,
                         (ii) which receives television reception and is used as
                         a viewing monitor for Karaoke activities and (iii)
                         contains a "cable-tuner module" responsible for signal
                         decoding (i.e., does not need an external/separate
                         device to receive the television signal from the
                         available cable), (c) has a tray load, single CD&G
                         player that is (1) capable of playing regular CD-ROM
                         discs as well as discs in DVD format containing audio
                         visual performances stored on DVD disks in a digital
                         form using a MPEG-2 compression standard, (ii) not
                         designed or capable of modifying any content of DVD or
                         compact disks in any form and (iii) is not designed or
                         capable of recording or copying

                                        6

<PAGE>

                         any content ("DVD Player"), (d) includes a video
                         camera feature that (i) is permanently attached to
                         the top of the Karaoke machine and manufactured as
                         part of the Karaoke machine hardware as a whole,
                         (ii) needs to be manually adjusted by the end-user
                         to record the end-user's performance, (iii) is not
                         an individual piece of hardware separate and apart
                         from the Karaoke machine and is not able to be
                         detached from the Karaoke machine for use
                         independent of the Karaoke machine and (iv) does
                         not contain the technical functionality to allow
                         it to operate as a stand alone video camera, (e)
                         includes a video cassette recorder device capable
                         of playing and recording audio visual Karaoke
                         performances solely in an analog form from and
                         onto film based tapes/cartridges ("VCR"), which
                         VCR is (i) manufactured as part of the Karaoke
                         machine as a whole and (ii) is not an individual
                         piece of hardware separate and apart from the
                         Karaoke machine and (f) includes a (i) remote
                         control which is solely operational with the
                         STVG-630 and (ii) Microphone (Model No. STVG-630).

                    (15) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) includes a
                         built-in 7 inch black and white television set (i)
                         manufactured as part of the Karaoke machine hardware as
                         a whole, (ii) that receives television reception and is
                         used as a viewing monitor for Karaoke activities and
                         (iii) does not contain a "cable-tuner module" (i.e.,
                         needs an external/separate device to receive the
                         television signal from the available cable), (c) has a
                         front load, single cassette deck for recording and
                         playing back Karaoke performances, (d) has a tray load,
                         single CD&G player, (e) has an AM/FM terrestrial radio
                         receiver (i.e., a device that enables an end-user to
                         listen to audio content solely via such receiver) and
                         (f) includes a (i) Microphone and (ii) built-in speaker
                         system (Model No. STVG-707).

                    (16) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a top load,
                         single CD&G player which also

                                        7

<PAGE>

                         operates as a DVD Player, (e) has a front load,
                         single cassette deck for recording and playing
                         back Karaoke performances and (f) includes a (i)
                         remote control solely operational with the
                         SMG-800, (ii) Microphone and (iii) built-in
                         speaker system (Model No. SMG-800).

                    (17) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a tray load,
                         single CD&G player which also operates as DVD Player,
                         (e) has a front load, dual cassette deck for recording
                         and playing back Karaoke performances, (f) stereo
                         functionality includes (i) a subwoofer and (ii) two
                         speakers that may be (y) detached from the main body of
                         the Karaoke machine and (z) connected to the Karaoke
                         machine using wires or short range wireless
                         communications solely using the radio spectrum
                         necessary for one-way wireless microphones and in no
                         way facilitates any other means of communication
                         including, but not limited to, a commercial mobile
                         radio service pursuant to **47 C.F.R. Part 20 and (g)
                         includes a (i) remote control solely operational with
                         the SMG-8 10, (ii) Microphone and (iii) built-in
                         speaker system (Model No. SMD-810).

                    (18) One version of a Karaoke hardware machine branded with
                         the Licensed Property which (a) enables the end-user to
                         play the Music Products and the Sampler Music Products
                         and participate in Karaoke activities, (b) does not
                         include a viewing monitor, (c) must be used with a
                         separate television set or viewing monitor in order to
                         view the lyrics of the songs, (d) has a tray load,
                         three CD&G changer, (e) has a front load, dual cassette
                         deck for recording and playing back Karaoke
                         performances, (f) stereo functionality includes (i) 40
                         watts stereo power, which also operates as an amplifier
                         (i.e., for a guitar or keyboard with volume control),
                         (ii) adjustable reverb and (iii) key control
                         functionality which allows the end-user to adjust the
                         music to the musical key of their choice and (g)
                         includes a (i) Microphone and (ii) built-in speaker
                         system (Model No. SMG-900).

                                        8

<PAGE>

                         ((9)-(18) only, each, a "2003 MTV Karaoke Machine"
                         and collectively, the "2003 MTV Karaoke
                         Machines").

                         ((4)-(18) each, a "MTV Karaoke Machine" and
                         collectively, the "MTV Karaoke Machines").

                         ((l)-(18) each, a "Licensed Product" and
                         collectively, the "Licensed Products").

                         The parties acknowledge and agree that, (1) in no
                         event shall the Licensed Products, or any features
                         contained therein, be Internet compatible or
                         contain any other components or technical
                         functionality now known or hereafter devised or
                         developed that would allow the Licensed Products
                         to broadcast, stream, deliver or distribute any
                         content. MTVN shall have prior approval rights
                         regarding all technical components of the Licensed
                         Products and (2) any device or item that does not
                         (a) meet all of the specifications and include all
                         of the capabilities set forth in the definitions
                         of the Licensed Products and (b) without limiting
                         the specifications, restrictions and descriptions
                         of functionality and capability set forth on the
                         definitions of the Licensed Products, contain all
                         the features included on the technical spec sheets
                         for the Licensed Products (excluding the Sampler
                         Music Products and the Music Products), attached
                         hereto at Attachment A, shall not constitute a
                         "Licensed Product" hereunder. In no event shall
                         any of the Licensed Products include any other
                         components or technical functionality now known or
                         hereafter devised or developed which is not
                         specified herein including, but not limited to,
                         wireless, cellular, satellite or any mobile
                         telephone functionality. If Licensee intends to
                         create, develop, sell, distribute or manufacture a
                         product that varies from the Licensed Products to
                         the extent that it modifies, enhances or otherwise
                         alters one or more of the stated features or adds
                         an unstated feature, then Licensee shall give MTVN
                         prior notice describing such requested alteration,
                         and MTVN then may elect in its sole discretion to
                         include such altered product as part of the
                         definition of "Licensed Products" by giving notice
                         to Licensee and amending this Agreement to such
                         effect.

6. The Presentation Date To Licensee's Retailers for the 2003 MTV Karaoke
Machines shall be January 9, 2003 at the Consumer Electronics Show.

                                        9

<PAGE>



7. The Initial Ship Date To Licensee's Retailers for the 2003 MTV Karaoke
Machines shall be June 1, 2003.

8. Licensee shall release a minimum of six of the eleven 2003 MTV Karaoke
Machines in accordance with Section 6 and Section 7 above and the terms and
conditions of the Agreement. Notwithstanding anything to the contrary, Licensee
shall have the right, but not the obligation, to release any of the no more than
five remaining unreleased 2003 MTV Karaoke Machines; provided, however, that
such release is in accordance with the terms and conditions of the Agreement.
The identity of all 2003 MTV Karaoke Machines to be released shall be mutually
agreed upon by MTVN and Licensee.

9. Licensee acknowledges and agrees that it shall not, or authorize others, to
design, manufacture, market, distribute or sell Karaoke machines that have the
same color schemes and designs as any MTV Karaoke machines that are being
released for the Term of the Agreement.

10. Licensee acknowledges and agrees that the MTV Karaoke Machines shall always
be primarily marketed and sold as Karaoke machines as opposed to other functions
or features which may be contained in the Licensed Products.

Except as otherwise herein amended, the Agreement is hereby ratified and
confirmed in all respects.

Please indicate your acceptance of the foregoing by signing in the space
provided below.

                                      Very truly yours,

                                      MTV Networks, a
                                      division of Viacom
                                      International Inc.


                                      By:      /s/ Donald Silvey
                                         -------------------------------------
                                      Name:    Donald Silvey
                                      Title:   SVP Program Enterprises
ACCEPTED AND AGREED TO:

THE SINGING MACHINE COMPANY, INC.


By:      /s/ Edward Steele
    ------------------------------
Name:    Edward Steele
Title:   CEO



                                       10

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>8
<FILENAME>certification991.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                                                    EXHIBIT 99.1


      CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
                TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of The Singing Machine Company, Inc.
(the "Company") on Form 10-Q for the period ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Edward Steele, Chairman and Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
    the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
    respects, the financial condition and result of operations of the Company.


Date:    February 14, 2003       / S /    Edward Steele

                                 Edward Steele
                                 Chairman and Chief Executive Officer
                                 (Principal Executive Officer)



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>9
<FILENAME>certification992.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
                                                                    EXHIBIT 99.2


      CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT
                TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of The Singing Machine Company, Inc.
(the "Company") on Form 10-Q for the period ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, April J Green, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
    the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
    respects, the financial condition and result of operations of the Company.


Date:    February 14, 2003       / S /    April J Green

                                 April J Green
                                 Chief Financial Officer
                                 (Principal Financial Officer)


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
