<SEC-DOCUMENT>0001144204-12-059129.txt : 20121102
<SEC-HEADER>0001144204-12-059129.hdr.sgml : 20121102
<ACCEPTANCE-DATETIME>20121102134702
ACCESSION NUMBER:		0001144204-12-059129
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20121019
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20121102
DATE AS OF CHANGE:		20121102

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:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24968
		FILM NUMBER:		121176155

	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>8-K
<SEQUENCE>1
<FILENAME>v327234_8k.htm
<DESCRIPTION>FORM 8-K
<TEXT>
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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: bold 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0">UNITED STATES</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B>SECURITIES AND EXCHANGE COMMISSION </B></P>

<P STYLE="font: normal 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0">Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B>FORM 8-K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B>CURRENT REPORT </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B>Pursuant to Section 13 OR 15(d) of The
Securities Exchange Act of 1934 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B>Date of Report (Date of earliest event
reported): October 19, 2012</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0"><B><U>THE SINGING MACHINE COMPANY, INC.</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0">(Exact name of registrant as specified in
its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: center">Delaware</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: center">0-24968</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: center">95-3795478</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(State or other jurisdiction</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">(Commission File Number)</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">(IRS Employer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">of incorporation)</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Identification No.)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" STYLE="width: 100%; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; width: 25%; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="text-align: center; width: 50%; border-bottom: Black 1pt solid">6301 NW 5<SUP>th</SUP> Way, Suite 2900, Fort Lauderdale, FL 33309</TD>
    <TD STYLE="text-align: center; width: 25%; padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of principal executive offices
and Zip Code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Registrant's telephone number, including
area code (954) 596-1000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copies to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Gary Atkinson, Esq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Chief Executive Officer</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">6301 NW 5<SUP>th</SUP> Way, Suite 2900</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Fort Lauderdale, FL 33309</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">954-596-1000 (phone)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">954-596-2000 (fax)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">&uml;</FONT> Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">&uml;</FONT> Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">&uml;</FONT> Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-family: Wingdings">&uml;</FONT> Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 1.01 Entry into a Material Definitive Agreement.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On October 19, 2012, the Company executed a two-year Accounts
Receivable Ledgered Line of Credit Facility (&ldquo;line of credit&rdquo;) with Crestmark Bank (&ldquo;Crestmark&rdquo;) of Troy,
Michigan which allows the company to receive and advance of up to 70% of qualified accounts receivable. The outstanding loan balance
on the line of credit cannot exceed $5,000,000 during our peak selling season between August 2 and February 14 and cannot exceed
$500,000 between February 15 and August 1 of each year the agreement is in effect. The Company has agreed to assign all of its
domestic accounts receivable shipped from North America (except drop shipment invoices) to Crestmark and will assume all of the
credit risk on accounts receivable assigned to Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest on the line of credit and discounting charges on accounts
receivable advances will be charged at a rate of 2% per annum over the prime rate as published by the Wall Street Journal and at
no time shall the effective rate be less than 5.25% per annum. The credit facility is secured with all assets of the Company as
well as related-party debt subordination agreements totaling $2,500,000 from Ram Light Management, Ltd. in the amount of $1,683,247
and Starlight Marketing Development, Ltd. in the amount of $816,753. The factoring fees will be 1% of the gross invoice for all
domestic accounts receivable assigned. There were no outstanding obligations on the line of credit facility as of September 30,
2012 and March 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 9.01 Financial Statements and Exhibits.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>(a)</B></TD><TD><B>Exhibits.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%; border-bottom: windowtext 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exhibit </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Number</B></P></TD>
    <TD STYLE="width: 2%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 88%; border-bottom: windowtext 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Description</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.1</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">(Filed herewith). Loan and Security Agreement</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.2</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">(Filed herewith). Schedule to Loan and Security Agreement</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.3</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">(Filed herewith). Promissory Note</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.4</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">(Filed herewith). Subordination Agreement with Ram Light Management</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.5</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">(Filed herewith). Subordination Agreement with Starlight Marketing</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 50%; font-weight: bold">THE SINGING MACHINE, COMPANY, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Date: November 1, 2012</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">/s/ Gary Atkinsn</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>



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<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>v327234_ex99-1.htm
<DESCRIPTION>EXHIBIT 99.1
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<P STYLE="margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LOAN AND SECURITY AGREEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(&ldquo;Agreement&rdquo;)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Agreement dated
_______________________, 2012, is an agreement between <B>CRESTMARK BANK</B>, a Michigan banking corporation (&ldquo;Crestmark&rdquo;),
and <B>THE SINGING MACHINE COMPANY, INC.</B>, a Delaware corporation and <B>SMC (COMERCIAL OFFSHORE DE MACAU) LIMITADA</B>, a Macau
corporation (individually or collectively referred to herein as &ldquo;Borrower&rdquo;). In this Agreement, Crestmark and Borrower
are collectively the &ldquo;Parties&rdquo;. Any person who guarantees the obligations of Borrower (each a &ldquo;Guarantor&rdquo;)
is required to sign this Agreement. The Parties have the addresses shown on the schedule (&ldquo;Schedule&rdquo;) which is attached
to this Agreement. These are the addresses of the Parties for all purposes and may be changed by one party giving notice to the
other party in writing of the new address.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>PURPOSE</U>. </B>The
purpose of this Agreement, including the Schedule, is to set forth the terms and conditions of the loan from Crestmark to
Borrower (&ldquo;Loan&rdquo;) and the obligations of Borrower. The Schedule is part of this Agreement. The promissory
note (&ldquo;Note&rdquo;) to be signed by Borrower, any guaranty(s), and any other documents now or hereafter signed by any
of the Parties in connection with this Agreement, the Loan or any document issued by Crestmark or the bank holding the
lockbox (&ldquo;Lockbox Bank&rdquo;), including subordination agreements or intercreditor agreements, are also all part of
this Agreement. All of the documents together are referred to collectively as the &ldquo;Loan Documents&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LOAN;
LOAN ADVANCES</U>. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Any
disbursement of money or advance of credit by Crestmark, including but not limited to amounts advanced for the payment of interest,
fees, expenses and amounts necessary to protect, maintain and preserve Crestmark&rsquo;s Collateral under the Loan Documents (&ldquo;Protective
Disbursements&rdquo;), is referred to collectively as an &ldquo;Advance&rdquo;. Whether Crestmark makes an Advance is in Crestmark&rsquo;s
sole discretion. If an Advance is made, it will be made in accordance with the advance formula set forth in the Schedule (&ldquo;Advance
Formula&rdquo;); but not at any time to exceed the maximum amount set forth on the Schedule (&ldquo;Maximum Amount&rdquo;). Crestmark
may choose to make Protective Disbursements in excess of the Maximum Amount or Advance Formula in its sole discretion. Each time
Crestmark makes an Advance, including a Protective Disbursement, the Advance will be debited against an account in Borrower&rsquo;s
name on Crestmark&rsquo;s books (&ldquo;Loan Account&rdquo;), and each payment will be credited against the Loan Account in the
manner described in this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
total amount Borrower owes to Crestmark will be the aggregate of the Advances made by Crestmark, the expenses and fees set forth
in the Schedule and any and all costs incurred by Crestmark (including reasonable attorney&rsquo;s fees), and interest at the rate
set forth in the Note on all amounts advanced (together with all other obligations of Borrower under the Loan Documents, the &ldquo;Obligations&rdquo;
or &ldquo;Indebtedness&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
must repay all Advances with respect to the Loan with interest, which is due monthly as specified in the Note, along with all other
fees and expenses of Crestmark set forth herein or in the Schedule. Crestmark may in its sole discretion collect any Obligations
due Crestmark by (i) directly applying any funds in the Lockbox Account, as defined in paragraph 5 below, to the Obligations (ii)
directly applying funds from any reserve to the Obligations, (iii) collecting the Obligations directly from Borrower; or (iv) otherwise
collecting the Obligations. Borrower understands that all the Obligations are repayable at any time in full or in part upon demand
by Crestmark. Crestmark may make demand for partial payments and such demand will not preclude Crestmark from demanding payment
in full at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>D. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
must comply with its representations, promises, covenants and reporting requirements set forth in this Agreement, in the Schedule
and in the other Loan Documents. Borrower&rsquo;s failure to do any of the foregoing is a default (&ldquo;Default&rdquo;). The
demand nature of the Obligations is not modified by reference to a Default in this Agreement or the other Loan Documents and any
reference to a Default is for the purpose of permitting Crestmark to exercise its remedies for Default, including charging interest
at the Extra Rate provided in the Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
aggregate amount of all Advances, plus the expenses and fees set forth in the Schedule, any and all costs incurred by Crestmark
(including reasonable attorney&rsquo;s fees), and interest at the rate set forth in the Note on all amounts advanced (the &ldquo;Loan
Amount&rdquo;), may not, at any time, exceed the Maximum Amount or the Advance Formula, and Borrower understands that if at any
time it should owe more to Crestmark than the lesser of the Maximum Amount or the Advance Formula (the &ldquo;Overformula&rdquo;)
it must repay that amount immediately, whether or not demand to repay the whole of the Obligations has been made. Protective Disbursements
must be immediately repaid whether or not an Overformula exists.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>RESERVES</U></B>.
If Crestmark believes in its sole discretion that the prospect for repayment of the Obligations is impaired or that its Collateral
margin is insufficient, Crestmark may establish cash reserves and credit balances to protect its interests and the repayment of
the Obligations. The reserve may be established by reducing the Advance Formula to achieve the target reserve level, withholding
monies due Borrower from any payments Crestmark receives, from a cash payment from Borrower or any other method Crestmark chooses.
Any money in a reserve account, whether or not it is a cash reserve, will not earn interest for Borrower, and Crestmark may apply
the funds in the reserve account to reduce the Obligations at any time Crestmark elects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>FEES
AND EXPENSES</U></B>. In connection with the Loan there are several types of fees that may be charged and Borrower may be required
to maintain a minimum Loan balance. Such fees and requirements are set forth in the Schedule. In addition, all expenses of every
kind incurred by Crestmark in connection with the Loan, any Advance, collection of the Obligations, inspection, and examination
are to be paid by Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LOCKBOX</U>.
</B>Borrower must immediately notify all persons who are obligated on accounts (&ldquo;Account Debtors&rdquo;) to direct all Account
Debtors and any other person or party that is liable to Borrower (collectively a &ldquo;Debtor&rdquo;) to remit all payments due
Borrower to the lock box address or pursuant to the wire transfer or ACH instructions set forth in the Schedule (the &ldquo;Lockbox
Account&rdquo;). The remit to address on all documents related to the accounts, including invoices, purchase orders, or contracts
(&ldquo;Documents&rdquo;) must be the Lockbox Account. At Crestmark&rsquo;s request, all Documents must be marked by Borrower to
show assignment to Crestmark, and Borrower must notify each Account Debtor by mail that the Account has been assigned to Crestmark
and that all payments on the Account, whether made by mail or electronically or otherwise must be made payable to Borrower or Crestmark,
at Crestmark&rsquo;s sole discretion, to the Lockbox Account or other address provided by Crestmark in writing. The language used
in such notices shall be approved by Crestmark in writing. Crestmark may at any time and from time to time, and at its sole discretion,
notify any Debtor or third party payee to make payments payable directly to Crestmark or to notify Debtor of the assignment to
Crestmark. All expenses for notification of each Account Debtor will be paid by Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If notwithstanding
the notice to Debtors, Borrower receives any funds from a Debtor, including any cash, checks, drafts or wire transfers from the
collection, enforcement, sale or other disposition of the Collateral (defined below), whether derived in the ordinary course of
business or not, or if Borrower receives any proceeds of insurance, tax refunds or any and all other funds of any kind, Borrower
shall hold such funds in trust for Crestmark, shall not mix such funds received with any other funds, and shall immediately deposit
such funds in the Lockbox Account in the form received. That means if the funds are received by mail, the Debtor checks will be
sent to the Lockbox Account uncashed, and if the funds are received electronically, the funds will be transferred immediately to
the Lockbox Account electronically. Crestmark will have sole possession and control over the Lockbox Account. The Lockbox Bank
will process all deposits and Borrower has no right to the Lockbox Account, it belongs to Crestmark. Crestmark is the owner of
all deposits in the Lockbox Account, and has no duty as to collection or protection of funds as long as it is not grossly negligent
or commits actual fraud. All expenses plus any applicable administration and servicing fees of the Lockbox Account will be paid
by Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LOAN
ACCOUNT</U></B>. All of the Obligations which are owed by Borrower will be shown in the Loan Account and Borrower will receive
a monthly statement either by mail, electronically or via access to the Crestmark online system at Crestmark&rsquo;s sole discretion.
The statement is binding on Borrower unless Borrower provides a written objection to Crestmark that is actually received by Crestmark
within fifteen (15) business days of the time the statement is provided or made available to Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>PAYMENTS</U></B>.
Should a check or other credit instrument not be collected after Borrower has been given credit for such payment, then the credit
will be reversed and a fee charged at Crestmark&rsquo;s then standard rate. Crestmark, at its sole discretion, may establish reserves
as set forth above or not apply a payment that it reasonably believes may be returned unpaid for any reason or disgorged due to
a preference claim or garnishment, and in such event the Maintenance Fee (as defined in the Schedule) will still be payable. In
the event that any payment received by Crestmark is sought to be recovered by or on behalf of the payer (including a trustee in
bankruptcy or assignee for the benefit of creditors), then Borrower agrees to immediately reimburse Crestmark on demand for any
amount so recovered and all of Crestmark&rsquo;s expenses in connection with any such proceeding, including reasonable attorneys&rsquo;
fees. This provision shall survive termination of this Agreement. Any payments received by Crestmark shall be applied to the Obligations
in whatever order Crestmark determines in its reasonable discretion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -35.95pt"><B>8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>SECURITY
INTEREST</U>. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
grants to Crestmark a security interest in all of its assets, now existing or hereafter arising, wherever located including all
Accounts, Goods, Inventory, Equipment, Chattel Paper, Instruments, Investment Property, specifically identified Commercial Tort
Claims, Documents, Deposit Accounts, Letter of Credit Rights, General Intangibles, Contract Rights, customer lists, furniture and
fixtures, books and records and supporting obligations for any of the foregoing, and all Proceeds of the foregoing (the &ldquo;Collateral&rdquo;),
to secure repayment of the Obligations (&ldquo;Security Interest&rdquo;). The Collateral also includes all monies on deposit with
Crestmark, or on deposit in the Lockbox Account. All capitalized terms used in this Section 8A. which are not otherwise defined
shall have the meanings assigned to them in the Uniform Commercial Code as adopted in the State of Michigan (the &ldquo;UCC&rdquo;).
Without limiting the forgoing, &ldquo;Accounts&rdquo; will also mean and include any and all other forms of obligations now owed
or hereafter arising or acquired by the Borrower evidencing any obligation for payment for goods of any kind, nature, or description
sold or leased or services rendered, and all proceeds of any of the foregoing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
gives Crestmark all of the rights of a secured party under the UCC. Borrower grants Crestmark the authority to file all appropriate
documentation for Crestmark to perfect its security interest in the Collateral, including a UCC-1 financing statement listing the
Collateral as &ldquo;All assets of the Debtor, now existing and hereafter arising, wherever located,&rdquo; or similar terms, as
well as UCC-3 amendments as may be required from time to time. All expenses of Crestmark relating to searching, filing or protecting
the Security Interest are part of the Obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
Security Interest gives Crestmark rights with respect to the Collateral and the Security Interest and this Agreement imposes duties
upon Borrower which relate to the Collateral. Some of the rights and duties are: (i) the right of Crestmark at any time to notify
any persons who may hold any part of the Collateral, such as Account Debtors and other debtors, of Crestmark&rsquo;s Security Interest.
Borrower understands that Crestmark may verify Accounts with the Account Debtors; (ii)<B> </B>Borrower must cooperate with Crestmark
in obtaining control of any Collateral in the possession of third persons, particularly Collateral consisting of deposit accounts,
investment property, letter of credit rights or other Collateral which is evidenced by electronic entries; (iii)<B> </B>except
for the right of Borrower to sell its inventory in the ordinary course of business, Borrower shall not sell or transfer any of
the Collateral or grant any other security interest in the Collateral, except as Crestmark may specifically agree to in writing.
Borrower remains liable to perform all of its obligations with respect to the Collateral such as the recognition of any warranties
in inventory sold and Crestmark is under no responsibility to perform any of the obligations of Borrower; and (iv)<B> </B>Borrower
must notify Crestmark immediately if it knows that any Account Debtor disputes an Account whether or not such disputes are deemed
valid by Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>POWER
OF ATTORNEY</U>.</B> Borrower irrevocably appoints Crestmark, or any person(s) designated by Crestmark, as its attorney-in-fact,
which appointment is coupled with an interest and shall remain in full force and effect until all Obligations of Borrower to Crestmark
have been fully satisfied and discharged, with full power, at Borrower&rsquo;s sole expense, to exercise at any time in Crestmark&rsquo;s
reasonable discretion all or any of the following powers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 231.05pt">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Receive,
take, endorse, assign, deliver, accept and deposit, in the name of Crestmark or Borrower, any and all cash, checks, commercial
paper, drafts, remittances and other instruments and documents relating to the Collateral or the proceeds thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Change
Borrower&rsquo;s address on all invoices and statements of Account mailed or to be mailed to Borrower&rsquo;s customers and to
substitute thereon the address designated by Crestmark, to place legends on all invoices and statements of Account mailed or to
be mailed to Borrower&rsquo;s customers, and to receive and open all mail addressed to Borrower, or to Borrower&rsquo;s trade name
at Crestmark&rsquo;s address, or any other designated address.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Upon
and after the occurrence of a Default, to change the address for delivery of Borrower&rsquo;s mail to Crestmark&rsquo;s or an address
designated by Crestmark. Borrower specifically authorizes Crestmark to sign any forms on behalf of Borrower to affect this change
with the United States Postal Service or any third party and requests such change to be accepted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Upon
and after the occurrence of a Default, to take or bring, in the name of Crestmark or Borrower, all steps, actions, suits or proceedings
deemed by Crestmark necessary or desirable to effect collection of or other realization upon any Collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Execute
on behalf of Borrower any UCC-l and/or UCC-3 Financing Statement(s) and/or any notices or other documents necessary or desirable
to carry out the purpose and intent of this Agreement, and to do any and all things reasonably necessary and proper to carry out
the purpose and intent of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>F. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
transfer any lockboxes belonging to Borrower to Crestmark at Crestmark&rsquo;s sole discretion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify"><B>G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
initiate ACH transfers from Borrower&rsquo;s depository accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
endorse and take any action with respect to bills of lading covering any inventory.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Upon
and after a Default, or at any time in the event that Borrower fails to do so within a reasonable time, execute, file and serve,
in its own name or in the name of Borrower, mechanics lien or similar notices, or claims under any payment or performance bond
for the benefit of Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Upon
and after a Default, or at any time in the event that Borrower fails to do so within a reasonable time, pay any sums necessary
to discharge any lien or encumbrance on the Collateral, which sums shall be included as Obligations hereunder, and which sums shall
accrue interest at the Extra Rate until paid in full.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>REPRESENTATIONS</U></B>.
Borrower makes the following representations and warranties to Crestmark and such representations and warranties must be true
at all times until the Obligations are paid in full. If Borrower learns that a representation and warranty once made is no longer
true, it has the duty to immediately notify Crestmark in writing:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 231.05pt">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
is in good standing under the laws of the state of its organization and is authorized to conduct business in any state that it
conducts business. Borrower has the power and authority to enter into this Agreement, and the persons signing this Agreement and
all persons who sign any documents with Crestmark have the appropriate authority. Borrower&rsquo;s organization identification
number, state of organization, and addresses where it conducts business are as shown on the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower&rsquo;s
entry into the Loan Documents do not violate any agreement which Borrower has or which binds Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
Loan Documents are fully enforceable against Borrower and the Collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>There
are no litigation or criminal charges pending or threatened against Borrower or Guarantor and neither Borrower nor Guarantor are
in default of any order or judgment of any court or any governmental agency of any kind. There are no unsatisfied liens or judgments
pending against Borrower in any jurisdiction except as shown on the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
financial information furnished by Borrower and Guarantor to Crestmark has been prepared in accordance with generally accepted
accounting principles, all financial statements are true and correct, and any projections of the business operations of Borrower
that have been given or will be given to Crestmark in the future will be based upon Borrower&rsquo;s reasonable assumptions and
estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
is the owner of all of the Collateral and there are no other liens or claims against the Collateral, except the Security Interest
of Crestmark or as shown on the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>All
of the Collateral is personal property and none of the Collateral will be permanently affixed to real estate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
has filed and will file all federal, state, local and foreign tax returns that it is required to file and has paid and will pay
all taxes and all other governmental charges as they become due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
is able to pay its debts as they become due and has sufficient capital to carry on its business. Borrower&rsquo;s obligations under
this Agreement and the Loan Documents, including the obligation to repay the Loan and the grant of the Security Interest, do not
render Borrower insolvent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
only uses the fictitious names, d/b/a&rsquo;s, tradenames and tradestyles set forth on the Schedule (collectively the &ldquo;Tradenames&rdquo;),
and Borrower certifies that all sales and any and all business done in the name of the Tradenames are the sales and business of
Borrower. Any and all checks, remittances or other payments received in the name of any of the Tradenames are Borrower&rsquo;s
sole and exclusive property, and are subject to Crestmark&rsquo;s security interest hereunder. Any and all authority given to Crestmark
by Borrower in this Agreement or elsewhere to endorse Borrower&rsquo;s name on any checks, negotiable instruments or other remittances
extends with equal and full force and effect to any checks, negotiable instruments, and other remittances received in the name
of any Tradename.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 231.05pt">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>All
Accounts assigned to Crestmark by Borrower are and will at all times be bonafide accounts arising from the sale of inventory or
providing services, and are not subject to discounts, deductions, allowances, contra items, offset or counterclaim and are free
and clear of all encumbrances of any kind whatsoever, except as disclosed to Crestmark in writing and approved by Crestmark in
writing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>L.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower&rsquo;s
assignment of any Accounts to Crestmark pursuant to this Agreement will not at any time violate any federal, state and/or local
law, rule or regulation, court or other governmental order or decree or terms of any contract relating to such Accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>M.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower
possesses all necessary trademarks, trade names, copyrights, patents, patent rights and licenses to conduct its business as now
operated, without any known conflict with any trademarks, trade names, copyrights, patents and license rights of any other person
or entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>N.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower&rsquo;s
legal name as of the date hereof as it appears in its official filing with its state of organization is as set forth in the opening
paragraph of this Agreement. Borrower has not organized another entity or Tradename using Borrower&rsquo;s name or Tradename as
set forth herein in any other jurisdiction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>O.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>As
to all of Borrower&rsquo;s Inventory and Equipment:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Inventory and Equipment are currently located only at the locations identified on the Schedule, or such other locations as consented
to by Crestmark in writing;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">ii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Inventory is now and at all times hereafter shall be of good and merchantable quality, free from defects, except as disclosed to
Crestmark in writing;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">iii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Inventory and Equipment are and shall remain free from all liens, claims, encumbrances, and security interests (except as held
by Crestmark, and except as identified on the Schedule).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">iv.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Inventory is not now stored with a bailee, warehouseman or similar party provided however, at Crestmark's sole discretion, such
Inventory may be deemed eligible upon such party entering into a waiver letter in form satisfactory to Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>BORROWER&rsquo;S
PROMISES</U></B>. Borrower makes the following promises to Crestmark and these promises are effective until the Obligations are
fully paid:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
pay all Obligations when due and perform all terms, conditions and obligations of the Loan Documents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
permit Crestmark, or its representatives, access to the Collateral on Borrower&rsquo;s premises or wherever collateral is located
and to Borrower&rsquo;s computer systems, books of account and financial records. Borrower will pay the cost of Field Examinations
as specified in the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
notify Crestmark promptly of any litigation, administrative or tax proceeding or other action threatened or instituted against
Borrower or Guarantor or its property, or of any other material matter which may adversely affect Borrower&rsquo;s financial condition.
The amount of claims as to which Borrower must notify Crestmark is specified in the Schedule as the &ldquo;Borrower Claims Threshold&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
pay when due all taxes, assessments and governmental charges, provided that Borrower has the right to contest the same as long
as it has a cash reserve with Crestmark in an amount as determined by Crestmark in its sole discretion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
comply with the Financial Covenants described in the Schedule (if applicable).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
maintain insurance on its business activities in such amount and in such form as Crestmark may from time to time require, and with
respect to such insurance if so designated, Crestmark shall be named as &ldquo;Lender Loss Payee&rdquo; under the policy and receive
evidence of the insurance. All insurance which protects Crestmark shall have at least a 30-day notice to Crestmark prior to any
cancellation. With respect to the insurance, Borrower appoints Crestmark as its attorney-in-fact exercisable after an event of
Default to negotiate any and all claims under all insurance policies and Crestmark also has the power to negotiate any payments
on the insurance policies. Required insurance is listed on the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
comply with all laws, ordinances and regulations or other requirements of any governmental authority or agency applicable to Borrower&rsquo;s
business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
maintain and preserve all Collateral in good repair, working order and condition, and with respect to accounts, pursue collections
thereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
provide Crestmark with evidence of ownership of any Collateral upon the request of Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
maintain a Loan Amount balance which shall not exceed the sum of Eligible Collateral times the corresponding Advance Rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>To
immediately reduce the Obligations to the applicable Maximum Amount on the date that the Maximum Amount changes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>NEGATIVE
COVENANTS</U></B>. Borrower agrees until the Obligations are paid in full, it will not without prior written consent of Crestmark:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Change
its state of organization or its name, or move its executive office or at any time adopt any assumed name without giving Crestmark
at least 30 days prior written notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Declare
or pay any dividend or make any other distribution with regard to its equity or purchase or retire any of its equity without Crestmark&rsquo;s
prior written consent, provided if it is taxed as an S Corporation or other &ldquo;pass through&rdquo; entity, Borrower may prior
to a Default distribute profits to its equity holders in an amount necessary to enable such holders to pay personal, state and
federal taxes directly attributable to the profits earned by Borrower for such year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<!-- Field: Page; Sequence: 8; Value: 2 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Make
any loan or guaranty or assume any obligation or liability, whether as borrower, guarantor, surety, indemnitor or otherwise (a
&ldquo;Borrower Obligation&rdquo;) (i) that would result in or create a Default, or (ii) that together with all other existing
Borrower Obligations would exceed the &ldquo;Borrower Obligation Threshold&rdquo; set forth in the Schedule, without Crestmark&rsquo;s
prior written consent, provided, however, that Borrower may be the borrower under the loans described in those Subordination Agreement(s)
that may be entered into in favor of Crestmark, upon terms and conditions acceptable to Crestmark, and the Borrower may make such
payments, if any, as permitted under the terms and conditions of such Subordination Agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Enter
into any transaction with its equity holders or any affiliates of Borrower except on terms at least as favorable as would be usual
and customary in similar transactions if the person with whom the transaction is entered into was not related to Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Release,
redeem, purchase, or acquire any of its equity interests without the prior written consent of Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt"><B>F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Default
in the payment of any debt to any other person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Suffer
or permit any judgment, decree or order not fully covered by insurance to be entered against Borrower or a Guarantor in an aggregate
amount in excess of the &ldquo;Claims Threshold&rdquo; set forth in the Schedule, or permit or suffer any warrant or attachment
to be filed against Borrower, any Guarantor, or against any property or asset of Borrower or Guarantor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Transfer
the ownership of any interest in Borrower without the prior written consent of Crestmark which shall not be unreasonably withheld.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Sell
any of the Collateral outside the normal course of its business without the prior written consent of Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Purchase
the stock or assets of any other entity without the prior written consent of Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 30pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>K</B>.<B>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Make any loans, advances, intercompany transfers or cash flow between the Borrower
and any officer, director, employee, shareholder, subsidiary, related entity or affiliate of the Borrower or with any company that
has common shareholders, officers or directors with the Borrower, except for Related Parties and Other Related Parties</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>FINANCIAL
REPORTS</U></B>. Borrower promises that until the Obligations are fully paid and this Agreement is terminated, it will keep its
books and records in a manner satisfactory to Crestmark and Crestmark will have the right at any time to verify any of the Collateral,
documentation or books and records of Borrower in whatever manner and as often as Crestmark deems necessary. Borrower will permit
Crestmark, or its representatives, access to the Collateral and Borrower&rsquo;s premises and to Borrower&rsquo;s computer systems,
books of account and financial records. Borrower will furnish to Crestmark the financial reports identified on the Schedule, certified
to by the president or chief financial officer of Borrower and Borrower&rsquo;s certified public accountant, if applicable. All
financial reports will be prepared in accordance with generally acceptable accounting principles and will be true and accurate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>CRESTMARK&rsquo;S
REMEDIES</U></B>. Crestmark has all the remedies available at law or in equity (including those under the UCC) in the event of
a Default or if Borrower fails to pay the Obligations on demand, including but not limited to the following: to charge the Extra
Rate; to notify Account Debtors to make the payments directly to Crestmark; to settle or compromise any disputed Account, sue on
any Account and make any agreement to deal with the Accounts as if it were the owner; to offset any of Borrower&rsquo;s or Guarantor&rsquo;s
funds under the control of Crestmark against the Obligations; and to require Borrower to gather up the Collateral and make it available
to Crestmark for Crestmark to conduct public or private UCC foreclosure sales. Borrower grants to Crestmark a license or other
right to use, without charge, Borrower&rsquo;s labels, patents, copyrights, trademarks, rights of use of any name, trade secrets,
tradenames and advertising materials, or any property of a similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale and selling any Collateral, and Borrower&rsquo;s rights under all licenses and franchise agreements shall
inure to Crestmark&rsquo;s benefit. If Crestmark should proceed against the Collateral and sell any of the Collateral on credit,
Borrower will be credited on the Obligations only with the amount actually received by Crestmark and Borrower waives any and all
provisions as to notice or a particular method of sale of any of the Collateral. Borrower will pay all expenses in connection with
the assembly or sale of the Collateral. Crestmark does not have to incur its own expenses in realizing upon the Collateral, but
all the expenses are for the account of Borrower. Borrower recognizes that at no time is Crestmark its agent in dealing with the
Collateral, but Crestmark acts only in its own interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>CUMULATIVE
RIGHTS</U></B>. Crestmark&rsquo;s rights and remedies under this Agreement and all other agreements shall be cumulative.
Crestmark shall have all other rights and remedies not inconsistent herewith as provided under the UCC, by law, or in equity.
No exercise by Crestmark of one right or remedy shall be deemed an election, and no waiver by Crestmark of any Default on
Borrower&rsquo;s part shall be deemed a continuing waiver. No delay by Crestmark shall constitute a waiver, election or
acquiescence by it.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>16.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LENDER
ACTIONS</U></B>. To the extent applicable law may impose duties on Crestmark to exercise remedies in a commercially reasonable
manner, Borrower agrees that it is not commercially unreasonable for Crestmark: to fail to exercise remedies against any Collateral
or any particular Account Debtor; to proceed against Account Debtors either directly or through collection agencies; to advertise
disposition of Collateral through publications or media of general circulation; to hire professional auctioneers to dispose of
Collateral; to dispose of Collateral in wholesale or retail markets; to disclaim warranties with respect to Collateral; or to
obtain services of attorneys or other professionals. The foregoing is not an exhaustive list and nothing contained in the foregoing
shall be construed to grant any rights to Borrower or to impose any duties on Crestmark that would not have been granted or imposed
by this Agreement or by applicable law in the absence of this <U>Section 16</U>. Borrower agrees that under no circumstances is
Crestmark the agent or representative of Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>17.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>APPLICATION
OF PROCEEDS</U></B>. Once collection efforts are commenced by Crestmark, any proceeds of sale or disposition of Collateral may
be applied by Crestmark first to expenses authorized by this Agreement, including Crestmark&rsquo;s reasonable attorneys&rsquo;
fees, which Borrower must pay, and the balance to payment of the Obligations in such manner as Crestmark may elect. Borrower and
Guarantor remain liable for any deficiency.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>NOTICES</U></B>.
Any notice is effective by either party if sent in writing or facsimile with confirmation of receipt or by certified mail or personal
delivery or expedited mail services to the addresses shown on the Schedule. In addition, the Borrower consents to Crestmark sending
the Borrower other communications via electronic mail and/or facsimile.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><B>19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>MISCELLANEOUS
PROVISIONS</U></B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>This
Agreement is binding upon and is for the benefit of Borrower and Crestmark, and their respective successors and assigns. However,
under no circumstances may Borrower assign this Agreement or its rights and duties hereunder. Crestmark may assign this Agreement
and its rights under the Loan Documents and Borrower will make payments to any such assignee if so directed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Crestmark
has the right at any time to assign, transfer, negotiate or sell participations in this Agreement or the Obligations or the rights
of Crestmark hereunder. In connection with any assignment, Borrower consents to disclosure of any and all books, records, files,
Loan Documents and all other documents in the possession or under the control of Crestmark.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>No
delay or failure of Crestmark in exercising any right or remedy will affect such right or remedy. No delay or failure of Crestmark
to demand strict adherence to the terms of this Agreement will be deemed to waive Crestmark&rsquo;s rights to demand such adherence
at any time in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>The
term &ldquo;including&rdquo; means &ldquo;including, without limitation&rdquo;, and the term &ldquo;includes&rdquo; means &ldquo;includes,
without limitation&rdquo;. The word &ldquo;will&rdquo; shall be construed to have the same meaning and effect as the word &ldquo;shall.&rdquo;
The definitions of terms in this Agreement shall apply equally to the singular and plural forms of the terms defined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>This
Agreement and the other Loan Documents will be interpreted and determined under the laws of the State of Michigan without any regard
to any conflict of laws provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Borrower,
at Crestmark&rsquo;s request, will make, execute and acknowledge any and all further instruments or agreements necessary to carry
out the intent of this Agreement and the other Loan Documents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>This
Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures
were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile or electronic
mail shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed
counterpart of the signature page to this Agreement by facsimile or electronic mail to any other party shall thereafter also promptly
deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually
executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement. <B> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Neither
Crestmark nor its affiliates, directors, officers, agents, attorneys or employees are liable to Borrower or Guarantor or affiliates
for any action taken or omitted by it or any of them under the Loan Documents except for such liability as may be imposed by law
for gross negligence or actual fraud, and no claim shall be made by Borrower or Guarantor or any of Borrower&rsquo;s affiliates,
directors, officers, agents, or employees for any special or consequential damages or punitive damages arising out of, or related
to the Loan Documents or the transactions between the Parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>This
Agreement and the other Loan Documents represent the complete Agreement between the parties with respect to the subject matter
of this Agreement, and there are no promises, undertakings, representations or warranties by Crestmark relative to the subject
matter of this Agreement not expressly set forth in this Agreement or the other Loan Documents. This Agreement and the other Loan
Documents may be amended only in writing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>J.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>If
any provision of this Agreement is in conflict with any law or statute or is otherwise unenforceable, then the provision will be
deemed null and void only to the extent of such provision and the provision will be deemed severable and the remainder of this
Agreement shall be in full force and effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>K.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>Any
payment made to Crestmark by either Borrower or Guarantor which is subsequently invalidated, declared fraudulent or preferential
or otherwise set aside under any bankruptcy, state, federal or equitable law, then to the extent of such invalidity such payment
will be deemed not to have been made and the obligation will continue in full force and effect. This provision shall survive termination
of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>L.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Lien Termination Without Release </B>In recognition of among other things, Borrower&rsquo;s indemnification obligations and Crestmark&rsquo;s
right to have its attorneys&rsquo; fees and other expenses incurred in connection with this Agreement secured by the Collateral,
notwithstanding payment in full of all Obligations by Borrower, Crestmark shall not be required to record any terminations or satisfactions
of any of its liens on the Collateral unless and until Borrower and all guarantors of its obligations have executed and delivered
to Crestmark a general release in a form acceptable to Crestmark in its sole discretion. Borrower understands that this provision
constitutes a waiver of its rights Borrower may have under &sect;9-513 of the UCC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in"><B>M.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Small
Business Jobs Act Certification </B>Pursuant to Section 4107(d)(2) (the &ldquo;Section&rdquo;) of the Small Business Jobs Act of
2010, certification is required from any business receiving a loan using funds received by the institution under the Small Business
Lending Act. As required by the Section, the Borrower hereby certifies to Crestmark that the principals of Borrower and its affiliates
have not been convicted of, or pleaded <I>nolo contendre</I> to, a sex offense against a minor (as such terms are defined in section
111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911)).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 228.05pt">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-align: justify; text-indent: 0.5in">The term &ldquo;principals&rdquo;
is defined as follows: if a sole proprietorship, the proprietor; if a partnership, each managing partner and each partner who is
a natural person and holds a 20% or more ownership interest in the partnership; and if a corporation, limited liability company,
association or a development company, each director, each of the five most highly compensated executives or officers of the entity,
and each natural person who is a direct or indirect holder of 20% or more of the ownership stock or stock equivalent of the entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 6pt; text-indent: 0.5in"><B>N.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;USA
Patriot Act Notification </B>The following notification is provided to Borrower pursuant to Section 3265 of the USA Patriot Act
of 2001, 31 U.S.C. Section 5318:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><B>IMPORTANT INFORMATION ABOUT
PROCEDURES FOR OPENING A NEW ACCOUNT</B>. To help the government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity
that opens an account, including any deposit account, treasury management account, loan or other extension of credit. We may ask
for the name, address, date of birth, and other information that will allow us to identify all Borrowers, principals and owners.
We may also ask to see your driver&rsquo;s license or other identifying documents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>RIGHT
OF FIRST REFUSAL</U>. </B>In consideration of Crestmark entering into this Agreement and making advances to Borrower, Borrower
hereby agrees that it will, within five (5) days of receipt, provide a copy of any proposal letter, term sheet, letter of intent
or commitment letter from any lender offering to Borrower a refinance of the Obligations. Crestmark shall have the right of first
refusal to match the offer(s) of such other lender(s), and if Crestmark advises Borrower that it intends to meet the financial
and operational terms set forth in such offers (but continuing to require that the loan be repayable on Demand) , Borrower will
be obligated to enter into an amendment to this Agreement extending the terms of this Agreement for at least the term proposed
in such other offer(s), and amending the financial and operational terms as set forth in this Agreement. Notwithstanding the foregoing,
Borrower recognizes that this Agreement can only be terminated as provided herein. Failure of Crestmark to meet the terms set forth
in such letter of interest or commitment letter does not relieve the Borrower from its obligations hereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>21.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>INDEMNIFICATION</U></B>.
Borrower hereby agrees to indemnify, defend and hold Crestmark and its executive committees, parent affiliates, subsidiaries, agents,
directors, officers, participants, employees, agents and their successors and assigns (collectively &ldquo;Indemnified Parties&rdquo;)
harmless against any and all liabilities of any kind, nature or description and damages whether they are direct, indirect or consequential,
including attorney&rsquo;s fees and other professionals and experts incurred or suffered directly or indirectly by Indemnified
Parties or asserted against Indemnified Parties by anyone whosoever, including Borrower or Guarantor, which arise out of the Loan
Documents or the relationship and transaction between the Parties. This provision shall survive the termination of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>22.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>JOINT
AND SEVERAL OBLIGATIONS</U></B>. If more than one person or entity is named as Borrower in this Agreement, all Obligations, representations,
warranties, covenants and indemnities of Borrower set forth herein and in the other Loan Documents shall be the joint and several
obligations of such persons and/or entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>23.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>JURISDICTION</U>.</B>
BORROWER AND GUARANTOR AGREE THAT ANY ACTION TO ENFORCE BORROWER&rsquo;S OR GUARANTOR&rsquo;S OBLIGATIONS TOCRESTMARK SHALL BE
PROSECUTED EITHER IN THE CIRCUIT COURT OF OAKLAND COUNTY MICHIGAN OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF MICHIGAN (UNLESS CRESTMARK, IN ITS SOLE DISCRETION, ELECTS SOME OTHER JURISDICTION), AND BORROWER AND GUARANTOR SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT SELECTED BY CRESTMARK. BORROWER AND GUARANTOR WAIVE ANY AND ALL RIGHTS TO CONTEST THE JURISDICTION
AND VENUE OF ANY ACTION BROUGHT IN THIS MATTER AND BORROWER AND GUARANTOR MAY BRING ANY ACTION AGAINST CRESTMARK ONLY IN THE CIRCUIT
COURT FOR THE COUNTY OF OAKLAND OR THE FEDERAL COURT OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>24.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>WAIVER</U></B>.
ALL PARTIES, INCLUDING BORROWER AND GUARANTOR EACH KNOWINGLY AND VOLUNTARILY WAIVE ANY CONSTITUTIONAL RIGHT TO A TRIAL BY JURY
WITH RESPECT TO ANY CLAIM, DISPUTE OR CONFLICT BETWEEN THE PARTIES OR UNDER THE LOAN DOCUMENTS AND AGREE THAT ANY LITIGATION SHALL
BE HEARD BY A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THEY HAVE HAD THE
OPPORTUNITY TO REVIEW THE EFFECT OF THIS PROVISION WITH COUNSEL OF THEIR CHOICE.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>25.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>RELEASE</U>.
BORROWER AND GUARANTOR RELEASE AND FOREVER DISCHARGE CRESTMARK, ITS AFFILIATES, OFFICERS, AGENTS, EMPLOYEES AND DIRECTORS FROM
ANY AND ALL CLAIMS OF ANY KIND WHATSOEVER FROM THE BEGINNING OF TIME TO DATE OF THIS AGREEMENT. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 30pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 30pt">The parties have executed this Agreement as of the
date and year first written above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 182.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">(Signatures on next page)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">CRESTMARK:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2"><B>CRESTMARK BANK</B>, a Michigan banking corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; width: 46%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">BORROWER:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">THE SINGING MACHINE COMPANY, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">a Delaware corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD>Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>CEO</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">SMC (COMERCIAL OFFSHORE DE MACAU) LIMITADA</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Macau corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD>Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>Director</TD></TR>
</TABLE>
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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>v327234_ex99-2.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>
<HTML>
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<P STYLE="margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SCHEDULE TO LOAN AND SECURITY AGREEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATED: _________________, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This Schedule is part of the Agreement between:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">CRESTMARK BANK (&ldquo;CRESTMARK&rdquo;)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">5480 CORPORATE DRIVE, SUITE 350</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">TROY, MICHIGAN 48098</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">ATTN: Gayle Finger</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">FACSIMILE #:(248) 641-5101</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AND</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">THE SINGING MACHINE COMPANY, INC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">6301 N.W. 5<SUP>TH</SUP> WAY, SUITE 2900</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">FT. LAUDERDALE, FL 33309</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">ATTN: Gary Atkinson</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">FACSIMILE #:(954) 596-2000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2in">and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">SMC (COMERCIAL OFFSHORE DE MACAU) LIMITADA</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">ALAMEDA DR. CARLOS D&rsquo;ASSUMPCAO</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">181-187 EDIFICIIO JARDIM BRILHAMTISMO</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">19 ANDAR D, MACAU</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">(individually or collectively referred to herein as
the &ldquo;BORROWER&rdquo;)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following paragraph numbers correspond
to paragraph numbers contained in the Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.5in; text-align: left"><B>2.</B></TD><TD STYLE="text-align: justify"><B><U>LOAN; LOAN ADVANCES</U>.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Advance Formula: Advances
of the Loan may be measured against a percentage of Eligible Accounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Loan Amount may
not exceed an amount which is the lesser of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>(i)
Five Million and 00/100 Dollars ($5,000,000.00) for the period from August 2<SUP>nd</SUP> through February 14<SUP>th</SUP> of each
year; and (ii) Five Hundred Thousand and 00/100 Dollars ($500,000.00) for the period from February 15<SUP>th</SUP> through August
1<SUP>st</SUP> of each year (as applicable, the &ldquo;Maximum Amount&rdquo;); or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>up
to seventy percent (70%) of Eligible Accounts (the &ldquo;Advance Formula&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Crestmark may, among other reserves, include
a &ldquo;Dilution Reserve&rdquo; which is the Dilution Percentage less the Base Dilution. &ldquo;Dilution Percentage&rdquo; means:
(i) all sales which have not been collected and have been removed from Borrower&rsquo;s accounts receivable aging plus all sales
that may not be collectable but not yet removed from the accounts receivable aging (as determined by Crestmark in its sole discretion)
divided by (ii) total sales and (iii) stated as a percentage, as determined by Crestmark. &ldquo;Base Dilution&rdquo; means: fifteen
percent (15%). Crestmark shall reserve against the advance rate for Eligible Accounts by one percent (1.00%) for each percentage
point or portion thereof that the Dilution Percentage exceeds Base Dilution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Eligible Accounts</U></B> means
and includes those Accounts, unless otherwise approved by Crestmark which:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD STYLE="text-align: justify">have been validly assigned to Crestmark;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD STYLE="text-align: justify">strictly comply with all of Borrower's promises, warranties and representations to Crestmark;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD STYLE="text-align: justify">contain payment terms of not greater than sixty (60) days from the date of invoice except for Toys
R Us which may contain payment terms of not greater than seventy-five (75) days from the date of invoice</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(iv)</TD><TD STYLE="text-align: justify">contain payment terms of not greater than thirty (30) days from the date of invoice for Accounts
for which Advances are requested during the period from December 1 through December 15 of each year;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(v)</TD><TD STYLE="text-align: justify">are not older than ninety (90) days from date of invoice. (&ldquo;Past Due Days&rdquo;); and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(vi)</TD><TD STYLE="text-align: justify">are invoiced no later than ten (10) days from the last date of service or sale.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Eligible Accounts shall not include the
following:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">&nbsp;</TD><TD STYLE="width: 0.5in">(a)</TD><TD STYLE="text-align: justify">Accounts with respect to which the Account Debtor is an officer, employee or agent of Borrower;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(b)</TD><TD STYLE="text-align: justify">Accounts with respect to which services or goods are placed on consignment, guaranteed sale, or
other terms by reason of which the payment by the Account Debtor may be conditional;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(c)</TD><TD STYLE="text-align: justify">Accounts with respect to which the Account Debtor is not a resident of the United States;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(d)</TD><TD STYLE="text-align: justify">Accounts with respect to which
                                                               the Account Debtor is the United States or any department, agency
                                                               or instrumentality of the United States; <U>provided</U>, <U>however</U>,
                                                               that an Account shall not be deemed ineligible by reason of this
                                                               clause (d) if the aggregate amount of such Accounts does not exceed
                                                               five percent (5%) of the total of Borrower&rsquo;s Accounts outstanding,
                                                               or in the event the aggregate amount of such Accounts does exceed
                                                               five percent (5%) of the total of Borrower&rsquo;s Accounts outstanding,
                                                               and that Borrower has completed all of the steps necessary, in
                                                               the sole opinion of Crestmark, to comply with the Federal Assignment
                                                               of Claims Act of 1940 (31 U.S.C. Section 3727) with respect to
                                                               such Account;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(e)</TD><TD STYLE="text-align: justify">Accounts with respect to which
                                                               the Account Debtor is any state of the United States or any city,
                                                               town, municipality, county or division thereof, <U>provided</U>,
                                                               <U>however</U>, that an Account shall not be deemed ineligible
                                                               by reason of this clause (e) if the aggregate amount of such Accounts
                                                               does not exceed five percent (5%) of the total of Borrower&rsquo;s
                                                               Accounts outstanding;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(f)</TD><TD STYLE="text-align: justify">Accounts with respect to which the Account Debtor is a subsidiary of, related to, affiliated with,
or has common shareholders, officers or directors with Borrower;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(g)</TD><TD STYLE="text-align: justify">Accounts with respect to which Borrower is or becomes liable to the Account Debtor for goods sold
or services rendered by the Account Debtor to Borrower;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(h)</TD><TD STYLE="text-align: justify">those Accounts where Crestmark has notified Borrower that, in Crestmark&rsquo;s sole discretion,
the Account or Account Debtor is not acceptable to Crestmark;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD STYLE="text-align: justify">all of the Accounts owed by an Account Debtor who is the subject of a bankruptcy, receivership
or similar proceeding;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(j)</TD><TD STYLE="text-align: justify">all of the Accounts owed by an Account Debtor where twenty percent (20%) or more of all of the
Accounts owed by that Account Debtor are greater than the Past Due Days;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(k)</TD><TD STYLE="text-align: justify">Accounts for which the services have not yet been rendered to the Account Debtor or the goods sold
have not yet been delivered to the Account Debtor (commonly referred to as &quot;pre-billed accounts&quot;);</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(l)</TD><TD STYLE="text-align: justify">Accounts not previously approved by Crestmark where the expected dollar value for such Account
Debtors is greater than ten percent (10%) of Borrower's existing Accounts;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(m)</TD><TD STYLE="text-align: justify">COD and cash sales;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(n)</TD><TD STYLE="text-align: justify">Accounts are disputed; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">(o)</TD><TD STYLE="text-align: justify">Accounts owing from Walgreen Co. and its affiliates (&ldquo;Walgreens&rdquo;), Toys&ldquo;R&rdquo;Us,Inc.,
in connection with its Direct Import Accounts (those Accounts which have terms of 45 days) (&ldquo;TRU DIA&rdquo;), Sam&rsquo;s
Club, in connection with its Direct Import Account (which have terms of L/C sight) (&ldquo;SC DIA&rdquo;), Amazon.com, in connection
with it Direct Import Accounts (which have terms of 1% 30, net 45)(&ldquo;Amazon DIA&rdquo;),</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Walmart.com, ToysRUs.com and BJ&rsquo;s.com,
all on drop shipments. Crestmark will determine in its sole discretion whether any Collateral is eligible for an Advance, but no
Collateral will be considered eligible unless the requirements set forth above are met. Regardless of whether any Collateral is
eligible, it is still part of the Collateral securing the Obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prior to any request for an Advance, Borrower
must furnish to Crestmark invoices, credit memos, purchase orders, evidence of delivery, proof of shipment, timesheets or any other
documents Crestmark requests, in its sole discretion, with respect to the Accounts that Borrower is tendering to Crestmark to support
the Advance (&ldquo;Account Documents&rdquo;). Crestmark will endeavor to provide the requested Advance by the end of the next
business day following the date it receives the request as long as the complete package of information for the request has been
received by Crestmark by 10:30 a.m. Eastern Time on the date of the request for the Advance. All requests for funding will be subject
to Crestmark&rsquo;s then standard fees for electronic funds transfer, wire transfers and check services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each time an Advance is made, the amount
of the Obligations will be increased by the amount of the Advance. On the later of three (3) business days (&ldquo;Clearance Days&rdquo;)
after checks, ACH or wire transfers or other credit instruments are applied to a specific invoice, Crestmark will credit the Loan
Account with the net amount actually received. On the date a collection is applied to a specific invoice, Borrower will receive
immediate credit on such funds in determining availability for Advances. Upon the receipt of a payment from an Account Debtor,
including, without limitation, Walgreens, Crestmark will use such payment to reduce the Obligations, and no portion of such payments
shall be released to the Borrower until the Obligations are reduced to $0.00. Notwithstanding the foregoing, Crestmark may release
to Borrower payments received on those Accounts listed in Section Eligible Accounts(o) except for Walgreens in Crestmark&rsquo;s
commercially reasonable discretion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When Crestmark receives a payment from
an Account Debtor, it will attempt to apply it against the appropriate Account Debtor and invoice according to the Account Debtor&rsquo;s
remittance advice. If it is not clear which Account Debtor or invoice the payment is to be applied against, Crestmark may contact
Borrower or the payor for assistance. Unless there is clear error, the application of payments by Crestmark is final.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.5in; text-align: left"><B>4.</B></TD><TD STYLE="text-align: justify"><B><U>FEES AND EXPENSES</U></B>. The following fees will
be paid by Borrower:</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Loan Fee</U>:
</B>Waived.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Late Reporting
Fee</U>:</B> Borrower will pay Crestmark a Late Reporting Fee in an amount equal to One Hundred Fifty and 00/100 Dollars ($150.00)
per document per business day for any day in which any report, financial statement or schedule required by the Agreement is delivered
late.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Lockbox Fee</U>:</B>
Each month Borrower will pay all costs in connection with the Lockbox and the Lockbox Account, as determined by Crestmark from
time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Documentation
Fee</U>:</B> In consideration of the extension of the Loan and the execution of this Agreement, Borrower will pay Crestmark a documentation
fee of Seven Hundred Fifty and 00/100 Dollars ($750.00), which fee is fully earned as of the date hereof and is non-refundable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Overformula Fee</U>:</B>
In the event of the occurrence of an Overformula, Borrower will pay to Crestmark an Overformula Fee of the greater of (i) 0.04937%
per day on the amount of such Overformula, or (ii) Two Hundred Fifty and 00/100 Dollars ($250.00) per day.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Misdirection
Fee</U>: </B>In the event that the Borrower fails to immediately deposit funds in the Lockbox Account or the Lockbox in the form
received as provided above, in addition to all other remedies of Crestmark hereunder, Borrower shall pay a Misdirection Fee. The
Misdirection Fee is equal to five percent (5.00%) of the amount of the funds which Borrower deposits in any bank account other
than the Lockbox Account or the Lockbox, or are otherwise not remitted to Crestmark as required in the Agreement. Nothing provided
herein shall in any manner authorize the Borrower to misdirect funds as prohibited by the Agreement. Crestmark is the owner of
all deposits in the Lockbox and the Lockbox Account, and has no duty as to collection or protection of funds as long as it is not
grossly negligent or commits actual fraud.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Missing Notation
Fee</U>: </B>Borrower will pay to Crestmark a Missing Notation Fee of five percent (5.00%) of the face amount of each invoice on
any invoice that is sent by Borrower to an Account Debtor that does not contain the notice as required by Section 5 of the Loan
and Security Agreement hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Maintenance Fee</U>:</B>
On each Account, Borrower will pay Crestmark a Maintenance Fee equal to one percent (1.00%) of the face amount of the invoice for
each ninety (90) days, or part thereof, that the Account is outstanding (the &ldquo;Initial Maintenance Fee&rdquo;); provided,
however, if the Account has not been paid in full in ninety (90) days and Crestmark does not recourse the Account back to Borrower,
Borrower will pay Crestmark an Incremental Maintenance Fee equal to one and one quarter of one percent (1.25%) of the face amount
of the invoice for each ten (10) days the Account is outstanding for over 90 days. The first ninety (90) day Maintenance Fee will
be due upon furnishing the invoice to Crestmark, and each Maintenance Fee thereafter will be due when Crestmark collects the Account,
or if Crestmark is not able to collect the Account, the Maintenance Fee will be paid by Borrower on demand by Crestmark and calculated
based on when Crestmark is paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Term</U>: </B>This
Agreement shall continue in full force and effect, but if not sooner demanded, for two (2) years from the date hereof (&ldquo;Term&rdquo;),
and for additional two (2) year terms unless terminated by Borrower sixty (60) days prior to the end of the initial Term or any
renewal Term. In the event of termination by Borrower of this Agreement or repayment in full of the Obligations prior to the expiration
of the Term or any renewal Term, Borrower shall pay to Crestmark, as an early termination fee (the &ldquo;Exit Fee&rdquo;), an
amount equal to Seventy Thousand and 00/100 Dollars ($70,000.00) per year, less actual Initial Maintenance Fees earned for such
year, or part thereof, remaining in Agreement plus any unpaid fees. In the event that payment of the Obligations shall be accelerated
for any reason whatsoever by Crestmark, the Exit Fee in effect as of the date of such acceleration shall be paid and such Exit
Fee shall also be added to the outstanding balance of the Obligations in determining the debt for the purposes of any judgment
of foreclosure of any loan documents given to secure the Obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>5.</B></TD><TD><B><U>LOCKBOX</U>.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in">The Lockbox Account means:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">Drawer 1764</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">PO Box 5935</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">Troy, MI 48007-5935</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(or) if by wire transfer or ACH transfer, according to the following
instructions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">Crestmark Bank</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">Troy, MI</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">ABA: 072413764</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">For Account of: Singing Machine Company, Inc. or-</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.44in">SMC (Comercial Offshore de Macau) Limitada</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in">Account Number: 9545961000</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>10.</B></TD><TD><B><U>REPRESENTATIONS</U>.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>(A)</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Singing Machine Company, Inc.&rsquo;s state of organization is Delaware and its state organizational identification number is 2376345.
SMC (COMERCIAL OFFSHORE DE MACAU) LIMITADA&rsquo;s country of organization is Macau and its registration no. is 21300 SO.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>(F)</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;List
Security Interests in the Collateral held by creditors other than Crestmark as Permitted Encumbrances:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">NONE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>(J</B>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;List
Borrower&rsquo;s Tradenames:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">NONE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>11.</B></TD><TD STYLE="text-align: justify"><B><U>BORROWER&rsquo;S PROMISES</U>:</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BORROWER
CLAIMS THRESHOLD: Two Thousand Five Hundred Dollars ($2,500.00).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL
COVENANTS: Borrower will maintain the following Financial Covenants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">Except as
otherwise permitted under this Agreement, at no time shall Borrower make any loans, advances, intercompany transfers or cash flow
between Borrower and any subsidiary, related entity or affiliate of Borrower or with any company that has common shareholders,
officers or directors with Borrower. Notwithstanding the foregoing, Borrower may do business with Starlight Marketing Development
Limited and Ram Light Management Limited (collectively the &ldquo;Related Parties&rdquo;) in the ordinary course of business and
on the same terms as would be applicable for non-related third parties, so long as the Related Parties enter into subordination
agreements with Crestmark in form and content satisfactory to Crestmark. Notwithstanding the foregoing, Borrower may do business
with Starlight Marketing Limited, Starlight R&amp;D Ltd., Hyundai Household Improvement Ltd., Starlight Consumer Electronics, USA,
Inc., Starlight Consumer Electronics, Ltd., Starlight Electronics USA, Inc., Starfair Electronics Co., Ltd., Cosmo HK, Cosmo Communications
Canada, Inc., Cosmo Communications USA Corp. and Star Light Electronics, Ltd. (collectively the &ldquo;Other Related Parties&rdquo;)
in the ordinary course of business and on the same terms as would be applicable for non-related third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">All of the
financial covenants in this Agreement shall be determined in accordance with GAAP, unless otherwise provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&quot;GAAP&quot;
means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards
Board that are applicable to the circumstances as of the date of determination and applied on a consistent basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">F.</TD><TD STYLE="text-align: justify">REQUIRED INSURANCE</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">Without limiting
Crestmark&rsquo;s requirements for insurance coverage, which may change from time to time, the following is/are the minimum insurance
requirement(s):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">PROPERTY DAMAGE- Crestmark named
Lender Loss Payee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">GENERAL AND PROFESSIONAL LIABILITY-Crestmark
named as additional insured for an amount not less than the smallest amount required under any contract with any Account Debtor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">All insurance required in any contract,
purchase order or any other agreement with Account Debtors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>12.</B></TD><TD STYLE="text-align: justify"><B><U>NEGATIVE COVENANTS</U>.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BORROWER
OBLIGATION THRESHOLD: Twenty Five Thousand Dollars ($25,000).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CLAIMS
THRESHOLD: Two Thousand Five Hundred Dollars ($2,500.00).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.5in; text-align: left">13<B>.</B></TD><TD STYLE="text-align: justify"><B><U>FINANCIAL REPORTS</U></B>.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Management Prepared
Financial Statements</U></B>: Borrower will deliver to Crestmark management prepared financial statements, balance sheets, and
profit and loss statements for quarter then ended, certified to by the president or chief financial officer of Borrower. Such
reports will set forth the financial affairs and true condition of Borrower for such time period and will be delivered to Crestmark
no later than forty-five (45) days after the end of each quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Annual Financial
Statements</U>:</B> Each year Borrower will deliver to Crestmark annual audited financial statements, cash flow statements, balance
sheets, and profit and loss statements prepared by a certified public accountant acceptable to Crestmark, all without exceptions.
Such reports will set forth in detail Borrower's true condition as of the end of Borrower's fiscal year. Borrower shall deliver
annual financial statements no later than one hundred twenty (120) days after the end of Borrower's fiscal years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All financial statements are and will be
prepared in accordance with GAAP on an accrual basis applied on a consistent basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><U>Accounts Receivable Aging and Accounts
Payable Aging Reports</U></B>: Borrower will furnish to Crestmark the following certified to by the president or chief financial
officer of Borrower within the time periods set forth:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><B>(a)</B></TD><TD><B><U>Accounts Receivable Reports</U></B>: Upon request
                                                                      by Crestmark; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in"><B>(b)</B></TD><TD><B><U>Accounts Payable Reports</U></B>: Upon request
                                                                      by Crestmark.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Field Examinations</U></B>:
Borrower will reimburse Crestmark for the costs to perform field examinations of Borrower's books and records, assets and liabilities,
to be performed by Crestmark's inspector, whether a Crestmark officer or an independent party, with all expenses (whether for a
Crestmark employee or otherwise, at the rate of the greater of $850.00 or current market rate, per examiner, per day, for each
day of the field examination including preparation of the field examination report, together with all out of pocket expenses including,
but not limited to, transportation, hotel, parking, and meals) paid by Borrower. Field examinations are performed for Crestmark&rsquo;s
internal use and Crestmark has no obligation to provide Borrower or Guarantor with the results of the examination or copies of
any reports or work papers in whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Tax Deposit Evidence</U></B>:
Submit payroll summaries and evidence of tax payments together with copies of bank statements from which the funds are impounded,
as well as, Federal Forms 940 and 941 to Crestmark upon Crestmark&rsquo;s request.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Customer Lists</U></B>:
Upon Crestmark&rsquo;s request, Borrower will deliver to Crestmark detailed customer lists showing the customer's name, address,
phone number and any other information Crestmark reasonably requests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Projections</U>:</B>
Borrower shall deliver to Crestmark, within sixty (60) days prior to each year-end, an annual financial projection including balance
sheet, income statements, and statement of cash flows together with assumptions for the following year, broken down monthly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><U>Other Information</U></B>:
Borrower and Guarantor will also deliver to Crestmark such other financial statements, financial reports, projections, documentation,
tax returns and other information as Crestmark requests from time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Signatures on Next Page)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">18.</TD><TD><B><U>NOTICES</U>.</B> Addresses for Notices are as set forth at the beginning of this Schedule.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">BORROWER:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 46%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">THE SINGING MACHINE COMPANY, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Delaware corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD>Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>CEO</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">SMC (COMERCIAL OFFSHORE DE MACAU)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">LIMITADA</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Macau corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD>Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>Director</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">CRESTMARK:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">CRESTMARK BANK</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Michigan banking corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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</HTML>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>v327234_ex99-3.htm
<DESCRIPTION>EXHIBIT 99.3
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

</BODY>
</HTML><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 174.85pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROMISSORY NOTE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold">Principal Amount $5,000,000</TD>
    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold; text-align: right">Troy, Michigan&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;&#9;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold; text-align: right">Dated: _______________, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Promissory Note
(&ldquo;Note&rdquo;) is made by the Borrower who has signed this Note. The Borrower promises to pay to the order of <B>CRESTMARK
BANK</B>, a Michigan banking corporation (&ldquo;Crestmark&quot;), ON DEMAND, at its offices located at 5480 Corporate Drive, Suite
350, Troy, Michigan 48098 or at such other place as Crestmark or the person that then holds this Note designates in writing, the
principal amount set forth above or such lesser or greater amount as may then be due under the Agreement (as defined below), plus
interest, fees and expenses as hereinafter provided. All payments that are made must be made in lawful money of the United States
of America in immediately available funds. Borrower does not have any right to offset, deduction, or counterclaim from the amount
due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Note is referred
to in and was delivered pursuant to the Loan and Security Agreement (&ldquo;Agreement&rdquo;) of even date between Borrower and
Crestmark under which Advances, repayment and further Advances may be made from time to time, pursuant to the provisions of the
Agreement. Reference is made to the Agreement for additional terms relating to this Note and the security given for this Note.
Any capitalized terms used in this Note, if not defined in this Note, will have the meanings assigned to such terms in the Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The outstanding principal
balance of this Note will bear interest based upon a year of 360 days with interest being charged for each day the principal amount
is outstanding including the date of actual payment. The interest rate will be a rate which is equal to two (2.00%) percentage
points in excess of that rate shown in the Wall Street Journal as the prime rate (the &ldquo;Effective Rate&rdquo;). Interest on
this Note will change with each change in the prime rate so published. If at any time Crestmark either abandons the use of the
Wall Street Journal prime rate or the Wall Street Journal prime rate is no longer published, then Crestmark will establish a similar
replacement rate in its sole discretion. Notwithstanding the foregoing, at no time will the Effective Rate be less than five and
one-quarter percent (5.25%) per annum.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Borrower must pay interest
on the principal amount which is outstanding each month in arrears commencing on the first day of the month following the funding
of the transaction, and continuing on the first day of each month thereafter until the Obligations are fully paid. If the Agreement
so provides, interest will also be payable at the same rate on all other sums constituting Obligations. If any payment is due on
a day which Crestmark is not open for business, then payments will be made on the next business day. Payments will be applied in
the manner provided in the Agreement. If Borrower at any time pays less than the amount then due, Crestmark may accept such payment,
but the failure to pay the entire amount due is a Default. The (i) failure of Borrower to comply with the provisions of the Agreement
or (ii) failure to pay the Obligations following demand will permit Crestmark to charge the Extra Rate. The &ldquo;Extra Rate&rdquo;
shall mean the Effective Rate plus twelve and three-quarters percent (12.75%) per annum.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Should Borrower make
any payment by mail, the payment must be actually received by Crestmark before the payment is credited but payment is still subject
to the Clearance Days as defined in the Schedule to the Agreement. Borrower assumes all risk resulting from non-delivery or delay,
in delivery of any payment no matter how the payment is delivered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If Borrower elects
to prepay this Note and/or terminate the Agreement, Borrower may do so, but only upon payment of all the Obligations, including
the Exit Fee set forth in the Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is the intent of
the parties that the rate of interest and other charges to Borrower under this Note shall be lawful; therefore, if for any reason
the interest or other charges payable hereunder are found by a court of competent jurisdiction, in a final determination, to exceed
the limit Crestmark may lawfully charge Borrower, then the obligation to pay interest or other charges shall automatically be reduced
to such limit and, if any amount in excess of such limit shall have been paid, then such amount shall be credited to the outstanding
principal balance of this Note, or if no such amount is outstanding, refunded to Borrower.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Borrower waives any
obligation of Crestmark to present this Note for payment or to give any notice of nonpayment or notice of protest and any other
notices of any kind. The liability of the Borrower is absolute and unconditional, without regard to the liability of any other
party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If this Note is signed by two or more parties,
the obligations and undertakings under this Note shall be that of all and any two or more jointly and also each severally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 50%; font-weight: bold">THE SINGING MACHINE COMPANY, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>a Delaware corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By: Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its: CEO</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">SMC (COMERCIAL OFFSHORE DE MACAU)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">LIMITADA</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>a Macau corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>By: Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Its: Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>v327234_ex99-4.htm
<DESCRIPTION>EXHIBIT 99.4
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="margin-top: 0; text-align: center; margin-bottom: 0; text-indent: 0.5in"><B><U>SUBORDINATION AGREEMENT</U></B></P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.85pt">THIS AGREEMENT
is made this ________ day of________________, 2 012, by and between Crestmark Bank, a Michigan banking corporation, having offices at 5480
Corporate Drive, Suite 350, Troy, Michigan 48098(the &quot;Bank&quot;), The Singing Machine Company, Inc., a Delaware
corporation whose address is 6301 N.W. 5<SUP>th </SUP>Way, Suite 2900, Ft. Lauderdale, FL 33309 and SMC (COMERCIAL OFFSHORE
DE MACAU) LIMITADA, a Macau corporation whose address is Alameda Dr. Carlos D'Assumpacao, 181-187 Edificiio Jardim
Brilhamtismo, 19 andar D, Macau (individually or collectively referred to herein as the &quot;Borrower&quot;), and Ram Light
Management Limited, whose address is 232 Aberdeen Main Road, Shing Dao Industrial Building, 5<SUP>th</SUP> Floor, Hong Kong
(the &quot;Subordinating Creditor&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 34.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 34.55pt"><B>BACKGROUND:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.85pt">As of the date hereof,
Borrower is now indebted to Subordinating Creditor in the approximate aggregate amount of One Million Six Hundred Eighty Three
Thousand Two Hundred Forty Seven and 32/100 Dollars ($1,683,247.32)and may in the future be owed additional sums (collectively,
the &quot;Junior Indebtedness&quot;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">Borrower is now, or
will be, indebted to Bank on the date hereof in an aggregate principal amount of up to Five Million Dollars ($5,000,000), and for
the Indebtedness (which may exceed the amount herein set forth) as defined in a Loan and Security Agreement executed between Bank
and Borrower, as amended from time to time (collectively, the &quot;Senior Indebtedness&quot;); and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">Subordinating Creditor
is financially interested in Borrower and desires to aid Borrower in obtaining financing; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.1pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.1pt">Bank is willing to
lend sums to Borrower provided Borrower and Subordinating Creditor comply with all of the terms and conditions of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">In consideration of
the mutual promises and covenants hereinafter contained, and as an inducement to Bank to advance credit and lend money to Borrower,
it is jointly and severally agreed by the parties hereto as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt"><B>1.</B> &nbsp;&nbsp;&nbsp;<B><U>Subordination
of the Junior Indebtedness</U>:</B> Except as permitted and as conditioned in Paragraph 23, the Senior Indebtedness, and all liability
of Borrower to Bank now existing or hereafter created shall be indefeasibly paid in full in cash and discharged, together with
all interest, collection expenses, and reasonable attorneys' fees, and Subordinating Creditor shall receive written notice thereof
from Bank, before any payment shall be accepted from or required of Borrower as to any of the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt"><B>2.
&nbsp;&nbsp;&nbsp;<U>Subordination of Lien</U>: </B>Subordinating Creditor, notwithstanding the order of attachment or
perfection of its security interests, in the assets of the Borrower, subordinates to the Bank any and all security interests
which Subordinating Creditor now has or in the future may have in the Collateral (as defined in the Loan and Security
Agreement) of the Borrower together with all products and proceeds thereof. Subordinating Creditor further agrees that it
will not enforce or assert any of its rights or security interests in or in any other manner interfere with Bank's security
interests in the Collateral, unless and until Bank has advised Subordinating Creditor, in writing, that Borrower has
indefeasibly paid in full and in cash, the Senior Indebtedness owing to Bank. By means of illustration, not limitation,
Subordinating Creditor agrees that it will not seek to foreclose on any Collateral, demand or accelerate any indebtedness
owing to Subordinating Creditor, assert any set-off or counterclaim, or notify account debtors of Subordinating Creditor's
security interest in the proceeds of the Collateral, if any, unless and until Bank has advised Subordinating Creditor, in
writing, that Borrower has satisfied, in full, the Senior Indebtedness. Furthermore, until receipt of such
notice, Subordinating Creditor (i) will not assert any claim for marshalling of Borrower's assets, (ii) consents to the
collection or sale of the Collateral by Bank free and clear of Subordinating Creditor's security interest, and (iii) without
the necessity of demand or request by Bank, Subordinating Creditor will turn or pay over to Bank any money or the proceeds of
any Collateral coming into Subordinating Creditor's possession, custody or control. In furtherance of the foregoing, at the
request of Bank, Subordinating Creditor agrees that it will take any and all such action as Bank may request to facilitate
the collection or sale of any Collateral by Bank or Borrower, including without limitation, the termination of Subordinating
Creditor's security interest in any such Collateral. Furthermore, Subordinating Creditor consents to any and all dispositions
of the Collateral now or hereafter made by Bank and waives any claims contesting the commercial reasonableness of any sales.
Subordinating Creditor acknowledges that the intent of this paragraph is to place Bank in the same position as if the
Collateral was not subject to Subordinating Creditor's security interest, and agrees that it will assert no claims against
Bank with respect to the Collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.5pt"><B>3. &nbsp;&nbsp;&nbsp;
<U>Receipt of Payments</U>:</B> In the event Subordinating Creditor shall receive payment from Borrower in violation of the law
or this Agreement, whether such payment be in cash or otherwise, Subordinating Creditor shall be liable and accountable to Bank
therefore, shall be deemed to have received such payment in trust for the use and benefit of Bank, shall not commingle the same
with any other funds and shall pay over and deliver such payment to Bank immediately, to be applied upon the Senior Indebtedness
of Borrower to Bank if in cash, and if in form other than cash, then as the same is converted into cash. In the event of the failure
of Subordinating Creditor to endorse any instrument received by Subordinating Creditor and made payable to Subordinating Creditor's
order, Bank or any officer or employee is hereby irrevocably constituted and appointed attorney in fact for Subordinating Creditor,
such appointment being deemed coupled with an interest, with full power to make any such endorsement, and with full power of substitution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.5pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.5pt"><B>4. &nbsp;&nbsp;&nbsp;<U>Survival</U>:
</B>This Agreement shall survive and remain in full force and effect in the event of any administration of the property and/or
affairs of Borrower arising from any assignment for the benefit of creditors, bankruptcy, receivership, liquidation or other like
proceedings; and no delay, forbearance, or omission by Bank in the exercise of any right or power accruing to it upon any default
in the performance hereof by the other parties hereto, shall impair any such right or power of Bank or shall be construed to be
a waiver of any such default or acquiescence therein. Possession by Bank of any note or other evidence of indebtedness made, endorsed
or guaranteed by Borrower shall be conclusive evidence (but not the only means of establishing) that Borrower is indebted to Bank
and that the indebtedness is covered by this Agreement. Furthermore, this Agreement shall continue in full force and effect and
Bank may make advancements of credit to Borrower in reliance upon this Agreement, until terminated as otherwise provided herein.
Thereafter, this Agreement shall nevertheless remain in full force and effect with respect to the Senior Indebtedness and the
Junior Indebtedness, and Bank may continue to grant to Borrower renewals and/or extensions of time, and may otherwise proceed
in its sole discretion in the enforcement of the Senior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>5. &nbsp;&nbsp;&nbsp;<U>Default</U>:
</B>It shall be a Default under the Loan and Security Agreement if Borrower, in violation of this Agreement, shall make payment
to Subordinating Creditor, whether such payment be in cash or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>6. &nbsp;&nbsp;&nbsp;<U>Amount
of Debt</U>: </B>The amounts set opposite the signature of Subordinating Creditor below represent all of the amounts currently
owing by Borrower to said Subordinating Creditor. Subordinating Creditor is the sole owner of the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>7. &nbsp;&nbsp;&nbsp;<U>Subrogation</U>:
</B>Until the Senior Indebtedness is indefeasibly paid in full in cash, Subordinating Creditor shall not exercise any rights of
subrogation. Until the Senior Indebtedness has been indefeasibly paid in full in cash, Subordinating Creditor also transfers and
assigns to Bank, as collateral security for any and all obligations of Borrower to Bank, the right to enforce the Junior Indebtedness
and all of the claims or demands of Subordinating Creditor against Borrower, with full right on the part of Bank, in its own name
or in the name of Subordinating Creditor, to collect and enforce said claims, by suit, proof of debt in bankruptcy, or other liquidation
proceedings, or otherwise. Any proceedings shall be at the sole discretion of Bank, and Bank has no obligation to Subordinating
Creditor to take any steps with regard to these claims or demands, or the Junior Indebtedness, or any collateral or other security
for the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>8. &nbsp;&nbsp;&nbsp;<U>Cumulative
Rights</U>:</B> Upon any default or breach of this Agreement by Subordinating Creditor or Borrower, Bank shall have all of the
rights and remedies available at law or equity, including those of a secured creditor under the Michigan Uniform Commercial Code,
as amended from time to time. This Agreement, and the rights of the parties hereto, are in addition to, and not in lieu of, any
other rights or remedies available to the parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>9. &nbsp; &nbsp;&nbsp;<U>Consents</U>:
</B>This Agreement and its terms shall in no way be affected or impaired by, and Subordinating Creditor hereby irrevocably consents
to, without notice: (a) any increase in the Senior Indebtedness; (b) any amendment, alteration, extension, renewal, waiver, indulgence
or other modification of the Loan and Security Agreement or Collateral Documents; (c) any settlement or compromise in connection
with the Loan and Security Agreement, Collateral Documents or Senior Indebtedness; (d) any substitution, exchange, release or
other disposition of all or any part of the Loan and Security Agreement, Collateral Documents or the Senior Indebtedness; (e)
any failure, delay, neglect, act or omission by Bank to act in connection with the Loan and Security Agreement, Collateral Documents
or Senior Indebtedness; (f) any advances for the purpose of performing or curing any term or covenant contained in the Loan and
Security Agreement, Collateral Documents or with respect to the Senior Indebtedness to which Borrower shall be or would otherwise
be in default; and (g) any other matter whether similar or dissimilar to the foregoing. The obligations and agreements of Subordinating
Creditor shall be unconditional, notwithstanding any defect in the genuineness, validity, regularity or enforceability of the
Senior Indebtedness or the Loan and Security Agreement, Collateral Documents or any other circumstances whether or not referred
to herein, which might otherwise constitute a legal or equitable discharge or a defense to Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>10.</B> &nbsp;&nbsp;
<B><U>Insurance Proceeds</U>:</B> Proceeds of the Collateral include insurance proceeds, and therefore, notwithstanding anything
contained in any other agreements, the priorities set forth herein shall govern the ultimate disposition of casualty insurance
proceeds. Bank, as the holder of a senior security interest on the Collateral shall have the sole and exclusive right to adjust
settlement of insurance claims in the event of any covered loss, theft or destruction of the Collateral. All proceeds of insurance
shall inure to Bank to the extent of the Senior Indebtedness, and Subordinating Creditor shall fully cooperate in effecting the
payment of insurance proceeds to Bank. In the event Bank, in its sole discretion or pursuant to an agreement with Borrower, permits
the Borrower to utilize the proceeds of insurance to replace the Collateral, the consent of Bank thereto shall be deemed to include
the consent of Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>11. &nbsp;<U>Waivers</U>:
</B>Subordinating Creditor hereby waives: (a) notice of any of the events set forth in Paragraph 9; (b) notice of the creation
of all or any portion of the Senior Indebtedness or an increase in the Senior Indebtedness; (c) presentment and demand for payment
of any Senior Indebtedness of Borrower, notice of nonperformance, protest, notice of protest, and notice of dishonor or default
in connection with any Senior Indebtedness; (d) all other notices to which Subordinating Creditor might otherwise be entitled;
(e) any defense arising by reason of any disability or other defense of Borrower; (f) any right to cause a marshalling of Borrower's
assets; (g) any right to require Bank to proceed against any person, including without limit Borrower or guarantor; (h) any right
to require Bank to proceed against or exhaust any of Borrower's, guarantor's or any other person's security; and (i) any right
to require Bank to pursue any other remedy in Bank's power. Subordinating Creditor acknowledges and agrees that Bank's rights
under this Agreement are not conditioned upon pursuit by Bank of any remedy Bank may have against Borrower or guarantor or any
other Person or any other security. No waiver or modification of any of Bank's rights under this Agreement shall be effective
unless the waiver or modification shall be in writing and signed by an authorized officer on behalf of Bank, and each waiver or
modification shall be a waiver or modification only with respect to the specific matter to which the waiver or modification relates
and shall in no way impair the rights of Bank or the obligations of Subordinating Creditor to Bank in any other respect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>12. &nbsp;<U>Non-Reliance</U>:
</B>Subordinating Creditor delivers this Agreement based solely on Subordinating Creditor's independent investigation of (or decision
not to investigate) the financial condition of Borrower and is not relying on any information furnished by Bank. Subordinating
Creditor assumes full responsibility for obtaining any further information concerning Borrower's financial condition, the status
of the Senior Indebtedness or any other matter which Subordinating Creditor may deem necessary or appropriate now or later. Subordinating
Creditor waives any duty on the part of Bank, and agrees that Subordinating Creditor is not relying upon nor expecting Bank to
disclose to Subordinating Creditor any fact now or later known by Bank, whether relating to the operations or condition of Borrower,
the existence, liabilities or financial condition of any guarantor of the Senior Indebtedness, the occurrence of any default with
respect to the Senior Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Subordinating Creditor's
risk or Subordinating Creditor's rights against Borrower. Subordinating Creditor knowingly accepts the full range of risk encompassed
in this Agreement, which risk includes, without limit, the possibility that Bank may demand repayment of the Senior Indebtedness
at any time and that Borrower may incur Senior Indebtedness to Bank after the financial condition of Borrower, or its ability
to pay Borrower's debts as they mature, has deteriorated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>13. &nbsp;&nbsp;<U>Joint
and Several</U>:</B> The term &quot;Subordinating Creditor&quot; or &quot;Borrower&quot; as used in this Agreement shall, if this
instrument is signed by more than one party as a Subordinating Creditor or Borrower, mean respectively Subordinating Creditor
and Borrower and each of them, jointly and severally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>14.&nbsp;&nbsp;
<U>Agreement/Choice of Laws</U>:</B> All parties hereto have the authority to enter into this Agreement and the execution of this
Agreement has been duly authorized. This Agreement shall be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns. This Agreement shall be construed according to the laws of the State of Michigan (irrespective
of the state's choice of law rules).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>15.&nbsp;&nbsp;
<U>Notice</U>:</B> Subordinating Creditor agrees, covenants and acknowledges that in the event of any default of Borrower to Subordinating
Creditor on the Junior Indebtedness to give prompt written notice thereof to Bank at the address provided herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>16. &nbsp;<U>Survival</U>:
</B>If after receipt of any payment of all or any part of the Senior Indebtedness, Bank is for any reason compelled to surrender
the payment to any person or entity, because the payment is determined to be void or voidable as a preference, impermissible setoff,
diversion of trust funds or for any other reason, then to the extent of that payment, the Senior Indebtedness shall be automatically
revived and Bank's rights under this Agreement shall be automatically continued in effect without reduction or discharge for that
payment, and this Agreement shall automatically continue in full force notwithstanding any contrary action which may have been
taken by Bank in reliance upon that payment (including, without limit, surrender or termination of this Agreement) and any contrary
action so taken shall be without prejudice to Bank's rights under this Agreement and shall be deemed to have been conditioned
upon that payment having become final and irrevocable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>17.&nbsp;&nbsp;
<U>Indemnification</U>:</B><FONT STYLE="font-weight: normal"> </FONT>Subordinating Creditor hereby assumes responsibility and
liability for, and hereby holds harmless and indemnifies Bank from and against, any and all losses, damages, costs and expenses,
including reasonable attorney fees, incurred or suffered, directly or indirectly, by Bank which arise in whole or in part from
any breach of this Agreement by Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>18. &nbsp;&nbsp;<U>Severability</U>:
</B>If any provision of this Agreement is in conflict with any statute or rule of law or is otherwise unenforceable for any reason,
then that provision shall be deemed null and void to the extent of the conflict or unenforceability and shall be deemed severable,
but shall not invalidate any other provision of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>19.&nbsp;&nbsp; <U>Counterparts</U>.</B><FONT STYLE="font-weight: normal">
</FONT>This Agreement may be executed in several counterparts, and each executed counterpart shall constitute an original instrument,
but such counterparts shall together constitute but one and the same instrument.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>20.</B>&nbsp;&nbsp;
<B><U>Binding Effect</U>: </B>Subordinating Creditor waives notice of acceptance by Bank of this Agreement and this Agreement
is immediately binding upon Subordinating Creditor. This Agreement constitutes a continuing agreement of subordination even though
at times Borrower may not be indebted to Bank. Subordinating Creditor acknowledges that the aforesaid Loan and Security Agreement
contemplates Money Advances and other sums being advanced, from time to time thereunder, which may be mandatory or discretionary,
and that the first, valid and prior interest of Bank herein granted, subordinated to and hereinafter warranted shall remain notwithstanding
the repayment, in whole or in part, of the Senior Indebtedness outstanding from time to time, until termination of the entire
relationship between Borrower and Bank, and receipt of notice by Subordinating Creditor as hereinabove contemplated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>21. <U>Waiver of
Jury Trial</U>: </B>BORROWER AND SUBORDINATING CREDITOR DO EACH KNOWINGLY AND VOLUNTARILY AND INTELLIGENTLY WAIVE THEIR CONSTITUTIONAL
RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM, DISPUTE, CONFLICT OR CONTENTION, IF ANY, AS MAY ARISE UNDER THIS AGREEMENT,
AND AGREE THAT ANY LITIGATION BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE HEARD BY A COURT OF COMPETENT JURISDICTION
SITTING WITHOUT A JURY. BORROWER AND SUBORDINATING CREDITOR HEREBY CONFIRM TO BANK THAT THEY HAVE REVIEWED THE EFFECT OF THIS WAIVER
OF JURY TRIAL WITH COMPETENT LEGAL COUNSEL OF THEIR CHOICE, OR HAVE BEEN AFFORDED THE OPPORTUNITY TO DO SO, PRIOR TO SIGNING THIS
AGREEMENT AND EACH ACKNOWLEDGE AND AGREE THAT BANK IS RELYING UPON THIS WAIVER IN EXTENDING THE LOAN TO BORROWER.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>22.</B> <B>&nbsp;&nbsp;<U>Consent
to Jurisdiction</U>: </B>BORROWER AND SUBORDINATING CREDITOR HEREBY WAIVE ANY PLEA OF JURISDICTION OR VENUE ON THE GROUND THAT
SUCH BORROWER OR SUBORDINATING CREDITOR IS NOT A RESIDENT OF OAKLAND COUNTY, MICHIGAN, AND HEREBY SPECIFICALLY AUTHORIZE ANY ACTION
BROUGHT TO ENFORCE BORROWER'S OR SUBORDINATING CREDITOR'S OBLIGATIONS TO THE BANK TO BE INSTITUTED AND PROSECUTED IN EITHER THE
CIRCUIT COURT OF OAKLAND COUNTY OR A DISTRICT COURT WITHIN THE BOUNDARIES OF OAKLAND COUNTY, AS APPROPRIATE, OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN AT THE ELECTION OF THE BANK, AND BORROWER AND SUBORDINATING CREDITOR
HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>23.&nbsp;&nbsp;
<U>Permitted Payments</U>: </B>Notwithstanding anything contained herein to the contrary, Subordinating Creditor may receive from
Borrower payments of invoices outstanding in the ordinary course and when due according to their terms, but without acceleration
or prepayment thereof for any reason, limited to the lesser of the amount then currently due under the invoices or fifty (50%)
percent of Free Cash Flow measured monthly (defined as net income plus depreciation and amortization less debt service, capital
expenditures, distributions, dividends, or loans to employees, shareholders or officers and affiliates) as and when due, provided
(i) a Default (which has not been cured if a cure is permitted under the terms of the Loan and Security Agreement) has not occurred
under the Loan and Security Agreement, and/or the permitted payment will not cause a Default under the Loan Agreement, (ii) Subordinating
Creditor has not received notice of the occurrence of the Default, at which time upon receipt of such notice, Subordinating Credit
may no longer receive payments from Borrower, and (iii) Borrower has sufficient excess availability to make repayment. In no event,
however, shall Subordinating Creditor make any demand or claim against Borrower for any sums due in excess of the above monthly
amount until all Senior Indebtedness now existing or hereafter created is indefeasibly paid in full in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 34.8pt">IN WITNESS WHEREOF, the
parties have caused this Agreement to be executed as of the date first written above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2"><B>&quot;<U>BANK</U>&quot;</B></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2"><B>&quot;<U>BORROWER</U>&quot;</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">Crestmark Bank, <BR> a Michigan bank</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">The Singing Machine Company, Inc., <BR> a Delaware corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="width: 35%; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 16%">&nbsp;</TD>
    <TD STYLE="width: 5%">By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; width: 40%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">Its: Vice President</TD>
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>CEO</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">SMC (COMERCIAL OFFSHORE DE MACAU)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">LIMITADA</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Macau corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">/s/ Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2"><B>&quot;<U>SUBORDINATING CREDITOR</U>&quot;</B></TD>
    <TD><B>&quot;<U>AMOUNT</U>&quot;</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">Ram Light Management Limited</TD>
    <TD>$1,683,247.32</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Lau Sak Hong</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">By:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lau Sak Hong</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 30%">Its:</TD>
    <TD STYLE="width: 25%">&nbsp;</TD>
    <TD STYLE="width: 45%; text-align: justify">On October 17, 2012, I Lau sak Hong, have signed a subordination agreement for Ram Light Management Limited in favor of Crestmark Bank in my capacity as Director with full consent of its Board of Director.<FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I> </I> </FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">STATE OF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)&nbsp;&nbsp;SS:</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">COUNTY OF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">I HEREBY CERTIFY that
on this day, before me, an officer duly authorized in the State aforesaid and in the County aforesaid to take acknowledgments,
the foregoing instrument was acknowledged before me by Lau Sak Hong, the ________________________of Ram Light Management Limited, a Hong Kong corporation/
freely and voluntarily under authority duly vested in him/her by said corporation, Lau Sak Hong is personally known to me or who
has produced ________________________as identification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">WITNESS my hand and official seal in the County
and State last aforesaid this day of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 135.85pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">________________________,2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>My Commission Expires:</TD>
    <TD COLSPAN="2" STYLE="border-top: windowtext 1pt solid">Notary Public</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 44%">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; width: 10%">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; width: 46%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">Typed, printed or stamped name of Notary Public</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 140.15pt; text-align: left">&nbsp;</P>

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<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>6
<FILENAME>v327234_ex99-5.htm
<DESCRIPTION>EXHIBIT 99.5
<TEXT>
<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>SUBORDINATION AGREEMENT</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.6pt">THIS AGREEMENT is
made this <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> day of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
, 2012, by and between Crestmark Bank, a Michigan banking corporation, having offices at 5480 Corporate Drive, Suite 350, Troy,
Michigan 48098(the &quot;Bank&quot;), The Singing Machine Company, Inc., a Delaware corporation whose address is 6301 N.W. 5<SUP>th
</SUP>Way, Suite 2900, Ft. Lauderdale, FL 33309 and SMC (COMERCIAL OFFSHORE DE MACAU) LIMITADA, a Macau corporation whose address
is Alameda Dr. Carlos D'Assumpacao, 181-187 Edificiio Jardim Brilhamtismo, 19 andar D, Macau (individually or collectively referred
to herein as the &quot;Borrower&quot;), and Starlight Marketing Development Limited, whose address is 232 Aberdeen Main Road, Shing
Dao Industrial Building, 5<SUP>th</SUP> Floor, Hong Kong (the &quot;Subordinating Creditor&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 34.8pt"><B>BACKGROUND:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.6pt">As of the date hereof,
Borrower is now indebted to Subordinating Creditor in the approximate aggregate amount of Eight Hundred Sixteen Thousand Seven
Hundred Fifty Two and 68/100 Dollars ($816,752.68)and may in the future be owed additional sums (collectively, the &quot;Junior
Indebtedness&quot;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt">Borrower is now,
or will be, indebted to Bank on the date hereof in an aggregate principal amount of up to Five Million Dollars ($5,000,000), and
for the Indebtedness (which may exceed the amount herein set forth) as defined in a Loan and Security Agreement executed between
Bank and Borrower, as amended from time to time (collectively, the &quot;Senior Indebtedness&quot;); and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">Subordinating Creditor
is financially interested in Borrower and desires to aid Borrower in obtaining financing; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.3pt">Bank is willing to
lend sums to Borrower provided Borrower and Subordinating Creditor comply with all of the terms and conditions of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">In consideration of
the mutual promises and covenants hereinafter contained, and as an inducement to Bank to advance credit and lend money to Borrower,
it is jointly and severally agreed by the parties hereto as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt"><B>1.&nbsp;</B>&nbsp;<B><U>Subordination
of the Junior Indebtedness</U>: </B>Except as permitted and as conditioned in Paragraph 23, the Senior Indebtedness, and all liability
of Borrower to Bank now existing or hereafter created shall be indefeasibly paid in full in cash and discharged, together with
all interest, collection expenses, and reasonable attorneys' fees, and Subordinating Creditor shall receive written notice thereof
from Bank, before any payment shall be accepted from or required of Borrower as to any of the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.55pt"><B>2.</B>&nbsp;&nbsp;<B><U>Subordination
of Lien</U>: </B>Subordinating Creditor, notwithstanding the order of attachment or perfection of its security interests, in the
assets of the Borrower, subordinates to the Bank any and all security interests which Subordinating Creditor now has or in the
future may have in the Collateral (as defined in the Loan and Security Agreement) of the Borrower together with all products and
proceeds thereof. Subordinating Creditor further agrees that it will not enforce or assert any of its rights or security interests
in or in any other manner interfere with Bank's security interests in the Collateral, unless and until Bank has advised Subordinating
Creditor, in writing, that Borrower has indefeasibly paid in full and in cash, the Senior Indebtedness owing to Bank. By means
of illustration, not limitation, Subordinating Creditor agrees that it will not seek to foreclose on any Collateral, demand or
accelerate any indebtedness owing to Subordinating Creditor, assert any set-off or counterclaim, or notify account debtors of Subordinating
Creditor's security interest in the proceeds of the Collateral, if any, unless and until Bank has advised Subordinating Creditor,
in writing, that Borrower has satisfied, in full, the Senior Indebtedness. Furthermore, until receipt of such notice, Subordinating
Creditor (i) will not assert any claim for marshalling of Borrower's assets, (ii) consents to the collection or sale of the Collateral
by Bank free and clear of Subordinating Creditor's security interest, and (iii) without the necessity of demand or request by Bank,
Subordinating Creditor will turn or pay over to Bank any money or the proceeds of any Collateral coming into Subordinating Creditor's
possession, custody or control. In furtherance of the foregoing, at the request of Bank, Subordinating Creditor agrees that it
will take any and all such action as Bank may request to facilitate the collection or sale of any Collateral by Bank or Borrower,
including without limitation, the termination of Subordinating Creditor's security interest in any such Collateral. Furthermore,
Subordinating Creditor consents to any and all dispositions of the Collateral now or hereafter made by Bank and waives any claims
contesting the commercial reasonableness of any sales. Subordinating Creditor acknowledges that the intent of this paragraph is
to place Bank in the same position as if the Collateral was not subject to Subordinating Creditor's security interest, and agrees
that it will assert no claims against Bank with respect to the Collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>3.</B>&nbsp;&nbsp;<B><U>Receipt
of Payments</U>:</B> In the event Subordinating Creditor shall receive payment from Borrower in violation of the law or this Agreement,
whether such payment be in cash or otherwise, Subordinating Creditor shall be liable and accountable to Bank therefore, shall
be deemed to have received such payment in trust for the use and benefit of Bank, shall not commingle the same with any other
funds and shall pay over and deliver such payment to Bank immediately, to be applied upon the Senior Indebtedness of Borrower
to Bank if in cash, and if in form other than cash, then as the same is converted into cash. In the event of the failure of Subordinating
Creditor to endorse any instrument received by Subordinating Creditor and made payable to Subordinating Creditor's order, Bank
or any officer or employee is hereby irrevocably constituted and appointed attorney in fact for Subordinating Creditor, such appointment
being deemed coupled with an interest, with full power to make any such endorsement, and with full power of substitution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>4.</B>&nbsp;&nbsp;<B><U>Survival</U>:
</B>This Agreement shall survive and remain in full force and effect in the event of any administration of the property and/or
affairs of Borrower arising from any assignment for the benefit of creditors, bankruptcy, receivership, liquidation or other like
proceedings; and no delay, forbearance, or omission by Bank in the exercise of any right or power accruing to it upon any default
in the performance hereof by the other parties hereto, shall impair any such right or power of Bank or shall be construed to be
a waiver of any such default or acquiescence therein. Possession by Bank of any note or other evidence of indebtedness made, endorsed
or guaranteed by Borrower shall be conclusive evidence (but not the only means of establishing) that Borrower is indebted to Bank
and that the indebtedness is covered by this Agreement. Furthermore, this Agreement shall continue in full force and effect and
Bank may make advancements of credit to Borrower in reliance upon this Agreement, until terminated as otherwise provided herein.
Thereafter, this Agreement shall nevertheless remain in full force and effect with respect to the Senior Indebtedness and the
Junior Indebtedness, and Bank may continue to grant to Borrower renewals and/or extensions of time, and may otherwise proceed
in its sole discretion in the enforcement of the Senior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>5.</B>&nbsp;&nbsp;<B><U>Default</U>:
</B>It shall be a Default under the Loan and Security Agreement if Borrower, in violation of this Agreement, shall make payment
to Subordinating Creditor, whether such payment be in cash or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>6.</B>&nbsp;&nbsp;<B><U>Amount
of Debt</U>:</B> The amounts set opposite the signature of Subordinating Creditor below represent all of the amounts currently
owing by Borrower to said Subordinating Creditor. Subordinating Creditor is the sole owner of the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>7.</B>&nbsp;&nbsp;<B><U>Subrogation</U>:
</B>Until the Senior Indebtedness is indefeasibly paid in full in cash, Subordinating Creditor shall not exercise any rights of
subrogation. Until the Senior Indebtedness has been indefeasibly paid infull in cash, Subordinating Creditor also transfers and
assigns to Bank, as collateral security for any and all obligations of Borrower to Bank, the right to enforce the Junior Indebtedness
and all of the claims or demands of Subordinating Creditor against Borrower, with full right on the part of Bank, in its own name
or in the name of Subordinating Creditor, to collect and enforce said claims, by suit, proof of debt in bankruptcy, or other liquidation
proceedings, or otherwise. Any proceedings shall be at the sole discretion of Bank, and Bank has no obligation to Subordinating
Creditor to take any steps with regard to these claims or demands, or the Junior Indebtedness, or any collateral or other security
for the Junior Indebtedness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>8.&nbsp;&nbsp;<U>Cumulative
Rights</U>:</B> Upon any default or breach of this Agreement by Subordinating Creditor or Borrower, Bank shall have all of the
rights and remedies available at law or equity, including those of a secured creditor under the Michigan Uniform Commercial Code,
as amended from time to time. This Agreement, and the rights of the parties hereto, are in addition to, and not in lieu of, any
other rights or remedies available to the parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>9.&nbsp;&nbsp;<U>Consents</U>:
</B>This Agreement and its terms shall in no way be affected or impaired by, and Subordinating Creditor hereby irrevocably consents
to, without notice: (a) any increase in the Senior Indebtedness; (b) any amendment, alteration, extension, renewal, waiver, indulgence
or other modification of the Loan and Security Agreement or Collateral Documents; (c) any settlement or compromise in connection
with the Loan and Security Agreement, Collateral Documents or Senior Indebtedness; (d) any substitution, exchange, release or
other disposition of all or any part of the Loan and Security Agreement, Collateral Documents or the Senior Indebtedness; (e)
any failure, delay, neglect, act or omission by Bank to act in connection with the Loan and Security Agreement, Collateral Documents
or Senior Indebtedness; (f) any advances for the purpose of performing or curing any term or covenant contained in the Loan and
Security Agreement, Collateral Documents or with respect to the Senior Indebtedness to which Borrower shall be or would otherwise
be in default; and (g) any other matter whether similar or dissimilar to the foregoing. The obligations and agreements of Subordinating
Creditor shall be unconditional, notwithstanding any defect in the genuineness, validity, regularity or enforceability of the
Senior Indebtedness or the Loan and Security Agreement, Collateral Documents or any other circumstances whether or not referred
to herein, which might otherwise constitute a legal or equitable discharge or a defense to Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.3pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>10.&nbsp;</B>&nbsp;<B><U>Insurance
Proceeds</U>: </B>Proceeds of the Collateral include insurance proceeds, and therefore, notwithstanding anything contained in
any other agreements, the priorities set forth herein shall govern the ultimate disposition of casualty insurance proceeds. Bank,
as the holder of a senior security interest on the Collateral shall have the sole and exclusive right to adjust settlement of
insurance claims in the event of any covered loss, theft or destruction of the Collateral. All proceeds of insurance shall inure
to Bank to the extent of the Senior Indebtedness, and Subordinating Creditor shall fully cooperate in effecting the payment of
insurance proceeds to Bank. In the event Bank, in its sole discretion or pursuant to an agreement with Borrower, permits the Borrower
to utilize the proceeds of insurance to replace the Collateral, the consent of Bank thereto shall be deemed to include the consent
of Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>11.&nbsp;&nbsp;<U>Waivers</U>:
</B>Subordinating Creditor hereby waives: (a) notice of any of the events set forth in Paragraph 9; (b) notice of the creation
of all or any portion of the Senior Indebtedness or an increase in the Senior Indebtedness; (c) presentment and demand for payment
of any Senior Indebtedness of Borrower, notice of nonperformance, protest, notice of protest, and notice of dishonor or default
in connection with any Senior Indebtedness; (d) all other notices to which Subordinating Creditor might otherwise be entitled;
(e) any defense arising by reason of any disability or other defense of Borrower; (f) any right to cause a marshalling of Borrower's
assets; (g) any right to require Bank to proceed against any person, including without limit Borrower or guarantor; (h) any right
to require Bank to proceed against or exhaust any of Borrower's, guarantor's or any other person's security; and (i) any right
to require Bank to pursue any other remedy in Bank's power. Subordinating Creditor acknowledges and agrees that Bank's rights under
this Agreement are not conditioned upon pursuit by Bank of any remedy Bank may have against Borrower or guarantor or any other
Person or any other security. No waiver or modification of any of Bank's rights under this Agreement shall be effective unless
the waiver or modification shall be in writing and signed by an authorized officer on behalf of Bank, and each waiver or modification
shall be a waiver or modification only with respect to the specific matter to which the waiver or modification relates and shall
in no way impair the rights of Bank or the obligations of Subordinating Creditor to Bank in any other respect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>12.&nbsp;&nbsp;<U>Non-Reliance:
</U></B>Subordinating Creditor delivers this Agreement based solely on Subordinating Creditor's independent investigation of (or
decision not to investigate) the financial condition of Borrower and is not relying on any information furnished by Bank. Subordinating
Creditor assumes full responsibility for obtaining any further information concerning Borrower's financial condition, the status
of the Senior Indebtedness or any other matter which Subordinating Creditor may deem necessary or appropriate now or later. Subordinating
Creditor waives any duty on the part of Bank, and agrees that Subordinating Creditor is not relying upon nor expecting Bank to
disclose to Subordinating Creditor any fact now or later known by Bank, whether relating to the operations or condition of Borrower,
the existence, liabilities or financial condition of any guarantor of the Senior Indebtedness, the occurrence of any default with
respect to the Senior Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Subordinating Creditor's
risk or Subordinating Creditor's rights against Borrower. Subordinating Creditor knowingly accepts the full range of risk encompassed
in this Agreement, which risk includes, without limit, the possibility that Bank may demand repayment of the Senior Indebtedness
at any time and that Borrower may incur Senior Indebtedness to Bank after the financial condition of Borrower, or its ability
to pay Borrower's debts as they mature, has deteriorated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>13.&nbsp;&nbsp;<U>Joint
and Several</U>:</B> The term &quot;Subordinating Creditor&quot; or &quot;Borrower&quot; as used in this Agreement shall, if this
instrument is signed by more than one party as a Subordinating Creditor or Borrower, mean respectively Subordinating Creditor
and Borrower and each of them, jointly and severally.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>14.&nbsp;&nbsp;<U>Agreement/Choice
of Laws</U>: </B>All parties hereto have the authority to enter into this Agreement and the execution of this Agreement has been
duly authorized. This Agreement shall be binding upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns. This Agreement shall be construed according to the laws of the State of Michigan (irrespective of the state's
choice of law rules).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>15.&nbsp;&nbsp;<U>Notice</U>:
</B>Subordinating Creditor agrees, covenants and acknowledges that in the event of any default of Borrower to Subordinating Creditor
on the Junior Indebtedness to give prompt written notice thereof to Bank at the address provided herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt"><B>16.&nbsp;&nbsp;<U>Survival</U>:
</B>If after receipt of any payment of all or any part of the Senior Indebtedness, Bank is for any reason compelled to surrender
the payment to any person or entity, because the payment is determined to be void or voidable as a preference, impermissible setoff,
diversion of trust funds or for any other reason, then to the extent of that payment, the Senior Indebtedness shall be automatically
revived and Bank's rights under this Agreement shall be automatically continued in effect without reduction or discharge for that
payment, and this Agreement shall automatically continue in full force notwithstanding any contrary action which may have been
taken by Bank in reliance upon that payment (including, without limit, surrender or termination of this Agreement) and any contrary
action so taken shall be without prejudice to Bank's rights under this Agreement and shall be deemed to have been conditioned
upon that payment having become final and irrevocable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>17.&nbsp;&nbsp;<U>Indemnification</U>:</B>&nbsp;Subordinating
Creditor hereby assumes responsibility and liability for, and hereby holds harmless and indemnifies Bank from and against, any
and all losses, damages, costs and expenses, including reasonable attorney fees, incurred or suffered, directly or indirectly,
by Bank which arise in whole or in part from any breach of this Agreement by Subordinating Creditor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>18.&nbsp;&nbsp;<U>Severability</U>:
</B>If any provision of this Agreement is in conflict with any statute or rule of law or is otherwise unenforceable for any reason,
then that provision shall be deemed null and void to the extent of the conflict or unenforceability and shall be deemed severable,
but shall not invalidate any other provision of this Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>19.&nbsp;&nbsp;<U>Counterparts</U>.</B>
This Agreement may be executed in several counterparts, and each executed counterpart shall constitute an original
instrument, but such counterparts shall together constitute but one and the same instrument.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>20.&nbsp;</B>&nbsp;<B><U>Binding
Effect</U>: </B>Subordinating Creditor waives notice of acceptance by Bank of this Agreement and this Agreement is immediately
binding upon Subordinating Creditor. This Agreement constitutes a continuing agreement of subordination even though at times Borrower
may not be indebted to Bank. Subordinating Creditor acknowledges that the aforesaid Loan and Security Agreement contemplates Money
Advances and other sums being advanced, from time to time thereunder, which may be mandatory or discretionary, and that the first,
valid and prior interest of Bank herein granted, subordinated to and hereinafter warranted shall remain notwithstanding the repayment,
in whole or in part, of the Senior Indebtedness outstanding from time to time, until termination of the entire relationship between
Borrower and Bank, and receipt of notice by Subordinating Creditor as hereinabove contemplated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>21.&nbsp;&nbsp;<U>Waiver
of Jury Trial</U>: </B>BORROWER AND SUBORDINATING CREDITOR DO EACH KNOWINGLY AND VOLUNTARILY AND INTELLIGENTLY WAIVE THEIR CONSTITUTIONAL
RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM, DISPUTE, CONFLICT OR CONTENTION, IF ANY, AS MAY ARISE UNDER THIS AGREEMENT,
AND AGREE THAT ANY LITIGATION BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE HEARD BY A COURT OF COMPETENT JURISDICTION
SITTING WITHOUT A JURY. BORROWER AND SUBORDINATING CREDITOR HEREBY CONFIRM TO BANK THAT THEY HAVE REVIEWED THE EFFECT OF THIS WAIVER
OF JURY TRIAL WITH COMPETENT LEGAL COUNSEL OF THEIR CHOICE, OR HAVE BEEN AFFORDED THE OPPORTUNITY TO DO SO, PRIOR TO SIGNING THIS
AGREEMENT AND EACH ACKNOWLEDGE AND AGREE THAT BANK IS RELYING UPON THIS WAIVER IN EXTENDING THE LOAN TO BORROWER.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>22.</B>&nbsp;&nbsp;<B><U>Consent
to Jurisdiction</U>: </B>BORROWER AND SUBORDINATING CREDITOR HEREBY WAIVE ANY PLEA OF JURISDICTION OR VENUE ON THE GROUND THAT
SUCH BORROWER OR SUBORDINATING CREDITOR IS NOT A RESIDENT OF OAKLAND COUNTY, MICHIGAN, AND HEREBY SPECIFICALLY AUTHORIZE ANY ACTION
BROUGHT TO ENFORCE BORROWER'S OR SUBORDINATING CREDITOR'S OBLIGATIONS TO THE BANK TO BE INSTITUTED AND PROSECUTED IN EITHER THE
CIRCUIT COURT OF OAKLAND COUNTY OR A DISTRICT COURT WITHIN THE BOUNDARIES OF OAKLAND COUNTY, AS APPROPRIATE, OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN AT THE ELECTION OF THE BANK, AND BORROWER AND SUBORDINATING CREDITOR
HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt"><B>23.&#9;<U>Permitted
Payments:</U> </B>Notwithstanding anything contained herein to the contrary, Subordinating Creditor may receive from
Borrower: (i) payments on the initial $1,107,678.76 of invoices outstanding (the &quot;Initial Invoices&quot;) in the
ordinary course and when due according to their terms, provided (a) a Default (which has not been cured if a cure is
permitted under the terms of the Loan and Security Agreement) has not occurred under the Loan and Security Agreement, and/or
the permitted payment will not cause a Default under the Loan Agreement, and (b) Subordinating Creditor has not received
notice of the occurrence of the Default, at which time upon receipt of such notice, Subordinating Credit may no longer
receive payments from Borrower; and (ii) as to all other amounts other than the Initial Invoices (the &quot;Remaining
Invoices&quot;), payments on invoices in the ordinary course, as and when due, but without acceleration or prepayment thereof
for any reason, limited to the lesser of, the amount currently due under the invoices or fifty (50%) percent of Free Cash
Flow measured monthly (defined as net income plus depreciation and amortization less debt service, capital expenditures,
distributions, dividends, or loans to employees, shareholders or officers and affiliates) as and when due, provided (a) a
Default (which has not been cured if a cure is permitted under the terms of the Loan and Security Agreement) has not occurred
under the Loan and Security Agreement, and/or the permitted payment will not cause a Default under the Loan Agreement, (b)
Subordinating Creditor has not received notice of the occurrence of the Default, at which time upon receipt of such notice,
Subordinating Credit may no longer receive payments from Borrower, and (c) Borrower has sufficient excess availability to
make repayment. In no event, however, shall Subordinating Creditor make any demand or claim against Borrower for any sums
due in excess of the above amounts until all Senior Indebtedness now existing or hereafter created is indefeasibly paid in
full in cash. It is agreed that the first monies paid by Borrower to Subordinating Creditor shall be applied to the Initial
Invoices and all amounts thereafter will be applied to the Remaining Invoices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 35.05pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.05pt">IN WITNESS WHEREOF,
the parties have caused this Agreement to be executed as of the date first written above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2"><B>&quot;<U>BANK</U>&quot;</B></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2"><B>&quot;<U>BORROWER</U>&quot;</B></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-left: 0.5pt; text-indent: -0.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5pt; text-indent: -0.5pt">Crestmark Bank,</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5pt; text-indent: -0.5pt">a Michigan bank</P></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Singing Machine Company, Inc.,<BR>
 a Delaware
        corporation</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="padding-left: 0.5pt; text-indent: -0.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="width: 44%; border-bottom: windowtext 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 4%">By;</TD>
    <TD STYLE="width: 44%; border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Gary Atkinson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Its:</TD>
    <TD>Vice President</TD>
    <TD>&nbsp;</TD>
    <TD>Its:</TD>
    <TD>CEO</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">SMC (COMERCIAL OFFSHORE DE MACAU)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">LIMITADA</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">a Macau corporation</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">/s/ Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Carol Chu Lan Lau</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Its :</TD>
    <TD>Director</TD></TR>
</TABLE>
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<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="text-align: center">&ldquo;<B><U>SUBORDINATING CREDITOR</U>&rdquo;</B></TD>
    <TD STYLE="font-weight: bold; text-decoration: none; text-align: center">&ldquo;<U>AMOUNT</U>&rdquo;</TD></TR>
<TR STYLE="vertical-align: top; text-decoration: none">
    <TD COLSPAN="3" STYLE="text-decoration: none">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-decoration: none; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">Starlight Marketing Development Limited</TD>
    <TD STYLE="text-align: center">$816,752.68</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid"></TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">/s/ Lau<FONT STYLE="font-size: 10pt"> Sak Hong</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="width: 32%">Lau <FONT STYLE="font-size: 10pt">Sak Hong</FONT></TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="text-align: center; width: 60%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Its</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">STATE OF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</TD>
    <TD ROWSPAN="3" STYLE="text-align: justify">On October 17, 2012, I, Lau Sak Hong have signed a subordination agreement for Starlight Marketing Development Limited in favor of Crestmark Bank in my Capacity as Director with full consent of its Board of Directors.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)&nbsp;&nbsp; SS:</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3">COUNTY OF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)</TD></TR>
</TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 34.8pt">I HEREBY CERTIFY
that on this day, before me, an officer duly authorized in the State aforesaid and in the County aforesaid to take acknowledgments,
the foregoing instrument was acknowledged before me by Lau Sak Hong, the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</U>of Starlight Marketing Development Limited, a Hong Kong corporation, freely and voluntarily under authority duly vested in
him/her by said corporation. Lau Sak Hong is personally known to me or who has produced <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</U>as identification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">WITNESS my hand and official seal in the
County and State last aforesaid this <U>&nbsp;&nbsp;&nbsp;&nbsp;</U> day of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>,
2012.</P>

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    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 50%; border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>My Commission Expires:</TD>
    <TD>Notary Public</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Typed, printed or stamped name of Notary<BR>
 Public</TD></TR>
</TABLE>
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