Document:

Exhibit 10.2

                     SECURITY AGREEMENT--GOODS AND CHATTELS

To:      MILBERG FACTORS, INC.
         99 Park Avenue
         New York, NY 10016

Gentlemen:

        1. To secure the payment of all debts, liabilities, obligations,
covenants and duties owing by us to you under that certain Factoring Agreement
bearing the effective date of February 9, 2004 as well as to secure the payment
in full of the other Obligations referred to herein, we hereby grant to you a
continuing security interest in all goods and general intangibles (as defined in
Article 9 of the Uniform Commercial Code) whether now owned or hereafter
acquired by us and wherever located, all replacements and substitutions therefor
or accessions thereto and all proceeds thereof, including, without limitation,
the machinery and equipment described in the annexed Schedule "A" (all herein
referred to collectively as "Collateral"). Inventory is specifically excluded
from the Collateral.

        2. The term "Obligations" as used herein shall mean and include the
indebtedness owing by us to you as hereinabove specifically set forth and also
any and all other loans, advances, extensions of credit, endorsements,
guaranties, benefits or financial accommodations heretofore or hereafter made,
granted or extended by you to us or which you have or will become obligated to
make, grant or extend to or for our account and any and all interest,
commissions, obligations, liabilities, indebtedness, charges or expenses
heretofore or hereafter chargeable against us or owing by us to you or upon
which we may be or have become liable as endorser and guarantor and any and all
renewals or extensions of any of the foregoing, no matter how or when arising,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether under any present or future agreement or instrument between us or
otherwise and the amount due upon any notes or other obligations given to or
received by you for or on account of any of the foregoing and the performance
and fulfillment by us of all of the terms, conditions, promises, covenants,
provisions and warranties contained in this Security Agreement and any note or
notes secured hereby or in any present or future agreement or instrument between
us.

        3. Unless expressly limited by the provisions of paragraph "1", your
security interest granted and created in the Collateral shall extend and attach
to the entire Collateral whether the same constitutes personal property or
fixtures, including, without limitation, to all dyes, jigs, tools, benches,
tables, substitutions, accretions, component parts, replacements thereof and
additions thereto, as well as to all accessories, motors, engines, auxiliary
parts used in connection with or attached to the Collateral and any packing
material in which the Collateral may be contained. We shall furnish you from
time to time upon request with written statements and schedules identifying and
describing the Collateral and any additions thereto and substitutions thereof in
such detail as you may require.

        4. We hereby warrant and covenant to you that:
(a) the Collateral is presently located at

         6601 Lyons Road, Building A-7, Coconut Creek, FL 33073
         303 West Artesia Blvd., Compton, CA 90220
         1975 Charles Willard Street, Rancho Dominguez, CA 90220

and we will notify you promptly of any new location where Collateral may be
located;

(b) we are the lawful owner of the Collateral free from any adverse lien,
security or encumbrance whatsoever and have the sole right to grant a security
interest therein and will defend the Collateral against all claims and demands
of all persons;

(c) we will keep the Collateral free and clear of all attachments, levies,
taxes, liens, security interests and encumbrances of every kind and nature;

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(d) we will at our own cost and expense keep the Collateral in good state of
repair and will not waste or destroy the same or any part thereof;

(e) we will not without your prior written consent, sell, exchange, lease or
otherwise dispose of the Collateral or any of our rights therein or permit any
lien or security interest to attach to same, except that created by this
Agreement;

(f) we will insure the Collateral in your name against loss or damage by fire,
theft, burglary, pilferage, loss in transit and such other hazards as you shall
specify in amounts and under policies by insurers acceptable to you and all
premiums thereon shall be paid by us and the policies delivered to you. If we
fail to do so, you may procure such insurance and charge the cost to our
account;

(g) we will not permit any Collateral to be removed from its present location
without your prior written consent, and we will at all times allow you or your
representatives free access to and the right of inspection of the Collateral;

(h) we shall comply in all material respects with the terms and conditions of
any leases covering the premises wherein the Collateral is located and any
orders, ordinances, laws or statutes of any city, state, or governmental
department having jurisdiction with respect to such premises or the conduct of
business thereon, and, when requested by you, we will execute any written
instruments and do any other acts necessary to effectuate more fully the
purposes and provisions of this Agreement;

(i) if any of the Collateral is or in your opinion may become part of any real
estate, we will obtain and deliver to you a written waiver by the record owner
and any mortgagees of said real estate of all interest in the Collateral and a
written subordination by any person who has a lien on said real estate which is
or may be superior to the security interest granted hereby;

(j) we will not permit anything to be done that may impair or lessen in any
material respect the value of any Collateral or the security intended to be
afforded by this Agreement;

(k) we will indemnify and save you harmless from all loss, costs, damage,
liability or expense, including reasonable attorneys' fees, that you may sustain
or incur to enforce payment, performance, or fulfillment of any of the debts or
obligations secured hereby or in the enforcement of this Agreement and the
priority thereof or in the prosecution or defense of any action or proceeding
either against you or us concerning any matter growing out of or in connection
with this Agreement and/or any of the Obligations secured hereby and/or any of
the Collateral; and

(1) the execution of this Agreement has been duly approved by the undersigned in
any manner required by law.

         5. We shall be in default under this Agreement upon the happening of
any of the following events or conditions:

(a) we shall fail to pay when due or punctually perform any of the Obligations;

(b) any covenant, warranty, representation or statement made or furnished to you
by us or on our behalf was false in any material respect when made or furnished;

(c) the loss, theft, substantial damage, destruction, sale or encumbrance to or
of any of the Collateral or the making of any levy, seizure or attachment
thereof or thereon;

(d) we shall become insolvent, cease operations, dissolve, terminate our
business existence, make an assignment for the benefit of creditors, suffer the
appointment of a receiver, trustee, liquidator or custodian of all or any part
of our property;

(e) any proceedings under any bankruptcy or insolvency law shall be commenced by
or against us or any guarantor or endorser of the Obligations; or

(f) any guarantor or endorser of the Obligations shall die, make an assignment
for the benefit of creditors, or suffer the appointment of a receiver of any
part of such guarantor's or endorser's property.

        6. Upon any such default and at any time thereafter, you may declare all
Obligations secured hereby immediately due and payable and you shall have the
remedies of the secured party provided in the Uniform Commercial Code, and in
addition, those provided by other provisions of law and in this Agreement. You
will at all

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times have the right to take possession of the Collateral and to maintain

such possession on our premises or to remove the Collateral or any part thereof
to such other premises as you may desire. Upon your request, we shall assemble
the Collateral and make it available to you at a place designated by you. If any
notification of intended disposition of any Collateral is required by law, such
notification, if mailed, shall be deemed properly and reasonably given if mailed
at least five days before such disposition, postage prepaid, addressed to us
either at our address shown herein or at any address appearing on your records
for us. Any proceeds of any disposition of any of the Collateral shall be
applied by you to the payment of all expenses in connection with the sale of the
Collateral, including reasonable attorneys' fees and other legal expenses and
disbursements and the reasonable expense of retaking, holding, preparing for
sale, sale, and the like, and any balance of such proceeds may be applied by you
toward the payment of the Obligations secured hereby in such order of
application as you may elect, and we shall be liable for any deficiency.

        7. If we default in the performance or fulfillment of any of the terms,
conditions, promises, covenants, provisions or warranties on our part to be
performed or fulfilled under or pursuant to this Agreement, you may at your
option without waiving your right to enforce this Agreement according to its
terms, immediately or at any time thereafter and without notice to us, perform
or fulfill the same or cause the performance or fulfillment of the same for our
account and at our sole cost and expense, and the cost and expense thereof
(including reasonable attorneys' fees) shall be added to the Obligations secured
hereby and shall be payable on demand with interest thereon at the rate charged
upon the Obligations secured hereby, but not in excess of that permitted by law.

         8. No delay or failure on your part in exercising any right, privilege
or option hereunder shall operate as a waiver of such or of any other right,
privilege, remedy or option, and no waiver whatever shall be valid unless in
writing, signed by you and then only to the extent therein set forth, and no
waiver by you of any default shall operate as a waiver of any other default or
of the same default on a future occasion. Your books and records containing
entries with respect to the Obligations secured hereby shall be admissible in
evidence in any action or proceeding, shall be binding upon us for the purpose
of establishing the items therein set forth and shall constitute prima facie
proof thereof. You shall have the right to enforce any one or more of the
remedies available to you, successively, alternately or concurrently. We agree
to join with you in executing financing statements or other instruments pursuant
to the Uniform Commercial Code in form satisfactory to you and in executing such
other documents or instruments as may be required or deemed necessary by you for
purposes of affecting or continuing your security interest in the collateral.

        9. This Agreement cannot be terminated orally. All of the rights,
remedies, options, privileges and elections given to you hereunder shall enure
to the benefit of your successors and assigns. The term "you" as herein used
shall include your company, any parent of your company, any of your subsidiaries
and any co-subsidiaries of your parent, whether now existing or hereafter
created or acquired, and all of the terms, conditions, promises, covenants,
provisions and warranties of this Agreement shall enure to the benefit of and
shall bind the representatives, successors and assigns of each of us and them.

                  Attest:                   Very truly yours,

                                            THE SINGING MACHINE COMPANY, INC.

/s/ April Green                             By: /s/ Yi Ping Chan
-----------------------                         ------------------------------
                                               Yi Ping Chan, Interim CEO & COO

                  (Seal)                    Dated:  February 9, 2004

                                            Accepted at New York, N.Y.

                  Attest:                   on February 9, 2004

                                            MILBERG FACTORS, INC.

/s/ Stephen R. Murphy                       By: /s/ Daniel R. Milberg
------------------------                        -------------------------
Stephen R. Murphy,                              Daniel R. Milberg,
Senior Vice President,                          Senior Vice President
Secretary & Treasurer

                  (Seal)

                                       3Exhibit 10.3

                  SECURITY INTEREST IN INVENTORY UNDER UNIFORM
                     COMMERCIAL CODE SUPPLEMENT TO FINANCING
                              OR FACTORING CONTRACT

To:  Milberg Factors, Inc.
     99 Park Avenue
     New York, NY 10016

Gentlemen:

         This is a supplement to our Factoring Agreement with you bearing the
effective date of February 9, 2004. It is hereby incorporated therein, shall
have a term concurrent therewith and is deemed in all respects a part thereof.

         1. In addition to your other security, we hereby grant you a continuing
security interest under the Uniform Commercial Code in all Inventory now and
hereafter owned by us. The term "Inventory" means and includes all merchandise
intended for sale by us and all raw materials, goods in process, finished goods,
materials and supplies of every nature used or useable in connection with the
manufacture, packing, shipping, advertising or sale of such merchandise, all of
which may be described generally (but without limitation) as:

   Karaoke machines, CD plus graphics, audiocassette tapes, recorded music and
         all products incidental to the manufacture and shipping thereof

We warrant that all Inventory is and will be owned by us, free of all other
liens, encumbrances and security interests.

         2. Your security interests in the Inventory shall continue through all
stages of manufacture and shall, without further act, attach to goods in
process, to the finished goods, to the accounts receivable or other proceeds
resulting from the sale or other disposition thereof and to all such Inventory
as may be returned to us by customers.

         3. The Inventory shall be security for all Advances made pursuant to
the Factoring Agreement and/or loans and advances to the undersigned under the
Factoring Agreement, as originally existing and as hereby and at any time
heretofore or hereafter supplemented or amended as well as for all other loans
and advances to us or for our account by you or your subsidiaries and for all
commissions, obligations, indebtedness, interest, charges and expenses
chargeable to our account or due from us from time to time, however arising, and
whether or not evidenced by notes or other instruments. Until all such
obligations have been paid in full, your security interest in the Inventory and
all proceeds thereof, shall continue in full force and effect and you will at
all times have the right to take possession of the Inventory and to maintain
such possession on our premises or to remove the Inventory or any part thereof
to such other places as you may desire. If you exercise your right to take
possession of the Inventory, we shall, upon your demand, assemble the Inventory
and make it available to you at a place reasonably convenient to you. In
addition, with respect to all Inventory as well as all Receivables and other
security, you shall be entitled to all of the rights and remedies set forth in
the Factoring Agreement and all of the rights provided by the Uniform Commercial
Code.

         4. Upon our request, you may make Advances to us prior to our sale of
Inventory. Any such Advances will be made at your sole discretion, will be
charged by you to our account and will bear interest payable in the manner and
at the rate specified in the Factoring Agreement. All such Advances shall be

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payable by us on demand and recourse to the security therefor will not be
required at any time. Their amounts and the relation thereof to the value of the
Inventory will be determined by you alone.

         5. Except for sales made in the regular course of our business, we
shall not sell, encumber or dispose of or permit the sale, encumbrance or
disposal of any Inventory without your prior written consent. As sales are made
in the regular course of business, we shall, in accordance with the provisions
of the Factoring Agreement, immediately execute and deliver to you schedules and
assignments of all Receivables created thereby. If sales are made for cash, we
shall immediately deliver to you the identical checks, cash or other forms of
payment which we receive. All payments received by you on account of cash sales
of Inventory as well as on account of Receivables will be credited to our
account in accordance with the provisions of the Factoring Agreement.

         6. We shall perform any and all steps requested by you to perfect your
security interest in the Inventory, such as leasing warehouses to you, placing
and maintaining signs, appointing custodians, executing and filing financing or
continuation statements in form and substance satisfactory to you, maintaining
stock records and transferring Inventory to warehouses. If any Inventory remains
in the possession or control of any of our agents or processors, we shall notify
such agents or processors of your security interest therein, and upon request,
instruct them to hold all such Inventory for your account and subject to your
instructions. A physical listing of all Inventory, wherever located, shall be
taken by us at least annually, and a copy of each such physical listing shall be
supplied to you. A perpetual inventory shall be maintained by us by location and
product, and a copy of such perpetual inventory shall be supplied to you monthly
and at such other times as you may request. You may examine and inspect the
Inventory at any time.

         7. We shall have the Inventory insured in your name against loss or
damage by fire, theft, burglary, pilferage, loss in transportation and such
other hazards as you shall specify, by insurers, in amounts and under policies
acceptable to you, and all premiums thereon shall be paid by us and the policies
delivered to you. If we fail to do so, you may procure such insurance and charge
the cost to us.

                  Attest:                   Very truly yours,

                                            THE SINGING MACHINE COMPANY, INC.

/s/ April Green                             By: /s/ Yi Ping Chan
------------------------                        ------------------------------
                                               Yi Ping Chan, Interim CEO & COO

                  (Seal)                    Dated:  February 9, 2004

                                            Accepted at New York, N.Y.

                  Attest:                   on February 9, 2004

                                            MILBERG FACTORS, INC.

/s/ Stephen R. Murphy                       By: /s/ Daniel R. Milberg
------------------------                        -------------------------
Stephen R. Murphy,                              Daniel R. Milberg,
Senior Vice President,                          Senior Vice President
Secretary & Treasurer

                  (Seal)

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