RIME 10-K & 10-Q changes, risk factors and insider trading
Algorhythm Holdings, Inc. · Nasdaq · Services-Computer Integrated Systems Design · CIK 923601 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Summary Risk Factors”
New heading “Risks Related to the Streeterville Transaction”
New heading “Risks Related to Ownership of Our Securities”
New heading “Our success depends on our SemiCab technology platform attaining market acceptance by transportation providers.”
New heading “Issues in the use of AI technologies in our SemiCab business may result in reputational harm or liability to us, and our business, operating results, and financial results may be adversely affected.”
New heading “We are subject to risks related to the sale of our Singing Machine business.”
New heading “The sale of a substantial number of our securities in the public market by Streeterville and/or by our existing security holders could cause the price of our common stock to fall.”
New heading “Shares of our common stock purchased by Streeterville may be issued at a price significantly below the prevailing market price of our common stock, resulting in substantial dilution of existing stockholders and a decrease in the price of our common stock.”
New heading “We may be required to make substantial cash payments to Streeterville, which could reduce the amount of cash available to fund our operations.”
Removed heading “If we are unable to develop new karaoke products, our revenues may not continue to grow.”
Removed heading “Our manufacturing operations are located in China, subjecting us to risks associated with the manufacturing and shipping of our products.”
Removed heading “We rely upon third party suppliers for the components that are incorporated into our karaoke products and if we were unable to obtain these components as needed, our operations would be adversely affected.”
Removed heading “We depend on the ability of our suppliers to manufacture our products without infringing, misappropriating or otherwise violating the intellectual property rights or proprietary rights of others.”
Removed heading “Changes in government regulations relating to international tariffs could significantly reduce our revenues, product cost and profitability.”
Removed heading “A small number of our customers account for a substantial portion of the revenue we generate from our karaoke business and the loss of one or more of these key customers would negatively impact our revenue and cash flow.”
Removed heading “Our customers may return karaoke products that they have purchased from us which would result in a reduction in our revenue and cash flow.”
Removed heading “We are subject to pressure from our customers relating to price reduction and financial incentives that negatively impact our revenue and cash flow from sales of our karaoke products.”
Removed heading “If we do not accurately forecast the demand for our karaoke products, our revenue, cash flow and results of operations will be adversely affected.”
Removed heading “We are subject to the costs and risks of carrying inventory for our customers and if we have too much inventory, it will negatively affect our cash flow from operations.”
Removed heading “We are subject to insurance risk of loss for karaoke products that are damaged while in transit from the manufacturer to the customer and our warehouse.”
Removed heading “Our karaoke business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively brief holiday season.”
Removed heading “Consumer discretionary spending may affect karaoke purchases and is affected by various economic conditions and changes.”
Removed heading “If our third-party logistics provider experiences disruptions to the operation of its distribution centers, it could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “Our production costs may increase if we are required to make purchases using the Chinese Yuan instead of the U.S. dollar.”
Removed heading “Our profit margin may be negatively impacted by higher raw material prices and higher production and shipping costs.”
Removed heading “If we are unable to compete in the karaoke products category, our revenue, cash flows and results of operations will be negatively impacted.”
Removed heading “If we ship products that contain defects, the market acceptance of our karaoke products and our reputation will be harmed and our customers could seek to recover their damages from us.”
Removed heading “Risks Related to Our AI Logistics and Distribution Business”
Removed heading “The transportation industry historically has experienced cyclical fluctuations in financial results that could negatively impact our business and results of operations.”
Removed heading “Fluctuation in freight volumes resulting from supply chain disruptions or other factors may impact working capital needs.”
Removed heading “SemiCab’s business is susceptible to numerous expense challenges which may impact operating results.”
Removed heading “SemiCab is dependent on third parties which may impact the provision of its services.”
Removed heading “Cyclical challenges in the transportation industry may impact SemiCab’s results of operations and operating cash flows.”
Removed heading “SemiCab faces substantial competition in the logistics and distribution industry.”
Removed heading “SemiCab’s business may be adversely affected by seasonality.”
Removed heading “SemiCab relies on technology to operate its business.”
Removed heading “SemiCab’s international operations subject it to complex and ever-changing operational, financial, and data privacy risks.”
Removed heading “SemiCab’s may not be able to hire and retain qualified employees.”
Removed heading “SemiCab may fail in its efforts to expand its use of machine learning and AI technologies and may be subject to risks and liabilities in the event it does expand its use of machine learning and AI technologies.”
Removed heading “We have integrated, and may continue to integrate in the future, AI in our logistics and distribution services. AI technology presents various operational, compliance, and reputational risks and if any such risks were to materialize, our business and results of operations may be adversely affected.”
Removed heading “We may be subject to risks associated with artificial intelligence and machine learning technology.”
Removed heading “SemiCab’s business is dependent on a single customer.”
Removed heading “SemiCab may be subject to a variety of claims arising from its transportation operations.”
Removed heading “SemiCab’s business is subject to numerous government regulations.”
Largest changes
“Changes in government regulations relating to international tariffs could significantly reduce our revenues, product cost and profitability.”see in full comparison
“If SemiCab fails to successfully integrate AI into its platform and business processes, or if it fails to keep pace with rapidly evolving AI technological developments, including attracting and retaining talented AI developers and programmers and cybersecurity personnel, it may face a competitive disadvantage. At the same time, the use or offering of AI technologies may result in new or expanded risks and liabilities, including enhanced government or regulatory scrutiny, litigation, privacy and compliance issues, ethical concerns, confidentiality, reputational harm, and security risks. …”see in full comparison
“We have integrated, and may continue to integrate in the future, AI in our logistics and distribution services. AI technology presents various operational, compliance, and reputational risks and if any such risks were to materialize, our business and results of operations may be adversely affected.”see in full comparison
“SemiCab may fail in its efforts to expand its use of machine learning and AI technologies and may be subject to risks and liabilities in the event it does expand its use of machine learning and AI technologies.”see in full comparison
“Issues in the use of AI technologies in our SemiCab business may result in reputational harm or liability to us, and our business, operating results, and financial results may be adversely affected.”see in full comparison
“Our manufacturing operations are located in China, subjecting us to risks associated with the manufacturing and shipping of our products.”see in full comparison
Full comparison: every changed paragraph (136)
Summary Risk Factors
Risks
Related to Our Financial ConditionCompany
Risks Related to the Streeterville Transaction
Risks Related to Ownership of Our Securities
We
have a history of losses, we can provide no assurance that we will ever become profitable, and the audit report issued by M&K CPAs,
PLLC in connection with our auditorsaudited concludedfinancial statements as of and for the year ended December 31, 2025 includes an explanatory paragraph
stating that there is substantial
doubt about our ability to continue as a going concern.
We
incurred net losses available to common stockholders of $15,900,000 and $23,257,000 for our fiscal years ended December 31, 2023,2025 and
2024, respectively, and had accumulated deficits of $49,172,000$65,072,000 and $25,915,000$49,172,000 as of December 31, 20242025 and 2023,2024, respectively. In addition,
net net
cash used by operating activities was $8,556,000$7,309,000 and $3,985,000 for our fiscal years ended December 31, 2025 and 2024, respectively.
Based upon this, our current cash resources and our internally generated cash flow projections, the audit report issued by M&K CPAS,
PLLC in connection with our audited financial statements as of and for the year ended December 31, 2024.2025 Basedincludes uponan thisexplanatory and our internally generatedparagraph
cash flow projections, our auditors concludedstating that there is substantial doubt about our ability to continue as a going concern for the
next 12 months.concern. Our future profitability is dependent upon
our ability to successfully execute upon our business plan. We can provide
no assurance that we will be able to sustain or increase profitability
on a quarterly or annual basis. Accordingly, we may continue to
generate losses in the future and, in the extreme case, may need to discontinue
operations.
While
we are optimistic about our ability to raise sufficient funds to continue our operations for at least one year after the date of this
report, we have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be
available available
in an amount or on terms acceptable to us, if at all. Our ability to obtain additional capital will be subject to a number
of factors,
including maintenance of our listing on the Nasdaq Stock Market (“Nasdaq”),Nasdaq, market conditions and our operating
performance. performance.
These factors may make the timing, amount, terms or conditions of any proposed future financing transactions unattractive
to us. If we
cannot raise additional capital when needed, or if such capital cannot be obtained on acceptable terms, we may not be able
to pay our
costs and expenses as they are incurred, take advantage of future acquisition opportunities, respond to competitive pressures
or unanticipated
events, or otherwise execute upon our business plan. This may adversely affect our business, financial condition and
results of operations
and, in the extreme case, cause us to discontinue operations.
On July 3, 2024, we completed the acquisition of substantially all of the assets and the assumption of certain liabilities of SemiCab, Inc., which was the owner of the United States component of our AI logistics and distribution business. On May 2, 2025, we and SemiCab Holdings completed the acquisition of substantially all of the issued and outstanding equity shares of SMCB and we purchased the 20% membership interest in SemiCab Holdings then held by SemiCab, Inc. We may continue to expand our business through the acquisition of additional businesses in the future.
We
depend upon our executive officers and may not be able to retain or replace these individuals or recruit additional personnel,personnel if they
leave, which
could harm our business.
We
believe that we have benefited substantially from the leadership and experience of our executive officers, including Gary Atkinson, who
who is our Chief Executive Officer, and Alex Andre, who is our Chief Financial Officer and General Counsel, and Bernardo Melo, who is
our Chief Revenue Officer.Counsel. Our executive officers may terminate
their employment with us at any time without penalty, and we do not
maintain key person life insurance policies on any of our executive
officers. The loss of the services of any of our executive
officers could have a material adverse effect on our business and prospects,
as we may not be able to find suitable individuals to
replace such personnel on a timely basis. In addition, any such departure could
be viewed in a negative light by investors and
analysts, which could cause the price of our common stock to decline. As our business
expands, our future success will depend
greatly on our continued ability to attract and retain highly skilled and qualified executive-level
personnel. Our inability to
attract and retain qualified executive officers could impair our growth and have an adverse effect on our
business, financial
condition and results of operations.
Our success depends on our SemiCab technology platform attaining market acceptance by transportation providers.
The continued growth in market demand for and market acceptance of our SemiCab technology platform is critical to our continued success. Demand for our SemiCab technology platform is affected by a number of factors, many of which are beyond our control, including the extension of our SemiCab technology platform for new use cases, the timing of development and release of new products, features and functionality introduced by us or our competitors, technological change and the growth or contraction of the market in which we compete. We may be unable to effectively adapt our platform and respond to changes in technology and customer needs. If we are unable to meet customer demand, or if we otherwise fail to achieve more widespread market acceptance of our SemiCab technology platform, our business, results of operations, financial condition and growth prospects may be adversely affected.
Our
failure or inability to enforce our trademarks, trade secrets and other proprietary rights could adversely affect our image, brands and
competitive position
or the value of our brands.position.
We
own U.S. registered trademarks for many of the signs, designs and expressions that identify the products and services that we use in
our business,
including “The Singing Machine” and “SemiCab”. We also have common law trademark rights for certain
of our proprietary marks and rely upon trade secrets
to protect certain of our rights. We believe that our trademarks, trade secrets
and other proprietary rights have significant value and
are important to our business and competitive position. We, therefore, devote
time and resources to the protection of these rights. Our
policy is to pursue registration of our important trademarks whenever feasible
and to oppose vigorously any infringement of our trademarks.
We protect our trade secrets and proprietary information, in part, by entering
into confidentiality agreements with our employees and
consultants. We also seek to preserve the integrity and confidentiality of our
proprietary information by maintaining physical security
of our premises and physical and electronic security of our information technology
systems.
Filing,
prosecuting, and defending intellectual property rights on our productstechnology in international jurisdictions is prohibitively expensive.
Competitors Competitors
may use our technologies in jurisdictions where we have not obtained intellectual property rights to develop their own productstechnology
and, and,
further, may export otherwise infringing productstechnology to territories where we have intellectual property rights, but where enforcement
is is
not as strong as that in the U.S. TheseTheir productstechnology may compete with our productstechnology in jurisdictions where we do not have any issued
or licensed
patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from
competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual
property protection, which could make it difficult for us to stop the infringement of ourany patents we may have in the future, or marketingthe use
of competing products
technologies in violation of our proprietary rights generally. Proceedings to enforce ourany patent rights we may have in the
future in foreign jurisdictions could result in substantial
cost and divert our efforts and attention from other aspects of our business.
Issues in the use of AI technologies in our SemiCab business may result in reputational harm or liability to us, and our business, operating results, and financial results may be adversely affected.
We actively integrate AI technologies in our SemiCab platform to enhance automation, analytics, customer experience, and operational efficiency. As we expand the use of AI-enabled capabilities, we are exposed to risks inherent in the development and deployment of emerging technologies.
AI systems may generate inaccurate, biased, incomplete, or unintended outputs due to limitations in algorithms, data quality, model design, or oversight. If AI-enabled features fail to perform as intended or are perceived as unreliable, we could experience reputational harm, customer dissatisfaction, competitive disadvantage, or legal exposure.
Certain AI capabilities rely on third party service providers, cloud infrastructure, or external models. Disruptions, security incidents, pricing changes, contractual restrictions, or termination of such services could impair the availability or performance of AI-enhanced features and increase our costs.
The regulatory framework governing AI, data privacy, and automated decision-making is evolving in the United States and internationally. New or expanded legal requirements may require product modifications, increased compliance expenditures, or limitations on certain AI-driven functionality.
Our AI-enabled features process sensitive customer data. Any failure to maintain appropriate safeguards, governance controls, or oversight could result in regulatory scrutiny, litigation, or reputational harm.
We have implemented governance frameworks, human oversight, security controls, and monitoring processes designed to manage risks associated with AI-enabled capabilities. However, these measures may not be sufficient to prevent errors, misuse, security incidents, or regulatory non-compliance. If our risk management efforts are ineffective, our business, financial condition, and results of operations could be adversely affected.
Any
significant changes in U.S. trade or other policies that block,block or restrict imports or increase import tariffs could have a material adverse
adverse effect on results of operations.
OurIn
karaoke products are manufactured in southern China. In recent years, the U.S. government has implemented substantial changes to U.S.
trade policies, including import restrictions, increased
import tariffs and changes in U.S. participation in multilateral trade agreements,
such as the United States-Mexico-Canada Agreement
to replace the former North American Free Trade Agreement. The U.S. government has
assessed supplemental tariffs on certain goods imported from China, resulting in China’s assessment of retaliatory tariffs on certain
imports of U.S. goods into China and block imports from Myanmar. In addition, the United States has assessed or proposed supplemental
tariffs and quantitative restrictions
on U.S. imports of certain products from othernumerous countries asthroughout well.the world. U.S. trade policy continues to
evolve in this regard. Such changes could prevent or make it difficult or more expensive for us to obtain our products, which could affect
our sales. Further tariff increases could require us to increase prices, which likely would decrease customer demand for our products.
Retaliatory tariff and trade measures imposed by other countries could affect our ability to export products and therefore adversely
affect sales. Any significant changes in current U.S. trade or other policies that restrict imports or increase import tariffs could
have a material
adverse effect upon results of our operations.
U.S.
and global markets are experiencing volatility and disruption as a result of the escalation of geopolitical tensions and themilitary
conflicts start of
the military conflict between Russiain and Ukraine.around OnUkraine, FebruaryIsrael, 24,and 2022,other a full-scale military invasionareas of Ukrainethe by Russian troops wasworld.
reported. Although the length and impact of theany potential or ongoing military conflict is highly unpredictable, thesuch conflictconflicts inhave Ukraine has leadled to market
market disruptions, including significant volatility in credit and capital markets.
For example, Russia’s
military interventions in Ukraine have led to sanctions and other penalties being levied by the U.S., European Union and other
countries countries
against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military
actions and
the resulting sanctions could adversely affect the global economy and financial markets. In addition, the invasion of Ukraine and the
resulting sanctions imposed on Russia have resulted in increased volatility in the financial markets and the markets for certain commodities
including oil, which may significantly impact the manufacturers that we rely on.
In addition, acts of war, terrorism or political instability in oil producing countries (e.g. the invasion of Ukraine by Russia and conflicts in the Middle East, including the recent escalation involving Iran, and recent U.S. intervention in Venezuela) have resulted in increased volatility in the financial markets and the markets for certain commodities including oil, which may significantly impact the manufacturers that we rely on.
Additionally,
the conflict in the Middle East between Israel and the government of Hamas in GazaGaza, hasHezbollah in Lebanon, as well as groups in Syria and Iran, have caused disruptions in shipping lanes in the Red
Sea where some major cargo lines have opted to route their vessels away from the region which has increased the time required to reach
their destinations as well as increased time for vessels to return to their port of origin with empty containers. Continued shipping
line disruptions and delays may impact the availability and cost of shipping containers during peak shipping season.
While
we have not experienced any direct impact from the conflicts in theand Ukrainearound andUkraine, the Middle East,East and elsewhere, the extent and duration of the
military military
action, sanctions and resulting market and shipping lane disruptions are impossible to predict but could be substantial and
could adversely
affect our operating results as they impact the global economy in the future.
Unfavorable
global or regional economic conditions may be triggered by numerous developments beyond our control, including inflation, geopolitical
events, health crises such as the COVID-19 pandemic, and other events that trigger economic volatility on a global or regional basis.
In particular, a significant deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment
levels, inflationary pressures or disruptions to credit and capital markets, could lead to decreased consumer confidence and consumer
spending more generally, thus reducing consumer demand for our products.services. Such heightened inflationary levels and economic conditions
may negatively impact consumer disposable income and discretionary spending, negatively impacting our business, financial condition and
results of operations.
We
sell productsour services primarily to retailers,large, includingfast-moving nationalconsumer chains,goods warehouse clubs, department stores, lifestyle merchants, specialty stores, and
direct mail catalogs and showrooms.companies. Deterioration in the financial condition of our customers
could result in these customers not being
able to pay us for our products and services. This would have a negative impact on our revenue and results
of operations.
As
we expand our producttechnology developmentdevelopment, service offerings and marketing activities, we will need to hire additional personnel and could
experience difficulties
attracting and retaining qualified employees. Competition for qualified personnel could be intense due to the
limited number of individuals
who possess the skills and experience required by such an industry. We may not be able to afford, attract
and retain quality personnel
on favorable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be
subject to allegations that such
personnel have been improperly solicited or that they have divulged proprietary or other confidential
information, or that their former
employers own their producttechnology or service ideas. Any of these events could have a material adverse
effect on our business, financial condition
and results of operations.
We could be a party to litigation that could adversely affect us by diverting management attention, increasing our expenses and subjecting us to significant monetary damages and other remedies.
Our
chartercertificate of incorporation provides limitations ofon director liability and indemnification of directors and officers and employees.
An
impairment in the carrying value of our fixed assets, intangible assets or goodwill could adversely affect our financial condition and
results of operationsoperations.
We are subject to risks related to the sale of our Singing Machine business.
On August 1, 2025, we entered into an asset purchase agreement with SMC and Stingray USA pursuant to which Stingray USA purchased substantially all of the assets, and assumed most of the liabilities, associated with our Singing Machine business. The transaction closed on August 1, 2025. Accordingly, we no longer own or operate the Singing Machine business line. In connection with the transaction, we also entered into a transitional services agreement with Stingray USA to provide certain limited services following the closing. The performance of these services by us and other related conditions outside of our control could adversely affect our operations and future financial results.
As a result of the sale of our Singing Machine business, we became a smaller, less diversified company than we were prior to the transaction, which could make us more vulnerable to factors impacting our performance, such as changing market conditions and market volatility. In addition, while it is intended that the transaction be tax-free to our stockholders for U.S. federal income tax purposes, there is no assurance that the transaction will qualify for this treatment. If the sale is ultimately determined to be taxable, we or our stockholders could incur income tax liabilities that could be significant. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, and the price of our common stock.
Risks
Related to Ourthe KaraokeStreeterville BusinessTransaction
The sale of a substantial number of our securities in the public market by Streeterville and/or by our existing security holders could cause the price of our common stock to fall.
On August 21, 2025, we completed the Streeterville Transaction. As of March 27, 2026, we had completed Pre-Paid Purchases for the aggregate amount of $21,285,000 and had repaid Pre-Paid Purchases in the aggregate amount of $9,845,000 as a result of Streeterville electing to exercise its right to purchase a total of 11,303,264 shares of our common stock under the First Pre-Paid Purchase, Second Pre-Paid Purchase and Third Pre-Paid Purchase. The Second Pre-Paid Purchase and Third Pre-Paid Purchase have been paid off in full. However, we have principal in the amount of approximately $1,085,000 and $10,355,000 outstanding under the First Pre-Paid Purchase and Fourth Pre-Paid Purchase, respectively. In the event Streeterville elects to exercise its right to purchase additional shares of our common stock under the First Pre-Paid Purchase or Fourth Pre-Paid Purchase, we may be required to issue a substantial number of additional shares of our common stock to Streeterville. The sale of a substantial number of our shares of common stock in the public market by Streeterville and/or by our other existing security holders, or the perception that those sales might occur, could result in a significant decline in the public trading price of our common stock.
Shares of our common stock purchased by Streeterville may be issued at a price significantly below the prevailing market price of our common stock, resulting in substantial dilution of existing stockholders and a decrease in the price of our common stock.
Following the funding of each Pre-Paid Purchase, Streeterville has the right, but not the obligation, to purchase from us that number of shares of common stock up to the lesser of: (i) a number of shares of common stock equal in value to the outstanding balance of the funded amount, and (ii) that number of shares of common stock such that Streeterville will not beneficially own greater than 9.99% of our outstanding shares of common stock. The price per share used to calculate the number of shares to be issued to Streeterville is equal to 90% of the lowest daily volume-weighted average price of our common stock during the ten (10) trading days immediately preceding the applicable purchase date, but not less than the floor price, which is the greater of: (i) 20% of the Minimum Price prior to the applicable closing of the Pre-Paid Purchase, and (ii) $0.10. If Streeterville exercises its right to purchase additional shares of our common stock under Pre-Paid Purchases, the shares may be sold by us to Streeterville at a price significantly below the prevailing market price. This could lead to substantial dilution of existing stockholders. This dilution, combined with the potential for downward pressure on our share price if Streeterville promptly sells the shares in the open market, could reduce the market value of our common stock significantly.
We may be required to make substantial cash payments to Streeterville, which could reduce the amount of cash available to fund our operations.
If Streeterville chooses to not exercise its right to purchase shares of common stock from us, we will be required to repay any outstanding Pre-Paid Purchases in cash. We may not have sufficient cash on hand or available resources to meet such a repayment obligation, which could force us to seek emergency financing or other arrangements which may not be available or, if available, may be on unfavorable terms. In the event we do have sufficient funds available, the cash payment obligations, if triggered, could significantly reduce the cash we have available to fund our operations or make necessary investments. This would adversely affect our financial condition, limit our ability to pursue growth opportunities, and adversely affect our business prospects.
In addition, the occurrence of an event of default under the Pre-Paid Purchases or certain change-of-control or other fundamental transactions may accelerate repayment or suspend Streeterville’s funding obligations to us. If an event of default occurs under a Pre-Paid Purchase, the outstanding balance will become immediately due and payable. At any time thereafter, upon written notice given by Streeterville, the outstanding balance will increase by seven-and-a half percent and interest will begin accruing at a rate of the lesser of 18% per annum or the maximum rate permitted under applicable law. If we are involved in a change-of-control or other fundamental transaction, we may be required to repay the Pre-Paid Purchases in cash. We may not have sufficient cash on hand or available resources to meet such a repayment obligation, which could force us to seek emergency financing or other arrangements which may not be available or, if available, may be on unfavorable terms. In the event we do have sufficient funds available, the cash payment obligations, if triggered, could significantly reduce the cash we have available to fund our operations or make necessary investments. This would adversely affect our financial condition, limit our ability to pursue growth opportunities, and adversely affect our business prospects.
If
we are unable to develop new karaoke products, our revenues may not continue to grow.
The
karaoke industry is characterized by rapid technological change, frequent new product introductions and enhancements and ongoing customer
demands for greater performance. In addition, the average selling price of any karaoke machine has historically decreased over its life,
and we expect that trend to continue. As a result, our products may not be competitive if we fail to introduce new products or product
enhancements that meet evolving customer demands. The development of new products is complex, and we may not be able to complete development
in a timely manner. To introduce products on a timely basis, we must:
We
will need to continue to enhance our karaoke machines and develop new machines to keep pace with competitive and technological developments
and to achieve market acceptance for our products. At the same time, we will need to continue to identify and develop other products
that may be different from our existing karaoke machines.
Our
manufacturing operations are located in China, subjecting us to risks associated with the manufacturing and shipping of our products.
We
currently use several contract manufacturers in China to manufacture all our karaoke products. Our arrangements with these contract manufacturers
are subject to the risks of doing business abroad, such as import duties, trade restrictions, work stoppages, and foreign currency fluctuations,
limitations on the repatriation of earnings and political instability, which could have an adverse impact on our margins. Furthermore,
we have limited control over the manufacturing processes. As a result, any difficulties encountered by our third-party manufacturers
that result in product defects, production delays, cost overruns or the inability to fulfill orders on a timely basis could adversely
affect our revenues, profitability and cash flow. Also, since we do not have written agreements with any of these contract manufacturers,
we are subject to additional uncertainty if the contract manufacturers do not deliver products to us on a timely basis.
We
rely principally on a limited number of contract ocean carriers to ship substantially all of our karaoke products that we import to our
outsourced warehouse facility in Chino, California. Retailers that take delivery of our products in China rely on a variety of carriers
to import those products. Any disruptions in shipping, whether in California or China, caused by labor strikes, other labor disputes,
terrorism, and international incidents may prevent or delay our customers’ receipt of our products. If our customers do not receive
their products on a timely basis, they may cancel their orders or return the products to us. This would negatively impact our revenue
and results of operations.
We
rely upon third party suppliers for the components that are incorporated into our karaoke products and if we were unable to obtain these
components as needed, our operations would be adversely affected.
Our
growth and ability to meet customer demand depends in part on our ability to obtain timely deliveries of karaoke machines and our electronic
products. We rely on third party suppliers to manufacture the parts and materials that are incorporated into these products. If our suppliers
are unable to provide our factories with the components needed, we will be unable to manufacture our products. For example, there has
been recent worldwide volatility in the supply of electronic chips due to the increased demand for semiconductors and we are currently
competing with large companies to obtain these parts and could see production and shipment delays. We cannot guarantee that we will be
able to purchase the components we need at reasonable prices or in a timely fashion. If we are unable to anticipate and address any shortages
of parts and materials in the future, we may experience manufacturing and delivery delays, which would negatively impact our sales and
business.
We
depend on the ability of our suppliers to manufacture our products without infringing, misappropriating or otherwise violating the intellectual
property rights or proprietary rights of others.
We
source our products from a variety of contract manufacturers. We buy finished goods from our suppliers and generally do not source the
raw materials and components incorporated into the final products. We rely on our contract manufacturers’ ability to secure injected
plastic, wood cabinets, integrated circuits, display panels, speaker drivers, and other components that are necessary for the manufacture
of our final products. While we are not responsible for sourcing raw materials, we rely on these suppliers to have all required licenses
and proprietary rights to the materials that are incorporated into our final products. In addition, we rely on the representations of
our contract manufacturers that they are using materials and components that meet all necessary legal, safety, and compliance requirements.
If our suppliers do not have the proper licenses or rights or are not in compliance with all regulatory requirements, we may be named
a party in disputes or be subject to claims, including claims of infringement or violating the intellectual property or proprietary rights
of third parties, with respect to our products.
Changes
in government regulations relating to international tariffs could significantly reduce our revenues, product cost and profitability.
U.S.
government administration and members of the U.S. Congress have recently implemented significant changes in U.S. trade policy and taken
certain actions that are impacting our business, including imposing tariffs on certain goods imported into the United States. Some of
these changes have triggered retaliatory actions by affected countries and may result in “trade wars” and increased costs
for goods imported into the United States. All of our products are manufactured and imported from China and we sell our products in Canada
and other countries. The implementation of tariffs has resulted in an increase in the cost of our products. If we are unable to mitigate
these increased costs through price increases, we may experience lower sales which would negatively impact our revenue, gross profit
margin and results of operations.
A
small number of our customers account for a substantial portion of the revenue we generate from our karaoke business and the loss of
one or more of these key customers would negatively impact our revenue and cash flow.
Management's Discussion & Analysis (MD&A)
New heading “Revenue Recognition”
Removed heading “Recent Corporate Events”
Removed heading “Change in Fiscal Year”
Removed heading “Name and Symbol Change”
Removed heading “Reverse Stock Split and Increase in Authorized Shares”
Removed heading “Reserve for Sales Returns and Returns Asset”
Largest changes
“Cost of goods sold consists primarily of costs for raw materials and the manufacturing of our Singing Machine karaoke products. We incurred only a minimal amount of costs in connection with our SemiCab business. Cost of goods sold decreased $4,295,000 to $18,713,000 for the year ended December 31, 2024 compared to $23,008,000 for the nine-month transition period ended December 31, 2023. The decrease in cost of goods sold was due primarily to a decrease of $3,553,000 for product manufacturing costs. …”see in full comparison
“We generated net sales of $23,494,000 for the year ended December 31, 2024, compared to $29,198,000 for the nine-month transition period ended December 31, 2023. The decrease was primarily due to decreases in sales to Walmart that resulted from us not participating in Walmart’s national Black Friday promotion and decreases in sales due to the loss of retail shelf space at Target. Gross profit decreased $1,409,000 to $4,781,000, or 20.4% of net sales, for the year ended December 31, 2024 compared to $6,190,000, or 21.2% of net sales, for the nine-month transition period ended December 31, 2023. …”see in full comparison
“Our operating expenses were $6,629,000 for the year ended December 31, 2025, compared to $8,248,000 for the year ended December 31, 2024. The decrease in operating expenses was due primarily to a decrease of $3,592,000 related to the impairment of goodwill recorded in connection with the acquisition of SemiCab, Inc’s business during the year ended December 31, 2024, partially offset by the increase in general and administrative expenses incurred in the growth and development of the SemiCab business during the year ended December 31, 2025. …”see in full comparison
“We generated net loss from continuing operations of $15,210,000, or $5.86 per share of common stock, for the year ended December 31, 2025, compared to $18,884,000, or $270.44 per share of common stock, for the year ended December 31, 2024. The decrease was due primarily to an increase of $4,094,000 for net sales and a decrease of $3,592,000 for impairment of goodwill. This was partially offset by an increase of $5,215,000 for cost of sales. We had total assets of $12,724,000 and $18,302,000 at December 31, 2025, and 2024, respectively. …”see in full comparison
“Net cash used by operating activities was $8,556,000 during the year ended December 31, 2024 compared to net cash provided by operating activities of $411,000 during the nine-month transition period ended December 31, 2023. The difference of $8,967,000 was due primarily to increases of $17,969,000 for net loss and $4,135,000 for refunds due to customers, and a decrease of $11,811,000 for accounts payable and accrued expenses. …”see in full comparison
“Net cash used in operating activities attributable to continuing operations was $7,309,000 during the year ended December 31, 2025, compared to $3,985,000 during the year ended December 31, 2024. …”see in full comparison
Full comparison: every changed paragraph (79)
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report contain
forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this report are based on
information available to us on the date hereof, and, except as required by law, we assume no obligation to update any such forward-looking
statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including those set forth herein under Item 1A. Risk Factors and elsewhere in this report. See also “Special
NoteDisclosure Regarding Forward-Looking Statements” beginning on page 1 of this report. The following should be read in conjunction
with our consolidated financial statements beginning on page F-1 of this report.
We are an AI technology company focused on the growth and development of SemiCab. SemiCab is an AI-enabled software logistics and distribution business that utilizes our SemiCab technology platform to enable retailers, brands and transportation providers to address common supply chain problems globally. We operate our SemiCab business through our subsidiary, SemiCab Holdings.
WePrior
areto anAugust AI1, technology2025, andwe consumerhad electronicsa holdingsecond companybusiness, withwhich two primary business units – SemiCab andwas Singing Machine. SemiCab
is an AI-enabled software logistics business operated through our subsidiary, SemiCab Holdings, LLC. Singing Machine iswas a home karaoke
consumer products business
that designsdesigned and distributesdistributed karaoke products globally to retailers and ecommerce partners globally through our subsidiary,
The Singing Machine
Company, Inc. We sold our Singing Machine business on August 1, 2025. Accordingly, we no longer own or operate the Singing Machine business.
SemiCab
is aan AI-enabled, cloud-based Collaborativecollaborative Transportationtransportation Platformplatform built to achieve the scalability required to predict and optimize loads and the
use of trucks. To orchestrate collaboration across manufacturers, retailers, distributors, and their carriers, SemiCab uses real-time
data from API-based load tendering and pre-built integrations with TMS and ELD partners. To build fully loaded round trips, SemiCab uses
AI/ML techniques and advanced predictive optimization models.
Since
2020, SemiCab has enabled major retailers, brands and transportation providers to address their transportation needs. SemiCab’s
Orchestrated Collaboration™ AI model has proven to increase transportation capacity, improve asset utilization, reduce empty miles,
lower logistics costs, and provide visibility into the entire transportation network. Models show that theour SemiCab technology has the
capability capability
of reducing costs through optimization. Additionally, SemiCab’sour SemiCab technology has the potential to play a key role in the improved
sustainability model. Based on itsour proven ability to improve truck utilization rates, this could result in a dramatic reduction in the
carbon footprint of the industry. The optimization of existing truck utilization can add trucking capacity without adding more trucks,
drivers or driven miles which addresses common problems plaguing the industry like severe driver shortage and road congestion. Trucking
optimization could also reduce carbon emissions attributable to road freight.
Through
Singing Machine, we engageengaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings.
We arewere a leading global karaoke and music entertainment company that specializes in the design and production of quality karaoke and
music enabled consumer products for adults and children. Our products arewere among the most widely available karaoke products internationally.
We sold our Singing Machine business on August 1, 2025. Accordingly, we no longer own or operate the Singing Machine business line.
Our
mission is to “create joy through music.” To deliver on this mission, we are focused on a multi-prong approach. In the short-term,
we seek to improve profitability by optimizing operations and continue to expand gross margins. In the mid-to-long-term, we seek to continue
to expand our business into new verticals including automotive and connected-TV devices and grow our global distribution for our consumer
karaoke products.
Recent
Corporate Events
Change
in Fiscal Year
During
2023, our board of directors approved a change in our fiscal year end from March 31 to December 31. In accordance with SEC regulations,
our consolidated financial statements are comprised of our balance sheets at December 31, 2024 and 2023 and our statements of operations,
stockholders’ deficit and cash flows for the year ended December 31, 2024 and the nine-month period ended December 31, 2023. As
a result, this Management’s Discussion and Analysis of Financial Condition and Results of Operations is comparing our results
of operations for the full year ended December 31, 2024 with our results of operations for only the nine-month period ended December
31, 2023.
Name
and Symbol Change
Effective
September 5, 2024, our Certificate of Incorporation was amended to change our name from “The Singing Machine Company, Inc.”
to “Algorhythm Holdings, Inc.” In addition, effective September 8, 2024, our ticker symbol was changed from “MICS”
to “RIME.”
Reverse
Stock Split and Increase in Authorized Shares
On
January 13, 2025, our stockholders voted to authorize our board of directors to effect a reverse stock split of the outstanding shares
of our common stock at a specific ratio within a range of 1-for-10 to a maximum of 1-for-250 and to amend our certificate of incorporation
to increase the number of authorized common stock from 100,000,000 to 800,000,000 shares. On January 14, 2025, our board of directors
approved a reverse stock split of 1-for-200 ratio and approved the filing of a certificate of amendment to our certificate of incorporation
to effect the reverse stock split and to increase our authorized shares of common stock from 100,000,000 to 800,000,000. The reverse
stock split took effect on February 10, 2025. In accordance with SEC rules and regulations, all share numbers and prices throughout this
report and our consolidated financial statements reflect post-reverse stock split numbers.
Our
SemiCab and Singing Machine businesses are each in very different stages of development. Accordingly, our plans for growing each of them
are very different.
SemiCabWe
is an early-stage business that is not yet contributing a material amount of revenue to us. We intend to invest in our SemiCab AI logistics and distribution business
to develop and grow it into a significant revenue producer for
us. This will involve investments in the continued research and development
of itsour technology, the hiring of additional qualified employees,
marketing and advertising initiatives, and back-office support. While
SemiCab this is a nascent business, it has already acquired someseveral multinationallarge,
fast-moving consumer products companies as customers. We believe that as
existing customers experience the benefits of our SemiCab logistics
and distribution solutions, they will begin to increase their use
of SemiCab.our services. We also believe that SemiCab’s provenour ability to improve truck
utilization rates and improve trucking capacity without
adding more trucks, drivers or driven miles will be of substantial interest to
additional companies that can benefit from SemiCab.our service.
We
acquired the United States component of our SemiCab business on July 3, 2024.2024 and acquired the India component of our SemiCab business
on May 2, 2025. We may make additional investments in companies operating
in the AI distribution and logistics space that we believe
are complementary to our SemiCab business. Our investments could involve an
acquisition of the assets or equity of complementary companies or businesses,
businesses or could involve a strategic partnership or joint venture
with complementary companies or businesses.businesses or digital asset treasury
strategies. We believe that additional investments could provide us with new AI logistics and distribution
technologies, services and
resources that we can implement across our entire SemiCab business,business or could help us to more quickly expand
our SemiCab footprint into other parts of
the world. We are actively evaluating additional opportunities to expand our SemiCab business
through investments in complementary AI
logistics and distribution businesses and companies.
In
contrast to our SemiCab business, our Singing Machine business has been successfully operating worldwide for decades. Our karaoke products
are well-known and established with retailers and consumers in the countries in which we sell them. Our plan for Singing Machine is to
continue to focus on customer retention through loyalty programs for the online and brick-and-mortar retailers offering our products
and compelling offer promotions, discounts, and special deals to attract customers and increase conversions. We also intend to reduce
costs through overhead trimming and the use of new selling and marketing methodologies, leverage data analytics to better understand
new trends in consumer preferences for our products, explore new product features and product offerings, and support our new and existing
products with fun and exciting digital marketing and advertising initiatives. We may also explore entering new markets that may offer
more profitable avenues for our products.
We generated net sales of $4,391,000 for the year ended December 31, 2025, compared to $297,000 for the year ended December 31, 2024. The increase in revenue was due primarily to the addition of net sales generated by our SemiCab business resulting from our acquisition of SMCB on May 2, 2025. Cost of sales was $5,706,000 for the year ended December 31, 2025, compared to $491,000 for the year ended December 31, 2024. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB resulting from our acquisition of SMCB on May 2, 2025.
Our operating expenses were $6,629,000 for the year ended December 31, 2025, compared to $8,248,000 for the year ended December 31, 2024. The decrease in operating expenses was due primarily to a decrease of $3,592,000 related to the impairment of goodwill recorded in connection with the acquisition of SemiCab, Inc’s business during the year ended December 31, 2024, partially offset by the increase in general and administrative expenses incurred in the growth and development of the SemiCab business during the year ended December 31, 2025. We incurred a net loss from continuing operations of $15,210,000 for the year ended December 31, 2025, compared to $18,884,000 for the year ended December 31, 2024. The most significant contributors to the decrease in the net loss from continuing operations were decreases in non-cash charges of $3,592,000 for impairment of goodwill and $8,889,000 for loss on the issuance of warrants. This decrease was partially offset by an increase of $6,468,000 for non-cash charges for changes in the fair value of warrants liability and increases in general and administrative expenses incurred in the growth and development of the SemiCab business.
We generated net loss from continuing operations of $15,210,000, or $5.86 per share of common stock, for the year ended December 31, 2025, compared to $18,884,000, or $270.44 per share of common stock, for the year ended December 31, 2024. The decrease was due primarily to an increase of $4,094,000 for net sales and a decrease of $3,592,000 for impairment of goodwill. This was partially offset by an increase of $5,215,000 for cost of sales. We had total assets of $12,724,000 and $18,302,000 at December 31, 2025, and 2024, respectively. Net cash used by operating activities attributable to continuing operations was $7,309,000 for the year ended December 31, 2025, compared to $3,985,000 for the year ended December 31, 2024.
We
generated net sales of $23,494,000 for the year ended December 31, 2024, compared to $29,198,000 for the nine-month transition
period ended December 31, 2023. The decrease was primarily due to decreases in sales to Walmart that resulted from us not
participating in Walmart’s national Black Friday promotion and decreases in sales due to the loss of retail shelf space at
Target. Gross profit decreased $1,409,000 to $4,781,000, or 20.4% of net sales, for the year ended December 31, 2024 compared to
$6,190,000, or 21.2% of net sales, for the nine-month transition period ended December 31, 2023. The decrease was due primarily to
the decrease of $5,704,000 for net sales, partially offset by a corresponding decrease of $4,295,000 for cost of goods sold
associated with less products being manufactured for sale. Our operating expenses increased $6,373,000 to $18,706,000 for the
year ended December 31, 2024 from $12,333,000 for the nine-month transition period ended December 31, 2023, primarily due to an
increase in general and administrative expenses incurred for the growth and development of our SemiCab business, a loss on the
issuance of warrants incurred in connection with our December 2024 public offering of securities, legal and accounting expenses
incurred in connection with the acquisition of SemiCab, Inc.’s business in July 2024 and the capital raising activities that we engaged
in during 2024, and impairment of goodwill recorded in connection with the acquisition of the SemiCab, Inc.’s business. As a result, we
incurred a loss from operations of $13,925,000 during the year ended December 31, 2024. We generated net losses available to common stockholders of $23,257,000, or
$353.87 per share of common stock, for the year ended December 31, 2024, compared to $6,398,000, or $263.04 per share of
common stock, for the nine-month transition period ended December 31, 2023. We had total assets of $18,302,000 and $27,715,000 at
December 31, 2024 and 2023, respectively. Net cash used by operating activities was $8,556,000 for the year ended December 31, 2024
compared to net cash provided by operating activities of $411,000 for the nine- month transition period ended December 31,
2023.
The
most significant contributors to the increase in our net loss available to common stockholders were a one-time, non-cash charge of
$3,592,000 for impairment of goodwill and a one-time, non-cash loss of $8,889,000 on the issuance of warrants.
We
incurred a one-time, non-cash charge of $3,592,000 for impairment of goodwill in connection with our acquisition of SemiCab,
Inc.’s business on July 3, 2024. We tested the recorded amount of goodwill for impairment on December 31, 2024 to see if the
carrying amount of goodwill exceeded its carried value. We calculated a market-based valuation utilizing inputs classified as level
3 on the fair value hierarchy by multiplying one by projected 2025 revenue for the SemiCab, Inc.’s business and determined an
impairment charge of $3,592,000 should be recorded as of December 31, 2024.
We
incurred a one-time, non-cash loss of $8,889,000 in connection with the public offering of securities that we completed on
December 6, 2024. In that offering, we sold Series A warrants and Series B warrants that had certain features and were subject to
certain contingencies that resulted in us having to record a warrant liability of $16,603,000 on our balance sheet and a loss on the
issuance of warrants of $8,889,000 on our income statement. All of the contingencies that the Series A warrants were subject to were
satisfied in January 2025, and of the Class B warrants were exercised in full in January 2025. As a result, we expect that the
warrant liability will be reclassified as equity on our balance sheet for our fiscal quarter ended March 31, 2025.
We expect net sales to increase substantially over the next 12 months as we generate more business through our growing customer base in India and as we begin to generate business in the United States and Europe. We expect costs of sales to increase over the next 12 months in connection with the increase in net sales that we expect to generate from our SemiCab business. We expect operating expenses and net loss available to common stockholders to increase over the next 12 months as we continue to fund the growth and development of our SemiCab business.
We
expect net sales of our Singing Machine karaoke products to decrease over the next 12 months due to the negative impact on our
business of recently implemented tariffs on our products manufactured in China. However, we expect revenue generated from our
SemiCab business to increase over the next 12 months as we generate more business from our growing customer base in the United
States. As a result, total net sales are expected to increase over the next 12 months. We expect gross profit to improve over the
next 12 months as costs of goods sold remain at similar levels, subject to uncertainty surrounding the recently implemented tariffs
on our products manufactured in China, and sales of our higher margin, newer streaming technology karaoke machines increase as a
percentage of total net sales. We expect operating expenses to remain flat, if not decrease, over the next 12 months as we implement
initiatives designed to reduce general and administrative expenses, particularly those related to marketing and advertising
initiatives. The reductions achieved may be partially offset by legal and accounting expenses that we incur as we engage in
additional capital-raising activities as needed to fund our business and expenses that we incur to fund the growth and development
of our SemiCab business. Net loss available to common stockholders is expected to decrease substantially during the next 12 months
primarily due to the fact that we do not expect to incur any non-cash losses in connection with the issuance of warrants requiring
liability classification. We also expect net loss available to common stockholders to decrease due to the aforementioned
improvements in gross profit that we expect to realize and the decreases in general and administrative expenses that we intend to
generate.
Notwithstanding
the foregoing, in the event we complete additional acquisitions of controlling or non-controlling financial interests in other complementary
businesses or companies through mergers, acquisitions, joint ventures or other strategic initiatives, such as the acquisition of the
United States component of our SemiCab business on July 3, 2024,2024 and the acquisition of the India component of our SemiCab business on
May 2, 2025, our financial results will include and reflect the financial results
of the target entities. Accordingly, the completion
of any such transactions in the future may have a substantial beneficial or negative
impact on our business, financial condition and
results of operations.
Revenue Recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is generated from contracts with customers. We recognize revenue when services are performed for the customer in an amount, referred to as the transaction price, that reflects the consideration to which we are expected to be entitled in exchange for those services. We determine revenue recognition utilizing the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract (promised services that are distinct); (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as, we transfer control of the service for each performance obligation.
Our performance obligations are established when a customer submits a purchase order notification and we accept the order. We identify performance obligations as the delivery of the requested service at the location specified in the customer’s contract and/or purchase order. Revenue from sales of services is recognized at the point in time when we transfer control to the customer, typically at the time when the services are performed in full, at which time there are no further performance obligations remaining.
Our contracts with customers consist of one performance obligation, which is the performance of services. Our contracts have no financing elements. Payment terms are generally less than 90 days and have no further contract asset or liability obligations once control of the service is transferred to the customer. Revenue is recorded in the amount of consideration we expect to receive for the sale of the service.
We utilize independent contractors and third-party carriers to perform transportation services in connection with our SemiCab business. In accordance with ASC Topic 606, Revenue Recognition: Principal Agent Considerations, we evaluate the terms of agreements with customers and vendors to determine whether we act as principal or agent in each arrangement.
This assessment focuses on whether control of the transportation service is obtained prior to transferring the service to the customer. Based on this evaluation of the control model, we concluded that it acts as the principal and, accordingly we recognize revenue on a gross basis. In the event we act as an agent, such revenue will be recognized net of the cost of purchased transportation.
All revenue earned from contracts are presented net of discounts, allowances, and applicable taxes
Reserve
for Sales Returns and Returns Asset
While
we have no overstock return privileges in its vendor agreements with its customers, we do accept defective returns, warranty exchanges
and overstock from seasonal customers. We estimate the sales value of goods to be returned from our allowance programs for goods returned
from the customer for various reasons, whereby a reserve for sales returns is recorded based on historic return amounts, specific events
as identified and management estimates. We estimate the net realizable value of these expected future sales returns. The net realizable value of these estimated
returns is classified as return assets as part of current assets on the accompanying consolidated financial statements.
Inventory
Inventory
is comprised primarily of electronic karaoke equipment, microphones, and accessories, and are stated at the lower of cost or net realizable
value, as determined using the first in, first out method. We reduce inventory on hand to its net realizable value on an item-by-item
basis when it is apparent that the expected realizable value of an inventory item falls below its original cost. A charge to cost of
sales results when the estimated net realizable value of specific inventory items declines below cost. Management regularly reviews our
investment in inventories for such declines in value.
We
classify the Series A and B warrants issued in our December 2024 public offering as a liability at its fair value. This liability is
subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value,
value, with the change in fair value recognized in our statement of operations. The fair value of these warrants requires
significate estimates
by management derived from unobservable inputs. Deviations from these estimates could result inhave a significatesignificant differenceaffect toon our financial
results.
In May 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810). This ASU provides that a reporting entity involved in a business combination effected primarily by the exchange of equity interests must consider the factors in Accounting Standards Codification (“ASC”) 805-10-55-12 through 55-15 to determine which entity is the accounting acquirer regardless of whether the legal acquiree is a Variable Interest Entity (“VIE”). The amendments in ASU 2025-03 must be applied prospectively to any business combination that occurs after the initial adoption date. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
In May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which clarifies the guidance in both ASC 718 and ASC 606 on the accounting for share-based payment awards that are granted by an entity as consideration payable to its customer. The ASU is intended to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, the ASU clarifies that the guidance in ASC 606 on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether an award’s grant date has occurred” (as determined under ASC 718). ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326), which provides a practical expedient for measuring expected credit losses on current receivables and contract assets arising under Topic 606, Revenue from Contracts with Customers. The ASU allows entities to assume that the macroeconomic conditions existing at the balance sheet date will remain unchanged over the remaining life of those assets. The amendments are effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
In
November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023- 07, Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures (“ASU 2023-07”). This ASU requires disclosure of significant segment expenses that
are regularly reviewed by the chief operating decision maker and included within each reported measure of segment profit or loss. The
standard also requires disclosure of the composition of other segment items included in the measure of segment profit or loss that are
not separately disclosed. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable
segment. The ASU is effective for our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods,
with early adoption permitted. We adopted ASU
2023-07 effective December 31, 2024 with additional disclosures detailed in the subsequent notes.
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
This ASU is intended to enhance the usefulness of income tax disclosures by requiring entities to disclose specific rate reconciliations,
amount of income taxes separate by federal and individual tax jurisdictions, and the amount of income (loss) from continuing operations
before income tax expense (benefit) disaggregated between federal, state and foreign. ASU 2023-09 is effective for us for our fiscal
year beginning January 1, 2025, with early adoption permitted. We are currently evaluating the impact of adopting this standard
on our consolidated financial statements and related disclosures.
In
November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income—Expense Disaggregation
Disclosures (Subtopic 220-40). This ASU requires disclosure on an annual and interim basis, in the notes to the financial statements,
of disaggregated information about specific categories underlying certain income statement expense line items. The guidance is effective
for annual periods beginning after December 15, 2026, and interim periods with annual reporting periods beginning after December 15,
2027, on a retrospective basis. We are currently evaluating the impact of this standard on our consolidated financial statements and
related disclosures.
In
NovemberAugust 2024,2025, the FASB issued ASU 2024-04,2025-06, DebtIntangibles –— Debt with ConversionGoodwill and Other Options— Internal-Use Software (Subtopic 470-20350-40).
This ASU
clarifies simplifies the requirementsaccounting for determiningcosts whetherincurred certainin settlementsthe development of convertibleinternal-use debtsoftware instrumentsby shouldremoving the concept of multiple
project stages. Under the new guidance, capitalization begins when management authorizes and commits funding to the project and it is
probable that the project will be accountedcompleted forand asthe an
inducedsoftware conversion.placed ASUinto 2024-04service. isThe amendments are effective for annual reporting periods
beginning after December 15, 2025,2027, and interim reporting periods within
those annual reporting periods.years. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. Adoption
can be on a prospective or retrospective basis.permitted. We are currently evaluating the
impact of this standard on our consolidated financial
statements and related disclosures.
In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815). This ASU clarifies the scope of derivative accounting for certain contracts and provides guidance on share-based, non-cash consideration received from a customer under Topic 606. The amendments expand a scope exception for contracts whose underlying is based on an entity’s own operations or activities, reducing the number of arrangements that qualify as derivatives. The ASU also clarifies the accounting for share-based consideration received from a customer. The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those years. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11). The purpose of this ASU is to improve the guidance of Topic 270, Interim Reporting, by providing clarity on the current interim reporting requirements. This amendment also provides additional guidance on what disclosures should be provided in interim reporting periods. The amendments in this ASU also add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the reporting entity. The amendments in this ASU are effective for all public companies for interim reporting periods within annual reporting periods beginning after December 31, 2027. Early adoption is permitted. The amendments in this ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
Comparison
of the YearYears Ended December 31, 20242025 and the Nine-Month Transition Period Ended December 31, 20232024
Net sales consist of sales generated by our SemiCab business. Net sales increased $4,094,000 to $4,391,000 for the year ended December 31, 2025, compared to $297,000 for the year ended December 31, 2024. The increase in net sales was due primarily to the addition of net sales generated by SMCB, which we acquired on May 2, 2025. We expect net sales to increase over the next 12 months as we generate more business through our growing customer base in India and as we begin to generate business in the United States and Europe.
Net
sales consist primarily of sales of our Singing Machine karaoke products. We generated only a minimal amount of sales from our
SemiCab business. Net sales decreased $5,704,000 to $23,494,000 for the year ended December 31, 2024 compared to $29,198,000 for the
nine-month transition period ended December 31, 2023. The decrease in net sales was due primarily to decreases of $7,700,000 in
sales to Walmart that resulted from us not participating in Walmart’s national Black Friday promotion and $1,200,000 in sales
due to the loss of retail shelf space at Target. The decrease of $8,900,000 from those two customers was partially offset by an
increase of $3,196,000 in sales to Costco and other customers. We expect net sales of our Singing Machine karaoke products to decrease over the next 12 months due to the negative impact on our business of recently implemented tariffs on our products
manufactured in China. However, we expect revenue generated from our SemiCab business to increase over the next 12 months as we
generate more business from our growing customer base. As a result, total net sales are expected to increase over the next 12
months.
Cost
of Goods SoldSales
Cost of sales consists primarily of freight, handling and servicing costs that we incur in connection with our SemiCab business. Cost of sales increased $5,215,000 to $5,706,000 for the year ended December 31, 2025, compared to $491,000 for the year ended December 31, 2024. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired on May 2, 2025. We expect costs of sales to increase over the next 12 months in connection with the increase in net sales that we expect to generate from our SemiCab business.
Cost
of goods sold consists primarily of costs for raw materials and the manufacturing of our Singing Machine karaoke products. We
incurred only a minimal amount of costs in connection with our SemiCab business. Cost of goods sold decreased $4,295,000 to
$18,713,000 for the year ended December 31, 2024 compared to $23,008,000 for the nine-month transition period ended December 31,
2023. The decrease in cost of goods sold was due primarily to a decrease of $3,553,000 for product manufacturing costs. Our decrease
in net sales resulted in a corresponding decrease in products manufactured, resulting in lower manufacturing costs. The decrease was
also due to a non-cash inventory impairment charge of $1,827,000 that we recorded during the nine-month transition period ended
December 31, 2023 that negatively impacted our cost of goods sold during the nine-month transition period ended December 31, 2023.
This was partially offset by an increase of $1,663,000 for our inventory reserve. We expect cost of goods sold to remain at similar
levels over the next 12 months, subject to uncertainty surrounding the recently implemented tariffs on our products manufactured in
China.
Gross
Profit
Gross
profit decreased $1,409,000 to $4,781,000, or 20.4% of net sales, for the year ended December 31, 2024 compared to $6,190,000, or 21.2%
of net sales, for the nine-month transition period ended December 31, 2023. The decrease in gross profit was primarily due to a decrease
of $5,704,000 for net sales, partially offset by a decrease of $4,295,000 in cost of goods sold. This decrease was partially offset by
an increase in higher margin sales of newer streaming technology karaoke machines as a percentage of total net sales. We expect gross
profit to improve over the next 12 months as costs of goods sold remain at similar levels, subject to uncertainty surrounding the recently
implemented tariffs on our products manufactured in China, and sales of our higher margin, newer streaming technology karaoke machines
increase as a percentage of total net sales.
Selling
expenses consist primarily of marketing and advertising expenses that we incur in connection with advertising campaigns and online
advertising initiativesactivities that we engage in from time to generatetime salesin ofconnection with our SingingSemiCab
business. MachineSelling karaokeexpenses products.were $4,000 for the year ended December 31, 2025. We did not incur any selling
expenses in connection with our SemiCab business. Selling expenses decreased $843,000 to $2,874,000 for the year ended December 31,
2024 from $3,717,000 for the nine-month transition period ended December 31, 2023. The decrease was primarily due to a decrease of
$666,000 in online marketing and social media advertising campaigns.2024. We expect selling expenses to decreaseincrease substantially over the next 12 months
as we engagebeing into fewer, butdevote more focused,resources
to marketing and advertising initiativesactivities andto as we navigatesupport the negative impact of recently
implemented tariffs on salesgrowth of our karaokeSemiCab products.business in India, the United States and Europe.
General
and administrative expenses consist primarily of payroll expenses, legal and accounting expenses, warehouse expenses and rent
expenseother associatedcorporate with our Singing Machine business, and general and administrative expenses incurred in the development and growth
of our SemiCab business.expenses. General
and administrative expenses increased $3,624,000$1,973,000 to $12,240,000$6,629,000 for the year ended December 31,
2024, 2025, compared to $8,616,000$4,656,000 duringfor the nine-month transition period year
ended December 31, 2023.2024. The increase was due primarily to
increases of $1,903,000 for general and administrativein expenses incurred in connection with the development and growthoperation of our SemiCab business andSemiCab.
$923,000 for warehouse expenses. We expect general and administrative expenses to decreaseincrease over the next 12 months as we implement
actions designedcontinue to reduce general and administrative expenses, particularly those related to marketing and advertising initiatives.
The reductions achieved may be partially offset by legal and accounting expenses that we incurinvest in connection with capital-raising
activities that we engage in as needed to fund our business and expenses that we incur to fund the growth and development
of our
SemiCab business.
Impairment
of goodwill consists of the expense that we incurred from the write down of the goodwill that we recorded in connection with the acquisition
of substantially all of the assets of SemiCab, Inc.’s businessInc. on July 3, 2025.2024. We recorded impairment of goodwill of $3,592,000 for the year ended
December 31, 2024.
We did not record any impairment of goodwill for the nine-month transition periodyear ended December 31, 2023.2025. We do not expect to incur any write
down of goodwill over the next 12 months.
What changed in the latest 10-Q
Risk Factors
Not required for smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six-Month Periods Ended June 30, 2026 and 2025”
New heading “Cost of Goods Sold”
New heading “Operating Expenses”
New heading “Net Loss Attributable to Non-Controlling Interests”
Largest changes
“On November 19, 2024, we filed our Quarterly Report on Form 10-Q for our fiscal quarter ended September 30, 2024 with the SEC. Therein, we reported stockholders’ equity of approximately $2,700,000. That same day we filed a Form 8-K with the SEC stating that we believed we had regained compliance with the stockholders’ equity requirement. On November 22, 2024, we received a letter from the Nasdaq indicating that, based on the Form 10-Q that we filed on November 19, 2024, the Nasdaq had determined that we were in compliance with the stockholders’ equity rule. …”see in full comparison
“On March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We will be subject to a mandatory panel monitor for a period of one year from March 25, 2025. …”see in full comparison
Full comparison: every changed paragraph (44)
Strategy
We
intend to invest in our SemiCab AI logistics and distribution business to develop and grow it into a significant revenue producer for
us. This will involve investments in the continued research and development of our technology, the hiring of additional qualified employees,
marketing and advertising initiatives, and back-office support. While this is a nascent business, it has already acquired several large,
fast-moving consumer products companies as customers. We believe that as existing customers experience the benefits of our SemiCab logistics
and distribution solutions, they will begin to increase their use of our services. We also believe that our ability to improve truck
utilization rates and improve trucking capacity without adding more trucks, drivers or driven miles will be of substantial interest to
additional companies that can benefit from our service.
We
acquired the United States component of our SemiCab business on July 3, 2024 and acquired the India component of our SemiCab business
on May 2, 2025. We may make additional investments in companies operating in the AI distribution and logistics space that we believe
are complementary to our business. Our investments could involve an acquisition of the assets or equity of complementary companies or
businesses or could involve a strategic partnership or joint venture with complementary companies or businesses. We believe that additional
investments could provide us with new AI logistics and distribution technologies, services and resources that we can implement across
our entire business or could help us to more quickly expand our footprint into other parts of the world. We are actively evaluating additional
opportunities to expand our SemiCab business through investments in complementary AI logistics and distribution businesses and companies.
We
generated net sales of $2,400,000 for the three-month period ended
March 31, 2026, compared to $123,000$3,005,000 for the three-month period ended MarchJune 31,30, 2026, compared to $1,152,000 for the three months ended June
30, 2025. The increase in net sales was due primarily to the
addition of net sales generated by our SemiCab business resulting from our
acquisition of SMCB on May 2, 2025. Cost of sales was $3,077,000
for the three months ended March 31, 2026, compared to $129,000$3,598,000 for the three months ended MarchJune 31,30, 2026, compared to $1,492,000 for
the three months ended June 30, 2025. The increase in cost of sales
was due primarily to the addition of freight, handling and servicing
costs incurred by SMCB resulting from our acquisition of SMCB on
May 2, 2025. Our operating expenses were $3,667,000$2,108,000 for the three months
ended June 30, 2026, compared to $868,000 for the three months ended MarchJune 31, 2026, compared to $1,056,000 for the
three months ended March 31,30, 2025. The increase in operating expenses was due primarily
to the increase in general and administrative
expenses incurred in the growth and development of our SemiCab business during the three
months ended MarchJune 31,30, 2026.
We
generated net loss from continuing operations of $5,380,000, or $0.52
per share of common stock,$4,149,000 for the three months ended MarchJune 31,30, 2026, compared to $7,546,000,a or $3.77 per shareloss of common stock,
$1,235,000 for
the three months ended MarchJune 31,30, 2025. The most significant contributors to the decreaseincrease in the net loss from continuing operations was mainly due to
a decrease of $6,468,000 for a non-cash charge for changes in the fair value of warrants liability partially offset by increases in general
and administrative expenses incurred in the growth and development of our SemiCab business.business and the interest expense incurred by us on
the pre-paid purchases under the Streeterville Transaction. We had total assets of $18,455,000$18,568,000 and $12,724,000
at MarchJune 31,30, 2026 and
December 31, 2025, respectively. Net cash used in operating activities attributable to continuing operations was
$3,922,000 $6,592,000 for the three
six months ended MarchJune 31,30, 2026, compared to $2,374,000$3,106,000 for the threesix months ended MarchJune 31,30, 2025.
Outlook
We
expect net sales to increase substantially over the next 12 months as we generate more business through our growing customer base in
India and as we begin to generate business in the United States and Europe. We expect costs of sales to increase over the next 12 months
in connection with the increase in net sales that we expect to generate from our SemiCab business. We expect operating expenses and net
loss available to common stockholders to increase over the next 12 months as we continue to fund the growth and development of our SemiCab
business.
Notwithstanding
the foregoing, in the event we complete additional acquisitions of controlling or non-controlling financial interests in other complementary
businesses or companies through mergers, acquisitions, joint ventures or other strategic initiatives, such as the acquisition of the
United States component of our SemiCab business on July 3, 2024 and the acquisition of the India component of our SemiCab business on
May 2, 2025, our financial results will include and reflect the financial results of the target entities. Accordingly, the completion
of any such transactions in the future may have a substantial beneficial or negative impact on our business, financial condition and
results of operations.
Comparison
of the Three-Month Periods Ended MarchJune 31,30, 2026 and 2025
Net
sales consist of sales generated by our SemiCab business. Net sales increased $2,277,000$1,853,000 to $2,400,000$3,005,000 for the three-month period ended
MarchJune 31,30, 2026, compared to $123,000$1,152,000 for the three-month period ended MarchJune 31,30, 2025. The increase in net sales was due primarily to
the addition of net sales generated by SMCB, which we acquired on May 2, 2025. We expect net sales to increase over the next 12 months
as we generate more business through our growing customer base in India and as we begin to generate business in the United States and
Europe.
Cost
of sales consists primarily of freight, handling and servicing costs that we incur in connection with our SemiCab business. Cost of sales
increased $2,948,000$2,106,000 to $3,077,000$3,598,000 for the three-month period ended MarchJune 31,30, 2026, compared to $129,000$1,492,000 for the three-month period
ended ended
MarchJune 31,30, 2025. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred
by by
SMCB, which we acquired on May 2, 2025. We expect costs of sales to increase over the next 12 months in connection with the increase
in net sales that we expect to generate from our SemiCab business.
Selling
expenses consist primarily of marketing and advertising activities
that we engage in from time to time in connection with our SemiCab
business. Selling expenses were $33,000$49,000 for the three-month period
ended MarchJune 31,30, 2026. We did not incur any selling expenses for the
three-month period ended MarchJune 31,30, 2025. We expect selling expenses
to increase substantially over the next 12 months as we begin to devote more resources to marketing and advertising activities to support
the growth of our SemiCab business in India, the United States and Europe.
General
and administrative expenses consist primarily of compensation
expense, legal and accounting expenses, and other corporate expenses. General
and administrative expenses increased $2,578,000$1,191,000 to $3,634,000
for the three-month period ended March 31, 2026, compared to $1,056,000$2,059,000 for the three-month period ended MarchJune 31,30, 2026, compared to $868,000 for
the three-month period ended June 30, 2025. The increase
was due primarily to increases in expenses incurred in connection with the operation of our SemiCab business and stock-based compensation
expense. We expect general and administrative expenses to decrease over the next 12 months as we incur less stock-based compensation expense.
This decrease will be partially offset by an increase in general and administrative expenses associated with the growth and development
of our SemiCab business.
Other expenses consist primarily of interest expense, including the amortization of deferred debt costs, incurred in connection with our financing transactions, as well as the loss on debt extinguishment related to the exchange of the partitioned pre-paid purchase for the Series A preferred stock. Other expenses increased $1,418,000 to $1,445,000 for the three-month period ended June 30, 2026, compared to $27,000 for the three-month period ended June 30, 2025. The increase was attributable to an increase of $1,018,000 increase in interest expense, including the amortization of deferred debt costs, associated with our recent financing transactions, and a $400,000 loss on debt extinguishment recognized in connection with the exchange of the partitioned pre-paid purchase for the Series A preferred stock during the three-month period ended June 30, 2026.
Other expenses consist primarily of the loss on the change in fair
value of warrants that we incurred in connection with the public offering of securities that we completed on December 6, 2024, and interest
expense that we incurred in connection with other financing transactions that we have completed. Other expenses decreased $5,448,000 to
$1,036,000 for the three-month period ended March 31, 2026, compared to $6,484,000 for the three-month period ended March 31, 2025. The
decrease was due primarily to the loss of $6,468,000 on the change in fair value of warrants that we incurred during the three-month period
ended March 31, 2025 in connection with the public offering of securities that we completed on December 6, 2024, partially offset by an
increase of $1,020,000 related to interest expense, including amortization of deferred debt costs, incurred in connection with financing
transactions that we incurred during the three-month period ended March 31, 2026. We expect other expenses to remain at similar levels
over the next 12 months as we continue to incur interest expense in connection with the financing transactions that we have completed.
SemiCab
Holdings owns our SemiCab business. Net loss attributable to non-controlling interest consists of the loss allocated to SemiCab, Inc.,
which owned a 20% of the outstanding membership interests of SemiCab Holdings until May 2, 2025, and Ajesh Kapoor and Vivek Sehgal, who
collectively owned 20% of the outstanding membership interests of SemiCab Holdings beginning May 2, 2025. The net loss attributable to
non-controlling interest of $274,000$320,000 for the three-month period ended MarchJune 31,30, 2026 represents the amount of loss incurred by SemiCab
Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings. The
net loss attributable to non-controlling interest of $103,000$224,000 for the three-month period ended MarchJune 31,30, 2025 represents the amount of
loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. between January 1, 2025 and MarchMay 31,2, 2025.2025, We expect net loss
attributableand to non-controllingAjesh interestKapoor toand
Vivek increaseSehgal overbetween theMay next2, 12 months as we continue to invest in the development2025 and growthJune of
our30, SemiCab business.2025.
Comparison of the Six-Month Periods Ended June 30, 2026 and 2025
Net Sales
Net sales increased $4,130,000 to $5,405,000 for the six-month period ended June 30, 2026, compared to $1,275,000 for the six-month period ended June 30, 2025. The increase in net sales was due primarily to the addition of net sales generated by SMCB, which we acquired on May 2, 2025
Cost of Goods Sold
Cost of sales increased $5,054,000 to $6,675,000 for the six-month period ended June 30, 2026, compared to $1,621,000 for the six-month period ended June 30, 2025. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired on May 2, 2025.
Operating Expenses
Selling Expenses
Selling expenses were $82,000 for the six-month period ended June 30, 2026. We did not incur any selling expenses for the six-month period ended June 30, 2025.
General and Administrative Expenses
General and administrative expenses increased $3,769,000 to $5,693,000 for the six-month period ended June 30, 2026, compared to $1,924,000 for the six-month period ended June 30, 2025. The increase was due primarily to increases in expenses incurred in connection with the operation of our SemiCab business and stock-based compensation expense.
Other Expenses
Other expenses decreased $4,030,000 to $2,481,000 for the six-month period ended June 30, 2026, compared to $6,511,000 for the six-month period ended June 30, 2025. The decrease was due primarily to the loss of $6,468,000 on the change in fair value of warrants that we incurred during the six-month period ended June 30, 2025 in connection with the public offering of securities that we completed on December 6, 2024, partially offset by the interest expense, including the amortization of deferred debt cost, associated with our recent financing transactions.
Net Loss Attributable to Non-Controlling Interests
The net loss attributable to non-controlling interest of $594,000 for the six-month period ended June 30, 2026 represents the amount of loss incurred by SemiCab Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings. The net loss attributable to non-controlling interest of $327,000 for the six-month period ended June 30, 2025 represents the amount of loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. between January 1, 2025 and May 2, 2025, and to Ajesh Kapoor and Vivek Sehgal between May 2, 2025 and June 30, 2025.
Since
our inception, we have funded our operations primarily through cash generated by our operations, private sales of equity securities and
the use of short- and long-term debt. As of MarchJune 31,30, 2026, our cash and restricted cash balance was $10,939,000.$7,955,000.
Net
cash used in operating activities attributable to continuing operations
was $3,922,000$6,592,000 during the three-monthsix-month period ended MarchJune 31,30, 2026,
compared to $2,374,000$3,106,000 during the three-monthsix-month period ended MarchJune 31,
30, 2025. The increase of $1,548,000$3,486,000 was due primarily to a decreasedecreases of
$6,468,000 for loss on the change in fair value of warrants thatrecognized we incurred
in connection with the public offering of securities that we completed
on December 6, 2024, and $2,550,000 for prepaid expenses and other current assets. These decreases were partially offset by aincreases
of decrease$1,482,000 for the amortization of $2,166,000
fordebt net lossdiscount and anissuance increasecosts ofand $1,655,000$2,754,000 for accounts payable and accrued expenses.
Net
cash used in investing activities attributable to continuing operations
was $128,000$267,000 during the three-monthsix-month period ended MarchJune 31,30, 2026,
compared to $672,000$1,344,000 during the three-monthsix-month period ended MarchJune 31,30, 2025.
The decrease of $544,000$1,077,000 was due primarily to a decreasedecreases of $672,000
$1,172,000 for advances to SMCB under our loan agreement with them,them and $758,000 for repurchases of shares of our common stock, partially
offset by a decrease of $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025 and an increase of $114,000 $248,000
for the capitalization of internal use software costs.costs Net
cash provided by financing activities attributable to continuing operations was $8,668,000 for the six-month period ended June 30, 2026,
compared to $379,000 during the six-month period ended June 30, 2025. The increase of $8,289,000 was due primarily to net proceeds of
$9,020,000 that we received from Streeterville under the Fourth Pre-Paid Purchase.
Net cash provided by financing activities attributable to continuing
operations was $8,843,000 for the three-month period ended March 31, 2026. We did not have any cash flows from financing activities attributable
to continuing operations during the three-month period ended March 31, 2025. The increase of $8,843,000 was due primarily to net proceeds
of $9,020,000 that we received from Streeterville under the Fourth Pre-Paid Purchase.
On
August 26, 2024, we received a letter from the Nasdaq advising us that we did not meet the minimum $1.00 per share bid price requirement
for continued inclusion on the Nasdaq pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2). To demonstrate compliance with this requirement,
the closing bid price of our common stock needed to be at least $1.00 per share for a minimum of 10 consecutive business days before
February 24, 2025.
On
August 26, 2024, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2024, did not satisfy the continued listing requirement under Nasdaq Listing
Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000. We reported a stockholders’
deficit of approximately $872,000 on June 30, 2024 in that quarterly report. Pursuant to the listing rule and instructions from Nasdaq,
we submitted a plan to regain compliance with the listing rule and were given an extension until November 14, 2024 to evidence compliance
through a public filing.
On
November 19, 2024, we filed our Quarterly Report on Form 10-Q for our fiscal quarter ended September 30, 2024 with the SEC. Therein,
we reported stockholders’ equity of approximately $2,700,000. That same day we filed a Form 8-K with the SEC stating that we believed
we had regained compliance with the stockholders’ equity requirement. On November 22, 2024, we received a letter from the Nasdaq
indicating that, based on the Form 10-Q that we filed on November 19, 2024, the Nasdaq had determined that we were in compliance with
the stockholders’ equity rule. The Nasdaq advised us that it would continue to monitor our ongoing compliance with the stockholders’
equity requirement and, if at the time of our next periodic report, we fail to comply with the requirement, we may be subject to delisting.
On December 30, 2024, we received notice from the Nasdaq indicating that the bid price for our common stock had closed below $0.10 per share for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and our securities would be subject to delisting from Nasdaq unless we timely request a hearing before the Nasdaq hearings panel. On February 10, 2025, we implemented a 200-for-1 reverse stock split. On that day, the closing price of our common stock was $2.98 per share and the closing bid of our common stock remained above $1.00 for the next 10 consecutive business days. On March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2).
On
March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of
$1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We will be subject to a mandatory
panel monitor for a period of one year from March 25, 2025. If, within that one-year monitoring period, the Nasdaq finds that we are
again out of compliance with the minimum bid price requirement, notwithstanding Nasdaq Listing Rule 5810(c)(2), then the Nasdaq will
issue a delist determination letter and we will have an opportunity to request a new hearing with the initial Nasdaq hearing panel or
a newly convened hearing panel if the initial panel is unavailable.
On May 14, 2026, we filed our Quarterly Report on Form 10-Q for the period ended March 31, 2026 wherein we reported stockholders’ equity of $3,168,000. On May 21, 2026, we filed a Form 8-K where we stated that, as a result of the $3,168,000 of stockholders’ equity that we reported in that quarterly report, we believe that we had regained compliance with Nasdaq Listing Rule 5550(b)(1) for continued listing on the Nasdaq. On May 26, 2026, we received a letter from the Nasdaq notifying us that, based on our Form 8-K, dated May 21, 2026, the Nasdaq had determined that we complied with Nasdaq Listing Rule 5550(b)(1).
On June 16, 2026, we received a letter from the Nasdaq notifying us that, based upon the closing bid price of our common stock for the 30 consecutive business days from May 4, 2026 to June 15, 2026, we did not meet the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. The letter stated that we have a compliance period of 180 calendar days, or until December 14, 2026, to regain compliance with the minimum bid price requirement. If at any time during this compliance period the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Nasdaq will provide us with written confirmation of compliance and the matter will be closed. The Nasdaq also stated that it may, in its discretion, require us to satisfy the minimum bid price requirement for a period in excess of 10 consecutive business days before determining that we have demonstrated an ability to maintain long-term compliance.
We intend to actively monitor the closing bid price of our common stock and consider available options to regain compliance with the minimum bid price requirement, including such actions as effecting a reverse stock split of our common stock.
In
this Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2026, we reported stockholders’ equity of approximately
$3,168,000. We intend to file a Form 8-K with the SEC stating that we believe we have regained compliance with the stockholders’
equity requirement.
As
of MarchJune 31,30, 2026, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred
to as structured finance or special purpose entities, that had been established for the purpose of facilitating off-balance sheet arrangements
or for other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such relationships.
RIME insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (2 insiders, 1 trade date, 8,196,700 shares, about $0) and open-market sales in 0 filings. Net open-market shares: 8,196,700 (purchases minus sales); net value about $0.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-15 | Azure Energy, Llc |
Open-market purchase | 4,076,312 | — | — |
| 2026-09-15 | Azure Energy, Llc |
Open-market purchase | 22,038 | — | — |
| 2026-09-15 | Thompson Andrew Little |
Grant/award | 2,119,542 | — | — |
| 2026-09-15 | Thompson Andrew Little |
Open-market purchase | 4,076,312 | — | — |
| 2026-09-15 | Thompson Andrew Little |
Open-market purchase | 22,038 | — | — |
| 2026-09-15 | Smith Ryan Jay |
Grant/award | 2,119,542 | — | — |
| 2026-05-11 | Andre Alex |
Disposition to issuer | 23,818 | — | — |
Well-known investors holding RIME (13F)
None of the 59 investors we track reported a position in their latest 13F.