[10-Q] Algorhythm Holdings, Inc. Quarterly Earnings Report
Algorhythm Holdings, Inc. (RIME) is now a pure-play AI logistics company but remains under severe financial pressure. The company sold its legacy Singing Machine karaoke business on August 1, 2025 for $500,000, which is reported as a discontinued operation, and now operates solely through its SemiCab AI-enabled logistics platform.
From continuing operations, net sales for the nine months ended September 30, 2025 rose to $3,018,000 from $127,000 a year earlier, yet the business still generated a gross loss of $698,000 and a loss from continuing operations of $10,713,000. Including discontinued operations, net loss was $13,085,000 versus $7,513,000 in the prior-year period.
Cash declined to $2,839,000 at September 30, 2025 from $7,233,000 at December 31, 2024, and management states there is substantial doubt about the company’s ability to continue as a going concern without additional financing. To fund operations, Algorhythm entered into multiple high-cost debt and structured equity arrangements, including a secured prepaid share purchase with Streeterville Capital and several short-term notes. Shares outstanding were 2,721,778 as of November 17, 2025 after a 1-for-200 reverse stock split and warrant-driven share issuances.
- Strategic pivot and revenue growth: Sale of the legacy Singing Machine business for $500,000 focuses Algorhythm on its SemiCab AI logistics platform, with continuing-operations revenue rising to $3,018,000 for the nine months ended September 30, 2025 from $127,000 a year earlier.
- Balance sheet clean-up of warrant liability: Shareholder approval and subsequent actions around Series A and B warrants eliminated a $16,603,000 warrant liability and restored shareholders’ equity from a $10,521,000 deficit at December 31, 2024 to a slightly positive $100,000 at September 30, 2025.
- Going concern warning and limited cash: With cash of $2,839,000 at September 30, 2025, recurring operating losses and declining working capital, management states there is substantial doubt about Algorhythm’s ability to continue as a going concern without new financing.
- Large continuing losses: Loss from continuing operations was $10,713,000 and total net loss was $13,085,000 for the nine months ended September 30, 2025, widening from a $7,513,000 net loss a year earlier despite higher revenue.
- High-cost and complex financing: The company relies on structured debt and equity, including a $4,390,000 secured prepaid share purchase with Streeterville at 9% interest and multiple short-term notes with original issue discounts and high effective rates, which increase refinancing and dilution risks.
- Customer and legal concentration risks: A majority of revenue and 56% of accounts receivable as of September 30, 2025 are tied to a small number of Indian customers, and a $506,000 liability related to a Blue Yonder judgment remains outstanding amid ongoing litigation.
Insights
Algorhythm shows fast revenue growth but deep losses, heavy financing and a going concern warning.
Algorhythm has pivoted into an AI-enabled logistics software model, exiting its legacy Singing Machine consumer business for
Liquidity is tight: cash fell to
The capital structure also shifted through derivative warrants: a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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As of November 17, 2025, there were shares of the issuer’s common stock, $ par value per share, outstanding.
ALGORHYTHM HOLDINGS, INC.
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | 2 | |
| Item 1. | Financial Statements | 2 |
Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024 |
2 | |
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 (Unaudited) | 3 | |
| Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024 (Unaudited) | 4 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (Unaudited) | 5 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 6 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 37 |
| Item 4. | Controls and Procedures | 37 |
| PART II – OTHER INFORMATION | 38 | |
| Item 1. | Legal Proceedings | 38 |
| Item 1A. | Risk Factors | 38 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38 |
| Item 3. | Defaults Upon Senior Securities | 38 |
| Item 4. | Mine Safety Disclosures | 38 |
| Item 5. | Other Information | 38 |
| Item 6. | Exhibits | 39 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2025 | December 31, 2024 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowances of $ | ||||||||
| Accounts receivable, related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Refund due to customer | ||||||||
| Warrant liability | ||||||||
| Promissory notes payable, net | ||||||||
| Current portion of notes payable to related parties | ||||||||
| Other current liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Notes payable to related parties, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding at September 30, 2025 and December 31, 2024 | ||||||||
| Common stock, $ par value; and shares authorized; | ||||||||
| and shares issued and outstanding at September 30, 2025 and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Treasury stock, and shares reserved at September 30, 2025 and December 31, 2024 | ( | ) | ||||||
| Total Shareholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Shareholders’ Equity (Deficit) | $ | $ | ||||||
See notes to the condensed consolidated financial statements
| 2 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating Expenses | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Expenses | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss From Continuing Operations Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax loss attributable to continuing operations | ( | ) | ( | ) | ||||||||||||
| Net Loss From Continuing Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net gain (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss attributable to non-controlling interest | ||||||||||||||||
| Net Income (Loss) Available to Common Shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Income (Loss) Per Common Share | ||||||||||||||||
| Basic and diluted from continuing operations | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted from discontinued operations | ) | ) | ) | |||||||||||||
| Basic and diluted | ) | ) | ) | |||||||||||||
| Weighted Average Common and Common Equivalent Shares: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
See notes to the condensed consolidated financial statements
| 3 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
For the Three Months Ended September 30, 2025 and 2024 (Unaudited)
| Common Stock | Additional Paid-in | Non- Controlling | Treasury | Accumulated | ||||||||||||||||||||||||
| Shares | Amount | Capital | Interest | Stock | Deficit | Total | ||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Common stock issued as commitment fee to investor | ||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net (loss) income | - | ( | ) | |||||||||||||||||||||||||
| Sale of common stock, net of offering costs | ||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Common stock issued for acquisition of SemiCab assets | ||||||||||||||||||||||||||||
| Issuance of subsidiary stock to non-controlling interest | - | |||||||||||||||||||||||||||
| Other | - | ( | ) | |||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
For the Nine Months Ended September 30, 2025 and 2024 (Unaudited)
| Common Stock | Additional Paid-in | Non- Controlling | Treasury | Accumulated | ||||||||||||||||||||||||
| Shares | Amount | Capital | Interest | Stock | Deficit | Total | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Exercise of Series B warrants | ||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Reclassification of Series A warrants to equity | - | |||||||||||||||||||||||||||
| Common stock issued for acquisition of SMCB | ||||||||||||||||||||||||||||
| Repurchase of common stock from related parties | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock issued as commitment fee to investor | ||||||||||||||||||||||||||||
| Common stock issued for services | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Sale of common stock, net of offering costs | ||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Common stock issued for acquisition of SemiCab assets | ||||||||||||||||||||||||||||
| Issuance of subsidiary stock to non-controlling interest | - | |||||||||||||||||||||||||||
| Other | - | ( | ) | |||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
See notes to the condensed consolidated financial statements
| 4 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
September 30, 2025 | September 30, 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Reduction in SMCB loan in exchange for services | ||||||||
| Gain on allowance for credit loss | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Stock-based compensation | ||||||||
| Payment of early termination fee on operating lease termination settlement | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Accounts receivable, related party | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other non-current assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| Refunds due to customers | ||||||||
| Other liabilities | ||||||||
| Net cash used in operating activities attributable to continuing operations | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Capitalization of internal use software costs | ( | ) | ||||||
| Repurchase of shares of common stock | ( | ) | ||||||
| Cash received from acquisition of SemiCab assets | ||||||||
| Cash received from acquisition of SMCB | ||||||||
| Advances to SMCB | ( | ) | ||||||
| Net cash provided by (used in) investing activities attributable to continuing operations | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of promissory notes, net | ||||||||
| Payment of promissory notes | ( | ) | ||||||
| Proceeds from sale of stock, net of offering costs | ||||||||
| Payments on merchant cash advances payable | ( | ) | ||||||
| Other | ( | ) | ||||||
| Net cash provided by financing activities attributable to continuing operations | ||||||||
| Net cash provided by (used in) operating activities attributable to discontinued operations | ( | ) | ||||||
| Net cash provided by (used in) investing activities attributable to discontinued operations | ( | ) | ||||||
| Net cash used in financing activities attributable to discontinued operations | ( | ) | ||||||
| Total cash provided by (used in) discontinued operations | ( | ) | ||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | 2,839,000 | $ | - | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-Cash investing and financing cash flow information: | ||||||||
| Reclassification of Series A warrants to equity | $ | $ | ||||||
| Common stock issued for exercise of Series B warrants | $ | $ | ||||||
| Common stock issued for acquisition of SMCB | $ | $ | ||||||
| Promissory note issued for acquisition of SMCB | $ | $ | ||||||
| Common stock issued for services | $ | $ | ||||||
| Common stock issued as commitment fee to investor | $ | $ | ||||||
| Common stock issued for acquisition of SemiCab assets | $ | $ | ||||||
See notes to the condensed consolidated financial statements
| 5 |
Note 1 – Nature of Business
Algorhythm Holdings, Inc. (f/k/a The Singing Machine Company, Inc.) (the “Company”) is an artificial intelligence (“AI”) technology holding company that currently has one business unit, which is SemiCab. SemiCab is an AI-enabled software logistics and distribution business operated through the Company’s subsidiary, SemiCab Holdings, LLC. Prior to August 1, 2025, the Company had a second business unit, which was Singing Machine. Singing Machine was a home karaoke consumer products business that designed and distributed karaoke products globally to retailers and ecommerce partners through the Company’s subsidiary, The Singing Machine Company, Inc. The Company sold its Singing Machine business on August 1, 2025. Accordingly, the Company no longer owns or operates the Singing Machine business line.
The Company’s operations
include its
Effective September 5, 2024, the Company’s Certificate of Incorporation was amended to change the name of the Company from “The Singing Machine Company, Inc.” to “Algorhythm Holdings, Inc.”
On
January 13, 2025,
Note 2 – Sale of Singing Machine Business
On
August 1, 2025, the
| 6 |
The Company determined that the sale of the Singing Machine business met the criteria under Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a discontinued operation as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial results. Accordingly, the Company accounted for the Singing Machine business as a discontinued operation in this Quarterly Report on Form 10-Q. All amounts and disclosures for all periods presented reflect only the continuing operations of the Company unless otherwise noted. Additional information is presented in Note 19 – Discontinued Operations.
Note 3 – Liquidity, Going Concern and Management Plans
Going Concern Analysis
As
of September 30, 2025, the Company’s cash balance was $
The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern and that the realization of assets and satisfaction of liabilities and commitments will continue in the ordinary course of business.
The Company plans to finance its operations by obtaining additional capital through external sources of financing. It may attempt to obtain additional capital through the sale of equity securities or the issuance of debt securities. The Company has not made any arrangements to obtain additional capital and can provide no assurance that additional financing will be available in an amount or on terms acceptable to the Company, if at all.
In making this assessment, management performed a comprehensive analysis of the Company’s current circumstances, including its financial position, cash flow forecasts, and obligations and debts. Although management has a recent history of successful capital raises, the analysis used to determine the Company’s ability to continue as a going concern does not include cash resources outside the Company’s direct control that management expects to be available within the next 12 months.
Note 4 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and disclosures required by US GAAP for complete consolidated financial statements.
| 7 |
In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed consolidated financial position and the condensed consolidated results of operations. The condensed consolidated results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of September 30, 2025 and condensed financial statement information for the three and nine months ended September 30, 2025 and 2024 are unaudited, whereas the condensed consolidated balance sheet as of December 31, 2024 is derived from the audited consolidated balance sheet as of that date. The condensed consolidated financial statements and notes hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2024. There have been no changes to the Company’s significant accounting policies as disclosed on the Company’s annual report on Form 10-K for the year ended December 31, 2024.
Segment Reporting
Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting (“ASC 280”), the Company’s Chief Executive Officer serves as the Company’s Chief Operating Decision Maker (“CODM”).
Prior to August 1, 2025,
the CODM determined that the Company operated in
The CODM evaluates and manages the Company’s operations using net loss as the primary measure to allocate resources, make operating decisions, and assess financial performance. In addition, the CODM considers non-financial information and other qualitative factors when evaluating performance, establishing compensation, monitoring budget-to-actual results, and making capital allocation decisions.
Additional information is presented in Note 15 – Segment Information and Revenue Disaggregation.
Recent Accounting Pronouncements
In May 2025, the FASB issued 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 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. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
| 8 |
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. The Company is currently evaluating the impact of this standard on its 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. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In August 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40). This ASU simplifies the accounting for costs incurred in the development of internal-use software by removing 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 completed and the software placed into service. The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its 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. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
| 9 |
Note 5 – Variable Interest Entities
The Company determined that SMCB was a VIE because the Company provided financial support to SMCB in the form of a loan agreement to fund SMCB’s operations. The Company further determined that it was not the primary beneficiary of SMCB because the Company did not have the power to direct or control’s significant activities related to its business. Accordingly, the Company did not consolidate SMCB’s results of operations and financial position in its condensed consolidated financial statements prior to May 2, 2025.
On
May 2, 2025, SemiCab Holdings acquired
Note 6 – Property and Equipment, Intangible Assets and Goodwill
A summary of the Company’s property and equipment at September 30, 2025 and December 31, 2024 is as follows:
| Useful | September 30, | December 31, | ||||||||
| Life | 2025 | 2024 | ||||||||
| Computer and office equipment | $ | $ | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Depreciation
expense was $
A summary of the Company’s intangible assets at September 30, 2025 and December 31, 2024 is as follows:
| Useful | September 30, | December 31, | ||||||||
| Life | 2025 | 2024 | ||||||||
| Customer relationships | $ | $ | ||||||||
| Trade name | ||||||||||
| Developed technology | ||||||||||
| Internal use software | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Amortization
expense was $
| 10 |
During
the three and nine months ended September 30, 2025, the Company capitalized costs related to the development of internal-use software
in accordance with ASC 350-40, Intangibles — Goodwill and Other — Internal-Use Software. Capitalized costs primarily
consist of personnel and third-party fees incurred during the application development stage for software that support the Company’s
Software as a Service (“SaaS”) operations. Costs incurred during the preliminary project and post-implementation stages are
expensed as incurred. The capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which
is
On
September 30, 2025, the Company tested the amount of goodwill that it recorded in connection with the acquisition of SemiCab, Inc.’s
business on July 3, 2024 for impairment to see if the carrying amount of goodwill exceeded its carried value. The Company 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 business. The Company determined that
On
May 2, 2025, SemiCab Holdings acquired
Note 7 – Notes Payable to Related Parties
SemiCab Holdings assumed
several unsecured loans from Ajesh Kapoor and Vivek Sehgal in the acquisition of SemiCab, Inc.’s business. The Company incurred
interest expense on these loans of $
The terms of each loan are summarized in the table below:
| Issue | Maturity | Interest | ||||||||||||
| Note Holder | Date | Date | Status | Rate | Principal | |||||||||
| Ajesh Kapoor | 7/10/2021 | Current | % | $ | ||||||||||
| Ajesh Kapoor | 8/27/2021 | Current | % | |||||||||||
| Vivek Sehgal | 4/17/2023 | Current | % | |||||||||||
| Ajesh Kapoor | 5/5/2023 | Current | % | |||||||||||
| Ajesh Kapoor | 5/17/2023 | Current | % | |||||||||||
| Balance as of September 30, 2025 | $ | |||||||||||||
| Less: current portion of notes payable to related parties | ||||||||||||||
| Notes payable to related parties, net of current portion | $ | |||||||||||||
As of December 31, 2024, the loans described above that were issued between April 17, 2023 and May 17, 2023 were in default. Subsequent to December 31, 2024, the Company entered into waivers and amendments with each of the note holders who are parties to those loans to extend the maturity dates of the loans to February 1, 2026. Additional information about these loans is presented in Note 20 – Subsequent Events.
| 11 |
On
February 18, 2025, the Company issued a promissory note to each of Stingray Group and Regalia Ventures in the amount of $
On
May 2, 2025, the Company and SemiCab Holdings acquired
Note 8 – Credit Facilities and Other Financing Arrangements
Oxford Credit Facility
On
March 28, 2024, the Company entered into a loan agreement and related revolving credit note with Oxford Commercial Finance (“Oxford”).
The agreement was for a two-year term and established a secured asset-backed revolving credit facility that was comprised of a maximum
$
On
October 17, 2024, the Company terminated the loan agreement and note and paid Oxford a termination fee of $
Agile Capital Merchant Cash Advance
In
connection with the acquisition of SemiCab, Inc.’s business, the Company assumed a merchant cash advance that was payable to Agile
Capital Funding, LLC that had been incurred under a financing agreement that SemiCab, Inc. had entered into on March 22, 2024. The initial
amount borrowed was $
Cedar Advance Merchant Cash Advance
In
connection with the acquisition of SemiCab, Inc.’s business, the Company assumed a merchant cash advance that was payable to Cedar
Advance, LLC that had been incurred under a financing agreement that SemiCab, Inc. had entered into on May 8, 2024. The initial amount
borrowed was $
| 12 |
Note 9 – Commitments and Contingencies
The Company is subject to claims, suits and other proceedings from time to time in the ordinary course of business that could result in fines, civil penalties, or other adverse consequences. In accordance with the provisions of ASC Topic 450, Contingencies, the Company records a liability when it believes that it is probable that a loss has been incurred and the amount can be reasonably estimated. If the Company determines that it is probable that a loss has been incurred and the loss or range of loss can be estimated, the Company discloses the estimated amount of the loss. The Company evaluates developments in its legal matters that could affect the amount of liability that has been previously accrued and makes adjustments as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters.
Efficient Capital Labs Settlement Agreement
On
May 18, 2023, SemiCab, Inc. entered into an installment business loan agreement with Efficient Capital Labs, Inc. (“ECL”)
pursuant to which SemiCab, Inc. borrowed the principal amount of $
On
May 18, 2024, SemiCab, Inc. entered into a settlement agreement with ECL pursuant to which SemiCab, Inc. agreed to pay ECL $
In
connection with the acquisition of SemiCab, Inc.’s business, the Company assumed this settlement liability. The final payment of
the settlement was made during the nine months ended September 30, 2025. Accordingly, there was unpaid balance at September 30, 2025.
As of December 31, 2024, the remaining unpaid balance of the settlement was $
Derivative Litigation
On December 21, 2023, Ault Lending, LLC (“Ault Lending”), a wholly-owned subsidiary of Ault Alliance, Inc., a former shareholder of the Company, filed a derivative shareholder action in Delaware Chancery Court against the Company, its board of directors, Stingray Group, LLC (“Stingray Group”) and Regalia Ventures, LLC (“Regalia Ventures”) for alleged breach of fiduciary duty in approving a recent above-market private placement equity transaction. The complaint alleged that the Company and its board of directors followed an inadequate process in evaluating the private placement transaction that the Company completed in November 2023 and that the Company and its board of directors entered into the transaction with an intent to dilute Ault’s ownership stake in the Company. Ault Lending was seeking the following relief from the court: (i) declarations that the defendant directors breached their fiduciary duties; and that Stingray Group and Regalia Ventures aided and abetted those breaches; (ii) rescission of the Company’s sale of shares to Stingray Group and Regalia Ventures; and (iii) damages and attorney’s fees. On April 30, 2025, Ault Lending filed a motion with the court requesting that the claims be dismissed without prejudice and on that same date, the court approved the dismissal of the claims without prejudice.
| 13 |
OAC Flatiron & OAC Adelphi Litigation
On
August 23, 2023, MICS NY entered into an Agreement of Lease (the “Lease Agreement”) with OAC 111 Flatiron, LLC and OAC Adelphi,
LLC (the “Landlord”), pursuant to which MICS NY agreed to lease approximately
During
the year ended December 31, 2024, the Company abandoned its plans to continue use of the leased space and exercised its early termination
provision of the Lease Agreement which was not accepted by the Landlord. Due to the abandonment of the lease, all assets related to the
lease were impaired. Assets including security deposits, rent deposits and right of use assets of approximately $
On July 26, 2024, the Landlord filed a civil action in the Supreme Court of the State of New York against MICS NY and the Company (the “Defendants”) for alleged breach of lease, seeking monetary damages including unpaid rent, future unpaid rent, and other expenses related to the lease. The complaint alleged the Defendants breached the lease in various material respects.
On
September 25, 2024, the Company entered into a settlement agreement for a full release and dismissal of the complaint within five business
days of the Company’s payment of $
Blue Yonder Liability
Pursuant
to the asset purchase agreement with SemiCab, Inc., the Company assumed a judgement against SemiCab, Inc. regarding damages resulting
from contract breach for IT subscription-based services. On March 28, 2020, SemiCab, Inc. entered into a service contract and agreement
with Blue Yonder, Inc. (“Blue Yonder”) for certain IT subscription-based services. The original term of the agreement was
for three years, at a price of $
On
June 21, 2023, Blue Yonder filed a lawsuit claiming damages in the amount of $
| 14 |
On
February 11, 2025, Blue Yonder filed a civil action in the Superior Court of the State of Arizona against the Company for breach of contract
and to enforce a stipulated judgment entered against SemiCab, Inc. in connection with the liabilities related to Blue Yonder that the
Company assumed when it acquired SemiCab, Inc.’s business. Blue Yonder alleges that, because the Company assumed these liabilities,
Blue Yonder can enforce the judgment against the Company. The judgement was in the amount of $
Note 10 – Stock Compensation Expense
Equity Incentive Plan
On April 12, 2022, the Company’s board of directors approved The Singing Machine Company, Inc. 2022 Equity Incentive Plan. The equity plan provides for the issuance of equity incentive awards, such as stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance awards and other stock or cash-based awards to the Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.
As of September 30, 2025, there were shares of common stock authorized for issuance under the plan. Of this amount, awards representing shares of common stock had been granted under the plan and shares remained available for issuance under the plan. The Company did not issue any share-based awards under the plan during the nine months ended September 30, 2025 and 2024, and no shares were forfeited during the three and nine months ended September 30, 2025.
As of September 30, 2025, there was an unrecognized expense of $ remaining on stock options currently vesting over time with an approximate weighted average of three years and eight months remaining until the options would be fully vested. The vested options outstanding as of September 30, 2025, had no intrinsic value.
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Net income (loss) available to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted weighted average of common stock outstanding | ||||||||||||||||
| Income (loss) per common share | ) | ) | ) | |||||||||||||
| 15 |
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Effect of dilutive stock options and warrants | ||||||||||||||||
| Diluted weighted average of common shares outstanding | ||||||||||||||||
Basic net income (loss) per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share reflects the potential dilution assuming shares of common stock underlying in-the-money options and warrants have been issued upon the exercise of the options and warrants and the proceeds thereof were used to purchase shares of the Company’s common stock at the average market price during the period using the treasury stock method.
For the three and nine months ended September 30, 2025, of common stock underlying stock options, respectively, and shares of common stock underlying warrants were excluded from the calculation of diluted net income (loss) per share as the result would have been anti-dilutive. For the three and nine months ended September 30, 2024, shares of common stock underlying stock options and shares of common stock underlying warrants were excluded from the calculation of diluted net income (loss) per share as the result would have been anti-dilutive.
Note 12 – Securities Transactions
Regalia Ventures Stock Repurchase Transaction
On
November 1, 2024, the Company entered into a stock repurchase agreement with Regalia Ventures pursuant to which the Company agreed to
repurchase the shares from Regalia Ventures at a price per share equal to the higher of: (i) the closing price of the common stock
on the last trading day immediately preceding the date of the repurchase agreement; or (ii) the highest volume weighted average price
(“VWAP”) of the common stock during a pricing period of 10 consecutive trading days prior to the date of the repurchase agreement. The
shares of common stock to be repurchased were originally issued to Regalia Ventures on November 21, 2023, pursuant to a certain stock
purchase agreement dated November 20, 2023. The Company recorded an accrued liability in the amount of the repurchase price, which was
$
On
February 18, 2025, the date of the closing of the transaction, the Company issued a promissory note to Regalia Ventures in the amount
of $
| 16 |
Stingray Group Stock Repurchase Transaction
On
December 3, 2024, the Company entered into a stock repurchase agreement with Stingray Group
pursuant to which the Company agreed to repurchase the shares from Stingray Group at a price per share equal to the higher of:
(i) the closing price of the common stock on the last trading day immediately preceding the date of the repurchase agreement; or (ii)
the highest VWAP of the common stock during a pricing period of 10 consecutive trading days prior to the date of the repurchase agreement.
The shares of common stock to be repurchased were originally issued to the Stingray Group on November 21, 2023, pursuant to a certain
stock purchase agreement dated November 20, 2023. The Company recorded an accrued liability in the amount of the repurchase price, which
was $
On
February 18, 2025, the date of the closing of the transaction, the Company issued a promissory note to Stingray Group in the amount of
$
December 2024 Public Offering
On
December 4, 2024, the Company entered into a securities purchase agreement in connection with a public offering of an aggregate of
shares of its common stock, pre-funded warrants to purchase up to shares of common stock, Series A warrants to purchase up to
shares of common stock, and Series B warrants to purchase up to shares of common stock. Each share of common stock, or
a pre-funded warrant in lieu thereof, was sold together with the accompanying warrants to purchase one share of common stock. The Company
received aggregate gross proceeds upon the closing of the offering of approximately $
The
Series A and B warrants were exercisable only upon receipt
of such shareholder approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market, LLC (the “Nasdaq”)
to permit the exercise of the Series A and B warrants. The Series A and B warrants include an exercise
price adjustment feature upon shareholder approval, whereby the exercise price will adjust to the greater of the lowest daily volume
weighted average price during the reset period or the floor price, which was $
The Company assessed the Series A and B warrants under ASC 480 and ASC 815 and determined that the Series A and B warrants needed to be classified as liabilities as they did not meet the requirements to be considered indexed to the Company’s own stock, due to: (a) the adjustment to the exercise price tied to shareholder approval, and (b) the potential change in the settlement amount of the Series B warrants upon an alternative cashless exercise election. Additionally, the Company concluded at issuance that it would not have sufficient authorized and available shares of common stock to settle the Series A and B warrants. See Note 13 – Derivative Liability.
| 17 |
On
January 13, 2025, the Company’s stockholders approved the issuance of the Series A and B warrants, at which time all of the Series
A and B warrants became exercisable. This approval triggered an adjustment to the exercise price of the Series A warrants to $
1800 Diagonal Financing Transactions
On
June 17, 2025, the Company entered into a securities purchase agreement with 1800 Diagonal Lending, LLC (“1800 Diagonal”)
pursuant to which the Company issued a promissory note to 1800 Diagonal in the principal amount of $
On
June 17, 2025, the Company entered into a second securities purchase agreement with 1800 Diagonal pursuant to which the Company issued
a promissory note to 1800 Diagonal in the principal amount of $
Boot Capital Financing Transaction
On
June 17, 2025, the Company entered into a securities purchase agreement with Boot Capital, LLC (“Boot Capital”) pursuant
to which the Company issued a promissory note to Boot Capital in the principal amount of $
| 18 |
Agile Capital Financing Transaction
On
July 3, 2025, the Company entered into a business loan and security agreement with Agile Capital Funding, LLC (“Agile
Funding”) pursuant to which it issued a promissory note to Agile Funding in the
principal amount of $
Streeterville Capital Securities Purchase Agreement
On
August 21, 2025, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Streeterville
Capital, LLC (“Streeterville”), providing for the issuance and sale of shares of the Company’s common stock in one or more
secured prepaid purchases (the “Pre-Paid Purchases”) for aggregate gross proceeds of up to $
The
initial Pre-Paid Purchase was $
The
initial Pre-Paid Purchase balance accrues interest at
Streeterville has the right,
but not the obligation, to convert the outstanding balances of Pre-Paid Purchases into shares of common stock at a price equal to
The Company may at any
time prepay all or any portion of the outstanding balance of a Pre-Paid Purchase. In the event the Company elects to do so, the Company
must pay Streeterville an amount equal to
As of September 30,
2025, the outstanding balance of the Pre-Paid Purchases was $
The
shares of common stock issued for the commitment fee were valued at $
per share, which was the closing price of the Company’s common stock on the measurement date, for aggregate consideration of
$
| 19 |
The debt issuance costs and commitment fee incurred under the Securities
Purchase Agreement are being amortized using the effective rate method. Amortization, which is included in interest expense, was $
Common Stock Issued for Services
During
the nine months ended September 30, 2025, the Company issued an aggregate of shares of its common stock to a vendor as consideration
for services rendered. The shares were issued in a non-cash transaction and were valued at $ per share, the closing price of the
Company’s common stock on the measurement date, resulting in a total fair value of $
Note 13 – Derivative Liability
During the nine months ended September 30, 2025, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis. These fair value measurements were estimated using a Monte Carlo simulation model, with the key inputs described below. Each of these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including the probability and expected date of stockholder approval.
The key inputs for the Series A warrant liabilities were as follows:
| Warrant Liability – Series A Warrants | January 17, 2025 | December 31, 2024 | ||||||
| Stock price on valuation date | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Number of shares of common stock | ||||||||
| Remaining term (years) | ||||||||
| Annual equity volatility | % | % | ||||||
| Annual volume volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected stockholder approval date | ||||||||
| Expected stockholder approval probability | % | % | ||||||
The Series B warrant liabilities were remeasured on each exercise date based on the closing price of the Company’s common stock on the date the warrants were exercised.
| 20 |
On
January 13, 2025, the Company’s shareholders approved the issuance of the Series A and Series B Warrants. This approval triggered
the adjustment to the exercise price described above. In connection with this approval, the holders of the Series B warrants exercised
their warrants in full under the alternative cashless exercise provision, resulting in the issuance of shares of common stock
and no additional proceeds received by the Company. The Series A warrants became exercisable for
The following table provides a roll-forward of the fair value of the derivative liabilities described above during the nine months ended September 30, 2025:
| Series A Warrants | Series B Warrants | Total Warrant Liabilities | ||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| Exercises | ( | ) | ( | ) | ||||||||
| Loss on change in fair value | ||||||||||||
| Reclassification to equity | ( | ) | ( | ) | ||||||||
| Balance at September 30, 2025 | $ | $ | $ | |||||||||
The following table provides a roll-forward of the number of warrants issued during the nine months ended September 30, 2025:
| Series A Warrants | Series B Warrants | Other Warrants | Total | |||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||
| Exercises | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2025 | ||||||||||||||||
The Company did not issue any warrants during the three and nine months ended September 30, 2024 and did not have any warrants outstanding as of September 30, 2024.
Note 14 – Income Taxes
The Company’s income tax provision for the nine months ended September 30, 2024, was approximately $
The
Company tax loss for income taxes for the three and nine months ended September 30, 2025 was $
| 21 |
Note 15 – Segment Information
Segment Information
On August 1, 2025, the
Company sold its Singing Machine business to Stingray USA. Prior to this transaction, the Company operated
In accordance with ASC 280, Segment Reporting, an operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, for which discrete financial information is available, and whose operating results are regularly reviewed by the CODM in allocating resources and assessing performance.
The Company’s CODM, its Chief Executive Officer, reviews consolidated operating results including net sales, gross profit, loss from operations, and net loss from continuing operations, as presented in the consolidated statements of operations. The CODM also considers consolidated operating expenses, non-financial information, and qualitative factors in evaluating performance, monitoring budgeted to actual results, and making decisions regarding capital allocation and levels of investment in operating activities. The CODM does not review segment asset information for purposes of allocating resources.
Geographic Information
Revenue is attributed to geographic areas based on the location where services are rendered. For the three and nine months ended September 30, 2025 and September 30, 2024, substantially all of the Company’s revenues were generated from customers located in India.
Notes 16 – Concentrations, Risks and Uncertainties
Bank Liquidity and Financial Stability
At times, the Company maintains cash in United States bank accounts that are more than the Federal Deposit Insurance Corporation insured amounts. The Company maintains cash balances in foreign financial institutions. The Company regularly monitors the financial stability of this financial institution and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However, in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.
| 22 |
Revenue Concentration
The
Company derives a majority of its revenue from sales of its AI-enabled software logistics services in India. The Company’s allowance
for credit losses is based upon management’s estimates and historical experience and reflects the fact that accounts receivable
is concentrated with several large customers. As of September 30, 2025,
Revenue
derived from the Company’s largest customer and three largest customers collectively as a percentage of total net sales was
Revenue
from customers representing greater than 10% of total net sales that were derived from the Company’s three largest customers
as a percentage of total net sales for the three months ended September 30, 2025 was
Note 17 – Related Party Transactions
Stingray Group Subscription Payments
The
Company has a music subscription sharing agreement with Stingray Group. For the three and nine months ended September 30, 2025, the Company
received music subscription revenue of $
SMCB
VIE Analysis
The
Company determined that SMCB, which was a subsidiary of SemiCab, Inc. prior to SemiCab Holdings’ acquisition of
| 23 |
The Company further determined that it was not the primary beneficiary of SMCB because the Company did not have the power to direct or control SMCB’s significant activities related to its business. Accordingly, the Company has not consolidated SMCB’s results of operations and financial position in its condensed consolidated financial statements prior to May 2, 2025.
Pursuant to the terms of the asset purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement that granted SemiCab Holdings the right to acquire all of the issued and outstanding equity securities of SMCB for shares of the Company’s common stock. The Company did not exercise this right and the option agreement expired on August 31, 2024.
Loan Agreement
The
Company is a party to a loan agreement with SMCB dated March 22, 2024. Under the loan agreement, the Company agreed to loan up to $
At
December 31, 2024, a total of $
On
May 2, 2025, the loan payable of $
| 24 |
Note 18 – Acquisition of SMCB
On
May 2, 2025, the Company and SemiCab Holdings entered into an equity purchase agreement with SemiCab, Inc. pursuant to which: (i) SemiCab
Holdings purchased shares of the issued and outstanding equity shares, Rs. par value, of SMCB, representing 99.99% of the issued
and outstanding equity shares of SMCB, for $
On
the Closing Date, the Company and SemiCab Holdings entered into an amended and restated employment agreement with each of Ajesh Kapoor
and Vivek Sehgal pursuant to which Mr. Kapoor agreed to serve as the Chief Executive Officer and Chief Technology Officer of SemiCab
Holdings and Mr. Sehgal agreed to serve as the Chief Product Officer of SemiCab Holdings. Pursuant to the terms of the employment agreements,
SemiCab Holdings granted Messrs. Kapoor and Sehgal a membership interest in SemiCab Holdings of
The Company has performed a preliminary valuation analysis of the fair market value of SMCB assets acquired and liabilities assumed. Using the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as May 2, 2025, the date the acquisition was completed:
| Consideration: | ||||
| Promissory note | $ | |||
| shares of common stock | ||||
| Assumption of debt | ||||
| Total | $ | |||
| Identifiable net assets acquired: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable, net | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment, net | ||||
| Other non-current assets | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | $ | |||
| 25 |
This preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma balance sheet and income statement. The fair values of assets and liabilities acquired represent the Company’s estimates of fair values as of the acquisition date. Management believes that the fair values recognized for the assets and liabilities acquired are based on reasonable estimates and assumptions. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the transaction accounting adjustments. The final allocation may include: (i) changes in fair values of property and equipment, (ii) changes in allocations to goodwill, and (iii) other changes to assets and liabilities.
Pro Forma Information
The unaudited pro forma financial information below presents the effects of the acquisition as though it had been completed on January 1, 2024. The pro forma adjustments are derived from the historically reported transactions of the respective companies. The pro forma results do not include anticipated combined effects or other expected benefits of the acquisition. The pro forma results for the nine months ended September 30, 2025 and 2024 reflect the combined performance of the Company and the SMCB business for that period. The unaudited pro forma information is based on available data and certain assumptions that the Company believes are reasonable given the circumstances. However, actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial information. This selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not intended to represent what the actual consolidated results of operations would have been had the acquisition date occurred on January 1, 2024, nor does it attempt to forecast future consolidated results of operations.
| Nine Months Ended | ||||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Net revenue | $ | $ | ||||||
| Operating loss from continuing operations | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
Note 19 – Discontinued Operations
On
August 1, 2025, the
The Company determined that the sale of the Singing Machine business met the criteria under Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a discontinued operation as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial results. Accordingly, the condensed consolidated balance sheets, the condensed consolidated statements of operations and the condensed consolidated statement of cash flows have been adjusted for prior periods to reflect the Singing Machine business as a discontinued operation.
| 26 |
The following table summarizes the results of the Singing Machine business as a discontinued operation in the condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024:
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Net (gain) loss on early termination of operating lease | ( | ) | ||||||||||||||
| Total Operating Expenses | ( | ) | ||||||||||||||
| Income (Loss) from Operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Expenses | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Loss on sale of Singing Machine business | ( | ) | ( | ) | ||||||||||||
| Total Other Expenses | ( | ) | ( | ) | ||||||||||||
| Income (Loss) Before Income Tax Benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Income Tax | ||||||||||||||||
| Net Income (Loss) from Discontinued Operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
The following table summarizes the assets and liabilities of the discontinued operations as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable, related party | ||||||||
| Inventory | ||||||||
| Returns asset | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets of Discontinued Operations | $ | $ | ||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| Total Non-Current Assets of Discontinued Operations | $ | $ | ||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Refund due to customer | ||||||||
| Reserve for sales returns | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities of Discontinued Operations | $ | $ | ||||||
| 27 |
Note 20 – Subsequent Events
Repayment of Notes Payable to Related Parties
On October 8, 2025, the Company
repaid two unsecured loans that it had assumed in connection with the acquisition of SemiCab, Inc.’s business on July 3, 2024.
The repaid loans consisted of: (i) a loan made to SemiCab, Inc. by Vivek Sehgal on April 17, 2023, and (ii) a loan made to SemiCab, Inc.
by Ajesh Kapoor on May 5, 2023, each in the original principal amount of $
Streeterville Capital Financing
On November 13, 2025, the Company
entered into Secured Pre-Paid Purchase #2 with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”),
under that certain securities purchase agreement (the “Securities Purchase Agreement”), dated August 21, 2025, between us
and Streeterville. Under the Securities Purchase Agreement, the Company agreed to issue and sell shares of its common stock to Streeterville
in one or more pre-paid purchases (each, a “Pre-Paid Purchase” and collectively, the “Pre-Paid Purchases”) for
an aggregate purchase price of up to $
The Second Pre-Paid Purchase is
similar to the first Pre-Paid Purchase that the Company completed on August 21, 2025, however the Second Pre-Paid Purchase is secured
by cash in an amount not less than the lesser of: (i) $
The Company has the right to use funds in the DACA Account to repay any portion of the outstanding balance of the Second Pre-Paid Purchase, but only so long as the payment does not cause the outstanding balance to drop below the Minimum Balance Amount. As long as no event of default has occurred, the Company may withdraw from the Deposit Account any funds in excess of the Minimum Balance Amount. The Second Pre-Paid Purchase is secured by the Guaranty, the Security Agreement, and the IP Security Agreement (each as defined in the Securities Purchase Agreement). In addition, RIME Holdings executed a guaranty of the obligations outstanding under the Second Pre-Paid Purchase for the benefit of Streeterville.
The Company entered into a new
placement agency agreement with Univest Securities, LLC to serve as the placement agent in the offering (the “Placement Agent”)
that supersedes the placement agency agreement that the Company previously entered into with them on August 21, 2025 in connection with
the offering. The Company agreed to pay the Placement Agent a cash fee equal to eight percent (
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. The following should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report and the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2024.
Overview
We are an artificial intelligence (“AI”) technology company that currently has one business unit, which is SemiCab. SemiCab is an AI-enabled software logistics business operated through our subsidiary, SemiCab Holdings, LLC. Prior to August 1, 2025, we had a second business unit, which was Singing Machine. Singing Machine was a home karaoke consumer products business that designed and distributed karaoke products globally to retailers and ecommerce partners 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 line.
SemiCab
SemiCab is a cloud-based Collaborative Transportation Platform 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 Transportation Management System (“TMS”) and Electronic Logging Device (“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 our SemiCab technology has the capability of reducing costs through optimization. Additionally, our SemiCab technology has the potential to play a key role in the improved sustainability model. Based on its 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.
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Singing Machine
Through Singing Machine, we engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings. We were a leading global karaoke and music entertainment company that specialized in the design and production of quality karaoke and music enabled consumer products for adults and children. Our products were 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.
Recent Corporate Events
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 condensed consolidated financial statements reflect post-reverse stock split numbers.
Acquisition of SMCB
On May 2, 2025 (the “Closing Date”), we and SemiCab Holdings entered into an equity purchase agreement with SemiCab Inc. pursuant to which: (i) SemiCab Holdings purchased 9,999 shares of the issued and outstanding equity shares, Rs. 10 par value, of SMCB, representing 99.99% of the issued and outstanding equity shares of SMCB, for $1,750,000, the payment of which amount was evidenced by the issuance of a promissory note by us to SemiCab, Inc., and (ii) we purchased the 20% membership interest in SemiCab Holdings then held by SemiCab, Inc. for aggregate consideration consisting of 119,742 shares of our common stock. The promissory note provides that $1,500,000 is due and payable by us on the first anniversary of the Closing Date and the remaining $250,000 is due and payable by us on the 18-month anniversary of the Closing Date. The promissory note bears interest at six percent per annum.
On the Closing Date, we and SemiCab Holdings entered into an amended and restated employment agreement with each of Ajesh Kapoor and Vivek Sehgal pursuant to which Mr. Kapoor agreed to serve as the Chief Executive Officer and Chief Technology Officer of SemiCab Holdings and Mr. Sehgal agreed to serve as the Chief Product Officer of SemiCab Holdings. Pursuant to the terms of the employment agreements, SemiCab Holdings granted Messrs. Kapoor and Sehgal a membership interest in SemiCab Holdings with three quarters of each such grant subject to certain forfeiture rights tied to continued employment with SemiCab Holdings. Additionally, Mr. Kapoor was granted the right to serve as a member of our board of directors and the right to appoint an additional member of our board of directors upon the occurrence of certain specified events.
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Also on the Closing Date, we, SemiCab Holdings, Ajesh Kapoor and Vivek Sehgal entered into an amended and restated limited liability company agreement for SemiCab Holdings which sets forth the terms and conditions governing the operation and management of SemiCab Holdings.
Sale of Singing Machine
On August 1, 2025, we entered into an asset purchase agreement with SMC and Stingray Music USA, Inc. (“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 for $500,000. The transaction closed on August 1, 2025.
We determined that the sale of the Singing Machine business met the criteria under Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a discontinued operation as the sale represents a strategic shift that will have a significant effect on our operations and financial results. Accordingly, we have accounted for the Singing Machine business as a discontinued operation in this Quarterly Report on Form 10-Q. Unless otherwise noted, the information contained in this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations consists exclusively of our continuing operations and does not include the operations of the Singing Machine business. Additional information concerning the Singing Machine business is presented in Note 19 -- Discontinued Operations of our condensed consolidated financial statements.
Streeterville Capital Financing
On November 13, 2025, we entered into Secured Pre-Paid Purchase #2 with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”), under that certain securities purchase agreement (the “Securities Purchase Agreement”), dated August 21, 2025, between us and Streeterville. Under the Securities Purchase Agreement, we agreed to issue and sell shares of our common stock to Streeterville in one or more pre-paid purchases (each, a “Pre-Paid Purchase” and collectively, the “Pre-Paid Purchases”) for an aggregate purchase price of up to $20,000,000. Secured Pre-Paid Purchase #2 provides for a second Pre-Paid Purchase in the principal amount of $5,450,000, before deducting an original issue discount of $450,000 (the “Second Pre-Paid Purchase”). The Second Pre-Paid Purchase accrues interest at the rate of nine percent (9%) per annum and has a maturity date of three years.
The Second Pre-Paid Purchase is similar to the first Pre-Paid Purchase that we completed on August 21, 2025, however the Second Pre-Paid Purchase is secured by cash in an amount not less than the lesser of: (i) $4,500,000, and (ii) 90% of the then-current outstanding balance of the Second Pre-Paid Purchase (the “Minimum Balance Amount”). The Minimum Balance Amount is being held in a deposit account (the “DACA Account”) held by RIME Holdings, LLC, a Utah limited liability company and wholly-owned subsidiary of ours that we formed in connection with this transaction (“RIME Holdings”), pursuant to a Deposit Account Control Agreement, dated November 13, 2025, by and among RIME Holdings, Lakeside Bank, an Illinois banking company, and Streeterville (the “DACA Agreement”). Accordingly, of the $5,000,000 proceeds that we received from the Second Pre-Paid Purchase, $4,500,000 were placed in the DACA Account.
We have the right to use funds in the DACA Account to repay any portion of the outstanding balance of the Second Pre-Paid Purchase, but only so long as the payment does not cause the outstanding balance to drop below the Minimum Balance Amount. As long as no event of default has occurred, we may withdraw from the Deposit Account any funds in excess of the Minimum Balance Amount. The Second Pre-Paid Purchase is secured by the Guaranty, the Security Agreement, and the IP Security Agreement (each as defined in the Securities Purchase Agreement). In addition, RIME Holdings executed a guaranty of the obligations outstanding under the Second Pre-Paid Purchase for the benefit of Streeterville.
We entered into a new placement agency agreement with Univest Securities, LLC to serve as the placement agent in the offering (the “Placement Agent”) that supersedes the placement agency agreement that we previously entered into with them on August 21, 2025 in connection with the offering. We agreed to pay the Placement Agent a cash fee equal to eight percent (8%) of the aggregate gross proceeds received by us from any Pre-Paid Purchases that we complete and reimburse the Placement Agent for legal fees in the amount of $50,000. The cash fee for the Second Pre-Paid Purchase must be paid on February 28, 2026; provided, however, that we may request that the payment date be extended by 90 days.
We completed the offer and sale of these securities in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act without engaging in any advertising or general solicitation of any kind.
Strategy
We intend to invest in our SemiCab business to develop and grow it into a significant revenue producer for us. This will involve investments in the continued research and development of its technology, the hiring of additional qualified employees, marketing and advertising initiatives, and back-office support. While SemiCab is a nascent business, it has already acquired several multinational 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. We also believe that SemiCab’s proven 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.
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 SemiCab 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 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 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.
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Financial Results
We generated revenue of $1,744,000 for the three-month period ended September 30, 2025, compared to $127,000 for the three-month period ended September 30, 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. Gross loss was $351,000, or 20% of net sales, for the three-month period ended September 30, 2025, compared to $32,000, or 25% of net sales, for the three-month period ended September 30, 2024. The increase was due primarily to an increase of $1,617,000 for net sales and an increase of $1,936,000 for cost of sales.
Our operating expenses were $1,214,000 for the three-month period ended September 30, 2025, compared to $1,791,000 for the three-month period ended September 30, 2024. The decrease in operating expenses was due primarily to a decrease of $816,000 for operating expenses incurred during the three-month period ended September 30, 2024 related to acquisition of the SemiCab business on July 3, 2024. We incurred net loss from continuing operations of $1,882,000 for the three-month period ended September 30, 2025 compared to $2,106,000 for the three-month period ended September 30, 2024.
We generated net loss available to common shareholders of $2,962,000, or $1.15 per share of common stock, for the three-month period ended September 30, 2025, compared to a net gain available to common shareholders of $1,195,000, or $0.13 per share of common stock, for the three-month period ended September 30, 2024. The net gain available to common shareholders for 2024 was due primarily to a one-time gain of $3,874,000 that we recognized on the early termination of an operating lease that we included in discontinued operations as a result of the sale of our Singing Machine business. We had total assets of $10,845,000 and $18,302,000 at September 30, 2025 and December 31, 2024, respectively. Net cash used by operating activities attributable to continuing operations was $4,343,000 for the nine-month period ended September 30, 2025 compared to $3,770,000 for the nine-month period ended September 30, 2024.
Outlook
We expect net sales generated from our SemiCab business to increase substantially over the next 12 months as we generate more business from our growing customer base in India. We expect gross loss to decrease over the next 12 months as the increase in net sales that we expect to generate from our SemiCab business exceeds the increase in cost of sales that we expect to incur in connection with the growth in sales. We expect operating expenses to increase over the next 12 months due to increases in legal and accounting expenses that we incur as we engage in additional capital-raising activities as needed to fund our business and increases in expenses that we expect to incur to fund the growth and development of our SemiCab business. Net loss available to common stockholders is expected to remain at similar levels. We expect cost reduction activities that we are engaging in to beneficially impact our net loss, but expect this to be offset by increases in the investment we will continue to make in the growth and development of our SemiCab business.
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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 September 30, 2025 and 2024
Net Sales
Net sales consist of sales generated by our SemiCab business. Net sales increased $1,617,000 to $1,744,000 for the three-month period ended September 30, 2025, compared to $127,000 for the three-month period ended September 30, 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 from our growing customer base in India
Cost of Sales
Cost of sales consists primarily of freight, handling and servicing costs that we incur in connection with our SemiCab business. Cost of sales increased $1,936,000 to $2,095,000 for the three-month period ended September 30, 2025, compared to $159,000 for the three-month period ended September 30, 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.
Operating Expenses
Operating expenses consist of selling expenses and general and administrative expenses.
Selling Expenses
Selling expenses consist primarily of marketing and advertising activities that we engage in from time to time. Selling expenses were $3,000 for the three-month period ended September 30, 2025. We did not incur any selling expenses for the three-month period ended September 30, 2024. We expect selling expenses to increase over the next 12 months as we being to devote more resources to marketing and advertising activities to support the growth of our SemiCab business.
General and Administrative Expenses
General and administrative expenses consist primarily of payroll expenses, legal and accounting expenses, and rent expense associated with our SemiCab business and corporate expenses.
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General and administrative expenses decreased $580,000 to $1,211,000 for the three-month period ended September 30, 2025, compared to $1,791,000 for the three-month period ended September 30, 2024. The decrease was due primarily to a decrease of $816,000 for operating expenses incurred during the three-month period ended September 30, 2024 in connection with our acquisition of SemiCab’s business on July 3, 2024. We expect general and administrative expenses to increase over the next 12 months as we continue to invest in the growth and development of our SemiCab business.
Other Expenses
Other expenses consist of financing costs that we incurred under our loans and other financing activities. Other expenses increased $10,000 to $293,000 for the three-months ended September 30, 2025, compared to $283,000 for the three-month period ended September 30, 2024. We may incur additional financing costs during the next 12 months and expect to continue to incur additional non-operating expenses in connection with the operation and growth of our SemiCab business.
Net Loss Attributable to Non-Controlling Interest
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. SemiCab Holdings owns our SemiCab business. We acquired our SemiCab business from SemiCab, Inc. on July 3, 2024, and, as part of the transaction, granted SemiCab, Inc. a 20% membership interest in SemiCab Holdings. The net loss attributable to non-controlling interest of $20,000 for the three-month period ended September 30, 2025 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 for the three-month period ended September 30, 2025. The net loss attributable to non-controlling interest of $221,000 for the three-month period ended September 30, 2024 represents the amount of loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. through its 20% membership interest in SemiCab Holdings for the three-month period ended September 30, 2024. We expect net loss attributable to non-controlling interest to increase over the next 12 months as we continue to invest in the development and growth of SemiCab’s business.
Comparison of the Nine-Month Periods Ended September 30, 2025 and 2024
Net Sales
Net sales increased $2,891,000 to $3,018,000 for the nine-month period ended September 30, 2025, compared to $127,000 for the nine-month period ended September 30, 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.
Cost of Sales
Cost of sales increased $3,557,000 to $3,716,000 for the nine-month period ended September 30, 2025, compared to $159,000 for the nine-month period ended September 30, 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.
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Operating Expenses
Selling Expenses
Selling expenses were $3,000 for the nine-month period ended September 30, 2025. We did not incur any selling expenses for the nine-month period ended September 30, 2024.
General and Administrative Expenses
General and administrative expenses increased $354,000 to $3,184,000 for the nine-month period ended September 30, 2025, compared to $2,830,000 for the nine-month period ended September 30, 2024. The increase was due primarily to increases in general and administrative expenses incurred in the growth and development of our SemiCab business.
Other Expenses
Other expenses increased $6,476,000 to $6,804,000 for the nine-month period ended September 30, 2025, compared to $328,000 for the nine-month period ended September 30, 2024. The increase was due primarily to an increase of $6,468,000 for a one-time, non-cash loss that we incurred in connection with the change in fair value of warrants sold in the public offering of securities that we completed on December 6, 2024.
Net Loss Attributable to Non-Controlling Interest
The net loss attributable to non-controlling interest of $347,000 represents the amount of loss incurred by SemiCab that was allocated to SemiCab, Inc. through its 20% membership interest in SemiCab Holdings for period beginning January 1, 2025 and ending May 2, 2025, and the amount of loss incurred by SemiCab that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings for the period beginning May 2, 2025 and ending September 30, 2025. The net loss attributable to non-controlling interest of $221,000 for the nine-month period ended September 30, 2024 represents the loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. through its 20% membership interest in SemiCab Holdings for the nine-month period ended September 30, 2024.
Liquidity And Capital Resources
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 September 30, 2025, our cash balance was $2,839,000.
Net cash used by operating activities attributable to continuing operations was $4,343,000 during the nine-month period ended September 30, 2025, compared to $3,770,000 during the nine-month period ended September 30, 2024. The increase of $573,000 was due primarily to an increase of $7,523,000 for loss from continuing operations, partially offset by an increase of $6,468,000 for the loss that we incurred in connection with the change in fair value of warrants sold in the public offering of securities that we completed on December 6, 2024.
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Net cash used by investing activities attributable to continuing operations was $1,888,000 during the nine-month period ended September 30, 2025, compared cash provided by investing activities attributable to continuing operations of $17,000 during the nine-month period ended September 30, 2024. The difference of $1,905,000 was due primarily to increases of $1,172,000 for advances to SMCB under our loan agreement with them, $758,000 for repurchases of shares of our common stock, and $541,000 for the capitalization of internal use software costs. These increases were partially offset by an increase of $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025.
Net cash provided by financing activities attributable to continuing operations was $4,115,000 during the nine-month period ended September 30, 2025, compared to $1,103,000 during the nine-month period ended September 30, 2024. The difference of $3,012,000 was due primarily to an increase of $4,293,000 for proceeds from the issuance of promissory notes, partially offset by a decrease of $1,489,000 for proceeds from the sale of stock.
Our limited cash resources along with our recent history of recurring operating losses and decreases in working capital create substantial doubt about our ability to continue as a going concern. To date, our capital needs have been met through cash generated by our operations, sales of our equity securities and the use of short- and long-term debt to fund our operations. We have used these sources of capital to pay virtually all of the costs and expenses that we have incurred to date. These costs and expenses have been comprised primarily of the professional fees, employee compensation expenses, and general and administrative expenses discussed above. We intend to continue to rely upon each of these sources to fund our operations and expansion efforts, including additional acquisitions of controlling or non-controlling financial interests in other complementary businesses and companies during the next 12 months.
We can provide no assurance that these sources of capital will be adequate to fund our operations and expansion efforts during the next 12 months. If these sources of capital are not adequate, we will need to obtain additional capital through alternative sources of financing. We may attempt to obtain additional capital through the sale of equity securities or the issuance of short- and long-term debt. If we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution. If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our common stock. Debt financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends. In addition, any equity securities or debt that we issue may have rights, preferences and privileges senior to those of the shares of common stock held by our stockholders.
We have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be 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 market conditions and our operating performance. These factors may make the timing, amount, terms and 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 our operations.
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Off-Balance Sheet Arrangements
As of September 30, 2025, 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.
Critical Accounting Estimates
Our interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions increases, such judgements become even more subjective. While management believes that its assumptions are reasonable and appropriate, actual results may be materially different than estimated. Our critical accounting estimates and assumptions have not materially changed from those identified in our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for small reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer, with the assistance of other members of our management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
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Our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective at December 31, 2024 due to the material weaknesses described below.
1. We lacked sufficient resources in our accounting department, restricting our ability to review and approve certain material journal entries which increases the likelihood that a material misstatement of interim or annual financial statements might not be prevented.
2. We lacked sufficient resources in our accounting department, which resulted in our inability to have proper segregation of duties for the preparation, review and approval of certain material reconciliations related to financial reporting in a timely manner.
3. Due to our lack of sufficient resource restrictions in our accounting department, we have not established a three-way match of documents or other controls precise enough to detect a material misstatement in revenue.
To remediate these material weaknesses, we intend to conduct a thorough review of the accounting department to ensure that the staff has the appropriate training and experience. We may hire one or more accounting persons to assist us with our accounting and financial reporting function. We also intend to implement more comprehensive written policies and procedures that address separation of duties and proper accounting and financial reporting.
Despite the material weaknesses identified above, we believe that the condensed consolidated financial statements included in the period covered by this report fairly present, in all material aspects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.
Changes in Internal Controls over Financial Reporting
During our fiscal quarter ended September 30, 2025, there were no additional changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 11, 2025, Blue Yonder filed a civil action in the Superior Court of the State of Arizona against the Company for breach of contract and to enforce a stipulated judgment entered against SemiCab, Inc. in connection with the liabilities related to Blue Yonder that the Company assumed when it acquired SemiCab, Inc.’s business. Blue Yonder alleges that, because the Company assumed these liabilities, Blue Yonder can enforce the judgment against the Company. The judgement was in the amount of $509,119. On August 1, 2025, the Company filed an answer to the complaint and counterclaims against Blue Yonder for breach of contract. The outcome of this matter is uncertain.
There were no other material changes to the disclosures made in Part I – Item 3. Legal Proceedings of our Annual Report on Form 10-K for our fiscal year ended December 31, 2024 and Part II – Other Information – Item 1. Legal Proceedings of our Quarterly Reports on Form 10-Q for our fiscal quarters ended March 31, 2025 and June 30, 2025 regarding these matters.
Item 1A. Risk Factors
Not required for small reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 18, 2025, we issued 31,513 shares of common stock to a vendor as consideration for services rendered. We completed the offer and sale of these securities to an accredited investor in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act without engaging in any advertising or general solicitation of any kind.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
During
the three-month period ended September 30, 2025, none of our officers or directors
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Item 6. Exhibits
The documents set forth below are filed as exhibits to this report. Where so indicated, exhibits that were previously filed with the SEC are incorporated by reference herein.
Exhibit No. |
Description | |
| 10.1 | Asset Purchase Agreement, dated August 1, 2025, by and among Algorhythm Holdings, Inc., The Singing Machine Company, Inc. and Stingray Music USA, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 7, 2025) | |
| 10.2 | Securities Purchase Agreement, dated August 21, 2025, by and among Algorhythm Holdings, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2025) | |
| 10.3 | Secured Pre-Paid Purchase #1, dated August 21, 2025, by and among Algorhythm Holdings, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2025) | |
| 10.4 | Security Agreement, dated August 21, 2025, by and among Algorhythm Holdings, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2025) | |
| 10.5 | Guaranty, dated August 21, 2025, by and among SemiCab Holdings, LLC, SMCB Solutions Private Limited, and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2025) | |
| 10.6* | Secured Pre-Paid Purchase #2, dated November 13, 2025, by and between Algorhythm Holdings, Inc. and Streeterville Capital, LLC | |
| 10.7* | Deposit Account Control Agreement, dated November 13, 2025, by and among RIME Holdings, LLC, Lakeside Bank and Streeterville Capital, LLC | |
| 10.8* | Guaranty, dated November 13, 2025, issued by RIME Holdings, LLC for the benefit of Streeterville Capital, LLC | |
| 31.1* | Certification of Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) | |
| 31.2* | Certification of Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) | |
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
* Filed herewith
** Furnished herewith.
| 39 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ALGORHYTHM HOLDINGS, INC. | ||
| Date: November 19, 2025 | By: | /s/ Gary Atkinson |
| Gary Atkinson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 19, 2025 | By: | /s/ Alex Andre |
| Alex Andre | ||
| Chief Financial Officer & General Counsel | ||
| (Principal Financial and Accounting Officer) | ||
| 40 |
FAQ
What is Algorhythm Holdings, Inc. (RIME) core business after the Q3 2025 period?
After selling its Singing Machine karaoke assets on
How did Algorhythm Holdings (RIME) perform financially for the nine months ended September 30, 2025?
From continuing operations, net sales reached
What is the liquidity position of Algorhythm Holdings (RIME) as of September 30, 2025?
Algorhythm reported cash of
What major financing arrangements did Algorhythm Holdings (RIME) enter into in 2025?
Key 2025 financings include a secured prepaid share purchase agreement with Streeterville Capital with an initial
How many Algorhythm Holdings (RIME) shares are outstanding and what corporate actions affected share count?
Algorhythm had 2,721,778 shares of common stock outstanding as of
What is the status of Algorhythm Holdings (RIME) warrant liabilities from the December 2024 public offering?
The December 2024 offering created Series A and B warrant liabilities totaling
What key risks does Algorhythm Holdings (RIME) highlight in its Q3 2025 filing?
Highlighted risks include substantial doubt about continuing as a going concern, reliance on a few large customers in India for most revenue and accounts receivable, exposure to high-cost financing obligations such as the Streeterville prepaid purchase, and legal exposure including a
