Algorhythm Holdings (RIME) grows revenue but flags going concern risk in Q2 2026
Rhea-AI Filing Summary
Algorhythm Holdings, Inc., an AI-driven logistics platform focused on its SemiCab business, reports continued losses for the three and six months ended June 30, 2026 while exiting its prior karaoke products business as discontinued operations. Net sales were $3,005,000 for the quarter and $5,405,000 for the six months, up sharply from $1,152,000 and $1,275,000 a year earlier, but cost of sales and operating expenses produced a six‑month net loss of $9,529,000.
Total assets increased to $18,568,000 from $12,724,000, driven by higher cash, intangibles and right‑of‑use assets, while total liabilities were $15,288,000, including $6,413,000 of promissory notes and $2,300,000 of related‑party debt. Shareholders’ equity improved from a deficit of $(1,860,000) at December 31, 2025 to positive $3,280,000, primarily from large equity issuances and the exchange of Streeterville debt into $3,500,000 of Series A preferred stock.
Cash and restricted cash totaled $7,955,000, but management states this is insufficient to fund planned operations for 12 months and concludes that substantial doubt exists about the company’s ability to continue as a going concern. The company is relying on external financings, including secured pre‑paid share purchase facilities, and settled a $500,000 Blue Yonder judgment in July 2026. As of August 11, 2026, 16,990,135 common shares were outstanding.
Positive
- Revenue growth: Net sales rose to $5,405,000 for the six months ended June 30, 2026 from $1,275,000 a year earlier, reflecting rapid expansion of the SemiCab AI logistics business.
- Balance sheet improvement: Shareholders’ equity moved from a deficit of $(1,860,000) at December 31, 2025 to positive $3,280,000 at June 30, 2026, supported by equity issuances and debt-to-preferred exchange.
- Liquidity increase: Cash and restricted cash grew to $7,955,000 at June 30, 2026 versus $6,146,000 at the start of the year, aided by multiple secured pre‑paid purchase financings.
Negative
- Going concern risk: Management states existing cash of $7,955,000 will not fund planned operations for 12 months, creating substantial doubt about the company’s ability to continue as a going concern.
- Large continuing losses: The company recorded a six‑month net loss from continuing operations of $9,529,000, with cost of sales exceeding revenue and significant general, administrative and interest expenses.
- High leverage and short‑term obligations: Current liabilities were $14,894,000 versus current assets of $13,387,000, including $6,413,000 in promissory notes and $2,300,000 in related‑party debt.
- Debt defaults to a key executive: The company failed to repay $165,000 and $150,000 loans due February 1 and July 10, 2026 to executive lender Ajesh Kapoor, triggering events of default.
- Cash outflow for litigation: A prior $509,119 Blue Yonder judgment was settled for $500,000, paid July 2, 2026, consuming cash despite an existing accrual.
Filing Explained
Streeterville now holds senior, non-convertible preferred stock with a 9% return ahead of common holders.
Form 10-Q is an unaudited quarterly report. The company completed a June 29 exchange that replaced
The preferred stock is non-convertible and has no general voting rights. It ranks senior to common stock for dividends, distributions and liquidation, so common holders are behind it for those payments.
The preferred stock accrues a
A specific credit issue remains disclosed: the company missed
Key Figures
Key Terms
going concern financial
discontinued operations financial
right-of-use assets financial
original issue discount financial
pre-funded warrants financial
alternative cashless exercise financial
Earnings Snapshot
FAQ
How did Algorhythm Holdings (RIME) perform financially for the six months ended June 30, 2026?
What is the going concern status of Algorhythm Holdings (RIME)?
How has Algorhythm Holdings (RIME) financed its operations recently?
What impact did the sale of the Singing Machine business have on RIME?
What major legal matters affect Algorhythm Holdings (RIME)?
AI-generated analysis. How Rhea-AI works. Not financial advice.
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
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
| (Address
of principal executive offices) |
(Zip Code) | (Registrant’s
telephone number, including area code) |
6301 NW 5th Way, Suite 2900, Fort Lauderdale, FL 33309
(former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||
The Nasdaq Stock Market LLC (The |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer ☐ |
| ☒ | Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 11, 2026, 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 | ||
| Item 1. | Financial Statements | 3 |
| Condensed Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 | 3 | |
| Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 (Unaudited) | 4 | |
| Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2026 and 2025 (Unaudited) | 5 | |
| Condensed Consolidated Statements of Shareholders’ Equity (Deficit) for the three and six months ended June 30, 2026 and 2025 (Unaudited) | 6 | |
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (Unaudited) | 8 | |
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 9 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 37 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 44 |
| Item 4. | Controls and Procedures | 44 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 45 |
| Item 1A. | Risk Factors | 45 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 45 |
| Item 3. | Defaults Upon Senior Securities | 45 |
| Item 4. | Mine Safety Disclosures | 45 |
| Item 5. | Other Information | 45 |
| Item 6. | Exhibits | 46 |
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2026 | December 31, 2025 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowances of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease- right of use assets | ||||||||
| Other non-current assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Promissory notes payable, net | ||||||||
| Notes payable to related parties | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabities, net of current portion | ||||||||
| Long-term provision for employee benefits | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ par value; shares authorized; and -- shares issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Common stock, $ par value; and shares authorized; and shares issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Treasury stock, shares reserved at June 30, 2026 and December 31, 2025 | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Shareholders’ Equity (Deficit) | $ | $ | ||||||
See notes to the condensed consolidated financial statements
| 3 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| 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 | ( | ) | ||||||||||||||
| Loss on debt extinguishment | ( | ) | ( | ) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Other Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss From Continuing Operations Before Income Tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax loss attributable to continuing operations | ( | ) | ( | ) | ||||||||||||
| Net Loss From Continuing Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from discontinued operations | ( | ) | ||||||||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interest | ||||||||||||||||
| Net Loss Available to Common Shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 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
| 4 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive loss | ||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||
| Total Comprehensive Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total comprehensive loss attributable to non-controlling interest | ||||||||||||||||
| Total Comprehensive Loss Available to Common Shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See notes to the condensed consolidated financial statements
| 5 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
For the Three Months Ended June 30, 2026 and 2025 (Unaudited)
| Common Stock | Preferred Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Non-Controlling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Loss | Deficit | Interest | Total | |||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Common stock issued for acquisition of SMCB | - | |||||||||||||||||||||||||||||||||||||||
| Exchange of partitioned pre-paid purchase for Series A preferred stock | ||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon settlement of prepaid purchases | - | |||||||||||||||||||||||||||||||||||||||
| Exchange of partitioned pre-paid purchase for Series A preferred stock | - | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||
| 6 |
For the Six Months Ended June 30, 2026 and 2025 (Unaudited)
| Common Stock | Preferred Stock | Additional Paid-in | Treasury | Accumulated Other Comprehensive | Accumulated | Non-Controlling | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Loss | Deficit | Interest | 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 | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Other | - | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||||||||||||||
| Common stock issued upon settlement of prepaid purchases | - | |||||||||||||||||||||||||||||||||||||||
| Exchange of partitioned pre-paid purchase for Series A preferred stock | - | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
See notes to the condensed consolidated financial statements
| 7 |
Algorhythm Holdings, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Net foreign currency translation adjustment | ||||||||
| Depreciation and amortization of property and equipment and intangible assets | ||||||||
| Amortization of debt discount and issuance cost | ||||||||
| Reduction in SMCB loan in exchange for services | ||||||||
| Gain on allowance for credit loss | ( | ) | ||||||
| Change in fair value of warrant liability | ||||||||
| Loss on debt extinguishment | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other non-current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Provision for employee benefits | ||||||||
| 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 SMCB | ||||||||
| Advances to SMCB | ( | ) | ||||||
| Net cash used in investing activities attributable to continuing operations | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of promissory notes, net of offering costs and discounts | ||||||||
| Payment of promissory notes | ( | ) | ||||||
| Net cash provided by financing activities attributable to continuing operations | ||||||||
| Net cash used in operating activities attributable to discontinued operations | ( | ) | ||||||
| Net cash provided by investing activities attributable to discontinued operations | ( | ) | ||||||
| Net cash provided by financing activities attributable to discontinued operations | ||||||||
| Total cash used in discontinued operations | ( | ) | ||||||
| Net change in cash | ( | ) | ||||||
| Cash and restricted cash at beginning of period | ||||||||
| Cash and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-cash investing and financing cash flow information: | ||||||||
| Common stock issued upon settlement of prepaid purchases | $ | $ | ||||||
| Exchange of partitioned pre-paid purchase for Series A preferred stock | $ | $ | ||||||
| Right of use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||
| 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 | $ | $ | ||||||
See notes to the condensed consolidated financial statements
| 8 |
Note 1 – Nature of Business
Algorhythm Holdings, Inc. (the “Company”) is an artificial intelligence (“AI”) technology company focused on the growth and development of SemiCab. SemiCab is an AI-enabled software logistics and distribution business that utilizes its technology platform to enable retailers, brands and transportation providers to address common supply chain problems globally. The Company operates its SemiCab business through its subsidiary, SemiCab Holdings, LLC.
Prior to August 1, 2025, the Company had a second business, which was Singing Machine. Singing Machine was a home karaoke consumer products business that designed and distributed karaoke products to retailers and ecommerce partners globally through its 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. The results of operations, cash flows, and related assets and liabilities of the Singing Machine business have been classified as discontinued operations in the Company’s condensed consolidated financial statements for all periods presented.
The
Company’s operations include its
On
January 13, 2025,
Note 2 – Sale of Singing Machine Business
On
August 1, 2025, the Company 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 the Company’s
Singing Machine business for $
| 9 |
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 has presented the results of the Singing Machine business as discontinued operations for all periods presented in this Quarterly Report on Form 10-Q. All amounts and disclosures included in these condensed consolidated financial statements reflect the Company’s continuing operations unless otherwise noted. Additional information is presented in Note 18 – Discontinued Operations.
Note 3 – Liquidity, Going Concern and Management Plans
Going Concern Analysis
As
of June 30, 2026, the Company’s cash and restricted 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 financial statements for the three and six months ended June 30, 2026 and 2025 have been prepared in accordance with accounting principles generally accepted in the United States of America (“US 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.
| 10 |
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 June 30, 2026 and condensed financial statement information for the three and six months ended June 30, 2026 and 2025 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2025 is derived from the Company’s 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, 2025. There have been no changes to the Company’s significant accounting policies as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2025.
Segment Reporting
Pursuant to 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 two reportable segments: (i) the SemiCab business, and (ii) the Singing Machine business. On August 1, 2025, the Company completed the sale of its Singing Machine business. Upon the completion of this transaction, the Company began operating as a single reportable segment consisting of its SemiCab business. 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 14 – Segment Information and Revenue Disaggregation.
Leases
The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). At the commencement date of a lease, the Company recognizes a lease liability, which represents its obligation to make lease payments arising from the lease measured on a discounted basis, and a right-of-use asset, which represents its right to use or control the use of the underlying asset for the lease term. Because the rate implicit in its leases is generally not readily determinable, the Company uses its incremental borrowing rate at the commencement date to measure the present value of its future lease payments. The lease term includes periods covered by options to extend or terminate the lease when the Company is reasonably certain to exercise such options.
The Company has elected not to recognize right-of-use assets and lease liabilities for leases with a term of twelve months or less. Lease cost for such leases is recognized on a straight-line basis over the lease term. The Company accounts for the lease and non-lease components of its lease arrangements separately. Operating lease cost is recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or rate are excluded from the measurement of lease liabilities and are recognized as expense in the period in which the obligation is incurred. All of the Company’s leases are classified as operating leases.
| 11 |
During the six months ended June 30, 2026, the Company was a party to operating leases for office space in the United States and India. Additional information is presented in Note 6 – Leases.
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 condensed consolidated financial statements and related disclosures.
In May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which clarifies the guidance in both ASC 718 and ASC 606 on the accounting for share-based payment awards that are granted by an entity as consideration payable to its customer. The ASU is intended to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, the ASU clarifies that the guidance in ASC 606 on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether an award’s grant date has occurred” (as determined under ASC 718). ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its condensed 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 Company adopted this ASU on January 1, 2026, and the adoption did not have a material impact on its condensed consolidated financial statements.
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 condensed consolidated financial statements and related disclosures.
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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 condensed consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). The purpose of this ASU is to improve the guidance of Topic 270, Interim Reporting, by providing clarity on the current interim reporting requirements. This amendment also provides additional guidance on what disclosures should be provided in interim reporting periods. The amendments in this ASU also add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the reporting entity. The amendments in this ASU are effective for all public companies for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.
The Company reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to the Company’s operations or that no material effect is expected on its condensed consolidated financial statements as a result of future adoption.
Note 5 – Property and Equipment, Intangible Assets and Goodwill
A summary of the Company’s property and equipment at June 30, 2026 and December 31, 2025 is as follows:
| Useful Life | June 30, 2026 | December 31, 2025 | ||||||||
| Computer and office equipment | $ | $ | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Depreciation
expense was $
A summary of the Company’s intangible assets at June 30, 2026 and December 31, 2025 is as follows:
| Useful life | June 30, 2026 | December 31, 2025 | ||||||||
| Customer relationships of SemiCab, Inc. | $ | $ | ||||||||
| Trade name of SemiCab, Inc. | ||||||||||
| Developed technology of SemiCab, Inc. | ||||||||||
| Customer relationships of SMCB | ||||||||||
| Reacquired rights of SMCB | ||||||||||
| Trade name of SMCB | ||||||||||
| Internal use software | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Amortization
expense was $
On
May 2, 2025, SemiCab Holdings acquired
During the year ended on December 31, 2025, the Company tested the recorded amount of goodwill from the acquisition of SemiCab, Inc.’s business on July 3, 2024 and SMCB on May 2, 2025 for impairment to see if the carrying amount of goodwill exceeded its carried value as of December 31, 2025. As a result of this test, the Company determined that no impairment of goodwill was needed to be recorded as of December 31, 2025.
During the six months ended June 30, 2026, the Company evaluated whether any events or changes in circumstances indicated that it is more likely than not that the fair value of its reporting unit was less than its carrying amount. The Company determined that no such triggering events occurred, and therefore, no interim goodwill impairment test was required.
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The following table presents the changes in the value of the goodwill recognized in connection with the acquisition of SemiCab, Inc. business on July 3, 2024 and SMCB on May 2, 2025:
| Balance at January 1, 2024 | $ | - | ||
| Goodwill from acquisition of SemiCab, Inc.’s business on July 3, 2024 | ||||
| Impairment of goodwill | ( | ) | ||
| Balance at December 31, 2024 | ||||
| Goodwill from acquisition of SMCB on May 2, 2025 | ||||
| Impairment of goodwill | -- | |||
| Balance at December 31, 2025 | ||||
| Impairment of goodwill | -- | |||
| Balance at June 30, 2026 | $ |
Note 6 – Leases
The Company leases office space in the United States and India under operating leases and has no finance leases.
The Company’s United States operating lease covers office space in Fort Lauderdale, Florida, with a term of 62 months that commenced in June 2026. The lease provides for two months of abated base rent and scheduled annual rent escalations. The Company’s India operating lease, held through its subsidiary SMCB, covers managed office seats in Bengaluru under a 26-month arrangement that commenced in January 2026 and provides for 5% annual escalation.
Supplemental balance sheet information related to operating leases as of June 30, 2026 is as follows:
| June 30, 2026 | ||||
| Assets | ||||
| Operating lease- right of use assets | $ | |||
| Liabilities | ||||
| Current portion of operating lease liabilities | ||||
| Operating lease liabilities, net of current portion | ||||
| $ | ||||
Supplemental statement of information related to operating leases for the three and six months ended June 30, 2026 is as follows:
| Three Months Ended | Six Months Ended | |||||||
| June 30, 2026 | June 30, 2026 | |||||||
| Operating lease expense as a component of general and administrative expense | $ | $ | ||||||
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Supplemental cash flow information related to operating leases for the six months ended June 30, 2026 is as follows:
| Six Months Ended | ||||
| June 30, 2026 | ||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||
| Operating cash flow paid for operating leases | $ | |||
| Right of use assets obtained in exchange for new operating lease liablities | $ | |||
The weighted average remaining lease term and discount rate for operating leases as of June 30, 2026 is as follows:
| June 30, 2026 | ||||
| Weighted average reamining lease term (years) | ||||
| Weighted average discount rate | % | |||
Future minimum lease payments under non-cancelable operating leases as of June 30, 2026 are as follows:
| Amount | ||||
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| Total undiscounted lease payments | ||||
| Less: interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
Note 7 – Notes Payable to Related Parties
Notes payable to related parties consisted of the following as of June 30, 2026 and December 31, 2025:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Loans assumed in acquisition of SemiCab, Inc.’s business | $ | $ | ||||||
| Promissory note issued for acquisition of SMCB | ||||||||
| Total | $ | $ | ||||||
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Loans With Related Parties Assumed in Acquisition of SemiCab, Inc.’s Business
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 and the balances as of June 30, 2026 and December 31, 2025 are summarized in the table below:
| Issue | Maturity | Interest | Outstanding Principal | |||||||||||||
| Note Holder | Date | Date | Rate | June 30, 2026 | December 31, 2025 | |||||||||||
| Ajesh Kapoor | % | $ | $ | |||||||||||||
| Ajesh Kapoor | % | |||||||||||||||
| Ajesh Kapoor | % | |||||||||||||||
| Total | $ | $ | ||||||||||||||
On
October 8, 2025, the Company repaid the loan from Vivek Sehgal issued on April 17, 2023 for $
The
Company failed to make payments of $
Mr. Kapoor serves as the Chief Executive Officer and Chief Technology Officer of SemiCab Holdings and as a member of the Company’s Board of Directors, and Mr. Sehgal serves as the Chief Product Officer of SemiCab Holdings.
Promissory Note Issued for Acquisition of SMCB
On
May 2, 2025, the Company and SemiCab Holdings acquired
Note 8 – 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.
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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 the SemiCab, Inc.’s business, the Company assumed this settlement liability. The final payment of the settlement was made during the year ended December 31, 2025. Accordingly, there was no unpaid balance at June 30, 2026 or December 31, 2025.
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.
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 $
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On
June 21, 2023, Blue Yonder filed a lawsuit claiming damages in the amount of $
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 alleged that, because the Company assumed these liabilities,
Blue Yonder could enforce the judgment against the Company. The judgment was in the amount of $
On
June 12, 2026, the Company entered into a confidential settlement agreement and mutual release with Blue Yonder to resolve all claims
related to the litigation and the underlying stipulated judgment. Under the terms of the settlement agreement, the Company agreed to
pay Blue Yonder $
Note 9 – 2022 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.
The number of shares of common stock initially available for issuance under the plan was shares of common stock and thereafter, beginning in 2023, an annual increase would occur as of the first day of the Company’s applicable fiscal year equal to the lesser of: (i) five percent of the outstanding shares of common stock calculated on a fully diluted basis as of the end of the Company’s immediately preceding fiscal year; (ii) shares; and (iii) a lesser amount as determined by the Company’s board of directors. The shares of common stock subject to stock awards granted under the equity plan that lapse, terminate, expire prior to exercise, are canceled, or are forfeited, become available for issuance again under the equity plan. Shares subject to a stock award under the equity plan do not become available for issuance or delivery again under the equity plan if such shares are: (i) shares tendered by a participant or retained by the Company as full or partial payment to the Company for the exercise or purchase price of an award; or (ii) shares used to satisfy tax withholding obligations in connection with an award.
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The Company’s board of directors may amend, suspend or terminate the plan or a portion of it at any time; provided, however, that to the extent required by applicable law, regulation or stock exchange rule, stockholder approval will be required for any amendment to the plan. The plan is scheduled to terminate automatically in 10 years following the earlier of: (i) the date the Company’s board of directors adopted the plan; and (ii) the date the stockholders approved the plan.
On
November 20, 2025, the plan was amended to provide that the number of shares of common stock available for issuance under the plan is
and that, commencing January 1, 2025, on the first day of each of the Company’s fiscal years thereafter, this number
will be increased by the lesser of: (i)
On January 1, 2026, the number of shares available for issuance under the plan increased to in accordance with the terms of the plan. As of June 30, 2026, shares remained available for issuance under the plan.
The Company did t grant any share-based awards during the three months ended June 30, 2026 or the three and six months ended June 30, 2025. The Company granted awards representing shares of common stock during the six months ended June 30, 2026. awards were forfeited during the three and six months ended June 30, 2026 and 2025.
As of June 30, 2026 and December 31, 2025, and shares of the Company’s common stock, respectively, were subject to outstanding awards under the plan.
Stock-based compensation expense represents the grant-date fair value of share-based awards recognized on a straight-line basis over the requisite service period. For the three and six months ended June 30, 2026, the Company recognized stock-based compensation expense related to stock options and restricted stock awards of $ and $, respectively. For the three and six months ended June 30, 2025, the Company recognized stock-based compensation expense related to stock options and restricted stock awards of $ and $, respectively.
As of June 30, 2026, there was $ of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average remaining vesting period of approximately three years and three months. Stock options vested as of June 30, 2026 had no intrinsic value.
As of June 30, 2026, there was $ of unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average remaining vesting period of approximately eleven months.
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| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average of common stock outstanding | ||||||||||||||||
| Loss per common share | $ | ) | $ | ) | ) | ) | ||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Effect of dilutive stock options and warrants | ||||||||||||||||
| Diluted weighted average of common shares outstanding | ||||||||||||||||
Basic net loss per share is based on the weighted average number of shares of common stock outstanding during the period. Diluted net 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 six months ended June 30, 2026, shares of common stock underlying stock options, respectively, and shares of common stock underlying warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive. For the three and six months ended June 30, 2025, shares of common stock underlying stock options and shares of common stock underlying warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive.
Note 11 – 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
$
| 20 |
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 $
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
public offering price for each share of common stock and one accompanying Series A warrant and Series B warrants was $. The public
offering price of each pre-funded warrant and one accompanying Series A warrant and Series B warrant was $. The exercise price of
each pre-funded warrant was $
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The pre-funded warrants were immediately exercisable upon issuance and were exercisable at any time until all pre-funded warrants were exercised in full. 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, after which the Series A and B warrants became exercisable for a period of five years and two and one-half years, respectively. The pre-funded warrants and Series A and B warrants contain standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions, and customary terms regarding the treatment of the pre-funded warrants and the Series A and B warrants in the event of a fundamental transaction, including but not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company, or a business combination resulting in any person acquiring more than 50% of the outstanding shares of common stock of the Company. Additionally, the pre-funded warrants and Series A and B warrants include restrictions on exercise in the event the purchaser’s beneficial ownership of the Company’s common stock would exceed 4.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise.
The
Series A and B warrants include an exercise price adjustment feature upon shareholder approval, whereby the exercise price adjusted to
the greater of the lowest daily volume weighted average price during the reset period or the floor price, which is $
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 12 – Derivative Liability.
At
inception, the estimated fair value of the Series A warrants was $
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During
December 2024, the pre-funded warrants were exercised in full, resulting in the Company receiving $
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
1800 Diagonal Loan #1
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 $
The
Company incurred and paid $
1800 Diagonal Loan #2
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 $
In
December 2025, the Company and 1800 Diagonal agreed that 1800 Diagonal would convert the initial payment of $
The
Company incurred and paid $
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 $
The
Company incurred and paid $
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 $
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The
Company incurred and paid $
Streeterville Capital Transaction
On
August 21, 2025, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, a Utah limited liability company
(“Streeterville”), pursuant to which the Company agreed to issue and sell to Streeterville shares of the Company’s common
stock 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 $
Following
the funding of each Pre-Paid Purchase, Streeterville has the right, but not the obligation, to purchase from the Company that number
of shares of common stock up to the lesser of: (i) a number of shares of common stock equal in value to the outstanding balance of the
funded amount, and (ii) that number of shares of common stock such that Streeterville will not beneficially own greater than
Pursuant to the terms of the securities purchase agreement, the Company filed a registration statement on Form S-1 under the Securities Act with the SEC to register the resale of the Commitment Shares and all shares of common stock issuable pursuant to the Pre-Paid Purchases. The registration statement became effective on November 10, 2025.
Nasdaq
Listing Rule 5635(d) provides that shareholder approval is required prior to the issuance of shares of the Company’s common stock equal
or greater in number 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
Univest
Securities, LLC served as the placement agent in the offering (“Univest”). The Company agreed to pay Univest a cash fee equal
to eight percent of the aggregate gross proceeds that it receives from any Pre-Paid Purchases that it completes and reimburse Univest
for legal fees in the amount of $
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Pre-Paid Purchase #1
The
securities purchase agreement provides for an initial Secured Pre-Paid Purchase in the principal amount of $
During
the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $
Pre-Paid Purchase #2
On
November 13, 2025, the Company entered into Secured Pre-Paid Purchase #2 with Streeterville (“Pre-Paid Purchase #2”). Pre-Paid
Purchase #2 provides for a second Pre-Paid Purchase in the principal amount of $
The
Second Pre-Paid Purchase was similar to the First Pre-Paid Purchase, 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 PPP2 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 PPP2 Minimum Balance Amount. RIME Holdings executed a guaranty of the obligations outstanding under the Second Pre-Paid Purchase for the benefit of Streeterville.
| 25 |
The
Company entered into a new placement agency agreement with Univest that superseded the placement agency agreement that the Company previously
entered into with them on August 21, 2025. The Company agreed to pay Univest a cash fee equal to eight percent of the aggregate gross
proceeds that the Company receives from any Pre-Paid Purchases that the Company completes and reimburse Univest for legal fees in the
amount of $
During
the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $
Pre-Paid Purchase #3
On
December 19, 2025, the Company entered into Secured Pre-Paid Purchase #3 with Streeterville (“Pre-Paid Purchase #3”). Pre-Paid
Purchase #3 provides for a third Pre-Paid Purchase in the principal amount of $
During
the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $
Pre-Paid Purchase #4
Initial Transaction
On
February 17, 2026, the Company entered into Secured Pre-Paid Purchase #4 with Streeterville (“Pre-Paid Purchase #4”). Pre-Paid
Purchase #4 provides for a fourth Pre-Paid Purchase in the principal amount of $
The Company has the right to use funds in the DACA Account to repay any portion of the outstanding balance of the Fourth Pre-Paid Purchase, but only so long as the payment does not cause the outstanding balance to drop below the PPP4 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 PPP4 Minimum Balance Amount. RIME Holdings executed a guaranty of the obligations outstanding under the Fourth Pre-Paid Purchase for the benefit of Streeterville.
| 26 |
The Company paid Univest a cash fee equal to eight percent of the aggregate gross proceeds received from the Fourth Pre-Paid Purchase that were not placed in the DACA Account. The Company will pay Univest a cash fee equal to eight percent of the funds held in the DACA Account when they are released to the Company.
Exchange Transaction
On
June 29, 2026, the Company entered into an exchange agreement (the “Exchange Agreement”) with Streeterville. Pursuant to
the Exchange Agreement, the Company and Streeterville agreed to partition a new Pre-Paid Purchase (the “Partitioned Pre-Paid Purchase”)
in the original principal amount of $
On
June 29, 2026, in connection with the issuance of the Exchange Shares, the Company filed a Certificate of Designation of Preferences
and Rights of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware.
The Certificate of Designation designates shares of the Company’s preferred stock, par value $ per share, as Series
A Preferred Stock and provides that each share of Series A Preferred Stock has a stated value of $
The Series A Preferred Stock is non-convertible and has no voting rights except in certain limited circumstances. It is not entitled to participate in dividends, distributions or payments to holders of the Company’s common stock and may be redeemed by the Company, at the sole discretion of its board of directors, for a cash redemption price equal to 110% of the applicable liquidation amount. The Series A Preferred Stock ranks senior to all shares of the Company’s capital stock, including the Company’s common stock, with respect to dividends, distributions and payments upon liquidation, dissolution and winding up. The Certificate of Designation also contains covenants restricting certain issuances of securities, changes to authorized shares, asset pledges, asset dispositions, reverse stock splits and fundamental transactions.
The
Company accounted for the Exchange Agreement as a partial extinguishment of a portion of the Pre-Paid Purchase #4 in accordance with
ASC 470-50. The reacquisition price was measured using the fair value of the extinguished debt because it represented the more readily
determinable measure of fair value. As a result, the Company derecognized the carrying amount of the extinguished debt of $
During
the three and six months ended June 30, 2026, the Company recognized interest expense related to the Fourth Pre-Paid Purchase of $
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Note 12 – Derivative Liability
During the six months ended June 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 and Series B warrant liabilities were as follows:
| Warrant Liability – Series A Warrants | Issuance Date | December 31, 2024 | January 13, 2025 | |||||||||
| 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 | % | % | % | |||||||||
| Warrant Liability – Series B Warrants | Issuance Date | 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.
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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 six months ended June 30, 2025:
| Series A Warrants | Series B Warrants | Total | ||||||||||
| Balance at December 31, 2024 | ||||||||||||
| Exercises | ( | ) | ( | ) | ||||||||
| Loss on change in fair value | ||||||||||||
| Reclassification to equity | ( | ) | ( | ) | ||||||||
| Balance at June 30, 2025 | ||||||||||||
The Company did not have any warrant liabilities outstanding at June 30, 2026 and December 31, 2025.
The following table provides a roll-forward of the number of warrants exercised during the six months ended June 30, 2026 and 2025:
| Series A Warrants | Series B Warrants | Other Warrants | Total | |||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||
| Exercises | ( | ) | ( | ) | ||||||||||||
| Balance at June 30, 2025 | ||||||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||
| Exercises | ||||||||||||||||
| Balance at June 30, 2026 | ||||||||||||||||
The Company did not issue any warrants during the three and six months ended June 30, 2026 and 2025.
Note 13 – Income Taxes
The Company did not have any provision for income taxes for the three and six months ended June 30, 2026 and 2025. The Company’s income tax expense differs from the expected tax expense based on statutory rates primarily due to full valuation allowance for all of its subsidiaries for the three and six months ended June 30, 2026 and 2025.
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Note 14 – Segment Information and Revenue Disaggregation
Segment Information
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.
Prior
to August 1, 2025, the CODM determined that the Company operated in
The Company’s CODM 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 six months ended June 30, 2026, all of the Company’s revenues were generated from customers located in India. For the three and six months ended June 30, 2025, substantially all of the Company’s revenues were generated from customers located in India.
Note 15 – 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.
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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 June 30, 2026,
Revenue
derived from the Company’s largest customer and four largest customers collectively as a percentage of total net sales was
Note 16 – Related Party Transactions
Stingray Holdings Music Subscription Agreement
The
Company had a music subscription sharing agreement with Stingray Group under which the Company generated 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
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.
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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 $
Note 17 – 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 % of the issued
and outstanding equity shares of SMCB, for $
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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 following table summarizes the allocation of the 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 tangible 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, accrued expenses and other liabilites | ( | ) | ||
| Net tangible assets acquired | $ | |||
| Identifiable intangible assets acquired: | ||||
| Customer relationships | $ | |||
| Reacquired rights | ||||
| Trade name | ||||
| Net intangible assets acquired | $ | |||
| Net assets acquired | $ | |||
| Goodwill | $ |
In
January 2026, the Indian government approved the purchase by SemiCab Holdings of the remaining outstanding equity share in SMCB, representing
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The
Company failed to make the initial payment of $
On
May 9, 2026, the Company and SemiCab, Inc. entered into a forbearance agreement pursuant to which: (i) SemiCab, Inc. irrevocably waived
any default or event of default that was or will be caused under the promissory note as a result of the Company’s failure to pay
the initial payment of $
On June 16, 2026, the Company and SemiCab, Inc entered into a second forbearance agreement pursuant to which: (i) SemiCab, Inc. irrevocably waived any default or event of default that was or will be caused under the promissory note as a result of the Company’s failure to pay the initial payment to SemiCab, Inc. on May 2, 2026, and (ii) SemiCab, Inc. will forbear from taking action with respect to any defaults or events of default arising after date of the forbearance agreement with respect to the Company’s failure to make such payment that occur at any time on or prior to July 16, 2026.
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, 2025. 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 six months ended June 30, 2026 and 2025 reflect the combined performance of the Company and the SMCB business for those periods. 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 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, 2025, nor does it attempt to forecast future consolidated results of operations.
| Six Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Net revenue | $ | $ | ||||||
| Operating loss from continuing operations | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
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Note 18 – Discontinued Operations
On
August 1, 2025,
The Company determined that the sale of the Singing Machine business met the criteria under 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.
The following table summarizes the results of the Singing Machine business as a discontinued operation in the consolidated statements of operations for the three and six months ended June 30, 2025:
| For the Three Months Ended | For the Six Months Ended | |||||||
| June 30, 2025 | June 30, 2025 | |||||||
| Net Sales | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating Expenses | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Total Operating Expenses | ||||||||
| Gain/ (Loss) From Operations | ( | ) | ||||||
| Income Tax | ||||||||
| Net Gain/ (Loss) From Discontinued Operations | $ | $ | ( | ) | ||||
There were no results of the Singing Machine business as a discontinued operation in the consolidated statements of operations for the three and six months ended June 30, 2026, and there were no assets and liabilities of the Singing Machine business as a discontinued operation in the condensed consolidated balance sheet as of June 30, 2026 and December 31, 2025, as the business had been sold on August 1, 2025.
| For the Three Months Ended | For the Six Months Ended | |||||||
| June 30, 2025 | June 30, 2025 | |||||||
| Net cash used in operating activities attributable to discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Net cash provided by investing activities attributable to discontinued operations | ( | ) | ( | ) | ||||
| Net cash provided by financing activities attributable to discontinued operations | ||||||||
| Total cash used in discontinued operations | $ | ( | ) | $ | ( | ) | ||
There were no cash flows of the Singing Machine business as a discontinued operation in the condensed consolidated statements of cash flows for the three and six months ended June 30, 2026 as the business had been sold on August 1, 2025.
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Note 19 – Subsequent Events.
Section 3(a)(10) Settlement Transaction
On
July 21, 2026, the Company entered into a settlement agreement and stipulation (the “Settlement Agreement”) with Continuation
Capital, Inc., a Delaware corporation (“CCI”), with respect to certain outstanding liabilities of the Company in the principal
amount of $
Pursuant
to the Settlement Agreement, the Company agreed to issue CCI up to
shares of the Company’s common stock in one or more tranches until CCI has generated aggregate proceeds equal to 120% of the
Claim Amount. On July 23, 2026, the Circuit Court of the Twelfth Judicial Circuit in and for Desoto County, Florida entered an order
approving the Settlement Agreement after a fairness hearing pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended.
The number of shares of common stock held by CCI at any given time cannot exceed
Amended and Restated Employment Agreements
On July 22, 2026, the Company entered into amended and restated employment agreements with Gary Atkinson, the Company’s Chief Executive Officer, which agreement supersedes and replaces that certain amended and restated employment agreement entered into with Mr. Atkinson on February 23, 2026 (the “CEO Agreement”), and Alex Andre, the Company’s Chief Financial Officer and General Counsel, which agreement supersedes and replaces that certain employment agreement entered into with Mr. Andre on February 12, 2025 (the “CFO Agreement” and together with the CEO Agreement, the “Employment Agreements”).
The Employment Agreements harmonize the change in control treatment applicable to each of the Company’s executive officers. In furtherance thereof, each executive officer now has the right to receive a bonus if, and each time, a Change of Control (as defined in the applicable Employment Agreement) occurs during the term of their employment in a lump sum payment equal to their Base Salary and Annual Bonus (each as defined in the applicable Employment Agreement) for the year in which the Change of Control occurs. The Employment Agreements also include additional provisions designed to ensure that various payments that may in the future be made by the Company to the executive officers fully comply with Sections 280G, 4999 and 409A of the Internal Revenue Code of 1986, as amended.
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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 regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements.
Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those set forth under Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 and elsewhere therein and in this report. Our actual results may differ materially from those anticipated in these forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason, except as required by law.
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, 2025.
Overview
We are an AI technology company focused on the growth and development of SemiCab. SemiCab is an AI-enabled software logistics and distribution business that utilizes our SemiCab technology platform to enable retailers, brands and transportation providers to address common supply chain problems globally. We operate our SemiCab business through our subsidiary, SemiCab Holdings.
Prior to August 1, 2025, we had a second business, which was Singing Machine. Singing Machine was a home karaoke consumer products business that designed and distributed karaoke products to retailers and ecommerce partners globally through our subsidiary, The Singing Machine Company, Inc. We sold our Singing Machine business on August 1, 2025. Accordingly, we no longer own or operate the Singing Machine business.
SemiCab
SemiCab is an AI-enabled, 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 TMS and ELD partners. To build fully loaded round trips, SemiCab uses AI/ML techniques and advanced predictive optimization models.
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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 our proven ability to improve truck utilization rates, this could result in a dramatic reduction in the carbon footprint of the industry. The optimization of existing truck utilization can add trucking capacity without adding more trucks, drivers or driven miles which addresses common problems plaguing the industry like severe driver shortage and road congestion. Trucking optimization could also reduce carbon emissions attributable to road freight.
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 specializes 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.
Financial Results
We generated net sales of $3,005,000 for the three-month period ended June 30, 2026, compared to $1,152,000 for the three months ended June 30, 2025. The increase in net sales was due primarily to the addition of net sales generated by our SemiCab business resulting from our acquisition of SMCB on May 2, 2025. Cost of sales was $3,598,000 for the three months ended June 30, 2026, compared to $1,492,000 for the three months ended June 30, 2025. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB resulting from our acquisition of SMCB on May 2, 2025. Our operating expenses were $2,108,000 for the three months ended June 30, 2026, compared to $868,000 for the three months ended June 30, 2025. The increase in operating expenses was due primarily to the increase in general and administrative expenses incurred in the growth and development of our SemiCab business during the three months ended June 30, 2026.
We generated net loss from continuing operations of $4,149,000 for the three months ended June 30, 2026, compared to a loss of $1,235,000 for the three months ended June 30, 2025. The increase in the net loss from continuing operations was mainly due to administrative expenses incurred in the growth and development of our SemiCab business and the interest expense incurred by us on the pre-paid purchases under the Streeterville Transaction. We had total assets of $18,568,000 and $12,724,000 at June 30, 2026 and December 31, 2025, respectively. Net cash used in operating activities attributable to continuing operations was $6,592,000 for the six months ended June 30, 2026, compared to $3,106,000 for the six months ended June 30, 2025.
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Comparison of the Three-Month Periods Ended June 30, 2026 and 2025
Net Sales
Net sales consist of sales generated by our SemiCab business. Net sales increased $1,853,000 to $3,005,000 for the three-month period ended June 30, 2026, compared to $1,152,000 for the three-month period ended June 30, 2025. The increase in net sales was due primarily to the addition of net sales generated by SMCB, which we acquired on May 2, 2025.
Cost of 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 $2,106,000 to $3,598,000 for the three-month period ended June 30, 2026, compared to $1,492,000 for the three-month period ended June 30, 2025. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired on May 2, 2025.
Operating Expenses
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 in connection with our SemiCab business. Selling expenses were $49,000 for the three-month period ended June 30, 2026. We did not incur any selling expenses for the three-month period ended June 30, 2025.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation expense, legal and accounting expenses, and other corporate expenses. General and administrative expenses increased $1,191,000 to $2,059,000 for the three-month period ended June 30, 2026, compared to $868,000 for the three-month period ended June 30, 2025. The increase was due primarily to increases in expenses incurred in connection with the operation of our SemiCab business.
Other Expenses
Other expenses consist primarily of interest expense, including the amortization of deferred debt costs, incurred in connection with our financing transactions, as well as the loss on debt extinguishment related to the exchange of the partitioned pre-paid purchase for the Series A preferred stock. Other expenses increased $1,418,000 to $1,445,000 for the three-month period ended June 30, 2026, compared to $27,000 for the three-month period ended June 30, 2025. The increase was attributable to an increase of $1,018,000 increase in interest expense, including the amortization of deferred debt costs, associated with our recent financing transactions, and a $400,000 loss on debt extinguishment recognized in connection with the exchange of the partitioned pre-paid purchase for the Series A preferred stock during the three-month period ended June 30, 2026.
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Net Loss Attributable to Non-Controlling Interest
SemiCab Holdings owns our SemiCab business. Net loss attributable to non-controlling interest consists of the loss allocated to SemiCab, Inc., which owned a 20% of the outstanding membership interests of SemiCab Holdings until May 2, 2025, and Ajesh Kapoor and Vivek Sehgal, who collectively owned 20% of the outstanding membership interests of SemiCab Holdings beginning May 2, 2025. The net loss attributable to non-controlling interest of $320,000 for the three-month period ended June 30, 2026 represents the amount of loss incurred by SemiCab Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings. The net loss attributable to non-controlling interest of $224,000 for the three-month period ended June 30, 2025 represents the amount of loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. between January 1, 2025 and May 2, 2025, and to Ajesh Kapoor and Vivek Sehgal between May 2, 2025 and June 30, 2025.
Comparison of the Six-Month Periods Ended June 30, 2026 and 2025
Net Sales
Net sales increased $4,130,000 to $5,405,000 for the six-month period ended June 30, 2026, compared to $1,275,000 for the six-month period ended June 30, 2025. The increase in net sales was due primarily to the addition of net sales generated by SMCB, which we acquired on May 2, 2025
Cost of Goods Sold
Cost of sales increased $5,054,000 to $6,675,000 for the six-month period ended June 30, 2026, compared to $1,621,000 for the six-month period ended June 30, 2025. The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired on May 2, 2025.
Operating Expenses
Selling Expenses
Selling expenses were $82,000 for the six-month period ended June 30, 2026. We did not incur any selling expenses for the six-month period ended June 30, 2025.
General and Administrative Expenses
General and administrative expenses increased $3,769,000 to $5,693,000 for the six-month period ended June 30, 2026, compared to $1,924,000 for the six-month period ended June 30, 2025. The increase was due primarily to increases in expenses incurred in connection with the operation of our SemiCab business and stock-based compensation expense.
Other Expenses
Other expenses decreased $4,030,000 to $2,481,000 for the six-month period ended June 30, 2026, compared to $6,511,000 for the six-month period ended June 30, 2025. The decrease was due primarily to the loss of $6,468,000 on the change in fair value of warrants that we incurred during the six-month period ended June 30, 2025 in connection with the public offering of securities that we completed on December 6, 2024, partially offset by the interest expense, including the amortization of deferred debt cost, associated with our recent financing transactions.
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Net Loss Attributable to Non-Controlling Interests
The net loss attributable to non-controlling interest of $594,000 for the six-month period ended June 30, 2026 represents the amount of loss incurred by SemiCab Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings. The net loss attributable to non-controlling interest of $327,000 for the six-month period ended June 30, 2025 represents the amount of loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc. between January 1, 2025 and May 2, 2025, and to Ajesh Kapoor and Vivek Sehgal between May 2, 2025 and June 30, 2025.
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 June 30, 2026, our cash and restricted cash balance was $7,955,000.
Net cash used in operating activities attributable to continuing operations was $6,592,000 during the six-month period ended June 30, 2026, compared to $3,106,000 during the six-month period ended June 30, 2025. The increase of $3,486,000 was due primarily to decreases of $6,468,000 for loss on the change in fair value of warrants recognized in connection with the public offering of securities that we completed on December 6, 2024, and $2,550,000 for prepaid expenses and other current assets. These decreases were partially offset by increases of $1,482,000 for the amortization of debt discount and issuance costs and $2,754,000 for accounts payable and accrued expenses.
Net cash used in investing activities attributable to continuing operations was $267,000 during the six-month period ended June 30, 2026, compared to $1,344,000 during the six-month period ended June 30, 2025. The decrease of $1,077,000 was due primarily to decreases of $1,172,000 for advances to SMCB under our loan agreement with them and $758,000 for repurchases of shares of our common stock, partially offset by a decrease of $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025 and an increase of $248,000 for the capitalization of internal use software costs
Net cash provided by financing activities attributable to continuing operations was $8,668,000 for the six-month period ended June 30, 2026, compared to $379,000 during the six-month period ended June 30, 2025. The increase of $8,289,000 was due primarily to net proceeds of $9,020,000 that we received from Streeterville under the Fourth Pre-Paid Purchase.
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.
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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.
Nasdaq Compliance
On December 30, 2024, we received notice from the Nasdaq indicating that the bid price for our common stock had closed below $0.10 per share for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and our securities would be subject to delisting from Nasdaq unless we timely request a hearing before the Nasdaq hearings panel. On February 10, 2025, we implemented a 200-for-1 reverse stock split. On that day, the closing price of our common stock was $2.98 per share and the closing bid of our common stock remained above $1.00 for the next 10 consecutive business days. On March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2).
On November 28, 2025, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, did not satisfy the continued listing requirement under Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000. We reported a stockholders’ equity of approximately $100,000 on September 30, 2025 in that quarterly report. Pursuant to the listing rule and instructions from Nasdaq, we submitted a plan to regain compliance with the listing rule and were given an extension until May 27, 2026 to evidence compliance through a public filing.
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On May 14, 2026, we filed our Quarterly Report on Form 10-Q for the period ended March 31, 2026 wherein we reported stockholders’ equity of $3,168,000. On May 21, 2026, we filed a Form 8-K where we stated that, as a result of the $3,168,000 of stockholders’ equity that we reported in that quarterly report, we believe that we had regained compliance with Nasdaq Listing Rule 5550(b)(1) for continued listing on the Nasdaq. On May 26, 2026, we received a letter from the Nasdaq notifying us that, based on our Form 8-K, dated May 21, 2026, the Nasdaq had determined that we complied with Nasdaq Listing Rule 5550(b)(1).
On June 16, 2026, we received a letter from the Nasdaq notifying us that, based upon the closing bid price of our common stock for the 30 consecutive business days from May 4, 2026 to June 15, 2026, we did not meet the minimum bid price requirement of $1.00 per share set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. The letter stated that we have a compliance period of 180 calendar days, or until December 14, 2026, to regain compliance with the minimum bid price requirement. If at any time during this compliance period the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Nasdaq will provide us with written confirmation of compliance and the matter will be closed. The Nasdaq also stated that it may, in its discretion, require us to satisfy the minimum bid price requirement for a period in excess of 10 consecutive business days before determining that we have demonstrated an ability to maintain long-term compliance.
We intend to actively monitor the closing bid price of our common stock and consider available options to regain compliance with the minimum bid price requirement, including such actions as effecting a reverse stock split of our common stock.
If we are unable to meet the continued listing of the Nasdaq, our common stock could be subject to delisting. If our common stock is delisted from the Nasdaq, trading of our common stock most likely will be conducted in the over-the-counter market on an electronic bulletin board established for unlisted securities such as the OTC Markets or in the “pink sheets.” Such a downgrade in our listing market may adversely impact our ability to raise capital, limit our ability to make a market in our common stock, and adversely affect the market price and liquidity of our common stock.
Off-Balance Sheet Arrangements
As of June 30, 2026, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, that had been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
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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, 2025.
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.
Our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective at December 31, 2025 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 resources 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 Control over Financial Reporting
During our fiscal quarter ended June 30, 2026, 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 11, 2025, Blue Yonder, Inc. (“Blue Yonder”) filed a civil action in the Superior Court of the State of Arizona against us for breach of contract and to enforce a stipulated judgment entered against SemiCab, Inc. in connection with the liabilities related to Blue Yonder that we assumed when we acquired SemiCab, Inc.’s business. Blue Yonder alleged that, because we assumed these liabilities, Blue Yonder could enforce the judgment against us. The judgment was in the amount of $509,119. On August 1, 2025, we filed an answer to the complaint and counterclaims against Blue Yonder for breach of contract. On January 30, 2026, the court granted Blue Yonder’s motion for judgment on the pleadings.
On June 12, 2026, we entered into a confidential settlement agreement and mutual release with Blue Yonder to resolve all claims related to the litigation and the underlying stipulated judgment. Under the terms of the settlement agreement, we agreed to pay Blue Yonder $500,000 in full settlement of all claims. We paid the settlement amount on July 2, 2026. Upon receipt of the payment, Blue Yonder released the Company and its subsidiaries from all claims related to the litigation and filed a satisfaction of judgment.
Except as described above, 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, 2025 regarding these matters.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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 June 30, 2026, 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 | |
| 3.1 | Certificate of Designation of Preferences and Rights of Series A Preferred Stock filed with the Secretary of State of the States of Delaware on June 29, 2026. (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on July 2, 2026). | |
| 10.1 | Forbearance Agreement, dated June 16, 2026, by and between Algorhythm Holdings, Inc. and SemiCab, Inc. (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on June 22, 2026). | |
| 10.2 | Exchange Agreement, dated June 29, 2026, by and between Algorhythm Holdings, Inc. and Streeterville Capital, LLC (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings, Inc.’s Current Report on Form 8-K filed with the SEC on July 2, 2026). | |
| 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 | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith.
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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: August 14, 2026 | By: | /s/ Gary Atkinson |
| Gary Atkinson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 14, 2026 | By: | /s/ Alex Andre |
| Alex Andre | ||
| Chief Financial Officer & General Counsel | ||
| (Principal Financial and Accounting Officer) | ||
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