What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-19 compared with 2024-05-15 · 154 added, 98 removed, 105 unchanged (71% of the section changed)

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Our results of operations, cash flows,

and all transactions impacting shareholders’ equity presented in this Quarterly Report on Form 10-Q as of March 31, 2024 are for

the three-month period ended March 31, 2024 and March 31, 2023.

Credit Facility

March 28, 2024, the Company and Oxford Commercial Finance, a Michigan banking corporation, (referred to as “Oxford”) entered

into a Loan Agreement (the “Loan Agreement”) and related Revolving Credit Note (the “Note”) for a $2 million

revolving line of credit (the “Oxford Line of Credit”).

Availability under the Oxford Line of Credit is determined monthly

by a borrowing base comprised of a percentage of eligible accounts receivable of the Company as set forth in the Loan Agreement.

connection with the Oxford Line of Credit, the Company is required to:

(a) Pay to Oxford a loan fee in the amount of one percent (1%)

of the Revolving Loan Cap (as defined in the Loan Agreement);

(b) Pay Field Exam (as defined in the Loan Agreement) expenses to Oxford;

(c) Maintain an average outstanding principal balance of the loan for each month in the amount of Five Hundred Seventy Thousand Dollars

($570,000) (“Minimum Loan Balance”).

If the actual average outstanding principal balance of the loan in any month is less

than the Minimum Loan Balance, the Company must pay interest for such month calculated on the Minimum Loan Balance;

(d) Pay an early

exit fee to Oxford, in the event the Company terminates the Loan Agreement and repays the obligations under the Note in full, as liquidated

damages and not as a penalty, in an amount equal to:

(i) if prior to the one year anniversary date of the Note, two percent (2.00%) of

the Revolving Loan Cap (as defined in the Loan Agreement) plus any fees which are due or to become due under the Loan Agreement, and

(ii) if on and after the one year anniversary date of the Note, but prior to the two year anniversary date of the Note, two percent (2.00%)

of the Revolving Loan Cap plus any fees which are due or to become due under the Loan Agreement;

and (e) Pay any and all third party

expenses, including the reasonable fees and disbursements of Oxford’s counsel, in connection with the preparation, administration

and enforcement of the Line of Credit agreements or the other loan documents.

revolving credit facility bears interest of the Prime Rate (the interest reported daily in the Wall Street Journal) plus 2.5%, but in

any event, not less than 10%.

to the Security Agreement (the “Security Agreement”) entered into by and between the Company and Oxford on March 28, 2024,

the obligations under the Loan Agreement are secured by all of the assets of the Company, presently owned or later acquired, and all

cash and non-cash proceeds thereof (including, without limitation, insurance proceeds).

and all transactions impacting shareholders’ equity presented in this Quarterly Report on Form 10-Q as of June 30, 2024 are for

the three and six month periods ended June 30, 2024 and 2023.

Offering June 2024

June 26, 2024, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant

Capital markets, LLC, as sales agent (the “Agent”), pursuant to which the Company could offer and sell, from time to time,

through the Agent (the “ATM Offering”), up to approximately $1,100,000 in shares of the Company’s common stock.

July 8, 2024, the Company entered into the First Amendment to the Sales Agreement (the “Amendment”) to increase the number

of shares to be sold in the ATM Offering to $2,020,000.

On August 9, 2024, the Company entered into the Second Amendment to the

Sales Agreement (the “Amendment”) to increase the number of shares to be sold in the ATM Offering to $3,100,000.

three and six months ended June 30, 2024, the Company had not yet sold any shares of its common stock from this ATM Offering.

to the agreement, the Agent is to be paid $30,000 in fees to cover legal and administrative expenses and will receive an amount equal

to 3% of the gross proceeds from each sale of the Company’s share of common stock.

to June 30, 2024 and through August 16, 2024(the last trading day prior to filing), the Company sold 1,657,172 shares of common stock

under the ATM offering, and received net proceeds from the ATM of approximately $1,676,000 after payment of brokerage commissions

and administrative fees to the agent of approximately $51,000.

June 11, 2024, the Company and its wholly owned subsidiary SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab

LLC” and collectively with the Company, the “Buyer”), SemiCab, Inc., a Delaware corporation (“SemiCab”

or the “Seller”), Ajesh Kapoor and Vivek Sehgal entered into an asset purchase agreement (the “Asset Purchase Agreement”)

pursuant to which the Seller agreed to sell and assign to the Company, and the Company agreed to purchase and assume from the Seller,

substantially all the assets, and certain specified liabilities relating to the business of the Seller.

Subject to certain exceptions

set forth in the Asset Purchase Agreement, the parties agreed that the Buyer will not assume the liabilities of the Seller.

an artificial intelligence, cloud-based collaborative transportation platform built to achieve the scalability required to predict and

optimize semi-tractor trailer load efficiency.

July 3, 2024, the parties closed on the asset purchase whereby the Company issued to the Seller (i) 641,806 shares of the Company’s

common stock (ii) a twenty percent (20%) membership interest in SemiCab LLC.

to the asset acquisition agreement, the Company and Seller entered into an option agreement (the “Option Agreement”), granting

the Buyer the right to acquire all of the issued and outstanding capital securities of SMCB Solutions Private Limited, a wholly owned

subsidiary of the Seller, in consideration for 320,903 shares of common stock of the Company.

The Option Agreement has not been exercised

through the date of this filing.

November 20, 2023, the Company entered into an agreement to sell $2,000,000 in common stock through a private placement of common stock

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for registration under the Securities Act of all or any portion of the shares purchased.

During the six months ended June 30, 2024, Jay

Foreman has made a written request to register his 1,099,000 shares.

August 23, 2023, MICS NY entered into an Agreement of Lease (the “Lease Agreement”) with OAC 111 Flatiron, LLC and OAC Adelphi,

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initial base rent in the amount of $30,000 beginning August 1, 2024, with scheduled increases over the term, as set forth in the Lease

March 2024, the Company initiated the termination of this lease under certain provisions made available under the Lease Agreement.

Landlord and the Company are in active discussions as to the terms of the lease termination however as of this filing, it is too early

in the negotiation process to estimate any potential loss, if any, related to the lease termination process.

February 15, 2023, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Aegis

Capital Corp, as sales agent (the “Agent”), pursuant to which the Company could offer and sell, from time to time, through

the Agent (the “ATM Offering”), up to approximately $1,800,000 in shares of the Company’s common stock.

For the three

months ended March 31, 2024 and 2023, the Company received net proceeds of approximately $0 and $36,000, respectively, after payment

of brokerage commissions and administrative fees to the agent.

As of May 12, 2023, the Company terminated the Sales Agreement.

the three months ended June 30, 2024, the Company abandoned its plans to continue use of the leased space due to failure to receive a

liquor license.

Consequently, the Company exercised its early termination provision of the Lease Agreement which was not accepted by

the Landlord.

While attempting to settle, the Company failed to make the first recurring cash lease payment due on July 31, 2024, and

as a result defaulted on the lease.

Due to the abandonment of the lease, all assets related to the lease were impaired.

Assets including

security deposits, rent deposits and right of use assets of approximately $3,878,000 have been written off during the three months ended

June 30, 2024 and are included as a component of operating expenses in the accompanying condensed consolidated statements of operations.

July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC, filed a civil action in the Supreme Court of the State of New York against

MICS NY and the Company (“the Defendants”) for alleged breach of lease, seeking monetary damages including unpaid rent, future

unpaid rent, and other expenses related to the lease.

The complaint alleges the Defendants breached the lease in various material respects.

of Operations

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of net sales as follows:

For Three Months Ended

March 31, 2024

March 31, 2023

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Cost of Goods Sold

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Other (Expenses) Income, Net

Loss Before Income Tax Provision

Income Tax Provision

Ended March 31, 2024 Compared to the Quarter Ended March 31, 2023

sales for the three months ended March 31, 2024, decreased to approximately $2,426,000 from approximately $3,383,000 representing a decrease

of approximately $957,000 (28.3 %) as compared to the three months ended March 31, 2023.

Loss Before Income Tax Benefit (Provision)

Income Tax Benefit (Provision)

Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

sales for the three months ended June 30, 2024, decreased to approximately $2,440,000 from approximately $2,625,000 representing a decrease

of approximately $185,000 (7.0 %) as compared to the three months ended June 30, 2023.

The decrease was primarily due to lower overall

sell-through results during the holiday season, largely with our largest customer, Walmart, which in turn diminished inventory restocking

need immediately after the holiday retail season.

profit for the three months ended March 31, 2024 decreased to approximately $502,000 from approximately $819,000 representing a decrease

of approximately $317,000 (38.7%) as compared to the three months ended March 31, 2023.

Gross margins for the three months ended March

31, 2024 were 20.7%, as compared to 24.2% for the three months ended March 31, 2023.

Approximately $86,000 was due to lower gross margins,

which was primarily caused by a $294,000 increase in repair costs during the period.

The remaining $231,000 reduction in gross income

was due to the reduction in sales in the first quarter of 2024 as compared to the same period in 2023.

the three months ended March 31, 2024, total operating expenses decreased to approximately $2,789,000, compared to approximately $2,965,000

during the three months ended March 31, 2023.

This represents a decrease in total operating expenses of approximately $176,000 (5.9%)

from the three months ended March 31, 2023.

The decrease in operating expenses was attributable to a decrease in selling expenses due

to the decrease in commissionable sales.

sell-through results during the past holiday season, mostly with our largest customer, Walmart, which in turn diminished inventory restocking

requirements during the first six months of the calendar year which is historically off-peak shipping season.

profit for the three months ended June 30, 2024 decreased to approximately $324,000 from approximately $529,000 representing a decrease

of approximately $205,000 (38.8%) as compared to the three months ended June 30, 2023.

Gross margins for the three months ended June

30, 2024 were 13.3% as compared to 20.2% for the three months ended June 30, 2023.

Approximately $260,000 of the decrease in gross profit

was primarily due to increased sales in excess inventory which yielded significantly lower margin than current models sold and was offset

by a decrease in expenses of approximately $57,000 associated with the miscellaneous logistics costs related to the timing of receipt

of new goods.

the three months ended June 30, 2024, total operating expenses increased to approximately $6,478,000, compared to approximately

$2,960,000 during the three months ended June 30, 2023.

This represents an increase in total operating expenses of approximately

$3,518,000 from the three months ended June 30, 2023.

The increase in operating expenses was primarily due to the write-off of

impaired operating lease assets of approximately $3,878,000 related to the hospitality lease (See Hospitality Lease in Recent

Developments).

This increase in operating expenses was offset by a decrease in seasonal bad debt reserves of approximately $156,000,

a decrease in logistics costs of approximately $124,000 associated with the closing of the warehouse operation and outsourcing of

logistics to a third-party logistics company, acceleration of depreciation expense of approximately $130,000 recognized in the prior

year on impaired fixed assets associated with the closing of the warehouse.

Expenses, net

expense consisted of interest expense of approximately $17,000 for the three months ended June 30, 2024, as compared to interest expense

of approximately $29,000 for the three months ended June 30, 2023.

the three months ended June 30, 2024 and 2023 the Company recognized a tax benefit of approximately $52,000 and $0, respectively.

Company is not recognizing any tax provision for the six months ended June 30, 2024 as the Company is not forecasting any taxable income

for the current year and had a loss before income tax benefit in the previous year.

The Company’s income tax expense differs for

the expected tax benefit based on statutory rates primarily due history of losses and forecasts that suggest the Company will not be

able to utilize any deferred tax assets in the future.

Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

sales for the six months ended June 30, 2024, decreased to approximately $4,866,000 from approximately $6,008,000 representing a decrease

of approximately $1,142,000 (19.0 %) as compared to the six months ended June 30, 2023.

The decrease was primarily due to lower overall

sell-through results during the past holiday season, mostly with our largest customer, Walmart, which in turn diminished inventory restocking

requirements during the first six months of the calendar year which is historically off-peak shipping season.

profit for the six months ended June 30, 2024 decreased to approximately $826,000 from approximately $1,349,000 representing a decrease

of approximately $523,000 (38.8%) as compared to the six months ended June 30, 2023.

Gross margins for the six months ended June 30,

2024 were 17.0%, as compared to 22.5% for the six months ended June 30, 2023.

There was a decrease of approximately $276,000 primarily

due to lower gross margins caused by increased sales mix of excess inventory yielding margins that were less than current models sold.

The remaining decrease in net sales as explained above accounted most of the remaining $267,000 of the decrease in gross profit.

the six months ended June 30, 2024, total operating expenses increased to approximately $9,267,000 compared to approximately $5,927,000

during the six months ended June 30, 2023.

This represents an increase in total operating expenses of approximately $3,340,000 from the

six months ended June 30, 2023.

The increase in operating expenses was primarily due to the write-off of impaired operating lease assets

of approximately $3,878,000 related to the hospitality lease (See Hospitality Lease in Recent Developments).

The increase in operating

expenses was primarily attributable to a seasonal decrease in bad debt reserves of approximately $81,000, acceleration of depreciation

expense of approximately $133,000 recognized in the prior year on impaired fixed assets associated with the closing of the logistics

warehouse, a decrease in stock based compensation expense of approximately $101,000, reduced costs in selling expense of approximately

$81,000 due to significantly lower inbound freight costs related to the reduced volume of product returns and a decrease in travel and

entertainment of approximately $81,000.

(Expenses) Income, net

expense consisted of interest expense of approximately $28,000 for the three months ended March 31, 2024, as compared to other income,

net of approximately $663,000 for the three months ended March 31, 2023.

During the three months ended March 31, 2023 there was a one-time

refund of approximately $704,000 from the Employee Retention Credit program offset by interest expense of approximately $41,000 which

accounted for the increase in other income, net.

Company’s income tax provision for the three months ended March 31, 2024, was approximately $52,000 due to income taxes due on

amended federal tax returns filed for 2020 and 2021 which took into account the one-time refunds received from the Employee Retention

Credit program.

The Company’s income tax provision for the three months ended March 31, 2023, was approximately $1,502,000 as the

Company recognized a full valuation allowance on all of its deferred tax assets based on the recent history of losses and forecasts that

suggested the Company would not be able to utilize the deferred tax assets in the future.

expense consisted of interest expense of approximately $45,000 for the six months ended June 30, 2024 as compared to other income, net

of approximately $635,000.

During the six months ended June 30, 2023, there was a one-time refund of approximately $704,000 from the

Employee Retention Credit program offset by interest expense of approximately $69,000 which accounted for the increase in other income,

the six months ended June 30, 2024, the Company did not recognize any income tax provision as the Company is not forecasting any taxable

income for the current year.

The Company’s income tax provision for the six months ended June 30, 2023, was approximately $1,502,000

as the Company recognized a full valuation allowance on all of its deferred tax assets based on the recent history of losses and forecasts

that suggested the Company would not be able to utilize the deferred tax assets in the future.

The Company’s income tax expense

differs for the expected tax benefit/expense based on statutory rates primarily due to full valuation allowance for all of its subsidiaries

for the six months ended June 30, 2023.

and Capital Resources

Company incurred a net loss of approximately $2,367,000 for the three-month period ended March 31, 2024 and has a history of recurring

March 31, 2024, we had cash on hand of approximately $4,125,000 as compared to approximately $6,703,000 as of December 31, 2023.

increase in cash on hand of approximately $2,578,000 from December 31, 2023, was primarily due to approximately $2,557,000 used in

operations primarily due to off-peak seasonal settlement of accounts receivable offset by seasonal decreases in accounts payable

(primarily to factories), accrued expenses related to seasonal accruals for estimated returned goods customer refunds and co-op

incentive program expenses.

As of March 31, 2024, our working capital was approximately $4,887,000.

March 31, 2023, we had cash on hand of approximately $2,895,000 as compared to $2,795,000 as of December 31, 2022.

The increase in

cash on hand of approximately $100,000 was primarily due to approximately $1,739,000 provided by financing activities primarily due

to borrowings from our credit facility with Fifth Third Bank and offset by approximately $1,934,000 in net cash used in operating

activities primarily due to off-peak seasonal settlement of accounts receivable offset by seasonal increases in accounts payable,

accrued expenses related to seasonal accruals for estimated returned goods, co-op incentive program expenses and customer refunds,

and approximately $95,000 used in investing activities for the purchase of molds an tooling.

of March 31, 2024, the Company’s cash balance was approximately $4,125,000.

Based on cash flow projections from operating and

financing activities and the existing balance of cash, management is of the opinion that the Company has insufficient funds to

sustain operations for at least one year after the date of this report, and it may not be able to meet its payment obligations from

operations and related commitments, if the Company is not able to obtain outside financing to allow the Company to continue as a

going concern.

Based on these factors, the Company has substantial doubt that it will continue as a going concern for the twelve

months following the issuance date of the financial statements included elsewhere in this report.

Company incurred a net loss of approximately $8,486,000 for the six-month period ended June 30, 2024, and has a history of recurring

June 30, 2024, we had cash on hand of approximately $1,245,000 as compared to approximately $6,703,000 on December 31, 2023.

in cash on hand of approximately $5,458,000 from December 31, 2023, was primarily due to approximately $5,410,000 used in operations

of which approximately $4,711,000 was used to seasonally pay down accounts payable and accrued expenses.

There were seasonal reductions

in customer deposits and refunds to customers of approximately $1,221,000 and a reduction of approximately $1,217,000 in reserves for

sales returns as customers seasonally returned defective and overstock goods from the past holiday season during the six months ended

June 30, 2024.

These uses of cash for operating activities were offset by a seasonal reduction of approximately $5,000,000 in accounts

receivable of which a significant amount of the reduction was offset by customers netting credit amounts due to them from returns and

co-op incentive programs against open invoices.

As of June 30, 2024, our working capital was approximately $2,688,000.

June 30, 2023, we had cash on hand of approximately $1,890,000 as compared to $2,795,000 as of December 31, 2022.

The decrease in cash

on hand of approximately $905,000 was primarily due to approximately $614,000 used in operating activities primarily due to off-peak

seasonal settlement of accounts receivable offset by seasonal increases in accounts payable, accrued expenses related to seasonal accruals

for estimated returned goods, co-op incentive program expenses and customer refunds, approximately $137,000 used investing activities

for the purchase of molds and tooling and approximately $154,000 used in financing activities.

While the Company received proceeds from

the exercise of common stock warrants and issuance of common stock (net of offering costs) of approximately $1,640,000, this increase

in financing activities was offset by repayment of revolving credit lines of credit and other debt of approximately $1,794,000 during

the six months ended June 30, 2024.

on cash flow projections from operating and financing activities and the existing balance of cash, management is of the opinion that

the Company has insufficient funds to sustain operations for at least one year after the date of this report, and it may not be able

to meet its payment obligations from operations and related commitments, if the Company is not able to obtain outside financing to allow

the Company to continue as a going concern.

Based on these factors, the Company has substantial doubt that it will continue as a going

concern for the twelve months following the issuance date of the financial statements included elsewhere in this report.

Company’s plan to alleviate the going concern issue is to increase revenue while controlling operating costs and expenses and obtaining

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis