What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-19 compared with 2024-08-19 · 730 added, 371 removed, 324 unchanged (77% of the section changed)

FINANCIAL STATEMENTS

Singing Machine Company, Inc.

HOLDINGS, INC.

and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, 2024

September 30, 2024

December 31, 2023

1 unchanged sentence

Accounts receivable, net of allowances of $ 266,000 and $ 174,000 , respectively

Due from Oxford Bank

Accounts receivable related parties

Accounts receivable

Due from Banks

Accounts receivable, related party

Returns asset

4 unchanged sentences

Other non-current assets

Intangible assets, net

Liabilities and Shareholders’ Equity

5 unchanged sentences

Reserve for sales returns

Other current liabilities

Merchant cash advances payable

Notes payable

Current portion of notes payable to related parties

Current portion of operating lease liabilities

Other current liabilities

Total Current Liabilities

Other liabilities, net of current portion

Other liabilities

Notes payable to related parties, net of current portion

Operating lease liabilities, net of current portion

7 unchanged sentences

100,000,000 shares authorized;

7,418,061 issued and 6,418,061 shares outstanding at June 30, 2024 and 6,418,061 issued and outstanding at December 31, 2023.

11,079,678 issued and

9,752,755 shares outstanding at September 30, 2024 and 6,418,061 issued and outstanding at December 31, 2023.

Additional paid-in capital

2 unchanged sentences

( 25,915,000 )

Total Shareholders’ (Deficit) Equity

Total Liabilities and Shareholders’ (Deficit) Equity

Non-controlling interest

Total Algorhythm Holdings Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

notes to the condensed consolidated financial statements

Singing Machine Company, Inc.

HOLDINGS, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

For the Three Months Ended

For the Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Cost of Goods Sold

2 unchanged sentences

General and administrative expenses

Operating lease impairment expense

Total Operating Expenses

Loss from Operations

( 6,154,000 )

Net (gain) loss on early termination of operating lease

( 3,874,000 )

Total Operating Expenses

Income (Loss) from Operations

( 7,185,000 )

1 unchanged sentence

Other (Expenses) Income

Gain on disposal of fixed assets

Gain from Employee Retention Credit Program refund

1 unchanged sentence

Total Other (Expenses) Income, net

Loss Before Income Tax Benefit (Provision)

( 6,171,000 )

( 2,460,000 )

Income (Loss) Before Income Tax Benefit

( 7,513,000 )

2 unchanged sentences

( 1,502,000 )

Consolidated Net Income (Loss)

( 7,513,000 )

( 5,348,000 )

Net (income) loss attributable to non-controlling interest

Net Income (Loss) Available to Common Stockholders

$ ( 7,292,000 )

$ ( 5,348,000 )

Loss per common share

Income (Loss) per common share

Basic and diluted

Weighted Average Common and Common Equivalent Shares:

Weighted Average Common and Common

Equivalent Shares:

Basic and diluted

notes to the condensed consolidated financial statements

Singing Machine Company, Inc.

HOLDINGS, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

the Three Months Ended June 30, 2024 and 2023

Balance at March 31, 2024

$ ( 28,282,000 )

the Three Months Ended September 30, 2024 and 2023

Additional Paid in

Non-Controlling

Balance at June 30, 2024

$ ( 34,401,000 )

$ ( 872,000 )

Net (loss) income

Sale of common stock, net of offering costs

Stock based compensation

Balance at June 30, 2024

Common stock issued for purchase of SemiCab Inc

Issuance of subsidiary stock to non-controlling interest

Balance at September 30, 2024

$ ( 148,000 )

1 unchanged sentence

Additional Paid in

Balance at March 31, 2023

$ ( 19,517,000 )

( 2,460,000 )

Non-Controlling

Balance at June 30, 2023

$ ( 21,977,000 )

Sale of common stock, net of offering costs

Stock based compensation

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 21,879,000 )

the Six Months Ended June 30, 2024 and 2023

the Nine Months Ended September 30, 2024 and 2023

Additional Paid in

Non-Controlling

Balance at December 31, 2023

2 unchanged sentences

( 7,513,000 )

Sale of common stock, net of offering costs

Stock based compensation

Balance at June 30, 2024

Common stock issued for purchase of SemiCab Inc

Issuance of subsidiary stock to non-controlling interest

Balance at September 30, 2024

$ ( 148,000 )

5 unchanged sentences

( 5,348,000 )

Net income (loss)

( 5,348,000 )

Sale of common stock, net of offering costs

1 unchanged sentence

Stock based compensation

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 21,879,000 )

1 unchanged sentence

notes to the condensed consolidated financial statements.

Singing Machine Company, Inc.

HOLDINGS, INC.

and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

June 30, 2024

June 30, 2023

For the Six Months Ended

June 30, 2024

June 30, 2023

For the Nine Months Ended

September 30, 2024

September 30, 2023

Cash flows from operating activities

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of intangible assets

Provision for estimated cost of returns

1 unchanged sentence

Credit losses

Operating lease impairment expense

Loss from disposal of property and equipment

Gain on termination of operating lease

Net gain from disposal of property and equipment

Stock based compensation

3 unchanged sentences

Accounts receivable

( 3,982,000 )

Due from banks

4 unchanged sentences

Accounts payable

( 3,940,000 )

Accrued expenses

( 1,939,000 )

Customer deposits

Refunds due to customers

Reserve for sales returns

( 1,967,000 )

Reserve for sales returns

( 1,180,000 )

Operating lease liabilities

Net cash used in operating activities

Payment of early termination fee on operating lease termination settlement

Net cash (used in) provided by operating activities

( 7,069,000 )

1 unchanged sentence

Purchase of property and equipment

Cash received from purchase of SemiCab Inc

Disposal of property and equipment

Net cash used in investing activities

1 unchanged sentence

Proceeds from sale of stock, net of offering costs

Net payments on revolving lines of credit

Payments on merchant cash advances payable

Net payment from revolving lines of credit

( 1,761,000 )

Net cash used in financing activities

Net cash provided by (used in) financing activities

Net change in cash

4 unchanged sentences

Cash paid for interest

Non-Cash investing and financing cash flow information:

Common stock issued for purchase of SemiCab Inc

Equipment purchased under capital lease

Right of use assets exchanged for lease liabilities

notes to the condensed consolidated financial statements

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

1 – NATURE OF BUSINESS

are primarily engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings.

Holdings, Inc.

(f/k/a The Singing machine Company, Inc.) (the “Company”) is a holding company for an AI enabled software

logistics business operated through our SemiCab Holding subsidiary and a home karaoke consumer products company that designs and distributes

karaoke products globally to retailers and ecommerce partners through our Singing Machine subsidiary.

operations include our wholly owned subsidiaries, SMC Logistics, Inc., a California corporation (“SMCL”), SMC-Music, Inc.,

a Florida corporation (“SMCM”), SMC (HK) Limited, a Hong Kong company (“SMH”), MICS Hospitality Holdings, Inc.,

a Delaware corporation (“MICS Hospitality”), MICS Hospitality Management, LLC, a Delaware limited liability company (“MICS

Hospitality Management”), MICS Nomad, LLC, a Delaware limited liability company (“MICS NY”) and SemiCab Holdings, LLC,

a Nevada limited liability company (“SemiCab”).

Machine is primarily engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings.

We are a 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.

Singing Machine’s operations include its wholly owned subsidiaries, SMC Logistics, Inc., a California corporation (“SMCL”),

SMC-Music, Inc., a Florida corporation (“SMCM”), SMC (HK) Limited, a Hong Kong company (“SMH”), MICS Hospitality

Holdings, Inc., a Delaware corporation (“MICS Hospitality”), MICS Hospitality Management, LLC, a Delaware limited liability

company (“MICS Hospitality Management”) and MICS Nomad, LLC, a Delaware limited liability company (“MICS NY”).

is a cloud-based collaborative transportation platform built to achieve the scalability required to predict and optimize full-truckload

transportation at enterprise-scale.

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.

2 - RECENT DEVELOPMENTS

and Symbol Change

September 5, 2024, our Certificate of Incorporation was amended to effect a change in the name of the Company from “The Singing

Machine Company, Inc.” to “Algorhythm Holdings, Inc.” In addition, effective September 8, 2024, the Company’s

ticker symbol was changed from “MICS” to “RIME.”

in Fiscal Year

1 unchanged sentence

Our results of operations, cash flows,

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

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

for the three and nine month periods ended September 30, 2024 and 2023.

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

5 unchanged sentences

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 .

to the agreement, the Agent was 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.

For the three and nine months ended September 30,

2024, the Company sold 1,673,077 shares of common stock under the ATM offering and received net proceeds of approximately $ 1,489,000

after payment of legal and accounting fees, brokerage commissions, and administrative fees to the agent of approximately $ 189,000 .

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

to September 30, 2024 and through November 18, 2024 (the last trading day prior to filing), the Company sold 2,162,423 shares of common

stock under the ATM offering, and received net proceeds of approximately $ 1,372,000 after payment of brokerage commissions and administrative

fees to the agent of approximately $ 42,000 .

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

10 unchanged sentences

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.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

November 20, 2023, the Company entered into an agreement to sell $ 2,000,000

in common stock through a private placement of common stock (the “Private Placement”).

The Private Placement was

completed with two Affiliates, (Stingray Group, Inc.

and Jay Foreman), both of which were existing shareholders with Board

representation.

The Private Placement was completed at $ 0.91

per share of common stock, with a total of approximately 2,198,000

shares issued.

Net proceeds from the transaction were approximately $ 1,900,000 ,

net of transaction fees of approximately $ 100,000 .

During the six-month period after the closing date, the purchasers may make a written request 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

the Buyer the right to acquire all of the issued and outstanding capital securities of SMCB Solutions Private Limited (“SMCB”),

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

The Option Agreement expired

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

2 unchanged sentences

York, New York (the “Premises”).

term of the Lease Agreement is for fifteen ( 15 ) years, or on such an earlier date upon which the term shall expire, be canceled or terminated

pursuant to any of the conditions or covenants of the Lease Agreement.

Pursuant to the Lease Agreement, MICS NY is obligated to pay an

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

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.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage

of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

the six months ended June 30, 2024, the Company abandoned its plans to continue use of the leased space and exercised its early termination

provision of the Lease Agreement which was not accepted by the Landlord.

Due to the abandonment of the lease, all assets related to the

lease were impaired.

Assets including security deposits, rent deposits and right of use assets of approximately $ 3,878,000 were written

off during the three months ended June 30, 2024.

July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC (the “Landlord”), filed a civil action in the Supreme Court of

the State of New York against MICS Nomad LLC, a subsidiary of the Company (“MICS NY”), and the Company (“the Defendants”)

for alleged breach of lease, seeking monetary damages including unpaid rent, future unpaid rent, and other expenses related to the lease.

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

September 25, 2024, the Company entered into a Settlement Agreement for a full release and dismissal of the complaint within 5 business

days of the Company’s payment of $ 250,000 .

Pursuant to the Settlement Agreement, the Company made the first payment of $ 150,000

was made on September 25, 2024 and a final payment of $ 100,000 was due and paid on October 25, 2024.

On October 29, 2024, the Landlord

filed a discontinuance with prejudice.

a result of the settlement, during the three months ended September 30, 2024, the Company wrote off the remaining operating lease liability

on the Lease Agreement and recognized a gain on early termination of the operating lease of approximately $ 3,874,000 .

For the nine months

ended September 30, 2024, the Company recognized a loss on early termination of the operating lease of $ 4,000 which includes the $ 250,000

termination settlement expense.

The net loss on early termination of the Lease Agreement was recorded as a component of operating expenses

in the accompanying condensed consolidated statements of operations.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

October 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with investors pursuant to which we

sold, in a private placement (the “Private Placement”), secured notes with an aggregate principal amount of $ 2,352,941 (the

“Notes”), for cash proceeds of $ 2,000,000 , net of original issue discount of $ 352,941 .

As consideration for entering into

the SPA, we issued a total of 2,299,998 shares of common stock of the Company to the investors on October 24, 2024 (See Note 17).

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 $ 2,000,000

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

On October 17, 2024, the Company terminated the Loan Agreement and

As of the date of termination, the Company had no outstanding amounts owed to Oxford and paid a termination fee of $ 40,000 .

November 1, 2024, the Company entered into a Stock Repurchase Agreement (the “Repurchase Agreement”) with Regalia Ventures

LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company agreed to repurchase from the Seller

an aggregate of 1,098,901 issued and outstanding shares of common stock, par value $ 0.01 per share, of the Company (the “Shares”).

Pursuant to the terms of the Repurchase Agreement, the Company has agreed to repurchase from the Seller, and the Seller has agreed to

sell, assign and transfer to the Company, all of the Seller’s right, title and interest in and to the Shares, at a price per Share

equal to the higher of:

(1) the closing price of the common stock on the last trading day immediately preceding the date of the Repurchase

or (2) the highest volume weighted average price (VWAP) of the common stock during a pricing period of ten (10) consecutive

trading days prior to the date of the Repurchase Agreement per share (the “Purchase Price”), and the Company shall issue

to the Seller a promissory note in the principal amount equal to the Purchase Price, substantially in the form attached to the Repurchase

Agreement as Exhibit A (the “Note”), and subject to terms and conditions therein.

shares of common stock to be repurchased were originally issued to the Seller on November 21, 2023, pursuant to a certain stock purchase

agreement, dated November 20, 2023.

of the date of this filing, the repurchase of the shares has not yet closed.

3 – LIQUIDITY, GOING CONCERN AND MANAGEMENT PLANS

of June 30, 2024, the Company had cash on hand of approximately $ 1,245,000 which is not sufficient to fund the Company’s planned

operations through one year after the date the consolidated financial statements are issued.

The Company has a recent history of recurring

operating losses and decreases in working capital.

These factors create substantial doubt about the Company’s ability to continue

as a going concern for at least one year after the date that the Company’s audited consolidated financial statements are issued.

previously reported on Form 8-K filed on August 30, 2024, on August 26, 2024, the Company received a notice from The Nasdaq Stock Market

LLC (“NASDAQ”) indicating that its stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the quarterly

period ended June 30, 2024 did not meet the minimum of $2,500,000 in stockholders’ equity required by NASDAQ Listing Rule 5550(b)(1)

(the “Equity Rule”) for continued listing, or the alternatives of market value of listed securities or net income from continuing

Pursuant to the Equity Rule, the Company submitted a plan to regain compliance with the Equity Rule.

November 13, 2024, the Company filed a Form 8-K stating that it believed it regained compliance with the Equity Rule.

As disclosed herein,

the Company reported stockholders’ equity of approximately $ 2.7 million.

has advised the Company that it will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement

and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting.

of September 30, 2024, the Company had cash on hand of approximately $ 621,000 and deficit working capital of approximately $ 2,082,000

which is not sufficient to fund the Company’s planned operations through one year after the date the consolidated financial statements

The Company has a recent history of recurring operating losses and decreases in working capital.

These factors create substantial

doubt about the Company’s ability to continue as a going concern for at least one year after the date that the Company’s

audited consolidated financial statements are issued.

condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue

3 unchanged sentences

the ordinary course of business.

The Singing Machine Company,

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

intends to finance operations with future debt or equity financings, however, if and when such financings may occur are uncertain.

5 unchanged sentences

direct control that management expects to be available within the next 12 months.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation

accompanying unaudited financial statements for the three months ended June 30, 2024 and 2023 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 Securities and Exchange Commission.

Accordingly, they do not include

all of the information and disclosures required by US GAAP for complete consolidated financial statements.

the opinion of management, such 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, 2024 and condensed financial statements information for the

three and six months ended June 30, 2024 and 2023 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2023

is derived from the audited consolidated balance sheet as of that date.

The condensed consolidated financial statements and notes hereto

should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report

on Form 10-KT for the transition period ended December 31, 2023.

There have been no changes to our significant accounting policies as

disclosed on the Company’s annual report on Form 10-KT for the transition period ended December 31, 2023.

accompanying unaudited financial statements for the three months ended September 30, 2024 and 2023 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 Securities and Exchange Commission.

Accordingly, they do not

include all of the information and disclosures required by US GAAP for complete consolidated financial statements.

In the opinion of management, such condensed consolidated

financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the condensed

consolidated financial position and the condensed consolidated results of operations.

The condensed consolidated results of operations

for the periods presented are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated balance

sheet as of September 30, 2024 and condensed financial statements information for the three and nine months ended September 30, 2024 and

2023 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2023 is derived from the audited consolidated balance

sheet as of that date.

The condensed consolidated financial statements and notes hereto should be read in conjunction with the consolidated

financial statements and notes thereto included in the Company’s annual report on Form 10-KT for the transition period ended December

There have been no changes to our significant accounting policies as disclosed on the Company’s annual report on Form

10-KT for the transition period ended December 31, 2023.

of Consolidation

Company evaluates its business relationships with related parties to identify potential Variable Interest Entities (“VIEs”)

under Accounting Standards Codification (“ASC”) 810, Consolidation.

The Company will consolidate any VIE in which it has

a controlling financial interest and is deemed to be the primary beneficiary.

A controlling financial interest has both of the following

characteristics:

(1) the power to direct the activities of the VIE that most significantly impact its economic performance;

obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE

that could be significant to the VIE.

If both characteristics are met, the Company is considered to be the primary beneficiary and therefore

will consolidate that VIE into its consolidated financial statements.

prescribed by ASC 810, if the Company holds a variable interest in a VIE but is not the entity’s primary beneficiary, it shall

disclose its methodology for determining if the Company is the primary beneficiary of the VIE, e.g., significant judgments and

assumptions made.

Additional information required includes information about the types of involvement considered significant, and

those considered in the determination of whether the reporting entity is the primary beneficiary.

if the Company provides or intends to provide financial or other support (explicitly or implicitly) to the VIE, when not contractually

required to, the Company shall disclose the type and amount of the support, along with the primary reasons for providing the support.

Both qualitative and quantitative information about the Company’s involvement with the VIE, shall include the nature, purpose,

size, and activities of the VIE, including how the VIE is financed.

Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based

upon their estimated fair values on the acquisition date.

Any excess of the purchase price over the fair value of the net assets acquired

is recorded as goodwill.

The purchase price allocation process requires management to make significant estimates and assumptions at the

acquisition date with respect to intangible assets.

The allocation of the consideration transferred in certain cases may be subject to

revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition

Direct transaction costs associated with the business combination are expensed as incurred.

The Company includes the results of

operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.

Company evaluates its goodwill for impairment in accordance with the Financial Accounting Standards Board (“FASB”) issued

Accounting Standards Update (“ASU”) 350, Intangibles – Goodwill and Other .

Goodwill is recorded when the purchase

price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.

Company tests the recorded amount of goodwill for impairment on an annual basis on December 31 or more frequently if there are indicators

that the carrying amount of the goodwill exceeds its carried value.

Company acquired amortizable intangibles assets as part of asset purchase agreements consisting of customer relationships, trade names

and proprietary technology.

Such intangibles are amortized over their useful lives on a straight-line

Company reviews intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount

of the assets might not be recoverable.

Factors that the Company considers in deciding when to perform an impairment review include significant

underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes

or planned changes in the use of the assets.

If an impairment review is performed to evaluate a long-lived asset for recoverability,

the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived

asset to its carrying value.

An impairment loss would be recognized when estimated undiscounted future cash flows expected to result

from the use of an asset are less than its carrying amount.

The impairment loss would be based on the excess of the carrying value of

the impaired asset over its fair value, determined based on discounted cash flows.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

Value Measurements

accordance with ASC 820, Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be

received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement

guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes

the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs include those that

market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent

of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants

would use in valuing the asset or liability.

The guidance establishes three levels of inputs that may be used to measure fair value:

Quoted market prices in active markets for identical assets or liabilities.

Inputs other than Level 1 that are observable, either directly or indirectly, such as

quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or model-derived valuations.

All significant inputs used in the Company’s valuations

are observable or can be derived principally from or corroborated with observable market

data for substantially the full term of the assets or liabilities.

Level 2 inputs also include

quoted prices that were adjusted for security-specific restrictions which are compared to

output from internally developed models such as a discounted cash flow model.

Unobservable inputs that are supported by little or no market activity and that are significant

to the fair value of the assets or liabilities.

carrying amounts of financial instruments carried at cost, including cash, accounts receivables and accounts and accounts receivable

– related party, trade payables advances and notes payables and notes payable – related party approximate their fair value

due to the short-term maturities of such instruments.

categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to

the fair value measurement.

ACCOUNTING PRONOUNCEMENTS

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , that

requires disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker and included within

each reported measure of segment profit or loss.

The standard also requires disclosure of the composition of other segment items included

in the measure of segment profit or loss that are not separately disclosed.

All disclosure requirements under ASU 2023-07 are also required

for public entities with a single reportable segment.

The ASU is effective for the Company’s Annual Report on Form 10-K for the

year ended December 31, 2024, and subsequent interim periods, with early adoption permitted.

The Company is currently evaluating the

impact of adopting this standard on our consolidated financial statements and related disclosures.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

8 unchanged sentences

our consolidated financial statements and related disclosures.

5 – ASSET ACQUISITION

June 11, 2024, the Company and its wholly owned subsidiary SemiCab,LLC, SemiCab, Inc., Ajesh Kapoor and Vivek Sehgal entered into 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.

The Company decided to acquire SemiCab as part of a strategic plan

to diversify its business and reduce its reliance solely on retail and consumer electronics and strategically focus on growth.

The acquisition

fit the Company’s strategic decision to pivot to a holding company structure.

July 3, 2024, the parties completed the Asset Purchase Agreement whereby the Company issued to the Seller (i) 641,806 shares of the Company’s

common stock with a value of approximately $ 494,000 (ii) a twenty percent ( 20 % ) membership interest in SemiCab LLC.

(See Note 2).

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 (“SMCB”),

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

As of the date of this filing,

the Option Agreement expired unexercised.

connection with the asset acquisition agreement, effective July 3, 2024, SemiCab, LLC entered into employment agreements (the “Agreements”)

with Ajesh Kapoor and Vivek Sehgal Kapoor’s agreement spans three years with an annual base salary of $ 140,000 for 2024, $ 240,000

for 2025, and $ 300,000 for subsequent years, and Sehgal’s agreement also spans three years with an annual base salary of $ 105,000

for 2024, $ 210,000 for 2025, $ 240,000 for 2026, $ 270,000 for 2027, and $ 300,000 for 2028.

Both executives’ salaries are subject

to annual review by the Board.

They are eligible for annual performance-based bonuses contingent on specific goals set by the Board and

will participate in the 2022 Equity Incentive Plan, receiving annual equity issuances and cash-based incentives tied to revenue milestones.

Both are entitled to standard employee benefits, including health insurance and retirement plans.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

July 3, 2024, the (“Acquisition Date”), the Company acquired substantially all the assets and assumed certain liabilities

of SemiCab, Inc.

in exchange for the purchase price consideration of approximately $ 983,000 .

On July 3, 2024, the value of the total

identifiable intangible assets, including goodwill was approximately $ 4,754,000 , based on the restricted value of SMC common shares on

the date of acquisition.

The Company also recognized non-controlling interest at fair value as of the Acquisition Date in the amount

of approximately $ 74,000 representing 20 % ownership in SemiCab Holdings, LLC, which is 80 % owned by the Company.

trade names and developed technology intangible assets were valued using the relief-from-royalty method.

The relief-from-royalty method

is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset

are based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated

by applying royalty rates of 0.5 % to the prospective revenue attributable to the intangible asset.

The resulting net annual royalty payments

are then discounted to present value using a discount factor of 33 %, and the remaining economic life of nine years .

Company determined an estimated fair value of customer relationships using multi-period excess earnings approach utilizing a discounted

cash flow methodology.

The analysis included assumptions regarding the growth rate for the development of new businesses, concluding

between 8 % and 20 % organic growth rates for revenue attributable to existing customers.

A discount rate of 33 % was used for the weighted

average cost of capital analysis, along with the evaluation of the capital expenditure requirements associated with any new initiatives

developed by SemiCab.

The purchase accounting for this transaction is provisional and subject

to measurement period adjustments for one year following the date of acquisition.

valuations for the above intangible assets require use of unobservable inputs that are classified as Level 3 on the fair value hierarchy.

goodwill resulting from this acquisition is tax deductible.

following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their

OF CONSIDERATION TRANSFERRED TO THE ASSETS ACQUIRED AND LIABILITIES ASSUMED

Equity consideration

Fair value of non-controlling interest

Total Equity Consideration

Debt Extinguishment

Total Consideration

Identifiable net assets acquired:

Cash and Cash Equivalents

Accounts receivable

Prepaid expenses and other current assets

Property and equipment, net

Other Non-Current Operating Assets, Net

Customer Relationships ( 9 year estimated useful life)

Trade Name ( 9 year estimated useful life)

Developed Technology ( 6 year estimated useful life)

Accounts payable and accrued expenses

( 2,680,000 )

Loans payable Merchant Cash Advances (MCA)

Notes payable Related Parties

Net assets acquired

( 2,371,000 )

Estimated Goodwill

Forma Information

unaudited pro forma financial information below presents the effects of the Asset Purchase Agreement as though it had been completed

on January 1, 2023.

The pro forma adjustments are derived from the historically reported transactions of the respective companies.

pro forma results do not include anticipated combined effects or other expected benefits of the acquisition.

The pro forma results for

the nine months ended September 30, 2024 and 2023 reflect the combined performance of the Company and the SemiCab business for that period.

The unaudited pro forma information is based on available data and certain assumptions that the Company believes are reasonable given

the circumstances.

However, actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial

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, 2023, nor does it attempt to forecast future consolidated results of operations.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

OF PRO FORMA FINANCIAL INFORMATION

Nine Months Ended

September 30, 2024

September 30, 2023

Operating loss from continuing operations

( 8,093,000 )

( 6,187,000 )

( 8,451,000 )

( 7,164,000 )

The pro forma results for

the nine months ended September 30, 2023, include a net increase in operating expenses of $ 265,000 , consisting of legal and accounting

expenses of approximately $ 215,000 associated with the acquisition of SemiCab and $ 50,000 in shares of SMC common stock issued

to Vivek Sehgal as sign-on bonus.

6 – FINANCING

3 unchanged sentences

The Credit Agreement established a secured asset-backed revolving credit facility which is comprised

of a maximum $ 2,000,000 revolving credit facility (“Credit Facility”).

Availability under the Credit Facility is determined

monthly by a borrowing base comprised of a percentage of eligible accounts receivable of the Borrowers.

The Company’s obligations

under the Credit Agreement are secured by a continuing security interest in all property of each Loan Party, subject to certain excluded

collateral (as defined in the Credit Agreement).

As of June 30, 2024, there was approximately $ 187,000 due from Oxford for cash collections

received that exceeded the amount due on the Credit Agreement.

As of June 30, 2024 there was approximately $ 89,000 available under the

Credit Facility.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

of a maximum $ 2,000,000 revolving credit facility (“Credit Facility”) (“Revolving Loan Cap”).

Availability under

the Credit Facility is determined monthly by a borrowing base comprised of a percentage of eligible accounts receivable of the Borrowers.

The Company’s obligations under the Credit Agreement are secured by a continuing security interest in all property of each Loan

Party, subject to certain excluded collateral (as defined in the Credit Agreement).

As of September 30, 2024, there was approximately

$ 22,000 due from Oxford for cash collections received that exceeded the amount due on the Credit Agreement.

As of September 30, 2024,

there were no funds available for borrowing under the Credit Facility.

under the Credit Facility take the form of base rate loans at interest rates of the Wall Street Journal Prime Rate plus 2.5 %, but in

2 unchanged sentences

asset liens, capital expenditures, formation of new entities and financial covenants.

For the three and six months ended June 30, 2024,

the Company incurred interest expense of approximately $ 17,000 and $ 42,000 , respectively associated with financing costs from the Credit

For the three and nine months ended September 30,

2024, the Company incurred interest expense of approximately $ 24,000 and $ 66,000 , respectively associated with financing costs from the

Credit Agreement.

Credit Agreement is for a two -year term that expires on November 28, 2026 , and automatically renews for an additional one-year term on

1 unchanged sentence

to pay off the Credit Facility and terminate the Credit Agreement.

Company is subject to a two percent ( 2 %) Exit Fee if the Company terminates the Credit Agreement and repays the obligations under Credit

Facility prior to the anniversary date of the Credit Agreement.

The Exit Fee shall automatically renew on the two-year anniversary date

of the Loan Agreement for an additional one-year period unless the Company notifies Lender in writing within sixty (60) days before such

anniversary date of Borrower’s intention to pay off this Credit Facility and terminate the Credit Agreement and all obligations

of the Credit Facility are paid in full by such anniversary date.

There were no draws against the Credit Facility to date.

Company is subject to a two percent ( 2 %) exit fee (“Exit Fee”) of the Revolving Loan Cap if the Company terminates the Credit

Agreement and repays the obligations under Credit Facility prior to the anniversary date of the Credit Agreement.

The Exit Fee shall

automatically renew on the two-year anniversary date of the Loan Agreement for an additional one-year period unless the Company notifies

Lender in writing within sixty (60) days before such anniversary date of Borrower’s intention to pay off this Credit Facility and

terminate the Credit Agreement and all obligations of the Credit Facility are paid in full by such anniversary date.

no draws against the Credit Facility since inception of the Credit Agreement.

October 17, 2024, the Company voluntarily terminated the Credit Agreement.

Pursuant to the terms of the Credit Agreement the Company

was obligated to pay a $ 40,000 Exit Fee due to termination prior to the anniversary date of the Credit Agreement.

Third Bank Asset-backed Revolving Credit Facility

10 unchanged sentences

associated with closing of the Credit Agreement of approximately $ 254,000 were deferred and being amortized over life of the loan.

the three months and six months ended June 30, 2023 the Company incurred approximately $ 21,000 and $ 42,000 , respectively associated with

the amortization of deferred financing costs from the Credit Agreement.

the three months and nine months ended September 30, 2023 the Company incurred approximately $ 21,000 and $ 63,000 , respectively associated

with the amortization of deferred financing costs from the Credit Agreement.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

under the Credit Facility took the form of base rate loans at interest rates of the greater of either (a) the Prime Rate plus 0.50% or

(b) the Secured Overnight Financing Rate (“SOFR”) 30-day term rate plus 3%, subject to a minimum of 0.050% in either case.

the three and six months ended June 30, 2023, the Company incurred interest expense of approximately $ 25,000

and $ 61,000 respectively, associated with interest

and financing costs from the Credit Agreement.

the three and nine months ended September 30, 2023, the Company incurred interest expense of approximately $ 19,000 and $ 59,000 respectively,

associated with interest and financing costs from the Credit Agreement.

May 19, 2023, the Company executed a Waiver and First Amendment agreement which provides for a waiver of previous defaults and instituted

4 unchanged sentences

$ 5,000,000 to $ 2,000,000 .

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

November 17, 2023, the Company voluntarily terminated the Credit Agreement as the Company could not comply with the debt coverage financial

1 unchanged sentence

There was no balance outstanding on the credit agreement as of the termination date.

Cash Advance payable – Agile Capital Funding, LLC

Pursuant to the acquisition of SemiCab, the Company assumed a Merchant

Cash Advance (“MCA Financing”) payable with Agile Capital Funding, LLC (“Agile”).

March 22, 2024, SemiCab entered into a MCA Financing agreement with Agile.

amount borrowed was $ 315,000 , with net proceeds to the Company in the amount of $ 300,000 .

Repayment terms stipulate weekly payments in

the amount of $ 16,200 for weeks, for a total of $ 453,600 repaid.

The effective interest rate for the borrowings is 15 %.

30, 2024 the amount due on this MCA Financing was approximately $ 146,500 .

Cash Advance payable – Cedar Advance, LLC

Pursuant to the acquisition of SemiCab, the Company assumed a MCA Financing

payable with Cedar Advance, LLC (“Cedar”).

May 8, 2024, SemiCab entered into an MCA Financing with Cedar.

The initial amount borrowed was $ 215,000 , with net proceeds

to the Company in the amount of $ 204,250 .

Repayment terms stipulate weekly payments in the amount of $ 11,133 for 28 weeks, for a total

of $ 311,750 repaid.

The effective interest rate for the borrowings is 18 %.

As September 30, 2024 the amount due on this MCA Financing

was approximately $ 156,920 .

Payable SemiCab Investor

maintains a loan from a SemiCab investor in the amount of $ 50,000 .

The loan bears interest at 10 % per annum and matured on May 15, 2024

and is unsecured.

As of September 30, 2024 the loan had not been paid and is in default.

The principal amount due is recorded as a component

of notes payable on the accompanying condensed consolidated balance sheets.

7 – LOANS PAYABLE – RELATED PARTIES

maintains several outstanding affiliate loans from Ajesh Kapoor and Vivek Sehgal, (current employees and original founders of SemiCab)

initially issued by SemiCab Holdings LLC.

The notes are unsecured.

There was accrued interest payable is approximately $ 72,000 that is

included as a component of accrued expenses on the accompanying condensed consolidated balance sheets.

Interest expense on these related

party loans for the three and nine months ended September 30, 2024 was approximately $ 28,000 .

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

specific terms of each loan are summarized in the table below:

Amount due as of September 30, 2024

Current portion of notes payable to related parties

Notes payable to related parties, net of current portion

8 - COMMITMENTS AND CONTINGENCIES

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

LLC (the “Landlord”), pursuant to which MICS NY agreed to lease approximately 10,000 square feet of ground floor retail space

and a portion of the basement underneath the ground floor retail space in the property located at 111 West 24 th Street, New

York, New York (the “Premises”).

term of the Lease Agreement is for fifteen ( 15 ) years, or on such an earlier date upon which the term shall expire, be canceled or terminated

pursuant to any of the conditions or covenants of the Lease Agreement.

Pursuant to the Lease Agreement, MICS NY is obligated to pay an

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

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.

Based on the Company’s assessment of the facts underlying the claims, the uncertainty of litigation, and the preliminary stage

of the case, the Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

Agreement – Efficient Capital Labs, Inc .

May 18, 2023 SemiCab entered into a Installment Business Loan Agreement (“IBLA”) with a principal balance of $ 1,000,000 with

Efficient Capital Labs, Inc.

(“ECL”) to finance working capital and product development.

The loan had a 12 -month maturity

Repayments were originally scheduled to begin in June 2023, in equal installments of $ 91,667 for 13 months, with an interest rate

On May 18, 2024, SemiCab entered into a settlement agreement (“Settlement”) with ECL.

The terms of repayment are

Semicab shall pay to ECL the sum of $ 946,666 USD (the “Settlement Sum”) as follows:

On or before May 20, 2024, Semicab shall pay ECL $ 25,000.00 USD (the “Initial Payment”);

On or before June 3, 2024, Semicab shall pay ECL $ 75,000.00 USD (the “Second Payment”);

On or before the first business day of each of the following ten (10) calendar months, starting July 1, 2024 Semicab shall pay ECL $ 84,666

USD (the “Additional Payments,” and each an “Additional Payment”).

of September 30, 2024 the amount payable on the Settlement is $ 578,917 and recorded as a component accrued expenses on the accompanying

condensed consolidated balance sheets.

to the asset purchase agreement with SemiCab, the Company assumed a judgement against SemiCab regarding damages resulting from contract

breach for IT subscription-based services.

On March 28, 2020, SemiCab entered into a service contract and agreement with Blue Yonder,

(“Blue Yonder”) for certain IT subscription-based services.

The original term of the agreement was for three years,

at a price of $ 100,000 per year, for a total of $ 300,000 .

On June 21, 2023, Blue Yonder filed a lawsuit claiming damages in the

amount of $ 275,000 with the Maricopa County Superior Court in Arizona (“Lawsuit”).

The suit was found in favor of Blue Yonder

in the amount of $ 509,119 , subject to two separate milestone payments that would otherwise deem the entire balance due satisfied if either

milestone payment is made by the Company.

The first milestone payment for $ 175,000 and was due on July 1, 2024 and was not made.

In the event this payment is made, the remaining settlement shall be deemed satisfied.

If this payment is not made, the Company shall

owe a total of $ 225,000 by October 1, 2024.

In the event this payment is made, the remaining settlement shall be deemed satisfied.

neither payment is made, Blue Yonder shall be entitled to execute the full $ 509,119 beginning January 1, 2025.

As of the date of this

filing, none of the scheduled payments have been made.

A liability of $ 509,119 has been recorded as a component of accrued expenses on

the accompanying condensed consolidated balance sheets.

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

December 21, 2023, Ault Lending, LLC, a wholly owned subsidiary of Ault Alliance, Inc.

8 unchanged sentences

The Company filed a motion to dismiss the complaint.

Company’s assessment of the facts underlying the claims, the uncertainty of the litigation, and the preliminary stage of the case, the

Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

Company’s assessment of the facts underlying the claims, the uncertainty of the litigation and the preliminary stage of the case,

the Company cannot reasonably estimate the potential loss or range of loss that may result from this action.

Company is involved in litigation arising from other matters in the ordinary course of business.

The Company is subject to claims, suits

and other proceedings that could result in fines, civil penalties, or other adverse consequences.

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

a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss.

Company evaluates developments in its legal matters that could affect the amount of liability that has been previously accrued, and the

matters and related reasonably possible losses disclosed, 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.

9 – OPERATING LEASES

the time of this filing, the Company has operating lease agreements for offices in Florida and Hong Kong and a retail location in New

York expiring in various years through 2038.

the time of this filing, the Company has operating lease agreements for offices in Florida and Hong Kong.

Company entered into an operating lease agreement, effective October 1, 2017, for our corporate headquarters located in Fort Lauderdale,

4 unchanged sentences

$10,000 per month subject to a 3% annual adjustment.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

Company entered into an operating lease on August 23, 2023, for approximately 10,000 square feet of ground floor retail space and a

portion of the basement underneath the ground floor retail space.

The lease expires August 22, 2038 , and the monthly base rent is

$ 30,000 , subject to annual increases.

The lease includes a 11-month free rent period between July 1, 2023, and June 30, 2024 and

also includes a $ 700,000 reimbursement for tenant improvements upon completion of construction milestones as defined in the lease.

Due to uncertainties as to whether these milestones will be met timely, the Company has not recorded any amounts related to the

tenant improvement allowance in our condensed consolidated financial statements at lease inception for the three and six months

ended June 30, 2024.

Company entered into an operating lease on August 23, 2023, for approximately 10,000 square feet of ground floor retail space and a portion

of the basement underneath the ground floor retail space.

During the nine months ended September 30, 2024, the Company abandoned its

plans to continue use of the leased space.

On September 25, 2024, the Company entered into a Settlement Agreement for a full release

and termination of the Lease Agreement in exchange for Company’s payment of $ 250,000 .

(See Note 2).

balance sheet information related to leases as of June 30, 2024 and December 31, 2023 is as follows:

balance sheet information related to leases as of September 30, 2024 and December 31, 2023 is as follows:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

June 30, 2024

September 30, 2024

December 31, 2023

4 unchanged sentences

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Three Months Ended September 30, 2024

Three Months Ended September 30, 2023

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Operating lease expense as a component of general and administrative expenses

5 unchanged sentences

Weighted average discount rate

future payments under all operating leases as of June 30, 2024, are as follows:

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

future payments under all operating leases as of September 30, 2024, are as follows:

OF OPERATING LEASE MINIMUM FUTURE PAYMENTS

3 unchanged sentences

Total operating lease liabilities

current portion of lease liabilities

Operating lease liabilities, net of current portion

8 – STOCK COMPENSATION EXPENSE

10 – ISSUANCE OF COMMON STOCK

Incentive Plan

4 unchanged sentences

under the 2022 Plan to the Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.

were no share base compensation awards issued under the 2022 Plan during the three and six months ended June 30, 2024 and 2023.

were 4,000 and 5,250 shares forfeited during the three and six months ended June 30, 2024, respectively.

There were no shares forfeited

during the three and six months ended June 30, 2023.

As of June 30, 2024, there were 204,053 shares available to be issued under the

of June 30, 2024, there was an unrecognized expense of approximately $ 69,000

remaining on options currently vesting over time with an approximate weighted average of twelve

months remaining until these options are fully vested.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

vested options as of June 30, 2024, had no intrinsic value.

warrants issued and outstanding as of June 30, 2024 and December 31, 2023, were 902,113 .

share base compensation awards issued under the 2022 Plan during the three and nine months ended September 30, 2024 with a weighted average grant date fair value of $ 0.55 per share.

There were no

share base compensation awards issued under the 2022 Plan during the three and nine months ended September 30, 2023.

There were 1,250

shares forfeited during the three and nine months ended September 30, 2024, respectively.

There were no

shares forfeited during the three and nine months ended September 30, 2023.

As of September 30, 2024, there were 63,453

shares available to be issued under the 2022 Plan.

Equity compensation under the 2022 Plan was approximately $ 101,000 and

$ 138,000 during the three and nine months ended September 30, 2024 and was expensed as a component of general administrative expenses

on the accompanying condensed consolidated statements of operations.

of September 30, 2024, there was an unrecognized expense of approximately $ 50,000 remaining on options currently vesting over time with

an approximate weighted average of twelve months remaining until these options are fully vested.

vested options as of September 30, 2024, had no intrinsic value.

Equity Compensation

the three and nine months ended September 30, 2024, the Company issued 774,528

shares of common stock to three vendors for payment

of consulting services rendered and 94,340

for restricted shares of common stock to Vivek

Sehgal (a related party) as bonus compensation (See Note 5).

The grant date fair value for all of these share issuances was approximately

and were expensed as a component of general and administrative expenses on the accompanying condensed consolidated statements of operations

during the three and nine months ended September 30, 2024.

These shares vest immediately but must be held for a minimum of six months

in accordance with Securities Exchange Commission Rule 144.

11 - WARRANTS

warrants issued and outstanding as of September 30, 2024 and December 31, 2023, were 902,113 .

There were no changes in the warrants outstanding

during the period.

of June 30, 2024, the Company’s warrants by expiration date were as follows:

of September 30, 2024, the Company’s warrants by expiration date were as follows:

OF WARRANTS EXPIRATION

Number of Common Warrants

Common Warrants

Exercise Price

1 unchanged sentence

September 15, 2026

ALGORHYTHM HOLDINGS, INC.

and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 and 2023

12 - COMPUTATION OF LOSS PER SHARE

of basic and dilutive loss per share for the three and six months ended June 30, 2024 and 2023 are as follows:

of basic and dilutive loss per share for the three and nine months ended September 30, 2024 and 2023 are as follows:

OF BASIC AND DILUTIVE LOSS PER SHARE

For the three months ended

June 30, 2024

For the three months ended

June 30, 2023

For the six months ended

June 30, 2024

For the six months ended

June 30, 2023

$ ( 6,119,000 )

$ ( 2,460,000 )

For the three months ended September 30, 2024

For the three months ended September 30, 2023

For the nine months ended September 30, 2024

For the nine months ended September 30, 2023

Net income (loss) available to common stockholders

$ ( 7,292,000 )

1 unchanged sentence

Weighted-average common shares outstanding

Basic loss per share

Basic and diluted income (loss) per share

net loss per share is based on the weighted average number of shares of common stock outstanding during the period.

3 unchanged sentences

using the treasury stock method.

the three and six months ended June 30, 2024 and 2023, options to purchase 108,511 and 108,343 shares of common stock, respectively and

options to purchase 902,113 common stock warrants for both June 30, 2024 and 2023 were excluded in the calculation of diluted net loss

per share as the result would have been anti-dilutive.

the three and nine months ended September 30, 2024 and 2023, options to purchase 98,178 and 91,261 shares of common stock, respectively

and options to purchase 902,113 common stock warrants for both September 30, 2024 and 2023 were excluded in the calculation of diluted

net loss per share as the result would have been anti-dilutive.

13 - INCOME TAXES

the three months ended June 30, 2024 and 2023 the Company recognized an income tax benefit of approximately $ 52,000

and $ 0 , respectively.

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 provision for the six months ended June 30, 2023, was approximately $ 1,502,000

as the Company recognized a valuation reserve of 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 three months ended September 30, 2024 and 2023 the Company did no t recognize income tax provision 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

provision for the nine months ended September 30, 2023, was approximately $ 1,502,000 as the Company recognized a valuation reserve of

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.

Company’s income tax expense differs from the expected tax benefit/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, 2024 and 2023.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

allowance for all of its subsidiaries for the three and nine months ended September 30, 2024 and 2023.

14 – REVENUE DISAGGREGATION

1 unchanged sentence

hardware and the Company has no other material business segments:

by product line is as follows:

Revenue by product line is as follows:

OF REVENUE BY PRODUCT LINE

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Classic Karaoke Machines

Licensed Products

SMC Kids Toys

Kids Youth Electronics

Microphones and Accessories

Music and other income

Music Subscriptions

Logistics Services

Total Net Sales

HOLDINGS, INC.

and SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

by geographic region for the periods presented are as follows:

OF SALES BY GEOGRAPHICAL REGION

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

North America

Total Net Sales

Company selectively participates in a retailer’s co-op promotion incentives by providing marketing fund allowances to its customers.

2 unchanged sentences

as a reduction to net sales.

For the three months ended June 30, 2024 and 2023, co-op promotion incentives were approximately $ 240,000

For the three months ended September 30, 2024 and 2023, co-op promotion incentives were approximately $ 908,000

and $ 1,637,000 , respectively.

For the six months ended June 30, 2024 and 2023, co-op promotion incentives were approximately $ 349,000 and

$ 264,000 , respectively.

For the nine months ended September 30, 2024 and 2023, co-op promotion incentives were approximately $ 1,257,000

and $ 1,901,000 , respectively.

The Company’s estimated reserve for co-op promotion incentives was approximately $ 1,833,000 and $ 1,277,000

as of September 30, 2024 and December 31, 2023, respectively.

The estimated reserve for co-op promotions is a component of accrued expenses

on the accompanying condensed consolidated balance sheets.

Company estimates variable consideration under its return allowance programs for goods returned from the customer whereby a revenue return

1 unchanged sentence

The Company’s reserve

for sales returns as of June 30, 2024 and December 31, 2023, was approximately $ 2,174,000 and $ 3,390,000 , respectively.

for sales returns as of September 30, 2024 and December 31, 2023, was approximately $ 2,212,000 and $ 3,390,000 , respectively.

In conjunction

3 unchanged sentences

returns asset on the condensed consolidated balance sheets.

The Company’s estimated cost of returns as of June 30, 2024 and December

31, 2023, was approximately $ 619,000 and $ 1,919,000 , respectively.

The Company’s estimated cost of returns as of September 30, 2024 and

December 31, 2023, was approximately $ 1,081,000 and $ 1,919,000 , respectively.

return program for defective goods is negotiated with each of the Company’s wholesale customers on a year-to-year basis.

11 unchanged sentences

with several large customers.

At June 30, 2024, 79 % of accounts receivable were due from three customers in North America that individually

owed over 10% of total accounts receivable.

On December 31, 2023, 82 % of accounts receivable were due from four customers in North America

that individually owed over 10% of total accounts receivable.

Singing Machine Company, Inc.

At September 30, 2024, 70 %

of accounts receivable were due from three customers in North America that individually owed over 10% of total accounts receivable.

December 31, 2023, 82 %

of accounts receivable were due from four customers in North America that individually owed over 10% of total accounts receivable.

from customers representing greater than 10% of total net sales derived from our top three customers as a percentage of net sales were

41 %, 20 %, and 13 % for the three months ended September 30, 2024.

Revenues from customers representing greater than 10% of total net sales

derived from three customers as a percentage of net sales were 28 %, 22 % and 21 % for the three months ended September 30, 2023.

from customers representing greater than 10% of total net sales derived from our top four customers as a percentage of net sales were

29 %, 27 %, 15 % and 10 % for the nine months ended September 30, 2024.

Revenues from customers representing greater than 10% of total net

sales derived from our top three customers as a percentage of net sales were 44 %, 13 % and 12 % for the nine months ended September 30,

The loss of any of these customers could have an adverse impact on the Company.

HOLDINGS, INC.

and SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

from customers representing greater than 10% of total net sales derived from our top three customers as a percentage of net sales were

39 %, 14 % and 13 % for the three months ended June 30, 2024.

Revenues from customers representing greater than 10% of total net sales derived

from one customer as a percentage of net sales was 87 % for the three months ended June 30, 2023.

Revenues from customers representing

greater than 10% of total net sales derived from our top three customers as a percentage of net sales were 50 %, 11 % and 10 % for the six

months ended June 30, 2024.

Revenues from customers representing greater than 10% of total net sales were derived from two customers

as a percentage of net sales were 86 % for the three months ended June 30, 2023.

Revenues from customers representing greater than 10%

of total net sales were derived from one customer as a percentage of net sales were 86 % for the six months ended June 30, 2023.The loss

of any of these customers could have an adverse impact on the Company.

16 – RELATED PARTY TRANSACTIONS

3 unchanged sentences

agreement with Stingray.

For the three months ended June 30, 2024, and 2023, the amounts earned from the subscription agreement were

approximately $ 109,000 and $ 176,000 , respectively.

For the six months ended June 30, 2024, and 2023, the amounts earned from the subscription

agreement were approximately $ 349,000 and $ 394,000 , respectively.

These amounts were included as a component of net sales in the accompanying

condensed consolidated statements of operations.

On June 30, 2024, the Company had approximately $ 1,000 due to Stingray.

31, 2023, the Company had approximately $ 269,000 due from Stingray for music subscription reimbursement.

the three and six months ended June 30, 2024, the Company advanced $ 415,000 to SemiCab for working capital.

As of June 30, 2024, the

company had approximately $ 415,000 due from SemiCab.

(See Note 2).

14 – ASSET ACQUISITION

June 11, 2024, the Company and its wholly owned subsidiary SemiCab,LLC, SemiCab, Inc., Ajesh Kapoor and Vivek Sehgal entered into 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.

July 3, 2024, the parties completed the Asset Purchase Agreement whereby the Company issued to the Seller (i) 641,806 shares of the Company’s

common stock with a value of approximately $ 738,000 (ii) a twenty percent ( 20 %) membership interest in SemiCab LLC.

(See Note 2).

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.

connection with the asset acquisition agreement, effective July 3, 2024, SemiCab, LLC entered into employment agreements (the “Agreements”)

with Ajesh Kapoor and Vivek Sehgal Kapoor’s agreement spans three years with an annual base salary of $ 140,000 for 2024, $ 240,000

for 2025, and $ 300,000 for subsequent years, and Sehgal’s agreement also spans three years with an annual base salary of $ 105,000

for 2024, $ 210,000 for 2025, $ 240,000 for 2026, $ 270,000 for 2027, and $ 300,000 for 2028.

Both executives’ salaries are subject

to annual review by the Board.

They are eligible for annual performance-based bonuses contingent on specific goals set by the Board and

will participate in the 2022 Equity Incentive Plan, receiving annual equity issuances and cash-based incentives tied to revenue milestones.

Both are entitled to standard employee benefits, including health insurance and retirement plans.

Singing Machine Company, Inc.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

30, 2024 and 2023

Forma Information

unaudited pro forma financial information below presents the effects of the Asset Purchase Agreement as though it had been completed

on January 1, 2023.

The pro forma adjustments are derived from the historically reported transactions of the respective companies.

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, 2024, and 2023 reflect the combined performance of the Company and the SemiCab business for that period.

The unaudited pro forma information is based on available data and certain assumptions that the Company believes are reasonable given

the circumstances.

However, actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial

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 Asset Purchase Agreement occurred

on January 1, 2023, nor does it attempt to forecast future consolidated results of operations.

OF PRO FORMA FINANCIAL INFORMATION

June 30, 2024

June 30, 2023

Six Months Ended

June 30, 2024

June 30, 2023

Operating loss from continuing operations

( 9,350,000 )

( 6,142,000 )

( 9,690,000 )

( 7,085,000 )

pro forma results for the six months ended June 30, 2023, include a net increase in operating expenses of $ 265,000 ,

consisting of legal and accounting expenses of approximately $ 215,000 associated

with the acquisition of SemiCab and $ 50,000 in

shares of SMC common stock issued to Vivek Sehgal as sign-on bonus.

For the three months ended September 30, 2024, and 2023, the amounts earned from the subscription agreement

were approximately $ 218,000 and $ 156,000 , respectively.

For the nine months ended September 30, 2024, and 2023, the amounts earned from

the subscription agreement were approximately $ 567,000 and $ 550,000 , respectively.

These amounts were included as a component of net

sales in the accompanying condensed consolidated statements of operations.

On September 30, 2024, the Company had approximately $ 157,000

due from Stingray.

On December 31, 2023, the Company had approximately $ 269,000 due from Stingray for music subscription reimbursement.

Company determined that SMCB is a VIE as the Company provides financial support to SMCB.

While not contractually obligated, SMCB currently

relies on our reimbursement of certain costs under a Services Agreement (“MSA”) whereby SMCB agree to provide IT software

development services to support SemiCab’s US operations.

In exchange, under the MSA, the Company grants intellectual property rights

to SMCB to use the software platform in India.

Compensation for services is invoiced and paid on a monthly or quarterly basis as agreed

by both parties, with rates subject to periodic review and revision.

As a result of this relationship SMCB has been determined to be

to the asset acquisition agreement of SemiCab, the Company entered into an option agreement granting the right to acquire all of the

issued and outstanding capital securities of SMCB, however the option agreement expired on August 31, 2024 unexercised.

Company further determined that it is not the primary beneficiary of SMCB as the Company does 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 the accompanying condensed consolidated financials presented for this period.

of September 30, 2024, the Company has advanced approximately $ 776,000

to SMCB for estimated prepaid services to be provided by SMCB in accordance with the MSA which are a component of prepaid expenses

and other current assets on the accompanying condensed consolidated balance sheets.

During the three months ended September 30,

2024, the Company incurred approximately $ 422,000

in software support services under the MSA.

17 – SUBSEQUENT EVENTS

Purchase Agreement

October 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), pursuant to which the Company agreed

to issue and sell to each purchaser (i) an Original Issue Discount Senior Secured Note with a principal amount equal to such purchaser’s

subscription amount divided by 0.85 (each a “Note” and collectively, the “Notes”), and (ii) a number of shares

of common stock of the Company, par value $ 0.01 equal to (i) 2,300,000 multiplied by (ii) such purchaser’s subscription amount

divided by (iii) $ 2,000,000 (the “Shares”) (the transactions contemplated under the SPA, the “Offering”).The

aggregate gross proceeds to the Company were approximately $ 2.0 million, before deducting placement agent fees and expenses.

intends to use the net proceeds from the Offering for working capital and other general corporate purposes.

Company agreed to certain registration rights with respect to the Shares, as described in the SPA.

The Company also granted the purchasers

a right to participate up to an amount of 20 % in any issuance by the Company of common stock or common stock equivalents for cash, subject

to certain exceptions, during the 90 days after the closing of the Offering.

Securities LLC served as the placement agent in the Offering and received 7 % of the gross proceeds received by the Company and reimbursement

of the legal fees of its counsel.

Offering closed on October 24, 2024.

At the closing, the Company issued to the purchasers an aggregate of 2,300,000 shares of its common

stock and Notes in the aggregate principal amount of $ 2,352,941 for total proceeds of $ 2,000,000 net of original issue discount of $ 352,941 .

the closing, the Company issued a Note to each purchaser equal to such purchaser’s subscription amount divided by 0.85 .

were issued with an original issue discount of 15 %.

No interest shall accrue on the Notes unless and until an Event of Default (as defined

in the Notes) has occurred, upon which interest shall accrue at a rate of fourteen percent ( 14.0 %) per annum and shall be computed on

the basis of a three hundred sixty (360)-day year and twelve (12) thirty (30)-day months and shall be payable on the maturity date, which

is ninety (90) days from the issuance date of October 24, 2024 .

Notes also provide for redemption upon a change of control, as such term is defined under the Notes and mandatory redemption upon the

receipt of net proceeds from any offering of equity or debt by the Company.

The Company also has the right to prepay the Notes.

Notes are secured by a security interest in the assets and property of the Company and its subsidiaries and guaranteed by the Company’s

subsidiaries, pursuant to the terms of a Guarantee Agreement entered into among the purchasers and the Company and each of its subsidiaries.

Repurchase Agreement

November 1, 2024, the Company entered into Stock Repurchase Agreement (the “Repurchase Agreement”) with Regalia Ventures

LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company agreed to repurchase from the Seller

an aggregate of 1,098,901 issued and outstanding shares of common stock, par value $ 0.01 per share, of the Company (the “Shares”).

The shares of common stock to be repurchased were originally issued to the Seller on November 21, 2023, pursuant to a certain stock purchase

agreement, dated November 20, 2023.

consideration for the transaction contemplated by the Repurchase Agreement (the “Stock Repurchase”), when the transaction

closes, the Company has agreed to repurchase from the Seller, and the Seller has agreed to sell, assign and transfer to the Company,

all of the Seller’s right, title and interest in and to the Shares, at a price per Share equal to the higher of:

(1) the closing

price of the common stock on the last trading day immediately preceding the date of the Repurchase Agreement;

or (2) the highest volume

weighted average price (VWAP) of the common stock during a pricing period of ten (10) consecutive trading days prior to the date of the

Repurchase Agreement per share (the “Purchase Price”), and the Company shall issue to the Seller a promissory note in the

principal amount equal to the Purchase Price.

of the date of this filing, the repurchase of the shares has not yet closed.

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 1. Financial Statements