What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-04-02 compared with 2025-04-15 · 329 added, 375 removed, 82 unchanged (90% of the section changed)

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Risk Factors and elsewhere in this report.

See also “Special

Note Regarding Forward-Looking Statements” beginning on page 1 of this report.

See also “Disclosure Regarding Forward-Looking Statements” beginning on page 1 of this report.

The following should be read in conjunction

with our consolidated financial statements beginning on page F-1 of this report.

are an AI technology and consumer electronics holding company with two primary business units – SemiCab and Singing Machine.

is an AI-enabled software logistics business operated through our subsidiary, SemiCab Holdings, LLC.

Singing Machine is a home karaoke

consumer products business that designs and distributes karaoke products globally to retailers and ecommerce partners through our subsidiary,

The Singing Machine Company, Inc.

is a cloud-based Collaborative Transportation Platform built to achieve the scalability required to predict and optimize loads and the

are an AI technology company focused on the growth and development of SemiCab.

SemiCab is an AI-enabled software logistics and distribution business that utilizes our SemiCab technology platform to enable retailers, brands and transportation providers to address

common supply chain problems globally.

We operate our SemiCab business through our subsidiary, SemiCab Holdings.

to August 1, 2025, we had a second business, which was Singing Machine.

Singing Machine was a home karaoke consumer products business

that designed and distributed karaoke products to retailers and ecommerce partners globally through our subsidiary, The Singing Machine

Company, Inc.

We sold our Singing Machine business on August 1, 2025.

Accordingly, we no longer own or operate the Singing Machine business.

is an AI-enabled, cloud-based collaborative transportation platform built to achieve the scalability required to predict and optimize loads and the

use of trucks.

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lower logistics costs, and provide visibility into the entire transportation network.

Models show that the technology has the capability

of reducing costs through optimization.

Additionally, SemiCab’s technology has the potential to play a key role in the improved

Models show that our SemiCab technology has the

capability of reducing costs through optimization.

Additionally, our SemiCab technology has the potential to play a key role in the improved

sustainability model.

Based on its proven ability to improve truck utilization rates, this could result in a dramatic reduction in the

Based on our proven ability to improve truck utilization rates, this could result in a dramatic reduction in the

carbon footprint of the industry.

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optimization could also reduce carbon emissions attributable to road freight.

Singing Machine, we engage in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings.

We are a leading global karaoke and music entertainment company that specializes in the design and production of quality karaoke and

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

We were a leading global karaoke and music entertainment company that specializes in the design and production of quality karaoke and

music enabled consumer products for adults and children.

Our products are among the most widely available karaoke products internationally.

mission is to “create joy through music.” To deliver on this mission, we are focused on a multi-prong approach.

In the short-term,

we seek to improve profitability by optimizing operations and continue to expand gross margins.

In the mid-to-long-term, we seek to continue

to expand our business into new verticals including automotive and connected-TV devices and grow our global distribution for our consumer

karaoke products.

Corporate Events

in Fiscal Year

2023, our board of directors approved a change in our fiscal year end from March 31 to December 31.

In accordance with SEC regulations,

our consolidated financial statements are comprised of our balance sheets at December 31, 2024 and 2023 and our statements of operations,

stockholders’ deficit and cash flows for the year ended December 31, 2024 and the nine-month period ended December 31, 2023.

a result, this Management’s Discussion and Analysis of Financial Condition and Results of Operations is comparing our results

of operations for the full year ended December 31, 2024 with our results of operations for only the nine-month period ended December

and Symbol Change

September 5, 2024, our Certificate of Incorporation was amended to change our name from “The Singing Machine Company, Inc.”

to “Algorhythm Holdings, Inc.” In addition, effective September 8, 2024, our ticker symbol was changed from “MICS”

Stock Split and Increase in Authorized Shares

January 13, 2025, our stockholders voted to authorize our board of directors to effect a reverse stock split of the outstanding shares

of our common stock at a specific ratio within a range of 1-for-10 to a maximum of 1-for-250 and to amend our certificate of incorporation

to increase the number of authorized common stock from 100,000,000 to 800,000,000 shares.

On January 14, 2025, our board of directors

approved a reverse stock split of 1-for-200 ratio and approved the filing of a certificate of amendment to our certificate of incorporation

to effect the reverse stock split and to increase our authorized shares of common stock from 100,000,000 to 800,000,000.

stock split took effect on February 10, 2025.

In accordance with SEC rules and regulations, all share numbers and prices throughout this

report and our consolidated financial statements reflect post-reverse stock split numbers.

SemiCab and Singing Machine businesses are each in very different stages of development.

Accordingly, our plans for growing each of them

are very different.

is an early-stage business that is not yet contributing a material amount of revenue to us.

We intend to invest in our SemiCab business

to develop and grow it into a significant revenue producer for us.

This will involve investments in the continued research and development

of its technology, the hiring of additional qualified employees, marketing and advertising initiatives, and back-office support.

SemiCab is a nascent business, it has already acquired some multinational consumer products companies as customers.

We believe that as

existing customers experience the benefits of our SemiCab logistics and distribution solutions, they will begin to increase their use

We also believe that SemiCab’s proven ability to improve truck utilization rates and improve trucking capacity without

adding more trucks, drivers or driven miles will be of substantial interest to additional companies that can benefit from SemiCab.

acquired the United States component of our SemiCab business on July 3, 2024.

We may make additional investments in companies operating

in the AI distribution and logistics space that we believe are complementary to our SemiCab business.

Our investments could involve an

acquisition of the assets or equity of complementary companies or businesses, or could involve a strategic partnership or joint venture

with complementary companies or businesses.

We believe that additional investments could provide us with new AI logistics and distribution

technologies, services and resources that we can implement across our entire SemiCab business, or could help us to more quickly expand

our SemiCab footprint into other parts of the world.

We are actively evaluating additional opportunities to expand our SemiCab business

through investments in complementary AI logistics and distribution businesses and companies.

contrast to our SemiCab business, our Singing Machine business has been successfully operating worldwide for decades.

Our karaoke products

are well-known and established with retailers and consumers in the countries in which we sell them.

Our plan for Singing Machine is to

continue to focus on customer retention through loyalty programs for the online and brick-and-mortar retailers offering our products

and compelling offer promotions, discounts, and special deals to attract customers and increase conversions.

We also intend to reduce

costs through overhead trimming and the use of new selling and marketing methodologies, leverage data analytics to better understand

new trends in consumer preferences for our products, explore new product features and product offerings, and support our new and existing

products with fun and exciting digital marketing and advertising initiatives.

We may also explore entering new markets that may offer

more profitable avenues for our products.

generated net sales of $23,494,000 for the year ended December 31, 2024, compared to $29,198,000 for the nine-month transition

period ended December 31, 2023.

The decrease was primarily due to decreases in sales to Walmart that resulted from us not

participating in Walmart’s national Black Friday promotion and decreases in sales due to the loss of retail shelf space at

Gross profit decreased $1,409,000 to $4,781,000, or 20.4% of net sales, for the year ended December 31, 2024 compared to

$6,190,000, or 21.2% of net sales, for the nine-month transition period ended December 31, 2023.

Our products were among the most widely available karaoke products internationally.

We sold our Singing Machine business on August 1, 2025.

Accordingly, we no longer own or operate the Singing Machine business line.

intend to invest in our SemiCab AI logistics and distribution business to develop and grow it into a significant revenue producer for

This will involve investments in the continued research and development of our technology, the hiring of additional qualified employees,

marketing and advertising initiatives, and back-office support.

While this is a nascent business, it has already acquired several large,

fast-moving consumer products companies as customers.

We believe that as existing customers experience the benefits of our SemiCab logistics

and distribution solutions, they will begin to increase their use of our services.

We also believe that our ability to improve truck

utilization rates and improve trucking capacity without adding more trucks, drivers or driven miles will be of substantial interest to

additional companies that can benefit from our service.

acquired the United States component of our SemiCab business on July 3, 2024 and acquired the India component of our SemiCab business

on May 2, 2025.

We may make additional investments in companies operating in the AI distribution and logistics space that we believe

are complementary to our business.

Our investments could involve an acquisition of the assets or equity of complementary companies or

businesses or could involve a strategic partnership or joint venture with complementary companies or businesses or digital asset treasury

We believe that additional investments could provide us with new AI logistics and distribution technologies, services and

resources that we can implement across our entire business or could help us to more quickly expand our footprint into other parts of

We are actively evaluating additional opportunities to expand our SemiCab business through investments in complementary AI

logistics and distribution businesses and companies.

generated net sales of $4,391,000 for the year ended December 31, 2025, compared to $297,000 for the year ended December 31, 2024.

increase in revenue was due primarily to the addition of net sales generated by our SemiCab business resulting from our acquisition of

SMCB on May 2, 2025.

Cost of sales was $5,706,000 for the year ended December 31, 2025, compared to $491,000 for the year ended December

The increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB resulting

from our acquisition of SMCB on May 2, 2025.

operating expenses were $6,629,000 for the year ended December 31, 2025, compared to $8,248,000 for the year ended December 31, 2024.

The decrease in operating expenses was due primarily to a decrease of $3,592,000 related to the impairment of goodwill recorded in connection

with the acquisition of SemiCab, Inc’s business during the year ended December 31, 2024, partially offset by the increase in general

and administrative expenses incurred in the growth and development of the SemiCab business during the year ended December 31, 2025.

incurred a net loss from continuing operations of $15,210,000 for the year ended December 31, 2025, compared to $18,884,000 for the year

ended December 31, 2024.

The most significant contributors to the decrease in the net loss from continuing operations were decreases

in non-cash charges of $3,592,000 for impairment of goodwill and $8,889,000 for loss on the issuance of warrants.

This decrease was partially

offset by an increase of $6,468,000 for non-cash charges for changes in the fair value of warrants liability and increases in general

and administrative expenses incurred in the growth and development of the SemiCab business.

generated net loss from continuing operations of $15,210,000, or $5.86 per share of common stock, for the year ended December 31, 2025,

compared to $18,884,000, or $270.44 per share of common stock, for the year ended December 31, 2024.

The decrease was due primarily to

the decrease of $5,704,000 for net sales, partially offset by a corresponding decrease of $4,295,000 for cost of goods sold

associated with less products being manufactured for sale.

Our operating expenses increased $6,373,000 to $18,706,000 for the

year ended December 31, 2024 from $12,333,000 for the nine-month transition period ended December 31, 2023, primarily due to an

increase in general and administrative expenses incurred for the growth and development of our SemiCab business, a loss on the

issuance of warrants incurred in connection with our December 2024 public offering of securities, legal and accounting expenses

incurred in connection with the acquisition of SemiCab, Inc.’s business in July 2024 and the capital raising activities that we engaged

in during 2024, and impairment of goodwill recorded in connection with the acquisition of the SemiCab, Inc.’s business.

As a result, we

incurred a loss from operations of $13,925,000 during the year ended December 31, 2024.

We generated net losses available to common stockholders of $23,257,000, or

$353.87 per share of common stock, for the year ended December 31, 2024, compared to $6,398,000, or $263.04 per share of

common stock, for the nine-month transition period ended December 31, 2023.

We had total assets of $18,302,000 and $27,715,000 at

December 31, 2024 and 2023, respectively.

Net cash used by operating activities was $8,556,000 for the year ended December 31, 2024

compared to net cash provided by operating activities of $411,000 for the nine- month transition period ended December 31,

most significant contributors to the increase in our net loss available to common stockholders were a one-time, non-cash charge of

$3,592,000 for impairment of goodwill and a one-time, non-cash loss of $8,889,000 on the issuance of warrants.

incurred a one-time, non-cash charge of $3,592,000 for impairment of goodwill in connection with our acquisition of SemiCab,

Inc.’s business on July 3, 2024.

We tested the recorded amount of goodwill for impairment on December 31, 2024 to see if the

carrying amount of goodwill exceeded its carried value.

We calculated a market-based valuation utilizing inputs classified as level

3 on the fair value hierarchy by multiplying one by projected 2025 revenue for the SemiCab, Inc.’s business and determined an

impairment charge of $3,592,000 should be recorded as of December 31, 2024.

incurred a one-time, non-cash loss of $8,889,000 in connection with the public offering of securities that we completed on

December 6, 2024.

In that offering, we sold Series A warrants and Series B warrants that had certain features and were subject to

certain contingencies that resulted in us having to record a warrant liability of $16,603,000 on our balance sheet and a loss on the

issuance of warrants of $8,889,000 on our income statement.

All of the contingencies that the Series A warrants were subject to were

satisfied in January 2025, and of the Class B warrants were exercised in full in January 2025.

As a result, we expect that the

warrant liability will be reclassified as equity on our balance sheet for our fiscal quarter ended March 31, 2025.

expect net sales of our Singing Machine karaoke products to decrease over the next 12 months due to the negative impact on our

business of recently implemented tariffs on our products manufactured in China.

However, we expect revenue generated from our

SemiCab business to increase over the next 12 months as we generate more business from our growing customer base in the United

As a result, total net sales are expected to increase over the next 12 months.

We expect gross profit to improve over the

next 12 months as costs of goods sold remain at similar levels, subject to uncertainty surrounding the recently implemented tariffs

on our products manufactured in China, and sales of our higher margin, newer streaming technology karaoke machines increase as a

percentage of total net sales.

We expect operating expenses to remain flat, if not decrease, over the next 12 months as we implement

initiatives designed to reduce general and administrative expenses, particularly those related to marketing and advertising

The reductions achieved may be partially offset by legal and accounting expenses that we incur as we engage in

additional capital-raising activities as needed to fund our business and expenses that we incur to fund the growth and development

of our SemiCab business.

Net loss available to common stockholders is expected to decrease substantially during the next 12 months

primarily due to the fact that we do not expect to incur any non-cash losses in connection with the issuance of warrants requiring

liability classification.

We also expect net loss available to common stockholders to decrease due to the aforementioned

improvements in gross profit that we expect to realize and the decreases in general and administrative expenses that we intend to

an increase of $4,094,000 for net sales and a decrease of $3,592,000 for impairment of goodwill.

This was partially offset by an increase

of $5,215,000 for cost of sales.

We had total assets of $12,724,000 and $18,302,000 at December 31, 2025, and 2024, respectively.

cash used by operating activities attributable to continuing operations was $7,309,000 for the year ended December 31, 2025, compared

to $3,985,000 for the year ended December 31, 2024.

expect net sales to increase substantially over the next 12 months as we generate more business through our growing customer base in

India and as we begin to generate business in the United States and Europe.

We expect costs of sales to increase over the next 12 months in

connection with the increase in net sales that we expect to generate from our SemiCab business.

We expect operating expenses and net

loss available to common stockholders to increase over the next 12 months as we continue to fund the growth and development of our

SemiCab business.

Notwithstanding

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businesses or companies through mergers, acquisitions, joint ventures or other strategic initiatives, such as the acquisition of the

United States component of our SemiCab business on July 3, 2024, our financial results will include and reflect the financial results

of the target entities.

Accordingly, the completion of any such transactions in the future may have a substantial beneficial or negative

impact on our business, financial condition and results of operations.

United States component of our SemiCab business on July 3, 2024 and the acquisition of the India component of our SemiCab business on

May 2, 2025, our financial results will include and reflect the financial results of the target entities.

Accordingly, the completion

of any such transactions in the future may have a substantial beneficial or negative impact on our business, financial condition and

results of operations.

Accounting Estimates

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discussion of our accounting policies and procedures, see our consolidated financial statements beginning on page F-1 of this report.

for Sales Returns and Returns Asset

we have no overstock return privileges in its vendor agreements with its customers, we do accept defective returns, warranty exchanges

and overstock from seasonal customers.

We estimate the sales value of goods to be returned from our allowance programs for goods returned

from the customer for various reasons, whereby a reserve for sales returns is recorded based on historic return amounts, specific events

as identified and management estimates.

We estimate the net realizable value of these expected future sales returns.

The net realizable value of these estimated

returns is classified as return assets as part of current assets on the accompanying consolidated financial statements.

is comprised primarily of electronic karaoke equipment, microphones, and accessories, and are stated at the lower of cost or net realizable

value, as determined using the first in, first out method.

We reduce inventory on hand to its net realizable value on an item-by-item

basis when it is apparent that the expected realizable value of an inventory item falls below its original cost.

A charge to cost of

sales results when the estimated net realizable value of specific inventory items declines below cost.

Management regularly reviews our

investment in inventories for such declines in value.

Warrant Liability

recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers.

All revenue is generated from contracts with customers.

We recognize revenue when services are performed for the customer in an amount, referred to as the transaction price, that reflects the

consideration to which we are expected to be entitled in exchange for those services.

We determine revenue recognition utilizing the

following five steps:

(i) identification of the contract with a customer;

(ii) identification of the performance obligations in the contract

(promised services that are distinct);

(iii) determination of the transaction price;

(iv) allocation of the transaction price to the

performance obligations;

and (v) recognition of revenue when, or as, we transfer control of the service for each performance obligation.

performance obligations are established when a customer submits a purchase order notification and we accept the order.

We identify performance

obligations as the delivery of the requested service at the location specified in the customer’s contract and/or purchase order.

Revenue from sales of services is recognized at the point in time when we transfer control to the customer, typically at the time when

the services are performed in full, at which time there are no further performance obligations remaining.

contracts with customers consist of one performance obligation, which is the performance of services.

Our contracts have no financing

Payment terms are generally less than 90 days and have no further contract asset or liability obligations once control of the

service is transferred to the customer.

Revenue is recorded in the amount of consideration we expect to receive for the sale of the service.

utilize independent contractors and third-party carriers to perform transportation services in connection with our SemiCab business.

In accordance with ASC Topic 606, Revenue Recognition:

Principal Agent Considerations, we evaluate the terms of agreements with customers

and vendors to determine whether we act as principal or agent in each arrangement.

assessment focuses on whether control of the transportation service is obtained prior to transferring the service to the customer.

on this evaluation of the control model, we concluded that it acts as the principal and, accordingly we recognize revenue on a gross

In the event we act as an agent, such revenue will be recognized net of the cost of purchased transportation.

revenue earned from contracts are presented net of discounts, allowances, and applicable taxes

classify the Series A and B warrants issued in our December 2024 public offering as a liability at its fair value.

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subject to re-measurement at each balance sheet date.

With each such re-measurement, the warrant liability will be adjusted to fair

value, with the change in fair value recognized in our statement of operations.

The fair value of these warrants requires

significate estimates by management derived from unobservable inputs.

Deviations from these estimates could result in a significate difference to our financial

With each such re-measurement, the warrant liability will be adjusted to fair value,

with the change in fair value recognized in our statement of operations.

The fair value of these warrants requires significate estimates

by management derived from unobservable inputs.

Deviations from these estimates could have a significant affect on our financial results.

Accounting Pronouncements

November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023- 07, Segment Reporting (Topic 280):

to Reportable Segment Disclosures (“ASU 2023-07”).

This ASU requires disclosure of significant segment expenses that

are regularly reviewed by the chief operating decision maker and included within each reported measure of segment profit or loss.

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

The ASU is effective for our Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods,

with early adoption permitted.

We adopted ASU

2023-07 effective December 31, 2024 with additional disclosures detailed in the subsequent notes.

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

Improvements to Income Tax Disclosures .

This ASU is intended to enhance the usefulness of income tax disclosures by requiring entities to disclose specific rate reconciliations,

amount of income taxes separate by federal and individual tax jurisdictions, and the amount of income (loss) from continuing operations

before income tax expense (benefit) disaggregated between federal, state and foreign.

ASU 2023-09 is effective for us for our fiscal

year beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the impact of adopting this standard

on our consolidated financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income—Expense Disaggregation

Disclosures (Subtopic 220-40) .

This ASU requires disclosure on an annual and interim basis, in the notes to the financial statements,

of disaggregated information about specific categories underlying certain income statement expense line items.

The guidance is effective

for annual periods beginning after December 15, 2026, and interim periods with annual reporting periods beginning after December 15,

2027, on a retrospective basis.

We are currently evaluating the impact of this standard on our consolidated financial statements and

related disclosures.

November 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20) .

clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an

induced conversion.

ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within

those annual reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

can be on a prospective or retrospective basis.

May 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-03,

Business Combinations (Topic 805) and Consolidation (Topic 810).

This ASU provides that a reporting entity involved in a business

combination effected primarily by the exchange of equity interests must consider the factors in Accounting Standards Codification (“ASC”)

805-10-55-12 through 55-15 to determine which entity is the accounting acquirer regardless of whether the legal acquiree is a Variable

Interest Entity (“VIE”).

The amendments in ASU 2025-03 must be applied prospectively to any business combination that occurs

after the initial adoption date.

ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods

within those fiscal years.

Early adoption is permitted.

We are currently evaluating the impact of this standard on our consolidated financial

statements and related disclosures.

May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers

(Topic 606) , which clarifies the guidance in both ASC 718 and ASC 606 on the accounting for share-based payment awards that are granted

by an entity as consideration payable to its customer.

The ASU is intended to reduce diversity in practice and improve existing guidance,

primarily by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service

conditions associated with share-based consideration payable to a customer.

In addition, the ASU clarifies that the guidance in ASC 606

on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether

an award’s grant date has occurred” (as determined under ASC 718).

ASU 2025-04 is effective for fiscal years beginning after

December 15, 2026, including interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the

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

July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326), which provides a practical

expedient for measuring expected credit losses on current receivables and contract assets arising under Topic 606, Revenue from

Contracts with Customers .

The ASU allows entities to assume that the macroeconomic conditions existing at the balance sheet date

will remain unchanged over the remaining life of those assets.

The amendments are effective for fiscal years beginning after

December 15, 2025, including interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the

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

August 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40).

This ASU simplifies the accounting for costs incurred in the development of internal-use software by removing the concept of multiple

project stages.

Under the new guidance, capitalization begins when management authorizes and commits funding to the project and it is

probable that the project will be completed and the software placed into service.

The amendments are effective for annual reporting periods

beginning after December 15, 2027, and interim periods within those years.

Early adoption is permitted.

We are currently evaluating the

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

September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815).

This ASU clarifies the scope of derivative accounting

for certain contracts and provides guidance on share-based, non-cash consideration received from a customer under Topic 606.

The amendments

expand a scope exception for contracts whose underlying is based on an entity’s own operations or activities, reducing the number

of arrangements that qualify as derivatives.

The ASU also clarifies the accounting for share-based consideration received from a customer.

The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those years.

adoption is permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements (“ASU 2025-11) .

purpose of this ASU is to improve the guidance of Topic 270, Interim Reporting, by providing clarity on the current interim reporting

requirements.

This amendment also provides additional guidance on what disclosures should be provided in interim reporting periods.

amendments in this ASU also add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting

period that have a material impact on the reporting entity.

The amendments in this ASU are effective for all public companies for interim

reporting periods within annual reporting periods beginning after December 31, 2027.

Early adoption is permitted.

The amendments in this

ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements.

currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to our operations

or that no material effect is expected on our consolidated financial statements as a result of future adoption.

of the Year Ended December 31, 2024 and the Nine-Month Transition Period Ended December 31, 2023

sales consist primarily of sales of our Singing Machine karaoke products.

We generated only a minimal amount of sales from our

SemiCab business.

Net sales decreased $5,704,000 to $23,494,000 for the year ended December 31, 2024 compared to $29,198,000 for the

nine-month transition period ended December 31, 2023.

The decrease in net sales was due primarily to decreases of $7,700,000 in

sales to Walmart that resulted from us not participating in Walmart’s national Black Friday promotion and $1,200,000 in sales

due to the loss of retail shelf space at Target.

The decrease of $8,900,000 from those two customers was partially offset by an

increase of $3,196,000 in sales to Costco and other customers.

We expect net sales of our Singing Machine karaoke products to decrease over the next 12 months due to the negative impact on our business of recently implemented tariffs on our products

manufactured in China.

However, we expect revenue generated from our SemiCab business to increase over the next 12 months as we

generate more business from our growing customer base.

As a result, total net sales are expected to increase over the next 12

of Goods Sold

of goods sold consists primarily of costs for raw materials and the manufacturing of our Singing Machine karaoke products.

incurred only a minimal amount of costs in connection with our SemiCab business.

Cost of goods sold decreased $4,295,000 to

$18,713,000 for the year ended December 31, 2024 compared to $23,008,000 for the nine-month transition period ended December 31,

The decrease in cost of goods sold was due primarily to a decrease of $3,553,000 for product manufacturing costs.

in net sales resulted in a corresponding decrease in products manufactured, resulting in lower manufacturing costs.

The decrease was

also due to a non-cash inventory impairment charge of $1,827,000 that we recorded during the nine-month transition period ended

December 31, 2023 that negatively impacted our cost of goods sold during the nine-month transition period ended December 31, 2023.

This was partially offset by an increase of $1,663,000 for our inventory reserve.

We expect cost of goods sold to remain at similar

levels over the next 12 months, subject to uncertainty surrounding the recently implemented tariffs on our products manufactured in

profit decreased $1,409,000 to $4,781,000, or 20.4% of net sales, for the year ended December 31, 2024 compared to $6,190,000, or 21.2%

of net sales, for the nine-month transition period ended December 31, 2023.

The decrease in gross profit was primarily due to a decrease

of $5,704,000 for net sales, partially offset by a decrease of $4,295,000 in cost of goods sold.

This decrease was partially offset by

an increase in higher margin sales of newer streaming technology karaoke machines as a percentage of total net sales.

We expect gross

profit to improve over the next 12 months as costs of goods sold remain at similar levels, subject to uncertainty surrounding the recently

implemented tariffs on our products manufactured in China, and sales of our higher margin, newer streaming technology karaoke machines

increase as a percentage of total net sales.

of the Years Ended December 31, 2025 and 2024

sales consist of sales generated by our SemiCab business.

Net sales increased $4,094,000 to $4,391,000 for the year ended December 31,

2025, compared to $297,000 for the year ended December 31, 2024.

The increase in net sales was due primarily to the addition of net sales

generated by SMCB, which we acquired on May 2, 2025.

We expect net sales to increase over the next 12 months as we generate more business

through our growing customer base in India and as we begin to generate business in the United States and Europe.

of sales consists primarily of freight, handling and servicing costs that we incur in connection with our SemiCab business.

Cost of sales

increased $5,215,000 to $5,706,000 for the year ended December 31, 2025, compared to $491,000 for the year ended December 31, 2024.

increase in cost of sales was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired

on May 2, 2025.

We expect costs of sales to increase over the next 12 months in connection with the increase in net sales that we expect

to generate from our SemiCab business.

expenses consist of selling expenses, general and administrative expenses, and impairment of goodwill.

expenses consist primarily of marketing and advertising expenses that we incur in connection with advertising campaigns and online

advertising initiatives that we engage in to generate sales of our Singing Machine karaoke products.

We did not incur any selling

expenses in connection with our SemiCab business.

Selling expenses decreased $843,000 to $2,874,000 for the year ended December 31,

2024 from $3,717,000 for the nine-month transition period ended December 31, 2023.

The decrease was primarily due to a decrease of

$666,000 in online marketing and social media advertising campaigns.

We expect selling expenses to decrease over the next 12 months

as we engage in fewer, but more focused, marketing and advertising initiatives and as we navigate the negative impact of recently

implemented tariffs on sales of our karaoke products.

expenses consist primarily of marketing and advertising activities that we engage in from time to time in connection with our SemiCab

Selling expenses were $4,000 for the year ended December 31, 2025.

We did not incur any selling expenses for the year ended

December 31, 2024.

We expect selling expenses to increase substantially over the next 12 months as we being to devote more resources

to marketing and advertising activities to support the growth of our SemiCab business in India, the United States and Europe.

and Administrative Expenses

and administrative expenses consist primarily of payroll expenses, legal and accounting expenses, warehouse expenses and rent

expense associated with our Singing Machine business, and general and administrative expenses incurred in the development and growth

and administrative expenses consist primarily of payroll expenses, legal and accounting expenses, and other corporate expenses.

and administrative expenses increased $1,973,000 to $6,629,000 for the year ended December 31, 2025, compared to $4,656,000 for the year

ended December 31, 2024.

The increase was due primarily to increases in expenses incurred in connection with the operation of our SemiCab.

We expect general and administrative expenses to increase over the next 12 months as we continue to invest in the growth and development

of our SemiCab business.

General and administrative expenses increased $3,624,000 to $12,240,000 for the year ended December 31,

2024, compared to $8,616,000 during the nine-month transition period ended December 31, 2023.

The increase was due primarily to

increases of $1,903,000 for general and administrative expenses incurred in the development and growth of our SemiCab business and

$923,000 for warehouse expenses.

We expect general and administrative expenses to decrease over the next 12 months as we implement

actions designed to reduce general and administrative expenses, particularly those related to marketing and advertising initiatives.

The reductions achieved may be partially offset by legal and accounting expenses that we incur in connection with capital-raising

activities that we engage in as needed to fund our business and expenses that we incur to fund the growth and development of our

SemiCab business.

of goodwill consists of the expense that we incurred from the write down of the goodwill that we recorded in connection with the acquisition

of SemiCab, Inc.’s business on July 3, 2025.

We recorded impairment of goodwill of $3,592,000 for the year ended December 31, 2024.

We did not record any impairment of goodwill for the nine-month transition period ended December 31, 2023.

expenses consists primarily of loss on the issuance of warrants that we incurred in connection with the public offering of

securities that we completed on December 6, 2024, and interest expense that we incurred in connection with shares of common stock

that we issued to investors in our October 2024 notes offering.

We incurred only a minimal amount of other expenses in connection

with our SemiCab business.

Other expenses increased $10,187,000 to $10,442,000 for the year ended December 31, 2024, compared to

$255,000 for the nine-month transition period ended December 31, 2023.

The increase was due primarily to increases of $8,889,000 for

non-cash losses that we incurred in connection with the issuance of the Series A and Series B warrants in the public offering of

securities that we completed on December 6, 2024, and $1,588,000 for non-cash interest expense that we incurred in connection with

shares of common stock that we issued to investors in our various financing transactions during 2024.

of substantially all of the assets of SemiCab, Inc.

on July 3, 2024.

We recorded impairment of goodwill of $3,592,000 for the year ended

December 31, 2024.

We did not record any impairment of goodwill for the year ended December 31, 2025.

We do not expect to incur any write

down of goodwill over the next 12 months.

expenses consists primarily of loss on the issuance of warrants that we incurred in connection with the public offering of securities

that we completed on December 6, 2024, and interest expense that we incurred in connection with shares of common stock that we issued

to investors in our October 2024 notes offering and other financing transactions.

We incurred only a minimal amount of other expenses

in connection with our SemiCab business.

Other expenses decreased $3,227,000 to $7,215,000 for the year ended December 31, 2025, compared

to $10,442,000 for the year ended December 31, 2024.

The decrease was due primarily to decreases of $2,087,000 for the loss that we incurred

in connection with the issuance and change in fair value of the Series A and Series B warrants that we sold in the public offering of

securities that we completed on December 6, 2024, and $1,588,000 for non-cash interest expense that we incurred in connection with shares

of common stock that we issued to investors in our various financing transactions during 2024.

We expect other expenses to decrease substantially

over the next 12 months.

Loss Attributable to Non-Controlling Interest

loss attributable to non-controlling interest consists of the loss allocated to SemiCab, Inc., which owns 20% of the outstanding membership

interests of SemiCab Holdings.

loss attributable to non-controlling interest consists of the loss allocated to SemiCab, Inc., which owned a 20% of the outstanding membership

interests of SemiCab Holdings until May 2, 2025, and Ajesh Kapoor and Vivek Sehgal, who collectively owned 20% of the outstanding membership

interests of SemiCab Holdings beginning May 2, 2025.

SemiCab Holdings owns our SemiCab business.

We acquired our SemiCab business from SemiCab, Inc.

3, 2024, and, as part of the transaction, granted SemiCab, Inc.

We acquired our SemiCab business from

SemiCab, Inc.

on July 3, 2024, and, as part of the transaction, granted SemiCab, Inc.

a 20% membership interest in SemiCab Holdings.

The net loss attributable to non-controlling interest of $701,000 for the year ended December 31, 2025 represents the amount of loss

incurred by SemiCab Holdings that was allocated to SemiCab Inc.

between January 1, 2025 and May 2, 2025, and to Ajesh Kapoor and Vivek

Sehgal through their collective 20% membership interest in SemiCab Holdings between May 2, 2025 and December 31, 2025.

The net loss attributable

to non-controlling interest of $1,110,000 represents the amount of loss incurred by SemiCab that was allocated to SemiCab, Inc.

its 20% membership interest in SemiCab Holdings.

We expect net loss attributable to non-controlling interest to increase over the next

12 months as we continue to invest in the development and growth of SemiCab’s business.

to non-controlling interest of $1,110,000 for the year ended December 31, 2024 represents the amount of loss incurred by SemiCab Holdings

that was allocated to SemiCab, Inc.

through its 20% membership interest in SemiCab Holdings between July 3, 2024 and December 31, 2024.

We expect net loss attributable to non-controlling interest to increase over the next 12 months as we continue to invest in the development

and growth of our SemiCab business.

And Capital Resources

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the use of short- and long-term debt.

As of December 31, 2024, our cash balance was $7,550,000.

cash used by operating activities was $8,556,000 during the year ended December 31, 2024 compared to net cash provided by operating

activities of $411,000 during the nine-month transition period ended December 31, 2023.

The difference of $8,967,000 was due

primarily to increases of $17,969,000 for net loss and $4,135,000 for refunds due to customers, and a decrease of $11,811,000 for

accounts payable and accrued expenses.

This was partially offset by increases of $8,889,000 for losses on the issuance of warrants

that we incurred in connection with the public offering of securities that we completed on December 6, 2024, $8,442,000 for accounts

receivable $3,352,000 for inventory, and $3,592,000 for impairment of goodwill.

cash used by investing activities was $2,245,000 during the year ended December 31, 2024, compared to $14,000 during the nine-month transition

period ended December 31, 2023.

The increase of $2,231,000 was due primarily to increases of $1,777,000 for advances to

SMCB under our loan agreement with them and $415,000 for pre-acquisition advances to SemiCab, Inc.

cash provided by financing activities was $11,648,000 for the year ended December 31, 2024, compared to $3,411,000 for the

nine-month transition period ended December 31, 2023.

As of March 25, 2026, our cash and restricted cash balance was approximately $10,939,000.

cash used in operating activities attributable to continuing operations was $7,309,000 during the year ended December 31, 2025, compared

to $3,985,000 during the year ended December 31, 2024.

The increase of $3,324,000 was due primarily to an increase of $2,087,000 for

proceeds received from the sale of stock, net of offering costs, and $2,000,000 for proceeds from the issuance of senior secured

notes, net of discounts.

This was partially offset by an increase of $2,353,000 for repayments of the senior secured notes and

$631,000 for payments on merchant cash advances payable.

primary sources of capital since September 30, 2024 are set forth below.

October 22, 2024, we entered into a securities purchase agreement with various accredited investors pursuant to which we sold original

issue discount senior secured notes in the aggregate principal amount of $2,352,941 for aggregate gross proceeds of $2,000,000.

a total of 11,500 shares of our common stock to the investors.

We registered the resale of these shares in a registration statement on

Form S-1 that was declared effective by the SEC on December 6, 2024.

December 6, 2024, we sold 21,000 shares of our common stock and pre-funded warrants to purchase 258,412 shares of our common stock in

lieu of receiving shares of common stock to accredited investors.

Each share of our common stock or pre-funded warrant in lieu thereof

was sold together with a Series A warrant to purchase one share of our common stock and a Series B warrant to purchase one share of our

common stock at an offering price of $34 per share of common stock or pre-funded warrant.

We issued Series A warrants for a total of 279,412 shares of common stock and Series B warrants for a total of 279,412

shares of common stock.

Univest Securities served as our exclusive

placement agent in connection with the offering.

We paid Univest Securities a cash fee equal to seven percent of the aggregate gross

proceeds received in the offering and a non-accountable expense allowance equal to one percent of the aggregate gross proceeds received

in the offering and reimbursed Univest Securities for various expenses incurred in connection with the offering.

The offering was made

pursuant to that certain registration statement on Form S-1, file no.

333-283178, as amended, that we originally filed with the SEC on

November 12, 2024, and that was declared effective by the SEC on December 6, 2024.

We received net proceeds of $8,370,000 from the offering

after deducting placement agent fees and other offering expenses.

December 18, 2024, we sold 120,337 shares of our common stock to institutional investors in a registered direct offering at a purchase

price of $16.62 per share.

Univest Securities served as our exclusive placement agent in connection with the offering.

We paid Univest

Securities a cash fee equal to eight percent of the aggregate gross proceeds received in the offering, and reimbursed Univest Securities

for various expenses incurred in connection with the offering.

The offering was made pursuant to that certain registration statement

on Form S-3, file no.

333-269183 that we originally filed with the SEC on January 11, 2023, and that was declared effective by the SEC

on January 20, 2023.

We received net proceeds of $1,665,000 from the offering after deducting placement agent fees and other offering

date, our capital needs have been met through cash generated by our operations, sales of our equity securities and the use of short-

and long-term debt to fund our operations.

We have used these sources of capital to pay virtually all of the costs and expenses that

we have incurred to date.

These costs and expenses have been comprised primarily of the professional fees, employee compensation expenses,

and general and administrative expenses discussed above.

We intend to continue to rely upon each of these sources to fund our operations

and expansion efforts, including additional acquisitions of controlling or non-controlling financial interests in other complementary

businesses and companies during the next 12 months.

the loss that we incurred in connection with the issuance and change in fair value of the Series A and Series B warrants that we sold

in the public offering of securities that we completed on December 6, 2024, and to an increase of $3,592,000 related to the impairment

of goodwill from the purchase of SemiCab, Inc recorded during the year ended December 31, 2024.

This was partially offset by a decrease

of $3,674,000 for loss from continuing operations.

cash used in investing activities attributable to continuing operations was $1,770,000 during the year ended December 31, 2025, compared

to $2,175,000 during the year ended December 31, 2024.

The decrease of $405,000 was due primarily to decreases of $605,000 for advances

to SMCB under our loan agreement with them, $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025, and

$415,000 for pre-acquisition advances to SemiCab.

This was partially offset by increases of $758,000 for repurchases of shares of our

common stock and $419,000 for the capitalization of internal use software costs.

cash provided by financing activities attributable to continuing operations was $9,686,000 during the year ended December 31, 2025, compared

to $11,648,000 during the year ended December 31, 2024.

The decrease of $1,962,000 was due primarily to decreases of $12,932,000 for

proceeds from the sale of common stock and warrants and $2,000,000 for proceeds from the issuance of senior secured notes, net of discounts.

This was partially offset by an increase of $10,213,000 for proceeds from the issuance of promissory notes and a decrease of $2,578,000

for payments of senior secured notes and debt issuance costs.

limited cash resources along with our recent history of recurring operating losses and decreases in working capital create substantial

doubt about our ability to continue as a going concern.

To date, our capital needs have been met through cash

generated by our operations, sales of our equity securities and the use of short- and long-term debt to fund our operations.

have used these sources of capital to pay virtually all of the costs and expenses that we have incurred to date.

These costs and expenses

have been comprised primarily of the professional fees, employee compensation expenses, and general and administrative expenses discussed

We intend to continue to rely upon each of these sources to fund our operations and expansion

efforts, including additional acquisitions of controlling or non-controlling financial interests in other complementary businesses

and companies during the next 12 months .

can provide no assurance that these sources of capital will be adequate to fund our operations and expansion efforts during the next

1 unchanged sentence

We may attempt to obtain additional capital through the sale of equity securities or the issuance of short- and long-term debt.

raise additional funds by issuing shares of our common stock, our stockholders will experience dilution.

we raise additional funds by issuing shares of our common stock, our stockholders will experience dilution.

If we raise additional funds

1 unchanged sentence

the securities are exercised or converted, as the case may be, into shares of our common stock.

Debt financing may involve agreements

containing covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity

securities, making capital expenditures for certain purposes or above a certain amount, or declaring dividends.

In addition, any equity

securities or debt that we issue may have rights, preferences and privileges senior to those of the shares of common stock held by our

stockholders.

financing may involve agreements containing covenants limiting or restricting our ability to take specific actions, such as incurring

additional debt, issuing equity securities, making capital expenditures for certain purposes or above a certain amount, or declaring

In addition, any equity securities or debt that we issue may have rights, preferences and privileges senior to those

of the shares of common stock held by our stockholders.

have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be available in an

4 unchanged sentences

financing transactions unattractive to us.

If we cannot raise additional capital when needed, or if such capital cannot be obtained on

acceptable terms, we may not be able to pay our costs and expenses as they are incurred, take advantage of future acquisition opportunities,

respond to competitive pressures or unanticipated events, or otherwise execute upon our business plan.

This may adversely affect our

business, financial condition and results of operations and, in the extreme case, cause us to discontinue our operations.

August 26, 2024, the we received a letter from the Nasdaq Listing Qualification Staff of the Nasdaq indicating that we were

not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price per share for our common stock had closed below

$1.00 for more than 30 consecutive business days.

We were given until February 24, 2025, to regain compliance with the

December 30, 2024, we received notice from the staff indicating that the bid price for our common stock had

closed below $0.10 per share for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be

subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and its securities would be subject to delisting

from Nasdaq unless we timely request a hearing before the Nasdaq Hearings Panel.

March 25, 2025, we received a letter from The Nasdaq stating that we had regained compliance with the minimum bid price

requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2).

be subject to a mandatory panel monitor for a period of one year from March 25, 2025.

If, within that one-year monitoring period, the

Nasdaq Listing Qualifications staff finds that we are again out of compliance with the minimum bid price requirement, notwithstanding

Nasdaq Listing Rule 5810(c)(2), then the staff will issue a delist determination letter and we will have an opportunity to request

a new hearing with the initial Nasdaq hearing panel or a newly convened hearing panel if the initial panel is unavailable.

raise additional capital when needed, or if such capital cannot be obtained on acceptable terms, we may not be able to pay our costs

and expenses as they are incurred, take advantage of future acquisition opportunities, respond to competitive pressures or unanticipated

events, or otherwise execute upon our business plan.

This may adversely affect our business, financial condition and results of operations

and, in the extreme case, cause us to discontinue our operations.

August 26, 2024, we received a letter from the Nasdaq advising us that we did not meet the minimum $1.00 per share bid price requirement

for continued inclusion on the Nasdaq pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2).

To demonstrate compliance with this requirement,

the closing bid price of our common stock needed to be at least $1.00 per share for a minimum of 10 consecutive business days before

February 24, 2025.

August 26, 2024, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our Quarterly

Report on Form 10-Q for the quarterly period ended June 30, 2024, did not satisfy the continued listing requirement under Nasdaq Listing

Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000.

We reported a stockholders’

deficit of approximately $872,000 on June 30, 2024 in that quarterly report.

Pursuant to the listing rule and instructions from Nasdaq,

we submitted a plan to regain compliance with the listing rule and were given an extension until November 14, 2024 to evidence compliance

through a public filing.

November 19, 2024, we filed our Quarterly Report on Form 10-Q for our fiscal quarter ended September 30, 2024 with the SEC.

we reported stockholders’ equity of approximately $2,700,000.

That same day we filed a Form 8-K with the SEC stating that we believed

we had regained compliance with the stockholders’ equity requirement.

On November 22, 2024, we received a letter from the Nasdaq

indicating that, based on the Form 10-Q that we filed on November 19, 2024, the Nasdaq had determined that we were in compliance with

the stockholders’ equity rule.

The Nasdaq advised us that it would continue to monitor our ongoing compliance with the stockholders’

equity requirement and, if at the time of our next periodic report, we fail to comply with the requirement, we may be subject to delisting.

December 30, 2024, we received notice from the Nasdaq indicating that the bid price for our common stock had closed below $0.10 per share

for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be subject to the provisions contemplated

under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and our securities would be subject to delisting from Nasdaq unless we timely request a

hearing before the Nasdaq hearings panel.

On February 10, 2025, we implemented a 200-for-1 reverse stock split.

On that day, the closing

price of our common stock was $2.98 per share and the closing bid of our common stock remained above $1.00 for the next 10 consecutive

business days.

March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of

$1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2).

We will be subject to a mandatory

panel monitor for a period of one year from March 25, 2025.

If, within that one-year monitoring period, the Nasdaq finds that we are

again out of compliance with the minimum bid price requirement, notwithstanding Nasdaq Listing Rule 5810(c)(2), then the Nasdaq will

issue a delist determination letter and we will have an opportunity to request a new hearing with the initial Nasdaq hearing panel or

a newly convened hearing panel if the initial panel is unavailable.

November 28, 2025, we received an additional letter from the Nasdaq indicating that our stockholders’ equity as reported in our

Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025, did not satisfy the continued listing requirement under

Nasdaq Listing Rule 5550(b)(1), which requires that a listed company’s stockholders’ equity be at least $2,500,000.

a stockholders’ equity of approximately $100,000 on September 30, 2025 in that quarterly report.

Pursuant to the listing rule and

instructions from Nasdaq, we submitted a plan to regain compliance with the listing rule and were given an extension until May 27, 2026

to evidence compliance through a public filing.

Sheet Arrangements

8 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis