What changed in this filing

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Item 1. Financial Statements

2026-05-14 compared with 2025-11-19 · 754 added, 737 removed, 498 unchanged (75% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

March 31, 2026

December 31, 2025

Current Assets

Restricted cash

Accounts receivable, net of allowances of $ 113,000 and $ 113,000 , respectively

Accounts receivable, related party

Accounts receivable

Prepaid expenses and other current assets

Current assets of discontinued operations

Total Current Assets

2 unchanged sentences

Intangible assets, net

Non-current assets of discontinued operations

Liabilities and Shareholders’ Equity

2 unchanged sentences

Accrued expenses

Refund due to customer

Warrant liability

Promissory notes payable, net

Current portion of notes payable to related parties

Other current liabilities

Current liabilities of discontinued operations

Promissory notes payable, net

Notes payable to related parties

Total Current Liabilities

Notes payable to related parties, net of current portion

Long-term provision for employee benefits

Total Liabilities

3 unchanged sentences

1,000,000 shares authorized;

no shares issued and

outstanding at September 30, 2025 and December 31, 2024

no shares issued and outstanding at

March 31, 2026 and December 31, 2025

Common stock, $ 0.01 par value;

800,000,000 and 100,000,000 shares authorized;

stock, $0.01 par value;

800,000,000 and 100,000,000 shares authorized;

2,641,778 and 470,825 shares issued and outstanding

at September 30, 2025 and December 31, 2024

14,651,665 and

3,414,542 shares issued and outstanding at March 31, 2026 and December 31, 2025

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

4 unchanged sentences

( 1,743,000 )

Treasury stock, 10,990 and 0 shares reserved at September 30, 2025 and December 31, 2024

Treasury stock, 10,990 shares reserved at March 31, 2026 and December 31, 2025

Total Shareholders’ Equity (Deficit)

1 unchanged sentence

Total Liabilities and Shareholders’ Equity/ (Deficit)

See notes to the condensed consolidated financial statements

Algorhythm Holdings, Inc.

notes to the condensed consolidated financial statements

Holdings, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

March 31, 2026

March 31, 2025

For the Three Months Ended

For the Nine Months Ended

September 30,

March 31, 2026

March 31, 2025

Cost of Sales

6 unchanged sentences

( 1,062,000 )

( 3,885,000 )

( 2,862,000 )

Other Expenses

1 unchanged sentence

( 6,468,000 )

Interest expense

Total Other Expenses

Interest expense, net

( 1,036,000 )

Loss From Continuing Operations Before Income Tax

Total Other Expenses

( 1,036,000 )

( 6,484,000 )

Loss From Continuing Operations Before Income Tax

( 5,380,000 )

4 unchanged sentences

( 7,546,000 )

( 10,713,000 )

( 3,190,000 )

Net gain (loss) from discontinued operations

( 1,100,000 )

( 2,372,000 )

( 4,323,000 )

Net Income (Loss)

Net loss from discontinued operations

( 1,748,000 )

2 unchanged sentences

Net loss attributable to non-controlling interest

Net Income (Loss) Available to Common Shareholders

$ ( 2,962,000 )

Net Loss Available to Common Shareholders

$ ( 5,106,000 )

$ ( 9,191,000 )

Income (Loss) Per Common Share

Loss Per Common Share

Basic and diluted from continuing operations

3 unchanged sentences

Basic and diluted

See notes to the condensed consolidated financial statements

Algorhythm Holdings, Inc.

notes to the condensed consolidated financial statements

Holdings, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

For the Three Months

Ended September 30, 2025 and 2024 (Unaudited)

Balance at June 30, 2025

$ ( 1,363,000 )

$ ( 758,000 )

$ ( 58,948,000 )

( 2,962,000 )

( 2,982,000 )

Stock-based compensation

Common stock issued as commitment fee to investor

Common stock issued for services

Balance at September 30, 2025

$ ( 1,383,000 )

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

March 31, 2026

March 31, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

$ ( 5,380,000 )

$ ( 9,294,000 )

Balance at June 30, 2024

Other comprehensive loss

Foreign currency translation adjustment

Total Comprehensive Loss

( 5,389,000 )

( 9,294,000 )

Net (loss) income

Sale of common stock, net of offering costs

Stock-based compensation

Common stock issued for acquisition of SemiCab assets

Issuance of subsidiary stock to non-controlling interest

Balance at September 30, 2024

Total comprehensive loss attributable to non-controlling interest

Total Comprehensive Loss Available to Common Shareholders

$ ( 5,113,000 )

$ ( 9,191,000 )

the Nine Months Ended September 30, 2025 and 2024 (Unaudited)

notes to the condensed consolidated financial statements

Holdings, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

the Three Months Ended March 31, 2026 and 2025 (Unaudited)

Additional Paid-in

Accumulated Other Comprehensive

Non-Controlling

Balance at December 31, 2024

7 unchanged sentences

Reclassification of Series A warrants to equity

Common stock issued for acquisition of SMCB

Repurchase of common stock from related parties

Common stock issued as commitment fee to investor

Common stock issued for services

Balance at September 30, 2025

Balance at March 31, 2025

$ ( 758,000 )

6 unchanged sentences

$ ( 1,860,000 )

Net income (loss)

$ ( 758,000 )

$ ( 65,043,000 )

Sale of common stock, net of offering costs

$ ( 1,743,000 )

$ ( 1,860,000 )

( 5,106,000 )

( 5,380,000 )

Foreign currency translation adjustment

Stock-based compensation

Common stock issued for acquisition of SemiCab assets

Issuance of subsidiary stock to non-controlling interest

Balance at September 30, 2024

Common stock issued upon settlement of prepaid purchases

Balance at March 31, 2026

$ ( 758,000 )

2 unchanged sentences

$ ( 758,000 )

to the condensed consolidated financial statements

Algorhythm Holdings, Inc.

$ ( 70,149,000 )

$ ( 2,019,000 )

notes to the condensed consolidated financial statements

Holdings, Inc.

and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CONSOLIDATED STATEMENTS OF CASH FLOWS

March 31, 2026

March 31, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

Cash flows from operating activities

3 unchanged sentences

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

Depreciation and amortization

Reduction in SMCB loan in exchange for services

Gain on allowance for credit loss

Net foreign currency translation adjustment

Depreciation and amortization of property and equipment and intangible assets

Amortization of debt discount and issuance cost

Change in fair value of warrant liability

Stock-based compensation

Payment of early termination fee on operating lease termination settlement

Changes in operating assets and liabilities:

Accounts receivable

( 1,376,000 )

Accounts receivable, related party

Accounts receivable

Prepaid expenses and other current assets

( 1,044,000 )

Other non-current assets

1 unchanged sentence

Accrued expenses

Refunds due to customers

Other liabilities

( 1,236,000 )

Other current liabilities

Provision for employee benefits

Net cash used in operating activities attributable to continuing operations

4 unchanged sentences

Capitalization of internal use software costs

Repurchase of shares of common stock

Cash received from acquisition of SemiCab assets

Cash received from acquisition of SMCB

Advances to SMCB

( 1,172,000 )

Net cash provided by (used in) investing activities attributable to continuing operations

( 1,888,000 )

Net cash used in investing activities attributable to continuing operations

Cash flows from financing activities

Proceeds from issuance of promissory notes, net

Proceeds from issuance of promissory notes, net of offering costs and discounts

Payment of promissory notes

Proceeds from sale of stock, net of offering costs

Payments on merchant cash advances payable

Net cash provided by financing activities attributable to continuing operations

Net cash provided by (used in) operating activities attributable to discontinued operations

( 3,123,000 )

Net cash provided by (used in) investing activities attributable to discontinued operations

Net cash used in financing activities attributable to discontinued operations

Total cash provided by (used in) discontinued operations

( 2,278,000 )

Net cash used in operating activities attributable to discontinued operations

Net cash provided by investing activities attributable to discontinued operations

Net cash provided by financing activities attributable to discontinued operations

Total cash used in discontinued operations

Net change in cash

( 3,966,000 )

Cash at beginning of period

Cash at end of period

Cash and restricted cash at beginning of period

Cash and restricted cash at end of period

Supplemental disclosures of cash flow information:

1 unchanged sentence

Non-cash investing and financing cash flow information:

Common stock issued upon settlement of prepaid purchases

Reclassification of Series A warrants to equity

Common stock issued for exercise of Series B warrants

Common stock issued for acquisition of SMCB

Promissory note issued for acquisition of SMCB

Common stock issued for services

Common stock issued as commitment fee to investor

Common stock issued for acquisition of SemiCab assets

Repurchase of common stock - related parties

notes to the condensed consolidated financial statements

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(f/k/a The Singing Machine Company, Inc.) (the “Company”) is an artificial intelligence (“AI”)

technology holding company that currently has one business unit, which is SemiCab.

SemiCab is an AI-enabled software logistics and distribution

business operated through the Company’s subsidiary, SemiCab Holdings, LLC.

Prior to August 1, 2025, the Company had a second business

unit, which was Singing Machine.

Singing Machine was a home karaoke consumer products business that designed and distributed karaoke

products globally to retailers and ecommerce partners through the Company’s subsidiary, The Singing Machine Company, Inc.

sold its Singing Machine business on August 1, 2025.

Accordingly, the Company no longer owns or operates the Singing Machine business

The Company’s operations

include its 80 %-owned subsidiaries, SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab Holdings”), and SMCB

Solutions Private Limited, an Indian company (“SMCB”), and 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”), The Singing Machine Company, Inc., a Delaware corporation (“SMC”), and RIME Holdings, LLC.

technology company focused on the growth and development of SemiCab.

SemiCab is an AI-enabled software logistics and distribution business

that utilizes the Company’s SemiCab technology platform to enable retailers, brands and transportation providers to address common

supply chain problems globally.

The Company operates its SemiCab business through its subsidiary, SemiCab Holdings, LLC.

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

Singing Machine was a home karaoke consumer products

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

Machine Company, Inc.

The Company sold its Singing Machine business on August 1, 2025.

Accordingly, the Company no longer owns or operates

the Singing Machine business.

The results of operations, cash flows, and related assets and liabilities of the Singing Machine business

have been classified as discontinued operations in the Company’s condensed consolidated financial statements for all periods presented.

Company’s operations include its 80 %-owned subsidiaries, SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab

Holdings”), and SMCB Solutions Private Limited, an Indian company (“SMCB”), and 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”), The Singing Machine Company, Inc., a Delaware corporation (“SMC”), and RIME Holdings, LLC, a Utah limited

liability company (“Rime”).

September 5, 2024, the Company’s Certificate of Incorporation was amended to change the name of the Company from “The Singing

17 unchanged sentences

Company determined that the sale of the Singing Machine business met the criteria under Accounting Standards Codification (“ASC”)

205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a

discontinued operation as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial results.

Accordingly, the Company accounted for the Singing Machine business as a discontinued operation in this Quarterly Report on Form 10-Q.

All amounts and disclosures for all periods presented reflect only the continuing operations of the Company unless otherwise noted.

information is presented in Note 19 – Discontinued Operations .

205-20, Presentation of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a discontinued

operation as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial

Accordingly, the Company has presented the results of the Singing Machine business as discontinued operations for all periods

presented in this Quarterly Report on Form 10-Q.

All amounts and disclosures included in these condensed consolidated financial statements

reflect the Company’s continuing operations unless otherwise noted.

Additional information is presented in Note 17 – Discontinued

3 – Liquidity, Going Concern and Management Plans

Concern Analysis

of September 30, 2025, the Company’s cash balance was $ 2,839,000 .

This will not be sufficient to fund the Company’s planned

of March 31, 2026, the Company’s cash and restricted cash balance was $ 10,939,000 .

This will not be sufficient to fund its planned

operations for at least one year after the date the condensed consolidated financial statements are issued.

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Company plans to finance its operations by obtaining additional capital through external sources of financing.

It may attempt to

obtain additional capital through the sale of equity securities or the issuance of debt securities.

The Company has not made any

arrangements to obtain additional capital and can provide no assurance that additional financing will be available in an amount or

on terms acceptable to the Company, if at all.

It may attempt to obtain

additional capital through the sale of equity securities or the issuance of debt securities.

The Company has not made any arrangements

to obtain additional capital and can provide no assurance that additional financing will be available in an amount or on terms acceptable

to the Company, if at all.

making this assessment, management performed a comprehensive analysis of the Company’s current circumstances, including its financial

position, cash flow forecasts, and obligations and debts.

Although management has a recent history of successful capital

raises, the analysis used to determine the Company’s ability to continue as a going concern does not include cash resources outside

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

Although management has a recent history of successful capital raises, the

analysis used to determine the Company’s ability to continue as a going concern does not include cash resources outside the Company’s

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

4 – Summary of Significant Accounting Policies

of Presentation

accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 have

been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) applicable

to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC.

Accordingly, they do not

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

accompanying unaudited financial statements for the three months ended March 31, 2026 and 2025 have been prepared in accordance with

accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information

and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC.

Accordingly, they do not include all of the information

and disclosures required by US GAAP for complete consolidated financial statements.

the opinion of management, the condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals)

2 unchanged sentences

for the full year.

The condensed consolidated balance sheet as of September 30, 2025 and condensed financial statement information for

the three and nine months ended September 30, 2025 and 2024 are unaudited, whereas the condensed consolidated balance sheet as of December

31, 2024 is derived from the audited consolidated balance sheet as of that date.

The condensed consolidated financial statements and

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

annual report on Form 10-K for the year ended December 31, 2024.

There have been no changes to the Company’s significant accounting

policies as disclosed on the Company’s annual report on Form 10-K for the year ended December 31, 2024.

to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment

Reporting (“ASC 280”), the Company’s Chief Executive Officer serves as the Company’s Chief Operating Decision

Maker (“CODM”).

Prior to August 1, 2025,

the CODM determined that the Company operated in two reportable segments:

The condensed consolidated balance sheet as of March 31, 2026 and condensed financial statement information for the

three months ended March 31, 2026 and 2025 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2025 is

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

The condensed consolidated financial statements and notes hereto

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

on Form 10-K for the year ended December 31, 2025.

There have been no changes to the Company’s significant accounting policies

as disclosed on the Company’s annual report on Form 10-K for the year ended December 31, 2025.

to ASC Topic 280, Segment Reporting (“ASC 280”), the Company’s Chief Executive Officer serves as the Company’s

Chief Operating Decision Maker (“CODM”).

Prior to August 1, 2025, the CODM determined that the Company operated in two reportable

(i) the SemiCab business, and (ii) the Singing Machine business.

On August 1, 2025, the Company completed the sale of its Singing Machine business.

Upon the completion of this transaction, the Company

began operating as a single reportable segment consisting of its SemiCab business.

CODM evaluates and manages the Company’s operations using net loss as the primary measure to allocate resources, make operating

decisions, and assess financial performance.

In addition, the CODM considers non-financial information and other qualitative factors

when evaluating performance, establishing compensation, monitoring budget-to-actual results, and making capital allocation decisions.

information is presented in Note 15 – Segment Information and Revenue Disaggregation.

On August 1, 2025, the Company completed the sale of its Singing

Machine business.

Upon the completion of this transaction, the Company began operating as a single reportable segment consisting of its

SemiCab business.

The CODM evaluates and manages the Company’s operations using net loss as the primary measure to allocate resources,

make operating decisions, and assess financial performance.

In addition, the CODM considers non-financial information and other qualitative

factors when evaluating performance, establishing compensation, monitoring budget-to-actual results, and making capital allocation decisions.

Additional information is presented in Note 13 – Segment Information and Revenue Disaggregation.

Accounting Pronouncements

May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810).

This ASU provides that

a reporting entity involved in a business combination effected primarily by the exchange of equity interests must consider the factors

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

Variable Interest Entity (“VIE”).

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

that occurs after the initial adoption date.

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

periods within those fiscal years.

This ASU provides that a reporting

entity involved in a business combination effected primarily by the exchange of equity interests must consider the factors in ASC 805-10-55-12

through 55-15 to determine which entity is the accounting acquirer regardless of whether the legal acquiree is a Variable Interest Entity

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

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on its

consolidated financial statements and related disclosures.

The Company is currently evaluating the impact of this standard on its condensed 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

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The Company is currently evaluating

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

the impact of this standard on its condensed 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

2 unchanged sentences

over the remaining life of those assets.

The amendments are effective for fiscal years beginning after December 15, 2025, including interim

periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on its

consolidated financial statements and related disclosures.

The Company adopted this ASU on January 1, 2026, and the adoption did not have a material impact

on its condensed consolidated financial statements.

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.

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

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

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

The amendments are effective for annual reporting periods beginning

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

Early adoption is permitted.

The Company is currently evaluating

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

The Company is currently evaluating the

impact of this standard on its condensed 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

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.

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.

The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements

and related disclosures.

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

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

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

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

The amendments

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

that have a material impact on the reporting entity.

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

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

Early adoption is permitted.

The Company is currently evaluating the impact of this

standard on its consolidated financial statements and related disclosures.

5 – Variable Interest Entities

Company determined that SMCB was a VIE because the Company provided financial support to SMCB in the form of a loan agreement to fund

SMCB’s operations.

The Company further determined that it was not the primary beneficiary of SMCB because the Company did not have

the power to direct or control’s significant activities related to its business.

Accordingly, the Company did not consolidate

SMCB’s results of operations and financial position in its condensed consolidated financial statements prior to May 2, 2025.

May 2, 2025, SemiCab Holdings acquired 99.99 % of the equity shares of SMCB from SemiCab, Inc.

As a result, on May 2,

2025, the Company consolidated SMCB’s results of operations and financial position in its condensed consolidated financial statements.

A discussion of this transaction is set forth herein in Note 18 – Acquisition of SMCB

The amendments in this ASU can

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

The Company is

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

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

Company’s operations or that no material effect is expected on its condensed consolidated financial statements as a result of future

5 – Property and Equipment, Intangible Assets and Goodwill

summary of the Company’s property and equipment at September 30, 2025 and December 31, 2024 is as follows:

of Property and Equipment

September 30,

summary of the Company’s property and equipment at March 31, 2026 and December 31, 2025 is as follows:

Schedule of Property and Equipment

Computer and office equipment

Property and equipment gross

accumulated depreciation

Property and equipment

expense was $ 1,000 and $ 5,000 for the three and nine months ended September 30, 2025, respectively, and $ 0 for the three and nine months

ended September 30, 2024.

summary of the Company’s intangible assets at September 30, 2025 and December 31, 2024 is as follows:

of Intangible Assets

September 30,

Customer relationships

Developed technology

and equipment net

expense was $ 2,000 and $ 0 for the three months ended March 31, 2026 and 2025, respectively.

summary of the Company’s intangible assets at March 31, 2026 and December 31, 2025 is as follows:

Schedule of Intangible Assets

Customer relationships of SemiCab, Inc.

Trade name of SemiCab, Inc.

Developed technology of SemiCab, Inc.

Customer relationships of SMCB

Reacquired rights of SMCB

Trade name of SMCB

Internal use software

Intangible assets gross

accumulated amortization

Intangible assets net

expense was $ 15,000 and $ 45,000 for the three and nine months ended September 30, 2025, respectively, and $ 44,000 for the three and nine

months ended September 30, 2024.

the three and nine months ended September 30, 2025, the Company capitalized costs related to the development of internal-use software

in accordance with ASC 350-40, Intangibles — Goodwill and Other — Internal-Use Software .

Capitalized costs primarily

consist of personnel and third-party fees incurred during the application development stage for software that support the Company’s

Software as a Service (“SaaS”) operations.

Costs incurred during the preliminary project and post-implementation stages are

expensed as incurred.

The capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which

is 5 years , beginning when the software is ready for its intended use.

September 30, 2025, the Company tested the amount of goodwill that it recorded in connection with the acquisition of SemiCab, Inc.’s

business on July 3, 2024 for impairment to see if the carrying amount of goodwill exceeded its carried value.

The Company calculated

a market-based valuation utilizing inputs classified as Level 3 on the fair value hierarchy by multiplying one by projected 2025 revenue

for the SemiCab business.

The Company determined that no impairment of goodwill needed to be recorded with respect to that goodwill during

the nine months ended September 30, 2025.

Accordingly, the balance of that goodwill was $ 786,000 on September 30, 2025.

expense was $ 91,000 and $ 15,000 for the three months ended March 31, 2026 and 2025, respectively.

May 2, 2025, SemiCab Holdings acquired 99.99 % of the equity shares of SMCB from SemiCab, Inc.

In connection with the

acquisition, the Company recorded additional goodwill in the amount of $ 3,632,000 .

As a result, the balance of the Company’s goodwill

was $ 4,418,000 on September 30, 2025.

In connection with the acquisition, the

Company recorded additional goodwill in the amount of $ 1,896,000 .

As a result, the balance of the Company’s goodwill was $ 2,682,000

on December 31, 2025.

the year ended on December 31, 2025, the Company tested the recorded amount of goodwill from the acquisition of SemiCab,

Inc.’s business on July 3, 2024 and SMCB on May 2, 2025 for impairment to see if the carrying amount of goodwill exceeded its

carried value as of December 31, 2025.

As a result of this test, the Company determined that no impairment of goodwill was needed to

be recorded as of December 31, 2025.

the three months ended March 31, 2026, the Company evaluated whether any events or changes in circumstances indicated that it is more

likely than not that the fair value of its reporting unit was less than its carrying amount.

The Company determined that no such triggering

events occurred, and therefore, no interim goodwill impairment test was required.

following table presents the changes in the value of the goodwill recognized in connection with the acquisition of SemiCab, Inc.

on July 3, 2024 and SMCB on May 2, 2025:

Schedule of Changes in Goodwill

Balance at January 1, 2024

Goodwill from acquisition of SemiCab, Inc.’s business on July 3, 2024

Impairment of goodwill

( 3,592,000 )

Balance at December 31, 2024

Goodwill from acquisition of SMCB on May 2, 2025

Impairment of goodwill

Balance at December 31, 2025

Impairment of goodwill

Balance at March 31, 2026

6 – Notes Payable to Related Parties

SemiCab Holdings assumed

several unsecured loans from Ajesh Kapoor and Vivek Sehgal in the acquisition of SemiCab, Inc.’s business.

The Company incurred

interest expense on these loans of $ 15,000 and $ 46,000 for the three and nine months ended September 30, 2025, respectively.

did no t have any accrued interest payable as of September 30, 2025.

terms of each loan are summarized in the table below:

of Notes Payable to Related Parties Loan

Balance as of September 30, 2025

current portion of notes payable to related parties

Notes payable to related parties, net of current portion

of December 31, 2024, the loans described above that were issued between April 17, 2023 and May 17, 2023 were in default.

to December 31, 2024, the Company entered into waivers and amendments with each of the note holders who are parties to those loans

to extend the maturity dates of the loans to February 1, 2026.

Additional information about these loans is presented in Note 20

– Subsequent Events.

February 18, 2025, the Company issued a promissory note to each of Stingray Group and Regalia Ventures in the amount of $ 286,000 and

payable to related parties consist of the following:

Schedule of Notes Payable to Related Parties

Loans assumed in acquisition of SemiCab, Inc.’s business

Promissory note issued for acquisition of SMCB

With Related Parties Assumed in Acquisition of SemiCab, Inc.’s Business

Holdings assumed several unsecured loans from Ajesh Kapoor and Vivek Sehgal in the acquisition of SemiCab, Inc.’s business.

Company incurred interest expense on these loans of $ 13,000 and $ 15,000 for the three months ended March 31, 2026, and March 31, 2025,

respectively.

A discussion of these transactions and the terms of the promissory notes is set forth herein in Note 12 –

Securities Transactions .

In relation to these loans, the Company had accrued interest payable of $ 4,000 as of March 31, 2026 that was included within

accounts payables in the Company’s condensed consolidated balance sheets.

The Company did no t have any accrued interest payable

as of December 31, 2025.

terms of each loan and the balances as of March 31, 2026 and December 31, 2025 are summarized in the table below:

Schedule of Notes Payable to Related Parties Loan

Outstanding Principal

March 31, 2026

December 31, 2025

October 8, 2025, the Company repaid the loan from Vivek Sehgal issued on April 17, 2023 for $ 50,000 and the loan from Ajesh Kapoor issued

on May 5, 2023 for $ 50,000 .

Kapoor serves as the Chief Executive Officer and Chief Technology Officer of SemiCab Holdings and as a member of the Company’s

Board of Directors, and Mr.

Sehgal serves as the Chief Product Officer of SemiCab Holdings.

Note Issued for Acquisition of SMCB

May 2, 2025, the Company and SemiCab Holdings acquired 99.99 % of the equity shares of SMCB from SemiCab, Inc.

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terms of the promissory note is set forth herein in Note 16 – Acquisition of SMCB .

8 – Credit Facilities and Other Financing Arrangements

Credit Facility

March 28, 2024, the Company entered into a loan agreement and related revolving credit note with Oxford Commercial Finance (“Oxford”).

The agreement was for a two-year term and established a secured asset-backed revolving credit facility that was comprised of a maximum

$ 2,000,000 revolving credit facility.

Availability under the credit facility was 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 were secured

by a continuing security interest in all property of each Loan Party, subject to certain excluded collateral.

As of June 30, 2024, there

was no availability under the Credit Facility as there were no eligible accounts receivable.

October 17, 2024, the Company terminated the loan agreement and note and paid Oxford a termination fee of $ 40,000 .

As of the date of

termination, the Company had no outstanding amounts owed to Oxford.

Capital Merchant Cash Advance

connection with the acquisition of SemiCab, Inc.’s business, the Company assumed a merchant cash advance that was payable to Agile

Capital Funding, LLC that had been incurred under a financing agreement that SemiCab, Inc.

had entered into on March 22, 2024.

amount borrowed was $ 315,000 , with net proceeds to SemiCab, Inc.

in the amount of $ 300,000 .

Repayment terms consisted of weekly payments

in the amount of $ 16,200 for 28 weeks for a total repayment of $ 453,600 .

The effective interest rate for the borrowings was 15 % per year.

As of December 31, 2024, the merchant cash advance had been repaid in full.

Advance Merchant Cash Advance

connection with the acquisition of SemiCab, Inc.’s business, the Company assumed a merchant cash advance that was payable to Cedar

Advance, LLC that had been incurred under a financing agreement that SemiCab, Inc.

had entered into on May 8, 2024.

The initial amount

borrowed was $ 215,000 , with net proceeds to SemiCab, Inc.

in the amount of $ 204,300 .

Repayment terms consisted of weekly payments in

the amount of $ 11,100 for 28 weeks for a total repayment of $ 312,000 .

The effective interest rate for the borrowings was 18 % per year.

As of December 31, 2024, the merchant cash advance had been repaid in full.

7 – Commitments and Contingencies

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day of each of the following 10 calendar months starting on July 1, 2024.

connection with the acquisition of SemiCab, Inc.’s business, the Company assumed this settlement liability.

The final payment of

the settlement was made during the nine months ended September 30, 2025.

Accordingly, there was no unpaid balance at September 30, 2025.

As of December 31, 2024, the remaining unpaid balance of the settlement was $ 325,000 and was included as a component of accrued expenses

on the Company’s condensed consolidated balance sheets.

connection with the acquisition of the SemiCab, Inc.’s business, the Company assumed this settlement liability.

The final payment

of the settlement was made during the year ended December 31, 2025.

Accordingly, there was no unpaid balance at March 31, 2026 or December

December 21, 2023, Ault Lending, LLC (“Ault Lending”), a wholly-owned subsidiary of Ault Alliance, Inc., a former shareholder

of the Company, filed a derivative shareholder action in Delaware Chancery Court against the Company, its board of directors, Stingray

Group, LLC (“Stingray Group”) and Regalia Ventures, LLC (“Regalia Ventures”)

for alleged breach of fiduciary duty in approving a recent above-market private placement equity transaction.

The complaint alleged that

the Company and its board of directors followed an inadequate process in evaluating the private placement transaction that the Company

completed in November 2023 and that the Company and its board of directors entered into the transaction with an intent to dilute Ault’s

ownership stake in the Company.

Group, LLC (“Stingray Group”) and Regalia Ventures, LLC (“Regalia Ventures”) for alleged breach of fiduciary

duty in approving a recent above-market private placement equity transaction.

The complaint alleged that the Company and its board of

directors followed an inadequate process in evaluating the private placement transaction that the Company completed in November 2023

and that the Company and its board of directors entered into the transaction with an intent to dilute Ault’s ownership stake in

Ault Lending was seeking the following relief from the court:

(i) declarations that the defendant directors

breached their fiduciary duties;

and that Stingray Group and Regalia Ventures aided and

abetted those breaches;

(ii) rescission of the Company’s sale of shares to Stingray Group and Regalia

(i) declarations that the defendant directors breached their

fiduciary duties;

and that Stingray Group and Regalia Ventures aided and abetted those breaches;

(ii) rescission of the Company’s

sale of shares to Stingray Group and Regalia Ventures;

and (iii) damages and attorney’s fees.

On April 30, 2025, Ault Lending filed a motion with the court requesting

that the claims be dismissed without prejudice and on that same date, the court approved the dismissal of the claims without prejudice.

Flatiron & OAC Adelphi Litigation

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”).

the year ended December 31, 2024, the Company abandoned its plans to continue use of the leased space and exercised its early termination

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

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

lease were impaired.

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

off during the year ended December 31, 2024.

July 26, 2024, the Landlord filed a civil action in the Supreme Court of the State of New York against MICS NY and the Company (the

“Defendants”) for alleged breach of lease, seeking monetary damages including unpaid rent, future unpaid rent, and other expenses

related to the lease.

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

September 25, 2024, the Company entered into a settlement agreement for a full release and dismissal of the complaint within five business

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

Pursuant to the settlement agreement, the Company made the first payment of $ 150,000

on September 25, 2024 and a final payment of $ 100,000 on October 25, 2024.

The remaining lease liability was written off upon settlement,

resulting in a loss upon termination of the lease of $ 4,000 , net of the write off of the related lease asset discussed above.

29, 2024, the Landlord filed a discontinuance with prejudice.

On April 30, 2025, Ault Lending filed

a motion with the court requesting that the claims be dismissed without prejudice and on that same date, the court approved the dismissal

of the claims without prejudice.

Yonder Liability

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deem the entire balance due satisfied if either milestone payment is made by the Company.

The first milestone payment for $ 175,000 was

due on July 1, 2024 and was not made.

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.

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As of the date of this filing, none of the scheduled payments have been made.

A liability of $ 506,000 has been recorded as a component

of accrued expenses on the accompanying condensed consolidated balance sheets.

A liability of $ 506,000 was recorded within accrued

expenses on the accompanying condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.

February 11, 2025, Blue Yonder filed a civil action in the Superior Court of the State of Arizona against the Company for breach of contract

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Blue Yonder can enforce the judgment against the Company.

The judgement was in the amount of $ 509,119 .

The judgment was in the amount of $ 509,119 .

On August 1, 2025, the Company

filed an answer to the complaint and counterclaims against Blue Yonder for breach of contract.

On January 30, 2026, the Court granted

Blue Yonder’s motion for judgment on the pleadings.

The outcome of this matter is uncertain.

10 – Stock Compensation Expense

Incentive Plan

8 – 2022 Equity Incentive Plan

April 12, 2022, the Company’s board of directors approved The Singing Machine Company, Inc.

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agents, advisors and independent contractors.

of September 30, 2025, there were 1,667 shares of common stock authorized for issuance under the plan.

Of this amount, awards representing

1,183 shares of common stock had been granted under the plan and 484 shares remained available for issuance under the plan.

did not issue any share-based awards under the plan during the nine months ended September 30, 2025 and 2024, and no shares were forfeited

during the three and nine months ended September 30, 2025.

of September 30, 2025, there was an unrecognized expense of $ 96,150 remaining on stock options currently vesting over time with an approximate

weighted average of three years and eight months remaining until the options would be fully vested.

The vested options outstanding as

of September 30, 2025, had no intrinsic value.

11 – Net Income (Loss) Per Share

computations of basic and dilutive income (loss) per share of commons stock outstanding for the three and nine months ended September 30,

2025 and 2024 are as follows:

of Basic and Diluted Income (Loss) Per Share

Three Months Ended

Nine Months Ended

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

Net income (loss) available to common shareholders

$ ( 2,962,000 )

number of shares of common stock initially available for issuance under the plan was 1,167 shares of common stock and thereafter, beginning

in 2023, an annual increase would occur as of the first day of the Company’s applicable fiscal year equal to the lesser of:

five percent of the outstanding shares of common stock calculated on a fully diluted basis as of the end of the Company’s immediately

preceding fiscal year;

(ii) 167 shares;

and (iii) a lesser amount as determined by the Company’s board of directors.

of common stock subject to stock awards granted under the equity plan that lapse, terminate, expire prior to exercise, are canceled,

or are forfeited, become available for issuance again under the equity plan.

Shares subject to a stock award under the equity plan do

not become available for issuance or delivery again under the equity plan if such shares are:

(i) shares tendered by a participant or

retained by the Company as full or partial payment to the Company for the exercise or purchase price of an award;

or (ii) shares used

to satisfy tax withholding obligations in connection with an award.

Company’s board of directors may amend, suspend or terminate the plan or a portion of it at any time;

provided, however, that to

the extent required by applicable law, regulation or stock exchange rule, stockholder approval will be required for any amendment to

The plan is scheduled to terminate automatically in 10 years following the earlier of:

(i) the date the Company’s board

of directors adopted the plan;

and (ii) the date the stockholders approved the plan.

November 20, 2025, the plan was amended to provide that the number of shares of common stock available for issuance under the plan is

5,000,000 and that, commencing January 1, 2025, on the first day of each of the Company’s fiscal years thereafter, this number

will be increased by the lesser of:

(i) 15 % of the outstanding common stock on a fully diluted basis as of the end of the Company’s

immediately preceding fiscal year, or (ii) an amount determined by the board of directors, provided that any shares from any such increases

in previous years that are not actually issued shall continue to be available for issuance under the plan.

Accordingly, as of December

31, 2025, there were 5,000,000 shares of common stock authorized for issuance under the plan.

January 1, 2026, the number of shares available for issuance under the plan increased to 5,710,066 in accordance with the terms of the

As of March 31, 2026, 3,919,911 shares remained available for issuance under the plan.

Company granted awards representing 1,506,489 shares of common stock during the three months ended March 31, 2026.

The Company did not

grant any share-based awards during the three months ended March 31, 2025.

No awards were forfeited during the three months ended March

31, 2026 and 2025.

of March 31, 2026 and December 31, 2025, 1,790,155 and 283,666 shares, respectively, were subject to outstanding awards under the plan.

compensation expense represents the grant-date fair value of awards, recognized on a straight-line basis over the requisite service period.

For the three months ended March 31, 2026 and 2025, the Company recognized stock-based compensation expense related to stock options

and restricted stock awards of $ 923,000 and $ 85,000 , respectively.

of March 31, 2026, there was $ 2,098,000 of unrecognized compensation expense related to stock options, which is expected to be recognized

over a weighted-average remaining vesting period of approximately three years and six months.

Stock options vested as of March 31, 2026

had no intrinsic value.

of March 31, 2026, there was $ 114,000 of unrecognized compensation expense related to restricted stock awards, which is expected to be

recognized over a weighted-average remaining vesting period of approximately one year and two months.

9 – Net Loss Per Share

computations of basic and dilutive loss per share of common stock outstanding for the three months ended March 31, 2026 and 2025 are

Schedule of Basic and Diluted Income (Loss) Per Share

March 31, 2026

March 31, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

Net loss available to common shareholders

$ ( 5,106,000 )

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Basic and diluted weighted average of common stock outstanding

Income (loss) per common share

computation of the fully diluted weighted average number of shares of common stock outstanding for the three and nine months ended September

Loss per common share

computation of the fully diluted weighted average number of shares of common stock outstanding for the three months ended March 31, 2026

and 2025 is as follows:

Diluted Weighted Average Number of Shares

Three Months Ended

Nine Months Ended

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

Schedule of Diluted Weighted Average Number of Shares

March 31, 2026

March 31, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

Basic weighted average common shares outstanding

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Diluted weighted average of common shares outstanding

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

Diluted net income (loss)

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

Diluted net loss

per share reflects the potential dilution assuming shares of common stock underlying in-the-money options and warrants have been issued

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at the average market price during the period using the treasury stock method.

For the three and nine months ended September 30, 2025,

of common stock underlying stock options,

respectively, and 1,138,163

shares of common stock underlying

warrants were excluded from the calculation of diluted net income (loss) per share as the result would have been anti-dilutive.

For the three

and nine months ended September 30, 2024, 543

shares of common stock underlying

stock options and 4,511

shares of common stock underlying

warrants were excluded from the calculation of diluted net income (loss) per share as the result would have been anti-dilutive.

the three months ended March 31, 2026, 1,248,008 shares of common stock underlying stock options and 1,138,163 shares of common stock

underlying warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive.

the three months ended March 31, 2025, 488 shares of common stock underlying stock options and 1,138,163 shares of common stock underlying

warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive.

10 – Securities Transactions

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(“VWAP”) of the common stock during a pricing period of 10 consecutive trading days prior to the date of the repurchase agreement.

shares of common stock to be repurchased were originally issued to Regalia Ventures on November 21, 2023, pursuant to a certain stock

The shares of common stock to be repurchased were originally issued to Regalia Ventures on November 21, 2023, pursuant to a certain stock

purchase agreement dated November 20, 2023.

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the issuance of the promissory note and the delivery of the shares.

February 18, 2025, the date of the closing of the transaction, the Company issued a promissory note to Regalia Ventures in the amount

of $ 472,000 , which was the principal amount of the purchase price.

The note was due and payable on demand and accrued interest at the

rate of 10 % per year.

The Company incurred $ 1,000 for interest expense for the nine months ended September 30, 2025 related to this promissory

On February 27, 2025, the Company paid off the note in full.

February 18, 2025, the date of the closing of the transaction, the Company issued a promissory note to Regalia Ventures in the

amount of $ 472,000 ,

which was the principal amount of the purchase price.

The note was due and payable on demand and accrued interest at the rate of 10 %

The Company incurred $ 1,000

for interest expense for the three months ended March 31, 2025 related to this promissory note.

On February 27, 2025, the Company

paid off the note in full.

Regalia Ventures is owned and controlled by Jay B.

Foreman, who serves

as a member of the Company’s board of directors.

Foreman, who served as a member of the Company’s

board of directors until November 14, 2025.

Group Stock Repurchase Transaction

December 3, 2024, the Company entered into a stock repurchase agreement with Stingray Group

pursuant to which the Company agreed to repurchase the 5,495 shares from Stingray Group at a price per share equal to the higher of:

(i) the closing price of the common stock on the last trading day immediately preceding the date of the repurchase agreement;

the highest VWAP of the common stock during a pricing period of 10 consecutive trading days prior to the date of the repurchase agreement.

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

stock purchase agreement dated November 20, 2023.

The Company recorded an accrued liability in the amount of the repurchase price, which

was $ 286,000 , as of December 31, 2024 as there were no further conditions that needed to be satisfied prior to the closing date other

than the issuance of the promissory note and the delivery of the shares.

December 3, 2024, the Company entered into a stock repurchase agreement with Stingray Group pursuant to which the Company agreed to repurchase

the 5,495 shares from Stingray Group at a price per share equal to the higher of:

(i) the closing price of the common stock on the last

trading day immediately preceding the date of the repurchase agreement;

or (ii) the highest VWAP of the common stock during a pricing

period of 10 consecutive trading days prior to the date of the repurchase agreement.

The shares of common stock to be repurchased were

originally issued to the Stingray Group on November 21, 2023, pursuant to a certain stock purchase agreement dated November 20, 2023.

The Company recorded an accrued liability in the amount of the repurchase price, which was $ 286,000 , as of December 31, 2024 as there

were no further conditions that needed to be satisfied prior to the closing date other than the issuance of the promissory note and the

delivery of the shares.

February 18, 2025, the date of the closing of the transaction, the Company issued a promissory note to Stingray Group in the amount of

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of 10 % per year.

The Company incurred $ 3,000 for interest expense for the nine months ended September 30, 2025 related to this promissory

The Company incurred $ 3,000 for interest expense for the three months ended March 31, 2025 related to this promissory note.

On April 3, 2025, the Company paid off the note in full.

Mathieu Peloquin is the Senior Vice-President, Marketing and Communications

of Stingray Group and serves as a member of the Company’s board of directors.

of Stingray Group and served as a member of the Company’s board of directors until October 6, 2025.

2024 Public Offering

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a pre-funded warrant in lieu thereof, was sold together with the accompanying warrants to purchase one share of common stock.

received aggregate gross proceeds upon the closing of the offering of approximately $ 9,000,000 , before deducting placement agents’

fees and other offering expenses.

Series A and B warrants were exercisable only upon receipt

of such shareholder approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market, LLC (the “Nasdaq”)

to permit the exercise of the Series A and B warrants .

The Series A and B warrants include an exercise

price adjustment feature upon shareholder approval, whereby the exercise price will adjust to the greater of the lowest daily volume

weighted average price during the reset period or the floor price, which was $ 6.84 per share, with a proportional increase in the number

of warrant shares.

public offering price for each share of common stock and one accompanying Series A warrant and Series B warrants was $ 34.00 .

offering price of each pre-funded warrant and one accompanying Series A warrant and Series B warrant was $ 32.00 .

The exercise price of

each pre-funded warrant was $ 2.00 per share.

Each Series A warrant is exercisable for one share of common stock and had an initial exercise

price equal to $ 34.00 .

Each Series B warrant was exercisable for one share of common stock and had an initial exercise price equal to

The Company received aggregate gross proceeds upon the closing of the offering of approximately $ 9,000,000 , before deducting

placement agents’ fees and other offering expenses.

pre-funded warrants were immediately exercisable upon issuance and were exercisable at any time until all pre-funded warrants were exercised

The Series A and B warrants were exercisable only upon receipt of such shareholder approval as may be required by the applicable

rules and regulations of the Nasdaq Stock Market, LLC (the “Nasdaq”) to permit the exercise of the Series A and B warrants,

after which the Series A and B warrants became exercisable for a period of five years and two and one-half years, respectively.

The pre-funded

warrants and Series A and B warrants contain standard adjustments to the exercise price, including for stock splits, stock dividends

and pro rata distributions, and customary terms regarding the treatment of the pre-funded warrants and the Series A and B warrants in

the event of a fundamental transaction, including but not limited to a merger or consolidation involving the Company, a sale of all or

substantially all of the assets of the Company, or a business combination resulting in any person acquiring more than 50% of the outstanding

shares of common stock of the Company.

Additionally, the pre-funded warrants and Series A and B warrants include restrictions on exercise

in the event the purchaser’s beneficial ownership of the Company’s common stock would exceed 4.99% of the number of shares

of common stock outstanding immediately after giving effect to the exercise.

Series A and B warrants include an exercise price adjustment feature upon shareholder approval, whereby the exercise price adjusted to

the greater of the lowest daily volume weighted average price during the reset period or the floor price, which is $ 6.844 per share,

with a proportional increase in the number of warrant shares.

The Series A and B warrants can be settled by a cash exercise or by cashless

exercise, and the Series B warrants specifically can be settled by way of an alternative cashless exercise after shareholder approval

is obtained, in which the Series B warrant holders can receive the same number of shares of common stock that would be issuable under

a cash exercise.

Upon meeting certain stock price requirements, the Company has the right to redeem any outstanding Series A and Series

B warrants for $ 2.00 per share, provided the holders do not elect to exercise prior to redemption.

Company assessed the Series A and B warrants under ASC 480 and ASC 815 and determined that the Series A and B warrants needed to be classified

as liabilities

as they did not meet the requirements to be considered indexed to the Company’s own stock, due to:

(a) the adjustment to the exercise

price tied to shareholder approval, and (b) the potential change in the settlement amount of the Series B warrants upon an alternative

cashless exercise election.

Additionally, the Company concluded at issuance that it would not have sufficient authorized and available

shares of common stock to settle the Series A and B warrants.

as liabilities as they did not meet the requirements to be considered indexed to the Company’s own stock, due to (a) the adjustment

to the exercise price tied to shareholder approval, and (b) the potential change in the settlement amount of the Series B warrants upon

an alternative cashless exercise election.

Additionally, the Company concluded at issuance that it would not have sufficient authorized

and available shares of common stock to settle the Series A and B warrants.

See Note 11 – Derivative Liability.

inception, the estimated fair value of the Series A warrants was $ 5,900,000 and the Series B warrants was $ 11,000,000 , for a total estimated

fair value of $ 16,900,000 .

The total fair value exceeded the proceeds received in the offering by $ 8,000,000 , which the Company recorded

as a loss upon issuance of warrants.

The Company also expensed approximately $ 900,000 of issuance costs incurred in the offering, resulting

in a total loss on issuance during the year ended December 31, 2024 of $ 8,889,000 .

The estimated fair values of the Series A and B warrants

have been recorded as a derivative liability at issuance and at December 31, 2024.

In the Company’s consolidated statement of operations

for the year ended December 31, 2024, the Company recognized a gain of $ 334,000 for the change in the fair value measurement of the warrant

December 2024, the 258,412 pre-funded warrants were exercised in full, resulting in the Company receiving $ 500,000 in cash proceeds.

January 13, 2025, the Company’s stockholders approved the issuance of the Series A and B warrants, at which time all of the Series

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liability reflected on the Company’s consolidated balance sheet at December 31, 2024 was reclassified to additional paid-in capital

on the Company’s condensed consolidated balance sheet at September 30, 2025.

Company recognized a loss of $ 6,468,000 for the change in the fair value measurement of the warrant liability as of the date the warrant

liability was reclassified to equity.

on the Company’s consolidated balance sheet at December 31, 2025.

The Company recognized a loss of $ 6,468,000 during the three months ended

March 31, 2025 for the change in the fair value measurement of the warrant liability as of the date the warrant liability was reclassified

Diagonal Financing Transactions

Diagonal Loan #1

June 17, 2025, the Company entered into a securities purchase agreement with 1800 Diagonal Lending, LLC (“1800 Diagonal”)

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$ 16,000 for placement agent fees and $ 5,000 for legal and due diligence fees.

Company incurred and paid $ 3,000 of interest expense under the promissory note during the three months ended March 31, 2026.

The outstanding

balance of this note was $ 32,000 as of March 31, 2026.

This amount is presented in the Company’s condensed consolidated balance

sheets net of unamortized issuance costs of $ 7,000 as of March 31, 2026.

Diagonal Loan #2

June 17, 2025, the Company entered into a second securities purchase agreement with 1800 Diagonal pursuant to which the Company issued

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approximately $ 29,000 .

An initial payment of $ 134,000 is due on December 15, 2025.

An initial payment of $ 134,000 was due on December 15, 2025.

Thereafter, the remainder is payable in six monthly

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deductions of $ 30,000 for original issue discount, $ 16,000 for placement agent fees and $ 5,000 for legal and due diligence fees.

December 2025, the Company and 1800 Diagonal agreed that 1800 Diagonal would convert the initial payment of $ 134,000 into shares of the

Company’s common stock rather than the Company making the payment to 1800 Diagonal in cash.

Accordingly, in December 2025, the

Company issued an aggregate of 135,723 shares of common stock to 1800 Diagonal in full satisfaction of the initial payment of $ 134,000 .

Company incurred $ 5,000 of interest expense under the promissory note during the three months ended March 31, 2026.

The outstanding balance

of this note was $ 60,000 as of March 31, 2026.

This amount is presented in the Company’s condensed consolidated balance sheets

net of unamortized issuance costs of $ 13,000 as of March 31, 2026.

Capital Financing Transaction

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The Company received net proceeds of $ 105,000 after deductions of $ 15,000 for original issue discount.

Company incurred and paid $ 3,000 of interest expense under the promissory note during the three months ended March 31, 2026.

The outstanding

balance of this note was $ 32,000 as of March 31, 2026.

This amount is presented in the Company’s condensed consolidated balance

sheets net of unamortized issuance costs of $ 4,000 as of March 31, 2026.

Capital Financing Transaction

July 3, 2025, the Company entered into a business loan and security agreement with Agile Capital Funding, LLC (“Agile

Funding”) pursuant to which it issued a promissory note to Agile Funding in the

principal amount of $ 368,000 .

The note is subject to a one-time interest charge of $ 162,000

and is payable in 28 weekly installments of $ 19,000

commencing on July 14, 2025.

The Company received net proceeds of $ 350,000

after deductions of $ 18,000

for administrative agent fees.

July 3, 2025, the Company entered into a business loan and security agreement with Agile Capital Funding, LLC (“Agile Funding”)

pursuant to which it issued a promissory note to Agile Funding in the principal amount of $ 368,000 .

The note is subject to a one-time

interest charge of $ 162,000 and is payable in 28 weekly installments of $ 19,000 commencing on July 14, 2025.

The Company received net

proceeds of $ 350,000 after deductions of $ 18,000 for administrative agent fees.

Company incurred and paid $ 3,000 of interest expense under the promissory note during three months ended March 31, 2026.

The promissory

note was paid in full during the three months ended March 31, 2026.

Streeterville

Capital Securities Purchase Agreement

August 21, 2025, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with Streeterville

Capital, LLC (“Streeterville”), providing for the issuance and sale of shares of the Company’s common stock in one or more

secured prepaid purchases (the “Pre-Paid Purchases”) for aggregate gross proceeds of up to $ 20,000,000 .

In connection with

the Securities Purchase Agreement, the Company issued 95,694 shares of common stock as a commitment fee to Streeterville.

initial Pre-Paid Purchase was $ 4,390,000 , reduced by an original issue discount of $ 360,000 and transaction expenses of $ 465,000 , resulting

in net proceeds of $ 3,565,000 .

initial Pre-Paid Purchase balance accrues interest at 9 % per annum, matures three years from issuance, and is secured by all assets of

the Company and guaranteed by its subsidiaries.

The Securities Purchase Agreement provides for additional Pre-Paid Purchases over a two-year

period, subject to certain conditions, with each purchase having a 9 % original issue discount and accruing interest at 9 % per annum.

Streeterville has the right,

but not the obligation, to convert the outstanding balances of Pre-Paid Purchases into shares of common stock at a price equal to 90 %

of the lowest daily volume weighted average price during the ten trading days preceding notice, but not less than a stated floor price,

and cannot beneficially own greater than 9.99 % of the Company’s outstanding shares of common stock at any given time.

until the Company obtains the requisite stockholder approval as required by Nasdaq Listing Rule 5635(d), the total cumulative number of

shares of common stock that may be issued to Streeterville under all Pre-Paid Purchases cannot exceed the numerical threshold required

by that rule.

The Company may at any

time prepay all or any portion of the outstanding balance of a Pre-Paid Purchase.

In the event the Company elects to do so, the Company

must pay Streeterville an amount equal to 110 % multiplied by the portion of the outstanding balance the Company has elected to prepay.

If an event of default occurs, the outstanding balance becomes immediately due and payable, increases by 7.5 %, and accrues interest at

a rate of 18 % per annum (or the maximum rate permitted by law).

As of September 30,

2025, the outstanding balance of the Pre-Paid Purchases was $ 4,390,000 .

This amount was presented in the condensed consolidated balance sheets net of the unamortized deferred debt issuance costs of $ 360,000

and transaction expenses of $ 465,000 .

Although the initial Pre-Paid Purchase matures three years from its effective date, the entire outstanding balance has been

classified as a current liability on the Company’s condensed consolidated balance sheet as of September 30, 2025.

terms of the initial Pre-Paid Purchase, Streeterville may, in its sole discretion, deliver purchase notices to the Company at any

time to require the Company to issue shares of common stock to Streeterville equal in value to the outstanding balance of the

initial Pre-Paid Purchase.

Streeterville can then sell such shares, the proceeds of which are applied to the outstanding balance of the initial

Pre-Paid Purchase.

The Company does not have an unconditional right to defer such settlement beyond twelve months from the balance

Accordingly, the Company determined that current liability classification was appropriate.

shares of common stock issued for the commitment fee were valued at $ 2.00

per share, which was the closing price of the Company’s common stock on the measurement date, for aggregate consideration of

Interest expense related to the Pre-Paid Purchases was $ 34,000

for both the three and nine months ended September 30, 2025.

The debt issuance costs and commitment fee incurred under the Securities

Purchase Agreement are being amortized using the effective rate method.

Amortization, which is included in interest expense, was $ 29,000

for the three and nine months ended September 30, 2025.

Stock Issued for Services

the nine months ended September 30, 2025, the Company issued an aggregate of 31,513 shares of its common stock to a vendor as consideration

for services rendered.

The shares were issued in a non-cash transaction and were valued at $ 2.38 per share, the closing price of the

Company’s common stock on the measurement date, resulting in a total fair value of $ 75,000 .

The total fair value was recorded as

general and administrative expenses in the accompanying condensed consolidated statement of operation for the period then ended.

Capital Transaction

August 21, 2025, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, a Utah limited liability company

(“Streeterville”), pursuant to which the Company agreed to issue and sell to Streeterville shares of the Company’

common stock in one or more pre-paid purchases (each, a “Pre-Paid Purchase” and collectively, the “Pre-Paid Purchases”)

for an aggregate purchase price of up to $ 20,000,000 (the “Streeterville Transaction”).

The Company also agreed to issue

an additional 95,694 shares of the Company’s common stock to Streeterville as a commitment fee for the pre-paid purchase facility

established under the securities purchase agreement (the “Commitment Shares”).

The securities purchase agreement provides

for a two-year commitment period during which, subject to certain specified conditions, the Company may request additional Pre-Paid Purchases

from Streeterville provided that the amount requested is no less than $ 250,000 and the total outstanding balance of all Pre-Paid Purchases

does not exceed $ 3,000,000 .

The original issue discount for each additional Pre-Paid Purchase will be nine percent of the amount set

forth in the applicable request and each additional Pre-Paid Purchase will accrue interest at the rate of nine percent per annum.

Company also executed a guaranty, a security agreement, and intellectual property security agreement in favor of Streeterville as part

of the Streeterville Transaction.

The Streeterville Transaction closed on August 21, 2025.

the funding of each Pre-Paid Purchase, Streeterville has the right, but not the obligation, to purchase from the Company that number

of shares of common stock up to the lesser of:

(i) a number of shares of common stock equal in value to the outstanding balance of the

funded amount, and (ii) that number of shares of common stock such that Streeterville will not beneficially own greater than 9.99 % of

the Company outstanding shares of common stock.

The purchase price of the shares of common stock will be 90 % of the lowest daily volume

weighted average price during the 10 trading days immediately prior to the purchase notice date, but not less than the floor price, which

is the greater of:

(i) 20 % of the “Minimum Price” as defined under Nasdaq Listing Rule 5635(d) prior to the applicable closing

of the Pre-Paid Purchase, and (ii) $ 0.10 .

to the terms of the securities purchase agreement, the Company filed a registration statement on Form S-1 under the Securities Act with

the SEC to register the resale of the Commitment Shares and all shares of common stock issuable pursuant to the Pre-Paid Purchases.

registration statement became effective on November 10, 2025.

Listing Rule 5635(d) provides that shareholder approval is required prior to the issuance of shares of the Company common stock equal

or greater in number to 20 % of the number of shares of the Company’s common stock issued and outstanding immediately prior to the

completion of the proposed issuance at a price that is less than the “Minimum Price” as such term is defined under Nasdaq

Listing Rule 5635(d) in a transaction that is not a public offering.

The Company obtained the requisite shareholder approval for the

Streeterville Transaction on November 20, 2025.

Company may at any time prepay all or any portion of the outstanding balance of a Pre-Paid Purchase.

In the event the Company elects to

do so, the Company must pay Streeterville an amount equal to 110 % multiplied by the portion of the outstanding balance the Company elected

If an event of default occurs under a Pre-Paid Purchase, the outstanding balance will become immediately due and payable.

At anytime thereafter, upon written notice given by Streeterville, the outstanding balance will increase by seven-and-a half percent

and interest will begin accruing at a rate of the lesser of 18 % per annum or the maximum rate permitted under applicable law.

obligations are secured by all of the Company assets pursuant to a security agreement and have been guaranteed by the Company’s

operating subsidiaries pursuant to a guarantee, each entered into with Streeterville on August 21, 2025.

Securities, LLC served as the placement agent in the offering (“Univest”).

The Company agreed to pay Univest a cash fee equal

to eight percent of the aggregate gross proceeds that it receives from any Pre-Paid Purchases that it completes and reimburse Univest

for legal fees in the amount of $ 40,000 .

securities purchase agreement provides for an initial Secured Pre-Paid Purchase in the principal amount of $ 4,390,000 , before deducting

an original issue discount of $ 360,000 and transaction expenses of $ 30,000 (the “First Pre-Paid Purchase”), the terms of

which are set forth on secured prepaid purchase #1 (“Pre-Paid Purchase #1”).

The First Pre-Paid Purchase accrues interest

at the rate of nine percent per annum and has a maturity date of three years.

The Company paid Univest a cash fee equal to eight percent

of the aggregate gross proceeds received by the Company from the First Pre-Paid Purchase.

the three months ended March 31, 2026, the Company repaid an aggregate principal amount of $ 3,305,000 under the First Pre-Paid Purchase

as a result of Streeterville exercising its right to purchase an aggregate of 3,218,166 shares of the Company’s common stock, and

recognized $ 69,000 of interest expense associated with the First Pre-Paid Purchase.

As of March 31, 2026, the outstanding principal balance

of the First Pre-Paid Purchase was $ 1,085,000 , which is reflected in the condensed consolidated balance sheets net of unamortized issuance

costs of $ 671,000 .

November 13, 2025, the Company entered into Secured Pre-Paid Purchase #2 with Streeterville (“Pre-Paid Purchase #2”).

Purchase #2 provides for a second Pre-Paid Purchase in the principal amount of $ 5,450,000 , before deducting an original issue discount

of $ 450,000 (the “Second Pre-Paid Purchase”).

The Second Pre-Paid Purchase accrues interest at the rate of nine percent per

annum and has a maturity date of three years.

Second Pre-Paid Purchase was similar to the First Pre-Paid Purchase, however the Second Pre-Paid Purchase is secured by cash in an

amount not less than the lesser of:

(i) $ 4,500,000 ,

and (ii) 90 %

of the then-current outstanding balance of the Second Pre-Paid Purchase (the “PPP2 Minimum Balance Amount”).

funds are being held in a deposit account (the “DACA Account”) held by RIME Holdings, LLC, a Utah limited liability

company and wholly-owned subsidiary of the Company that the Company formed in connection with this transaction (“RIME

Holdings”), pursuant to a Deposit Account Control Agreement, dated November 13, 2025, by and among RIME Holdings, Lakeside

Bank, an Illinois banking company (“Lakeside Bank”), and Streeterville.

Accordingly, of the $ 5,000,000

of net proceeds that the Company received from the Second Pre-Paid Purchase, $ 4,500,000

were placed in the DACA Account.

Company has the right to use funds in the DACA Account to repay any portion of the outstanding balance of the Second Pre-Paid Purchase,

but only so long as the payment does not cause the outstanding balance to drop below the PPP2 Minimum Balance Amount.

As long as no event

of default has occurred, the Company may withdraw from the Deposit Account any funds in excess of the PPP2 Minimum Balance Amount.

Holdings executed a guaranty of the obligations outstanding under the Second Pre-Paid Purchase for the benefit of Streeterville.

Company entered into a new placement agency agreement with Univest that superseded the placement agency agreement that the Company previously

entered into with them on August 21, 2025.

The Company agreed to pay Univest a cash fee equal to eight percent of the aggregate gross

proceeds that the Company receives from any Pre-Paid Purchases that the Company completes and reimburse Univest for legal fees in the

amount of $ 50,000 .

the three months ended March 31, 2026, the Company repaid an aggregate principal amount of $ 4,913,000 under the Second Pre-Paid Purchase

as a result of Streeterville exercising its right to purchase an aggregate of 6,447,017 shares of the Company’s common stock, and

recognized $ 45,000 of interest expense associated with the Second Pre-Paid Purchase.

The Second Pre-Paid Purchase was repaid in full

on February 13, 2026.

December 19, 2025, the Company entered into Secured Pre-Paid Purchase #3 with Streeterville (“Pre-Paid Purchase #3”).

Purchase #3 provides for a third Pre-Paid Purchase in the principal amount of $ 1,090,000 , before deducting an original issue discount

of $ 90,000 (the “Third Pre-Paid Purchase”).

The Third Pre-Paid Purchase accrues interest at the rate of nine percent per

annum and has a maturity date of three years.

The Company paid Univest a cash fee equal to eight percent of the aggregate gross proceeds

received from the Third Pre-Paid Purchase.

the three months ended March 31, 2026, the Company repaid an aggregate principal amount of $ 991,000 under the Third Pre-Paid Purchase

as a result of Streeterville exercising its right to purchase an aggregate of 1,132,410 shares of the Company’s common stock, and

recognized $ 2,000 of interest expense associated with the Third Pre-Paid Purchase.

The Third Pre-Paid Purchase was repaid in full on

January 7, 2026.

February 17, 2026, the Company entered into Secured Pre-Paid Purchase #4 with Streeterville (“Pre-Paid Purchase #4”).

Pre-Paid Purchase #4 provides for a fourth Pre-Paid Purchase in the principal amount of $1 0,355,000 ,

before deducting an original issue discount of $ 855,000

(the “Fourth Pre-Paid Purchase”).

The Fourth Pre-Paid Purchase accrues interest at the rate of nine percent per annum

and has a maturity date of three years.

The Fourth Pre-Paid Purchase is similar to the Second Pre-Paid Purchase in that the Fourth

Pre-Paid Purchase is secured by cash in an amount not less than the lesser of:

(i) $ 3,500,000 ,

and (ii) 90 %

of the then-current outstanding balance of the Fourth Pre-Paid Purchase (the “PPP4 Minimum Balance Amount”).

Accordingly, of the $ 9,500,000

of net proceeds that the Company received from the Fourth Pre-Paid Purchase, $ 3,500,000

was placed in the DACA Account.

Company has the right to use funds in the DACA Account to repay any portion of the outstanding balance of the Fourth Pre-Paid Purchase,

but only so long as the payment does not cause the outstanding balance to drop below the PPP4 Minimum Balance Amount.

As long as no event

of default has occurred, the Company may withdraw from the Deposit Account any funds in excess of the PPP4 Minimum Balance Amount.

Holdings executed a guaranty of the obligations outstanding under the Fourth Pre-Paid Purchase for the benefit of Streeterville.

Company paid Univest a cash fee equal to eight percent of the aggregate gross proceeds received from the Fourth Pre-Paid Purchase that

were not placed in the DACA Account.

The Company will pay Univest a cash fee equal to eight percent of the funds held in the DACA Account

when they are released to the Company.

the three months ended March 31, 2026, the Company recognized $ 109,000 of interest expense associated with the Fourth Pre-Paid Purchase.

The Company has not repaid any of the principal outstanding under the Fourth Pre-Paid Purchase.

As of March 31, 2026, the outstanding

principal balance of the Fourth Pre-Paid Purchase was $ 10,355,000 , which is reflected in the condensed consolidated balance sheets net

of unamortized issuance costs of $ 1,288,000 .

11 – Derivative Liability

the nine months ended September 30, 2025, the Company had derivative warrant liabilities that were measured at fair value on a recurring

the three months ended March 31, 2025, the Company had derivative warrant liabilities that were measured at fair value on a recurring

These fair value measurements were estimated using a Monte Carlo simulation model, with the key inputs described below.

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including the probability and expected date of stockholder approval.

key inputs for the Series A warrant liabilities were as follows:

of Derivative Warrant Liabilities

key inputs for the Series A and Series B warrant liabilities were as follows:

Schedule of Derivative Warrant Liabilities

Warrant Liability – Series A Warrants

Issuance Date

December 31, 2024

January 13, 2025

Stock price on valuation date

Exercise price

Number of shares of common stock

Remaining term (years)

Annual equity volatility

Annual volume volatility

Risk-free interest rate

Expected stockholder approval date

January 14, 2025

January 13, 2025

Expected stockholder approval probability

Warrant Liability – Series B Warrants

Issuance Date

December 31, 2024

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In connection with this approval, the holders of the Series B warrants exercised

their warrants in full under the alternative cashless exercise provision, resulting in the issuance of 1,910,975 shares of common stock

and no additional proceeds received by the Company.

The Series A warrants became exercisable for 1,133,652 shares of common stock at

an exercise price of $ 8.38 per share after the shareholder approval adjustment was finalized on March 17, 2025.

In addition, the Company

reassessed the classification of the Series A warrants after the shareholder approval adjustment was finalized, concluding that the Series

A warrants now met the requirements for equity classification under ASC 480 and ASC 815.

The Company adjusted the Series A Warrants to

fair value upon reclassification and reclassified that value to additional paid-in capital during the nine months ended September 30,

following table provides a roll-forward of the fair value of the derivative liabilities described above during the nine months ended

September 30, 2025:

of Fair Value of the Derivative Liabilities

their warrants in full under the alternative cashless exercise provision, resulting in the issuance of 1,910,975

shares of common stock and no additional

proceeds received by the Company.

The Series A warrants became exercisable for 1,133,652

shares of common stock at an exercise

price of $ 8.38

per share after the shareholder approval

adjustment was finalized on March 17, 2025.

In addition, the Company reassessed the classification of the Series A warrants after the

shareholder approval adjustment was finalized, concluding that the Series A warrants now met the requirements for equity classification

under ASC 480 and ASC 815.

The Company adjusted the Series A Warrants to fair value upon reclassification and reclassified that value

to additional paid-in capital during the three months ended March 31, 2025.

The Company did not have any warrant liabilities outstanding

at March 31, 2026 and December 31, 2025.

following table provides a roll-forward of the fair value of the derivative liabilities described above during the three months ended

March 31, 2025:

Schedule of Fair Value of the Derivative Liabilities

Series A Warrants

Series B Warrants

Total Warrant Liabilities

Balance at December 31, 2024

Beginning balance

( 15,214,000 )

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( 7,857,000 )

Balance at September 30, 2025

following table provides a roll-forward of the number of warrants issued during the nine months ended September 30, 2025:

of Shares of Common Stock Underlying Warrants

Balance at March 31, 2025

Ending balance

Company did not have any derivative liabilities outstanding during the three months ended March 31, 2026.

following table provides a roll-forward of the number of warrants exercised during the three months ended March 31, 2026 and 2025:

Schedule of Shares of Common Stock Underlying Warrants

Series A Warrants

2 unchanged sentences

Balance at December 31, 2024

Balance at September 30, 2025

Company did not issue any warrants during the three and nine months ended September 30, 2024 and did not have any warrants outstanding

as of September 30, 2024.

Balance at March 31, 2025

Balance at December 31, 2025

Balance at March 31, 2026

Company did not issue any warrants during the three months ended March 31, 2026 and 2025.

12 – Income Taxes

The Company’s income tax provision for the nine months ended September 30, 2024, was approximately $ 52,000 due

to income taxes due on amended federal tax returns filed for 2020 and 2021 which took into account the one-time refunds received from

the Employee Retention Credit program.

Company did not have any provision for income taxes for the three and nine months ended September 30, 2025 and 2024.

Company tax loss for income taxes for the three and nine months ended September 30, 2025 was $ 24,000 and $ 0 for the three and nine months

ended September 30, 2024.

The Company’s income tax expense differs from the expected tax expense based on statutory rates primarily

due to full valuation allowance for all of its subsidiaries for the three and nine months ended September 30, 2025 and 2024.

15 – Segment Information

On August 1, 2025, the

Company sold its Singing Machine business to Stingray USA.

Prior to this transaction, the Company operated two

reportable segments:

(i) the Singing Machine business, a home karaoke consumer products business, and (ii) the SemiCab business, an

AI-enabled software logistics and distribution platform.

Following the sale, the Company’s operations consist solely of its

SemiCab business.

The Company is therefore managed on a consolidated basis and now has a single operating and reportable segment.

a result of the sale, the operating results and cash flows of the Singing Machine business have been reclassified as discontinued

operations for all periods presented.

Company did not have any provision for income taxes for the three months ended March 31, 2026 and 2025.

The Company’s income tax

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

for the three months ended March 31, 2026 and 2025.

13 – Segment Information and Revenue Disaggregation

accordance with ASC 280, Segment Reporting, an operating segment is defined as a component of an enterprise that engages in business

activities from which it may earn revenues and incur expenses, for which discrete financial information is available, and whose operating

results are regularly reviewed by the CODM in allocating resources and assessing performance.

to August 1, 2025, the CODM determined that the Company operated in two reportable segments:

(i) the SemiCab business, and (ii) the Singing

Machine business.

On August 1, 2025, the Company completed the sale of its Singing Machine business.

Upon the completion of this transaction,

the Company began operating as a single reportable segment consisting of its SemiCab business.

As a result of the sale, the operating

results and cash flows of the Singing Machine business have been reclassified as discontinued operations for all periods presented in

the consolidated financial statements.

Additional information regarding the discontinued operations is provided in Note 17 –

Discontinued Operations.

In accordance with ASC

280, Segment Reporting, an operating segment is defined as a component of an enterprise that engages in business activities from which

it may earn revenues and incur expenses, for which discrete financial information is available, and whose operating results are regularly

reviewed by the CODM in allocating resources and assessing performance.

The Company’s

CODM, its Chief Executive Officer, reviews consolidated operating results including net sales, gross profit, loss from operations,

and net loss from continuing operations, as presented in the consolidated statements of operations.

The CODM also considers

consolidated operating expenses, non-financial information, and qualitative factors in evaluating performance, monitoring budgeted

to actual results, and making decisions regarding capital allocation and levels of investment in operating activities.

The CODM does not review segment asset information for purposes of allocating resources.

Company’s CODM reviews consolidated operating results including net sales, gross profit, loss from operations, and net loss from

continuing operations, as presented in the consolidated statements of operations.

The CODM also considers consolidated operating expenses,

non-financial information, and qualitative factors in evaluating performance, monitoring budgeted to actual results, and making decisions

regarding capital allocation and levels of investment in operating activities.

The CODM does not review segment asset information for

purposes of allocating resources.

is attributed to geographic areas based on the location where services are rendered.

For the three and nine months ended September

30, 2025 and September 30, 2024, substantially all of the Company’s revenues were generated from customers located

For the three months ended March 31, 2026, all of

the Company’s revenues were generated from customers located in India.

For the three months ended March 31, 2025, all of the Company’s

revenues were generated from customers located in the United States.

14 – Concentrations, Risks and Uncertainties

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is concentrated with several large customers.

As of September 30, 2025, 56 % of accounts receivable were due from two customers in India

that each individually owed more than 10% of the Company’s total accounts receivable.

At December 31, 2024, no customer individually

owed more than 10% of the Company’s total accounts receivable.

As of March 31, 2026, 47 % of accounts receivable were due from two customers in India that

each individually owed more than 10% of the Company’s total accounts receivable.

As of December 31, 2025, 58 % of accounts receivable

were due from three customers in India that each individually owed more than 10% of the Company’s total accounts receivable.

derived from the Company’s largest customer and three largest customers collectively as a percentage of total net sales was 25 %

31 % and 72 % of the Company’s revenue, respectively, for the three months ended September 30, 2025.

Revenue derived from the

Company’s largest customer and three largest customers collectively as a percentage of total net sales was 31 % and 73 % of the

Company’s revenue, respectively, for the nine months ended September 30, 2025.

The loss of any of these customers could have

an adverse impact on the Company.

from customers representing greater than 10% of total net sales that were derived from the Company’s three largest customers

as a percentage of total net sales for the three months ended September 30, 2025 was 31 %, 30 % and 12 %.

Revenue from customers

representing greater than 10% of total net sales that were derived from the Company’s three largest customers as a percentage

of total net sales for the nine months ended September 30, 2025 was 32 %, 28 % and 13 %.

The loss of any of these customers could have

an adverse impact on the Company.

and 74 % of the Company’s revenue, respectively, for the three months ended March 31, 2026.

The loss of any of these customers could

have an adverse impact on the Company.

15 – Related Party Transactions

Group Subscription Payments

Company has a music subscription sharing agreement with Stingray Group.

For the three and nine months ended September 30, 2025, the Company

received music subscription revenue of $ 64,000 and $ 515,000 , respectively, from Stingray Group.

For the three and nine months ended September

30, 2024, the Company received music subscription revenue of $ 218,000 and $ 567,000 , respectively, from Stingray Group.

As of September

30, 2025 and December 31, 2024, the Company had $ 0 and $ 212,000 , respectively, due from Stingray Group for music subscription reimbursement.

Holdings Music Subscription Agreement

Company had a music subscription sharing agreement with Stingray Group under which the Company generated music subscription revenue of

$ 264,000 during the three months ended March 31, 2025.

revenue was included in net loss from discontinued operations on the Company’s condensed consolidated statements of operations

for the three months ended March 31, 2025.

The Company did not generate any music subscription revenue under this agreement during the

three months ended March 31, 2026 as the Company sold its Singing Machine business to Stingray Group on August 1, 2025.

Peloquin is the Senior Vice-President, Marketing and Communications of Stingray Group and served as a member of the Company’s board

of directors until October 6, 2025 .

Company determined that SMCB, which was a subsidiary of SemiCab, Inc.

prior to SemiCab Holdings’ acquisition of 99.99 % of the

equity shares of SMCB on May 2, 2025, was a VIE as the Company provides financial support to SMCB.

While not contractually obligated,

SMCB currently relies on the Company’s reimbursement of certain costs under an intercompany services agreement (“MSA”)

whereby SMCB agrees to provide IT software development services to SemiCab, Inc.

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.

The agreement is for a term of two years ending

on April 1, 2025 and automatically renews for additional 12-month periods unless prior notice is given by the terminating party.

agreement automatically renewed for an additional 12-month period on April 1, 2025.

As a result of this relationship and the financial

support provided by the Company to SMCB under the loan agreement described below to fund SMCB’s operations, SMCB has been determined

to be a VIE prior to May 2, 2025.

prior to SemiCab Holdings’ acquisition of 99.99 % of the equity

shares of SMCB on May 2, 2025, is a VIE as the Company provides financial support to SMCB.

While not contractually obligated, SMCB currently

relies on the Company’s reimbursement of certain costs under an intercompany services agreement (“MSA”) whereby SMCB

agrees to provide IT software development services to SemiCab, Inc.

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.

The agreement is for a term of two years ending on April

1, 2025 and automatically renews for additional 12-month periods unless prior notice is given by the terminating party.

The agreement

automatically renewed for an additional 12-month period on April 1, 2025.

As a result of this relationship and the financial support

provided by the Company to SMCB under the loan agreement described below to fund SMCB’s operations, SMCB has been determined to

be a VIE prior to May 2, 2025.

Company further determined that it was not the primary beneficiary of SMCB because the Company did not have the power to direct or control

2 unchanged sentences

and financial position in its condensed consolidated financial statements prior to May 2, 2025.

to the terms of the asset purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement

that granted SemiCab Holdings the right to acquire all of the issued and outstanding equity securities of SMCB for 1,605 shares of the

Company’s common stock.

The Company did not exercise this right and the option agreement expired on August 31, 2024.

Company is a party to a loan agreement with SMCB dated March 22, 2024.

17 unchanged sentences

As a result, no such loans payable and loans receivable were outstanding on the Company’s condensed consolidated balance sheet

at September 30, 2025.

at December 31, 2025.

Also on May 2, 2025, revenue generated by SMCB for services performed by SMCB under the MSA of $ 304,000 , and expenses

2 unchanged sentences

As a result, no such revenue and expenses were reflected on the Company’s

condensed consolidated statements of operations for the three and nine months ended September 30, 2025.

condensed consolidated statements of operations for the three months ended March 31, 2025.

16 – Acquisition of SMCB

22 unchanged sentences

these amounts, one quarter of each such grant vested in full on the date of grant, and the remaining amounts vest evenly over three years.

Company has performed a preliminary valuation analysis of the fair market value of SMCB assets acquired and liabilities assumed.

the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities.

The following

table summarizes the allocation of the preliminary purchase price as May 2, 2025, the date the acquisition was completed:

of Business Acquisition

following table summarizes the allocation of the purchase price as May 2, 2025, the date the acquisition was completed:

Schedule of Business Acquisition

Consideration:

2 unchanged sentences

Assumption of debt

Identifiable net assets acquired:

Identifiable net tangible assets acquired:

Cash and cash equivalents

3 unchanged sentences

Other non-current assets

Accounts payable and accrued expenses

Other current liabilities

Accounts payable, accrued expenses and other liabilites

Net tangible assets acquired

Identifiable intangible assets acquired:

Customer relationships

Reacquired rights

Net intangible assets acquired

Net assets acquired

preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma balance sheet

and income statement.

The fair values of assets and liabilities acquired represent the Company’s estimates of fair values as of

the acquisition date.

Management believes that the fair values recognized for the assets and liabilities acquired are based on reasonable

estimates and assumptions.

The final purchase price allocation will be determined when the Company has completed the detailed valuations

and necessary calculations.

The final allocation could differ materially from the preliminary allocation used in the transaction accounting

The final allocation may include:

(i) changes in fair values of property and equipment, (ii) changes in allocations to goodwill,

and (iii) other changes to assets and liabilities.

January 2026, the Indian government approved the purchase by SemiCab Holdings of the remaining outstanding equity share in SMCB, representing

0.01 % of the issued and outstanding equity shares of SMCB, from Sudheer Srinivas Kadandale for $ 10 .

Forma Information

1 unchanged sentence

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

The pro forma results

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

The pro forma results for the nine months

ended September 30, 2025 and 2024 reflect the combined performance of the Company and the SMCB business for that period.

The unaudited

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

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

This selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not intended

to represent what the actual consolidated results of operations would have been had the acquisition date occurred on January 1, 2024,

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

of Pro Forma Financial Information

Nine Months Ended

September 30, 2025

September 30, 2024

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

The pro forma results for

the three months ended March 31, 2026 and 2025 reflect the combined performance of the Company and the SMCB business for those

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

reasonable given the circumstances.

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

forma financial information.

This selected unaudited pro forma condensed combined financial information is presented for

illustrative purposes only and is not intended to represent what the actual consolidated results of operations would have been had

the acquisition date occurred on January 1, 2025, nor does it attempt to forecast future consolidated results of

Schedule of Pro Forma Financial Information

March 31, 2026

March 31, 2025

Three Months Ended

March 31, 2026

March 31, 2025

Operating loss from continuing operations

4 unchanged sentences

17 – Discontinued Operations

August 1, 2025, the Company entered into an asset purchase agreement with SMC and Stingray Music USA, Inc.

(“Stingray USA”)

August 1, 2025, the Company entered into an asset purchase agreement with SMC and Stingray USA

pursuant to which Stingray USA purchased substantially all of the assets, and assumed most of the liabilities, associated with the Company’s

1 unchanged sentence

The transaction closed on August 1, 2025.

The Company determined that

the sale of the Singing Machine business met the criteria under Accounting Standards Codification (“ASC”) 205-20, Presentation

of Financial Statements – Discontinued Operations (“ASC 205-20”), to be classified as a discontinued operation

as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial results.

Accordingly, the condensed consolidated balance sheets, the condensed consolidated statements of operations and the condensed consolidated

statement of cash flows have been adjusted for prior periods to reflect the Singing Machine business as a discontinued operation.

The following table summarizes

the results of the Singing Machine business as a discontinued operation in the condensed consolidated statements of operations for the

three and nine months ended September 30, 2025 and 2024:

Holdings, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

of Discontinued Operation Income Statement, Assets and Liabilities in the Condensed Consolidated Statements of

Company determined that the sale of the Singing Machine business met the criteria under ASC 205-20, to be classified as a discontinued

operation as the sale represented a strategic shift that will have a significant effect on the Company’s operations and financial

Accordingly, the condensed consolidated balance sheets, the condensed consolidated statements of operations and the condensed

consolidated statement of cash flows have been adjusted for prior periods to reflect the Singing Machine business as a discontinued operation.

following table summarizes the results of the Singing Machine business as a discontinued operation in the consolidated statements of

operations for the three months ended March 31, 2025:

Schedule of Discontinued Operation Income Statement, Assets and Liabilities in the Condensed Consolidated Statements of Operations

For the Three Months Ended

For the Nine Months Ended

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2025

Cost of Goods Sold

2 unchanged sentences

General and administrative expenses

Net (gain) loss on early termination of operating lease

( 3,874,000 )

Total Operating Expenses

Income (Loss) from Operations

( 2,268,000 )

( 4,323,000 )

Other Expenses

Interest expense

Loss on sale of Singing Machine business

Total Other Expenses

Income (Loss) Before Income Tax Benefit

( 1,100,000 )

( 2,372,000 )

Loss From Operations

( 1,748,000 )

Net Income (Loss) from Discontinued Operations

Net Loss From Discontinued Operations

$ ( 1,748,000 )

were no results of the Singing Machine business as a discontinued operation in the consolidated statements of operations for the three

months ended March 31, 2026, and there were no assets and liabilities of the Singing Machine business as a discontinued operation in

the condensed consolidated balance sheet as of March 31, 2026 and December 31, 2025, as the business had been sold on August 1, 2025.

following table summarizes the cash flows of the Singing Machine business as a discontinued operation in the condensed consolidated statements

of cash flows for the three months ended March 31, 2025:

For the Three Months Ended

March 31, 2025

Net cash used in operating activities attributable to discontinued operations

$ ( 921,000 )

Net cash provided by investing activities attributable to discontinued operations

Net cash provided by financing activities attributable to discontinued operations

Total cash used in discontinued operations

$ ( 920,000 )

following table summarizes the assets and liabilities of the discontinued operations as of September 30, 2025 and December 31, 2024:

September 30, 2025

December 31, 2024

Current Assets

Accounts receivable, net

Accounts receivable, related party

Accounts receivable

Returns asset

Prepaid expenses and other current assets

Total Current Assets of Discontinued Operations

Property and equipment, net

Other non-current assets

Total Non-Current Assets of Discontinued Operations

Current Liabilities

Accounts payable

Accrued expenses

Refund due to customer

Reserve for sales returns

Other current liabilities

Total Current Liabilities of Discontinued Operations

were no cash flows of the Singing Machine business as a discontinued operation in the condensed consolidated statements of cash

flows for the three months ended March 31, 2026 as the business had been sold on August 1, 2025.

18 – Subsequent Events .

Repayment of Notes Payable to Related Parties

On October 8, 2025, the Company

repaid two unsecured loans that it had assumed in connection with the acquisition of SemiCab, Inc.’s business on July 3, 2024.

The repaid loans consisted of:

(i) a loan made to SemiCab, Inc.

by Vivek Sehgal on April 17, 2023, and (ii) a loan made to SemiCab, Inc.

by Ajesh Kapoor on May 5, 2023, each in the original principal amount of $ 50,000 .

Kapoor serves as the Chief Executive Officer and

Chief Technology Officer of SemiCab Holdings and as a member of the Board of Directors of the Company, and Mr.

Sehgal serves as the Chief

Product Officer of SemiCab Holdings.

Streeterville Capital Financing

On November 13, 2025, the Company

entered into Secured Pre-Paid Purchase #2 with Streeterville Capital, LLC, a Utah limited liability company (“Streeterville”),

under that certain securities purchase agreement (the “Securities Purchase Agreement”), dated August 21, 2025, between us

and Streeterville.

Under the Securities Purchase Agreement, the Company agreed to issue and sell shares of its common stock to Streeterville

in one or more pre-paid purchases (each, a “Pre-Paid Purchase” and collectively, the “Pre-Paid Purchases”) for

an aggregate purchase price of up to $ 20,000,000 .

Secured Pre-Paid Purchase #2 provides for a second Pre-Paid Purchase in the principal

amount of $ 5,450,000 , before deducting an original issue discount of $ 450,000 (the “Second Pre-Paid Purchase”).

Pre-Paid Purchase accrues interest at the rate of nine percent ( 9 % ) per annum and has a maturity date of three years.

The Second Pre-Paid Purchase is

similar to the first Pre-Paid Purchase that the Company completed on August 21, 2025, however the Second Pre-Paid Purchase is secured

by cash in an amount not less than the lesser of:

(i) $ 4,500,000 , and (ii) 90 % of the then-current outstanding balance of the Second Pre-Paid

Purchase (the “Minimum Balance Amount”).

The Minimum Balance Amount is being held in a deposit account (the “DACA Account”)

held by RIME Holdings, LLC, a Utah limited liability company and wholly-owned subsidiary of the Company that the Company formed in connection

with this transaction (“RIME Holdings”), pursuant to a Deposit Account Control Agreement, dated November 13, 2025, by and

among RIME Holdings, Lakeside Bank, an Illinois banking company, and Streeterville (the “DACA Agreement”).

Accordingly, of

the $ 5,000,000 proceeds that the Company received from the Second Pre-Paid Purchase, $ 4,500,000 were placed in the DACA Account.

The Company has the right to use

funds in the DACA Account to repay any portion of the outstanding balance of the Second Pre-Paid Purchase, but only so long as the payment

does not cause the outstanding balance to drop below the Minimum Balance Amount.

As long as no event of default has occurred, the Company

may withdraw from the Deposit Account any funds in excess of the Minimum Balance Amount.

The Second Pre-Paid Purchase is secured by the

Guaranty, the Security Agreement, and the IP Security Agreement (each as defined in the Securities Purchase Agreement).

In addition, RIME

Holdings executed a guaranty of the obligations outstanding under the Second Pre-Paid Purchase for the benefit of Streeterville.

The Company entered into a new

placement agency agreement with Univest Securities, LLC to serve as the placement agent in the offering (the “Placement Agent”)

that supersedes the placement agency agreement that the Company previously entered into with them on August 21, 2025 in connection with

the offering.

The Company agreed to pay the Placement Agent a cash fee equal to eight percent ( 8 % ) of the aggregate gross proceeds received

by the Company from any Pre-Paid Purchases that it completes and reimburse the Placement Agent for legal fees in the amount of $ 50,000 .

The cash fee for the Second Pre-Paid Purchase must be paid on February 28, 2026;

provided, however , that the Company may request

that the payment date be extended by 90 days.

Company failed to make the initial payment of $ 1,500,000 due to SemiCab, Inc.

on May 2, 2026 under the promissory note that it issued

to SemiCab, Inc.

on May 2, 2025.

As a result, an event of default was triggered under the promissory note.

On May 9, 2026, the Company and SemiCab, Inc.

entered into a forbearance

agreement pursuant to which:

(i) SemiCab, Inc.

irrevocably waived any default or event of default that was or will be caused under the

promissory note as a result of the Company’s failure to pay the initial payment of $ 1,500,000 to SemiCab, Inc.

on May 2, 2026, and

(ii) SemiCab, Inc.

will forbear from taking action with respect to any defaults or events of default arising after May 9, 2026 with respect

to the Company’s failure to make such payment that occur at any time on or prior to June 16, 2026.

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