What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-19 · 213 added, 284 removed, 83 unchanged (86% of the section changed)

1 unchanged sentence

Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report contain

forward-looking statements that involve risks and uncertainties.

All forward-looking statements included in this report are based on

information available to us on the date hereof, and, except as required by law, we assume no obligation to update any such forward-looking

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number

of factors, including those set forth herein under Item 1A.

Risk Factors and elsewhere in this report.

The following should be

read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this

report and the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended

December 31, 2024.

are an artificial intelligence (“AI”) technology company that currently has one business unit, which is SemiCab.

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

Prior to August 1, 2025, we 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 our subsidiary, The Singing Machine Company, Inc.

forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities

Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

All statements other than statements of historical facts

are statements that could be deemed forward-looking statements.

These statements are based on current expectations, estimates, forecasts,

and projections about the industries in which we operate and the beliefs and assumptions of our management.

Words such as “expects,”

“anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,”

“believes,” “momentum,” “seeks,” “estimates,” “continues,” “endeavors,”

“strives,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking

In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends

in our businesses, and other characterizations of future events or circumstances are forward-looking statements.

Readers are cautioned that these forward-looking statements are only

predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those set forth under Item

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 and elsewhere therein and in this report.

Our actual results may differ materially from those anticipated in these forward-looking statements.

We undertake no obligation to revise

or update any forward-looking statements for any reason, except as required by law.

The following should be read in conjunction with our unaudited condensed

consolidated financial statements and notes thereto included in Part I, Item 1 of this report and the audited consolidated financial statements

and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025.

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

SemiCab is an AI-enabled software logistics and distribution

business that utilizes our SemiCab technology platform to enable retailers, brands and transportation providers to address common supply

chain problems globally.

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

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

Singing Machine was a home karaoke consumer products business

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

Company, Inc.

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

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

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

use of trucks.

To orchestrate collaboration across manufacturers, retailers, distributors, and their carriers, SemiCab uses real-time

data from API-based load tendering and pre-built integrations with Transportation Management System (“TMS”) and Electronic

Logging Device (“ELD”) partners.

To build fully loaded round trips, SemiCab uses AI/ML techniques and advanced predictive

optimization models.

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

loads and the use of trucks.

To orchestrate collaboration across manufacturers, retailers, distributors, and their carriers, SemiCab

uses real-time data from API-based load tendering and pre-built integrations with TMS and ELD partners.

To build fully loaded round trips,

SemiCab uses AI/ML techniques and advanced predictive optimization models.

2020, SemiCab has enabled major retailers, brands and transportation providers to address their transportation needs.

5 unchanged sentences

sustainability model.

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

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

carbon footprint of the industry.

1 unchanged sentence

drivers or driven miles which addresses common problems plaguing the industry like severe driver shortage and road congestion.

optimization could also reduce carbon emissions attributable to road freight.

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

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

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

music enabled consumer products for adults and children.

2 unchanged sentences

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

Corporate Events

and Symbol Change

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

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

Stock Split and Increase in Authorized Shares

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

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

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

On January 14, 2025, our board of directors

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

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

stock split took effect on February 10, 2025.

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

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

May 2, 2025 (the “Closing Date”), we and SemiCab Holdings entered into an equity purchase agreement with SemiCab Inc.

(i) SemiCab Holdings purchased 9,999 shares of the issued and outstanding equity shares, Rs.

10 par value, of SMCB, representing

99.99% of the issued and outstanding equity shares of SMCB, for $1,750,000, the payment of which amount was evidenced by the issuance

of a promissory note by us to SemiCab, Inc., and (ii) we purchased the 20% membership interest in SemiCab Holdings then held by SemiCab,

for aggregate consideration consisting of 119,742 shares of our common stock.

The promissory note provides that $1,500,000 is due

and payable by us on the first anniversary of the Closing Date and the remaining $250,000 is due and payable by us on the 18-month anniversary

of the Closing Date.

The promissory note bears interest at six percent per annum.

the Closing Date, we and SemiCab Holdings entered into an amended and restated employment agreement with each of Ajesh Kapoor and Vivek

Sehgal pursuant to which Mr.

Kapoor agreed to serve as the Chief Executive Officer and Chief Technology Officer of SemiCab Holdings and

Sehgal agreed to serve as the Chief Product Officer of SemiCab Holdings.

Pursuant to the terms of the employment agreements, SemiCab

Holdings granted Messrs.

Kapoor and Sehgal a membership interest in SemiCab Holdings with three quarters of each such grant subject to

certain forfeiture rights tied to continued employment with SemiCab Holdings.

Additionally, Mr.

Kapoor was granted the right to serve

as a member of our board of directors and the right to appoint an additional member of our board of directors upon the occurrence of

certain specified events.

on the Closing Date, we, SemiCab Holdings, Ajesh Kapoor and Vivek Sehgal entered into an amended and restated limited liability company

agreement for SemiCab Holdings which sets forth the terms and conditions governing the operation and management of SemiCab Holdings.

of Singing Machine

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

(“Stingray USA”) pursuant

to which Stingray USA purchased substantially all of the assets, and assumed most of the liabilities, associated with our Singing Machine

business for $500,000.

The transaction closed on August 1, 2025.

We 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 represents a strategic shift that will have a significant effect on our operations and financial results.

Accordingly, we

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

Unless otherwise noted,

the information contained in this Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

consists exclusively of our continuing operations and does not include the operations of the Singing Machine business.

Additional information

concerning the Singing Machine business is presented in Note 19 -- Discontinued Operations of our condensed consolidated financial

Streeterville Capital Financing

On November 13, 2025, we 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, we agreed to issue and sell shares of our 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”).

The Second 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 we 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 ours that we 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 we received from the Second Pre-Paid Purchase, $4,500,000 were placed in the DACA Account.

We have 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, we 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.

We 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 we previously entered into with them on August 21, 2025 in connection with the offering.

We agreed to pay the Placement Agent a cash fee equal to eight percent (8%) of the aggregate gross proceeds received by us from any Pre-Paid

Purchases that we complete 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 we may request that the payment date be extended by 90 days.

We completed the offer and sale

of these securities in a private placement transaction that was exempt from the registration requirements of the Securities Act pursuant

to Section 4(a)(2) of the Securities Act without engaging in any advertising or general solicitation of any kind.

intend to invest in our SemiCab business to develop and grow it into a significant revenue producer for us.

This will involve investments

in the continued research and development of its technology, the hiring of additional qualified employees, marketing and advertising

initiatives, and back-office support.

While SemiCab is a nascent business, it has already acquired several multinational consumer products

companies as customers.

We believe that as existing customers experience the benefits of our SemiCab logistics and distribution solutions,

they will begin to increase their use of SemiCab.

We also believe that SemiCab’s proven ability to improve truck utilization rates

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

that can benefit from SemiCab.

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

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

marketing and advertising initiatives, and back-office support.

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

fast-moving consumer products companies as customers.

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

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

We also believe that our ability to improve truck

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

additional companies that can benefit from our service.

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

1 unchanged sentence

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

are complementary to our SemiCab business.

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

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

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

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

other parts of the world.

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

AI logistics and distribution businesses and companies.

generated revenue of $1,744,000 for the three-month period ended September 30, 2025, compared to $127,000 for the three-month period

ended September 30, 2024.

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

resulting from our acquisition of SMCB on May 2, 2025.

Gross loss was $351,000, or 20% of net sales, for the three-month period

ended September 30, 2025, compared to $32,000, or 25% of net sales, for the three-month period ended September 30, 2024.

increase was due primarily to an increase of $1,617,000 for net sales and an increase of $1,936,000 for cost of sales.

operating expenses were $1,214,000 for the three-month period ended September 30, 2025, compared to $1,791,000 for the three-month

period ended September 30, 2024.

The decrease in operating expenses was due primarily to a decrease of $816,000 for operating

expenses incurred during the three-month period ended September 30, 2024 related to acquisition of the SemiCab business on July 3,

We incurred net loss from continuing operations of $1,882,000 for the three-month period ended September 30, 2025 compared to

$2,106,000 for the three-month period ended September 30, 2024.

generated net loss available to common shareholders of $2,962,000, or $1.15 per share of common stock, for the three-month period ended

September 30, 2025, compared to a net gain available to common shareholders of $1,195,000, or $0.13 per share of common stock, for the

three-month period ended September 30, 2024.

The net gain available to common shareholders for 2024 was due primarily to a one-time gain of $3,874,000 that we

recognized on the early termination of an operating lease that we included in discontinued operations as a result of the sale of our Singing

Machine business.

We had total assets of $10,845,000 and $18,302,000 at September 30, 2025 and December 31,

2024, respectively.

Net cash used by operating activities attributable to continuing operations was $4,343,000 for the nine-month period

ended September 30, 2025 compared to $3,770,000 for the nine-month period ended September 30, 2024.

expect net sales generated from our SemiCab business to increase substantially over the next 12 months as we generate more business

from our growing customer base in India.

We expect gross loss to decrease over the next 12 months as the increase in net sales that

we expect to generate from our SemiCab business exceeds the increase in cost of sales that we expect to incur in connection with the growth in sales.

We expect operating expenses to increase over the next 12 months due to increases

in legal and accounting expenses that we incur as we engage in additional capital-raising activities as needed to fund our business

and increases in expenses that we expect to incur to fund the growth and development of our SemiCab business.

Net loss available to

common stockholders is expected to remain at similar levels.

We expect cost reduction activities that we are engaging in to

beneficially impact our net loss, but expect this to be offset by increases in the investment we will continue to make in the growth

and development of our SemiCab business.

are complementary to our business.

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

businesses or could involve a strategic partnership or joint venture with complementary companies or businesses.

We believe that additional

investments could provide us with new AI logistics and distribution technologies, services and resources that we can implement across

our entire business or could help us to more quickly expand our footprint into other parts of the world.

We are actively evaluating additional

opportunities to expand our SemiCab business through investments in complementary AI logistics and distribution businesses and companies.

We generated net sales of $2,400,000 for the three-month period ended

March 31, 2026, compared to $123,000 for the three-month period ended March 31, 2025.

The increase in net sales was due primarily to the

addition of net sales generated by our SemiCab business resulting from our acquisition of SMCB on May 2, 2025.

Cost of sales was $3,077,000

for the three months ended March 31, 2026, compared to $129,000 for the three months ended March 31, 2025.

The increase in cost of sales

was due primarily to the addition of freight, handling and servicing costs incurred by SMCB resulting from our acquisition of SMCB on

Our operating expenses were $3,667,000 for the three months ended March 31, 2026, compared to $1,056,000 for the

three months ended March 31, 2025.

The increase in operating expenses was due primarily to the increase in general and administrative

expenses incurred in the growth and development of our SemiCab business during the three months ended March 31, 2026.

We generated net loss from continuing operations of $5,380,000, or $0.52

per share of common stock, for the three months ended March 31, 2026, compared to $7,546,000, or $3.77 per share of common stock, for

the three months ended March 31, 2025.

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

a decrease of $6,468,000 for a non-cash charge for changes in the fair value of warrants liability partially offset by increases in general

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

We had total assets of $18,455,000 and $12,724,000

at March 31, 2026 and December 31, 2025, respectively.

Net cash used in operating activities attributable to continuing operations was

$3,922,000 the three months ended March 31, 2026, compared to $2,374,000 the three months ended March 31, 2025.

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

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

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

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

We expect operating expenses and net

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

Notwithstanding

6 unchanged sentences

results of operations.

of the Three-Month Periods Ended September 30, 2025 and 2024

Net sales consist of sales

generated by our SemiCab business.

Net sales increased $1,617,000 to $1,744,000 for the three-month period ended September 30, 2025, compared

to $127,000 for the three-month period ended September 30, 2024.

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

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

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

from our growing customer base in India

of the Three-Month Periods Ended March 31, 2026 and 2025

sales consist of sales generated by our SemiCab business.

Net sales increased $2,277,000 to $2,400,000 for the three-month period ended

March 31, 2026, compared to $123,000 for the three-month period ended March 31, 2025.

The increase in net sales was due primarily to

the addition of net sales generated by SMCB, which we acquired on May 2, 2025.

We expect net sales to increase over the next 12 months

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

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

Cost of sales

Cost of sales consists primarily

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

Cost of sales increased $1,936,000 to

$2,095,000 for the three-month period ended September 30, 2025, compared to $159,000 for the three-month period ended September 30, 2024.

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

on May 2, 2025.

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

to generate from our SemiCab business.

increased $2,948,000 to $3,077,000 for the three-month period ended March 31, 2026, compared to $129,000 for the three-month period ended

March 31, 2025.

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

SMCB, which we acquired on May 2, 2025.

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

in net sales that we expect to generate from our SemiCab business.

expenses consist of selling expenses and general and administrative expenses.

Selling expenses consist

primarily of marketing and advertising activities that we engage in from time to time.

Selling expenses were $3,000 for the three-month

period ended September 30, 2025.

We did not incur any selling expenses for the three-month period ended September 30, 2024.

selling expenses to increase over the next 12 months as we being to devote more resources to marketing and advertising activities to

support the growth of our SemiCab business.

and Administrative Expenses

and administrative expenses consist primarily of payroll expenses, legal and accounting expenses, and rent expense associated with our

SemiCab business and corporate expenses.

General and administrative

expenses decreased $580,000 to $1,211,000 for the three-month period ended September 30, 2025, compared to $1,791,000 for the three-month

period ended September 30, 2024.

The decrease was due primarily to a decrease of $816,000 for operating expenses incurred during the

three-month period ended September 30, 2024 in connection with our acquisition of SemiCab’s business on July 3, 2024.

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

SemiCab business.

expenses consist of financing costs that we incurred under our loans and other financing activities.

Other expenses increased $10,000

to $293,000 for the three-months ended September 30, 2025, compared to $283,000 for the three-month period ended September 30, 2024.

We may incur additional financing costs during the next 12 months and expect to continue to incur additional non-operating expenses

in connection with the operation and growth of our SemiCab business.

Net Loss Attributable to Non-Controlling

Net loss attributable to

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

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

of SemiCab Holdings beginning May 2, 2025.

SemiCab Holdings owns our SemiCab business.

We acquired our SemiCab business from SemiCab,

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

a 20% membership interest in SemiCab Holdings.

attributable to non-controlling interest of $20,000 for the three-month period ended September 30, 2025 represents the amount of loss

incurred by SemiCab Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab

Holdings for the three-month period ended September 30, 2025.

The net loss attributable to non-controlling interest of $221,000 for the

three-month period ended September 30, 2024 represents the amount of loss incurred by SemiCab Holdings that was allocated to SemiCab,

through its 20% membership interest in SemiCab Holdings for the three-month period ended September 30, 2024.

We expect net loss attributable

to non-controlling interest to increase over the next 12 months as we continue to invest in the development and growth of SemiCab’s

of the Nine-Month Periods Ended September 30, 2025 and 2024

Net sales increased $2,891,000

to $3,018,000 for the nine-month period ended September 30, 2025, compared to $127,000 for the nine-month period ended September 30, 2024.

The increase in net sales was due primarily to the addition of net sales generated by SMCB, which we acquired on May 2, 2025.

Cost of sales increased $3,557,000 to $3,716,000 for the nine-month

period ended September 30, 2025, compared to $159,000 for the nine-month period ended September 30, 2024.

The increase in cost of sales

was due primarily to the addition of freight, handling and servicing costs incurred by SMCB, which we acquired on May 2, 2025.

Selling expenses were $3,000

for the nine-month period ended September 30, 2025.

We did not incur any selling expenses for the nine-month period ended September 30,

Selling expenses consist primarily of marketing and advertising activities

that we engage in from time to time in connection with our SemiCab business.

Selling expenses were $33,000 for the three-month period

ended March 31, 2026.

We did not incur any selling expenses for the three-month period ended March 31, 2025.

We expect selling expenses

to increase substantially over the next 12 months as we begin to devote more resources to marketing and advertising activities to support

the growth of our SemiCab business in India, the United States and Europe.

and Administrative Expenses

and administrative expenses increased $354,000 to $3,184,000 for the nine-month period ended September 30, 2025, compared to $2,830,000

for the nine-month period ended September 30, 2024.

The increase was due primarily to increases in general and administrative expenses

incurred in the growth and development of our SemiCab business.

expenses increased $6,476,000 to $6,804,000 for the nine-month period ended September 30, 2025, compared to $328,000 for the

nine-month period ended September 30, 2024.

The increase was due primarily to an increase of $6,468,000 for a one-time, non-cash

loss that we incurred in connection with the change in fair value of warrants sold in the public offering of

securities that we completed on December 6, 2024.

Net Loss Attributable to Non-Controlling

The net loss attributable

to non-controlling interest of $347,000 represents the amount of loss incurred by SemiCab that was allocated to SemiCab, Inc.

its 20% membership interest in SemiCab Holdings for period beginning January 1, 2025 and ending May 2, 2025, and the amount of loss incurred

by SemiCab that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings for

the period beginning May 2, 2025 and ending September 30, 2025.

The net loss attributable to non-controlling interest of $221,000 for

the nine-month period ended September 30, 2024 represents the loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc.

its 20% membership interest in SemiCab Holdings for the nine-month period ended September 30, 2024.

General and administrative expenses consist primarily of compensation

expense, legal and accounting expenses, and other corporate expenses.

General and administrative expenses increased $2,578,000 to $3,634,000

for the three-month period ended March 31, 2026, compared to $1,056,000 for the three-month period ended March 31, 2025.

was due primarily to increases in expenses incurred in connection with the operation of our SemiCab business and stock-based compensation

We expect general and administrative expenses to decrease over the next 12 months as we incur less stock-based compensation expense.

This decrease will be partially offset by an increase in general and administrative expenses associated with the growth and development

of our SemiCab business.

Other expenses consist primarily of the loss on the change in fair

value of warrants that we incurred in connection with the public offering of securities that we completed on December 6, 2024, and interest

expense that we incurred in connection with other financing transactions that we have completed.

Other expenses decreased $5,448,000 to

$1,036,000 for the three-month period ended March 31, 2026, compared to $6,484,000 for the three-month period ended March 31, 2025.

decrease was due primarily to the loss of $6,468,000 on the change in fair value of warrants that we incurred during the three-month period

ended March 31, 2025 in connection with the public offering of securities that we completed on December 6, 2024, partially offset by an

increase of $1,020,000 related to interest expense, including amortization of deferred debt costs, incurred in connection with financing

transactions that we incurred during the three-month period ended March 31, 2026.

We expect other expenses to remain at similar levels

over the next 12 months as we continue to incur interest expense in connection with the financing transactions that we have completed.

Loss Attributable to Non-Controlling Interest

Holdings owns our SemiCab business.

Net loss attributable to non-controlling interest consists of the loss allocated to SemiCab, Inc.,

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

collectively owned 20% of the outstanding membership interests of SemiCab Holdings beginning May 2, 2025.

The net loss attributable to

non-controlling interest of $274,000 for the three-month period ended March 31, 2026 represents the amount of loss incurred by SemiCab

Holdings that was allocated to Ajesh Kapoor and Vivek Sehgal through their collective 20% membership interest in SemiCab Holdings.

net loss attributable to non-controlling interest of $103,000 for the three-month period ended March 31, 2025 represents the amount of

loss incurred by SemiCab Holdings that was allocated to SemiCab, Inc.

between January 1, 2025 and March 31, 2025.

We expect net loss

attributable to non-controlling interest to increase over the next 12 months as we continue to invest in the development and growth of

our SemiCab business.

And Capital Resources

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the use of short- and long-term debt.

As of September 30, 2025, our cash balance was $2,839,000.

Net cash used by operating

activities attributable to continuing operations was $4,343,000 during the nine-month period ended September 30, 2025, compared to $3,770,000

during the nine-month period ended September 30, 2024.

The increase of $573,000 was due primarily to an increase of $7,523,000 for loss

from continuing operations, partially offset by an increase of $6,468,000 for the loss that we incurred in connection with the change

in fair value of warrants sold in the public offering of securities that we completed on December 6, 2024.

Net cash used by investing

activities attributable to continuing operations was $1,888,000 during the nine-month period ended September 30, 2025, compared cash provided

by investing activities attributable to continuing operations of $17,000 during the nine-month period ended September 30, 2024.

The difference

of $1,905,000 was due primarily to increases of $1,172,000 for advances to SMCB under our loan agreement with them, $758,000 for repurchases

of shares of our common stock, and $541,000 for the capitalization of internal use software costs.

These increases were partially offset

by an increase of $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025.

Net cash provided by financing

activities attributable to continuing operations was $4,115,000 during the nine-month period ended September 30, 2025, compared to $1,103,000

during the nine-month period ended September 30, 2024.

The difference of $3,012,000 was due primarily to an increase of $4,293,000 for

proceeds from the issuance of promissory notes, partially offset by a decrease of $1,489,000 for proceeds from the sale of stock.

As of March 31, 2026, our cash and restricted cash balance was $10,939,000.

Net cash used in operating activities attributable to continuing operations

was $3,922,000 during the three-month period ended March 31, 2026, compared to $2,374,000 during the three-month period ended March 31,

The increase of $1,548,000 was due primarily to a decrease of $6,468,000 for loss on change in fair value of warrants that we incurred

in connection with the public offering of securities that we completed on December 6, 2024, partially offset by a decrease of $2,166,000

for net loss and an increase of $1,655,000 for accrued expenses.

Net cash used in investing activities attributable to continuing operations

was $128,000 during the three-month period ended March 31, 2026, compared to $672,000 during the three-month period ended March 31, 2025.

The decrease of $544,000 was due primarily to a decrease of $672,000 for advances to SMCB under our loan agreement with them, partially

offset by an increase of $114,000 for the capitalization of internal use software costs.

Net cash provided by financing activities attributable to continuing

operations was $8,843,000 for the three-month period ended March 31, 2026.

We did not have any cash flows from financing activities attributable

to continuing operations during the three-month period ended March 31, 2025.

The increase of $8,843,000 was due primarily to net proceeds

of $9,020,000 that we received from Streeterville under the Fourth Pre-Paid Purchase.

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

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

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

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

To demonstrate compliance with this requirement,

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

February 24, 2025.

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

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

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

We reported a stockholders’

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

Pursuant to the listing rule and instructions from Nasdaq,

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

through a public filing.

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

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

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

we had regained compliance with the stockholders’ equity requirement.

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

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

the stockholders’ equity rule.

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

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

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

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

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

hearing before the Nasdaq hearings panel.

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

On that day, the closing

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

business days.

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

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

We will be subject to a mandatory

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

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

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

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

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

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

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

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

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

Pursuant to the listing rule and

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

to evidence compliance through a public filing.

this Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2026, we reported stockholders’ equity of approximately

We intend to file a Form 8-K with the SEC stating that we believe we have regained compliance with the stockholders’

equity requirement.

we are unable to meet the continued listing of the Nasdaq, our common stock could be subject to delisting.

If our common stock is delisted

from the Nasdaq, trading of our common stock most likely will be conducted in the over-the-counter market on an electronic bulletin board

established for unlisted securities such as the OTC Markets or in the “pink sheets.” Such a downgrade in our listing market

may adversely impact our ability to raise capital, limit our ability to make a market in our common stock, and adversely affect the market

price and liquidity of our common stock.

Sheet Arrangements

of September 30, 2025, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred

of March 31, 2026, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred

to as structured finance or special purpose entities, that had been established for the purpose of facilitating off-balance sheet arrangements

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Quantitative and Qualitative Disclosures About Market Risk

required for small reporting companies.

required for smaller reporting companies.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis