What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-08-14 compared with 2026-05-14 · 489 added, 273 removed, 979 unchanged (44% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2026

June 30, 2026

December 31, 2025

5 unchanged sentences

Property and equipment, net

Operating lease- right of use assets

Other non-current assets

5 unchanged sentences

Other current liabilities

Current portion of operating lease liabilities

Promissory notes payable, net

1 unchanged sentence

Total Current Liabilities

Operating lease liabities, net of current portion

Long-term provision for employee benefits

4 unchanged sentences

1,000,000 shares authorized;

no shares issued and outstanding at

March 31, 2026 and December 31, 2025

3,500 and - 0 - shares issued and outstanding at June 30, 2026 and December 31, 2025

Common stock, $ 0.01 par value;

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

14,651,665 and

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

15,670,768 and 3,414,542 shares issued and outstanding at June 30, 2026 and December 31, 2025

Additional paid-in capital

6 unchanged sentences

( 1,743,000 )

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

Treasury stock, 10,990 shares reserved at June 30, 2026 and December 31, 2025

Total Shareholders’ Equity (Deficit)

5 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

For the Six Months Ended

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

Cost of Sales

( 1,270,000 )

Operating Expenses

5 unchanged sentences

( 1,208,000 )

( 7,045,000 )

( 2,270,000 )

Other Expenses

1 unchanged sentence

( 6,468,000 )

Loss on debt extinguishment

Interest expense, net

( 1,045,000 )

( 2,081,000 )

Total Other Expenses

1 unchanged sentence

( 2,481,000 )

( 6,511,000 )

Loss From Continuing Operations Before Income Tax

1 unchanged sentence

( 1,235,000 )

( 9,526,000 )

( 8,781,000 )

Income tax loss attributable to continuing operations

2 unchanged sentences

( 1,235,000 )

( 9,529,000 )

( 8,781,000 )

Net loss from discontinued operations

2 unchanged sentences

( 9,529,000 )

( 10,103,000 )

Net loss attributable to non-controlling interest

2 unchanged sentences

$ ( 585,000 )

$ ( 8,935,000 )

$ ( 9,776,000 )

Loss Per Common Share

8 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

For the Six Months Ended

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

$ ( 4,149,000 )

$ ( 809,000 )

$ ( 9,529,000 )

$ ( 10,103,000 )

Other comprehensive loss

3 unchanged sentences

( 9,522,000 )

( 10,103,000 )

Total comprehensive loss attributable to non-controlling interest

2 unchanged sentences

$ ( 585,000 )

$ ( 8,929,000 )

$ ( 9,776,000 )

notes to the condensed consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

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

the Three Months Ended June 30, 2026 and 2025 (Unaudited)

Preferred Stock

Additional Paid-in

1 unchanged sentence

Non-Controlling

Balance at March 31, 2025

$ ( 758,000 )

$ ( 58,363,000 )

$ ( 1,139,000 )

Stock-based compensation

Common stock issued for acquisition of SMCB

Exchange of partitioned pre-paid purchase for Series A preferred stock

Balance at June 30, 2025

$ ( 758,000 )

$ ( 58,948,000 )

$ ( 1,363,000 )

Balance at March 31, 2026

$ ( 758,000 )

$ ( 70,149,000 )

$ ( 2,019,000 )

( 3,829,000 )

( 4,149,000 )

Foreign currency translation adjustment

Stock-based compensation

Common stock issued upon settlement of prepaid purchases

Exchange of partitioned pre-paid purchase for Series A preferred stock

Balance at June 30, 2026

$ ( 758,000 )

$ ( 73,978,000 )

$ ( 2,336,000 )

the Six Months Ended June 30, 2026 and 2025 (Unaudited)

Preferred Stock

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

Balance at March 31, 2025

Balance at June 30, 2025

$ ( 758,000 )

15 unchanged sentences

Common stock issued upon settlement of prepaid purchases

Balance at March 31, 2026

Exchange of partitioned pre-paid purchase for Series A preferred stock

Balance at June 30, 2026

$ ( 758,000 )

8 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

March 31, 2026

March 31, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

For the Six Months Ended

June 30, 2026

June 30, 2025

Cash flows from operating activities

6 unchanged sentences

Amortization of debt discount and issuance cost

Reduction in SMCB loan in exchange for services

Gain on allowance for credit loss

Change in fair value of warrant liability

Loss on debt extinguishment

Stock-based compensation

6 unchanged sentences

Accrued expenses

( 1,236,000 )

Other current liabilities

Operating lease liabilities

Provision for employee benefits

5 unchanged sentences

Capitalization of internal use software costs

Repurchase of shares of common stock

Cash received from acquisition of SMCB

Advances to SMCB

( 1,172,000 )

Net cash used in investing activities attributable to continuing operations

( 1,344,000 )

Cash flows from financing activities

3 unchanged sentences

Net cash used in operating activities attributable to discontinued operations

( 2,013,000 )

Net cash provided by investing activities attributable to discontinued operations

1 unchanged sentence

Total cash used in discontinued operations

( 2,028,000 )

Net change in cash

6 unchanged sentences

Common stock issued upon settlement of prepaid purchases

Exchange of partitioned pre-paid purchase for Series A preferred stock

Right of use assets obtained in exchange for new operating lease liabilities

Reclassification of Series A warrants to equity

Common stock issued for exercise of Series B warrants

Repurchase of common stock - related parties

Common stock issued for acquisition of SMCB

Promissory note issued for acquisition of SMCB

notes to the condensed consolidated financial statements

1 unchanged sentence

Holdings, Inc.

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

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.

(the “Company”) is an artificial intelligence (“AI”) technology company focused on the growth

and development of SemiCab.

SemiCab is an AI-enabled software logistics and distribution business that utilizes its 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.

10 unchanged sentences

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

Machine Company, Inc.” to “Algorhythm Holdings, Inc.”

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”).

January 13, 2025, the Company’s stockholders voted to authorize the Company’s board of directors to effect a reverse stock

24 unchanged sentences

Concern Analysis

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

of June 30, 2026, the Company’s cash and restricted cash balance was $ 7,955,000 .

This will not be sufficient to fund its planned

23 unchanged sentences

of Presentation

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.

accompanying unaudited financial statements for the three and six months ended June 30, 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 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.

The condensed consolidated balance sheet as of June 30, 2026 and condensed financial statement information for the

three and six months ended June 30, 2026 and 2025 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2025

is derived from the Company’s 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 in 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

11 unchanged sentences

Additional information is presented in Note 14 – Segment Information and Revenue Disaggregation .

Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”).

At the commencement date of a lease, the

Company recognizes a lease liability, which represents its obligation to make lease payments arising from the lease measured on a discounted

basis, and a right-of-use asset, which represents its right to use or control the use of the underlying asset for the lease term.

the rate implicit in its leases is generally not readily determinable, the Company uses its incremental borrowing rate at the commencement

date to measure the present value of its future lease payments.

The lease term includes periods covered by options to extend or terminate

the lease when the Company is reasonably certain to exercise such options.

Company has elected not to recognize right-of-use assets and lease liabilities for leases with a term of twelve months or less.

cost for such leases is recognized on a straight-line basis over the lease term.

The Company accounts for the lease and non-lease components

of its lease arrangements separately.

Operating lease cost is recognized on a straight-line basis over the lease term.

Variable lease

payments that do not depend on an index or rate are excluded from the measurement of lease liabilities and are recognized as expense

in the period in which the obligation is incurred.

All of the Company’s leases are classified as operating leases.

the six months ended June 30, 2026, the Company was a party to operating leases for office space in the United States and India.

information is presented in Note 6 – Leases .

Accounting Pronouncements

66 unchanged sentences

5 – Property and Equipment, Intangible Assets and Goodwill

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

summary of the Company’s property and equipment at June 30, 2026 and December 31, 2025 is as follows:

Schedule of Property and Equipment

2 unchanged sentences

accumulated depreciation

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:

Property and equipment

expense was $ 3,000 and $ 5,000 for the three and six months ended June 30, 2026, respectively, and $ 1,000 and $ 1,000 for the three and

six months ended June 30, 2025, respectively.

summary of the Company’s intangible assets at June 30, 2026 and December 31, 2025 is as follows:

Schedule of Intangible Assets

6 unchanged sentences

Internal use software

Intangible assets gross

accumulated amortization

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

Intangible assets net

expense was $ 98,000 and $ 189,000 for the three and six months ended June 30, 2026, respectively, and $ 17,000 and $ 32,000 for the three

and six months ended June 30, 2025, respectively.

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

3 unchanged sentences

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 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 six months ended June 30, 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

12 unchanged sentences

Impairment of goodwill

Balance at March 31, 2026

Balance at June 30, 2026

Company leases office space in the United States and India under operating leases and has no finance leases.

Company’s United States operating lease covers office space in Fort Lauderdale, Florida, with a term of 62 months that commenced

in June 2026.

The lease provides for two months of abated base rent and scheduled annual rent escalations.

The Company’s India

operating lease, held through its subsidiary SMCB, covers managed office seats in Bengaluru under a 26-month arrangement that commenced

in January 2026 and provides for 5% annual escalation.

balance sheet information related to operating leases as of June 30, 2026 is as follows:

Schedule of Supplemental Balance Sheet Information Related to Operating Leases

June 30, 2026

Operating lease- right of use assets

Current portion of operating lease liabilities

Operating lease liabilities, net of current portion

Operating lease liabilities

statement of information related to operating leases for the three and six months ended June 30, 2026 is as follows:

Schedule of Operating Leases Cost

Three Months Ended

Six Months Ended

June 30, 2026

Operating lease expense as a component of general and administrative expense

cash flow information related to operating leases for the six months ended June 30, 2026 is as follows:

Six Months Ended

June 30, 2026

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flow paid for operating leases

Right of use assets obtained in exchange for new operating lease liablities

weighted average remaining lease term and discount rate for operating leases as of June 30, 2026 is as follows:

June 30, 2026

Weighted average reamining lease term (years)

Weighted average discount rate

minimum lease payments under non-cancelable operating leases as of June 30, 2026 are as follows:

Schedule of Future Minimum Lease Payments Under Non-Cancelable Operating Leases

Remainder of 2026

Total undiscounted lease payments

Total operating lease liabilities

7 – Notes Payable to Related Parties

payable to related parties consist of the following:

payable to related parties consisted of the following as of June 30, 2026 and December 31, 2025:

Schedule of Notes Payable to Related Parties

3 unchanged sentences

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.

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:

Company incurred interest expense on these loans of $ 13,000 and $ 26,000 for the three and six months ended June 30, 2026, respectively,

and $ 15,000 and $ 31,000 for the three and six months ended June 30, 2025, respectively.

In relation to these loans, the Company had accrued

interest payable of $4,000 as of June 30, 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 June 30, 2026 and December 31, 2025 are summarized in the table below:

Schedule of Notes Payable to Related Parties Loan

Outstanding Principal

March 31, 2026

June 30, 2026

December 31, 2025

1 unchanged sentence

on May 5, 2023 for $ 50,000 .

Company failed to make payments of $ 165,000 and $ 150,000 due to Mr.

Kapoor on February 1, 2026, and July 10, 2026, respectively.

result, an event of default was triggered under the loans.

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

39 unchanged sentences

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

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

Accordingly, there was no unpaid balance at June 30, 2026 or December

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

37 unchanged sentences

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.

expenses on the accompanying condensed consolidated balance sheets as of June 30, 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

2 unchanged sentences

Company assumed when it acquired SemiCab, Inc.’s business.

Blue Yonder alleges that, because the Company assumed these liabilities,

Blue Yonder can enforce the judgment against the Company.

Blue Yonder alleged that, because the Company assumed these liabilities,

Blue Yonder could enforce the judgment against the Company.

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

3 unchanged sentences

Blue Yonder’s motion for judgment on the pleadings.

The outcome of this matter is uncertain.

June 12, 2026, the Company entered into a confidential settlement agreement and mutual release with Blue Yonder to resolve all claims

related to the litigation and the underlying stipulated judgment.

Under the terms of the settlement agreement, the Company agreed to

pay Blue Yonder $ 500,000 in full settlement of all claims.

The Company paid the settlement amount on July 2, 2026.

Upon receipt of the

payment, Blue Yonder agreed to release the Company and its subsidiaries from all claims related to the litigation and to file a satisfaction

9 – 2022 Equity Incentive Plan

34 unchanged sentences

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

As of June 30, 2026, 3,919,911 shares remained available for issuance under the plan.

Company did no t grant any share-based awards during the three months ended June 30, 2026 or the three and six months ended June 30, 2025.

The Company granted awards representing 1,506,489 shares of common stock during the six months ended June 30, 2026.

No awards were forfeited

during the three and six months ended June 30, 2026 and 2025.

of June 30, 2026 and December 31, 2025, 1,790,155 and 283,666 shares of the Company’s common stock, respectively, were subject

to outstanding awards under the plan.

compensation expense represents the grant-date fair value of share-based awards recognized on a straight-line basis over the requisite

service period.

For the three and six months ended June 30, 2026, the Company recognized stock-based compensation expense related to

stock options and restricted stock awards of $ 196,000 and $ 1,119,000 , respectively.

For the three and six months ended June 30, 2025,

the Company recognized stock-based compensation expense related to stock options and restricted stock awards of $ 0 and $ 85,000 , respectively.

of June 30, 2026, there was $ 1,931,000 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 three months.

Stock options vested as of June 30, 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.

of June 30, 2026, there was $ 84,000 of unrecognized compensation expense related to restricted stock awards, which is expected to be

recognized over a weighted-average remaining vesting period of approximately eleven months.

10 – 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

computations of basic and dilutive loss per share of common stock outstanding for the three and six months ended June 30, 2026 and 2025

are as follows:

Schedule of Basic and Diluted Income (Loss) Per Share

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

For the Six Months Ended

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

Net loss available to common shareholders

1 unchanged sentence

$ ( 585,000 )

$ ( 8,935,000 )

$ ( 9,776,000 )

Basic and diluted weighted average of common stock outstanding

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:

computations of the fully diluted weighted average number of shares of common stock outstanding for the three and six months ended June

30, 2026 and 2025 are as follows:

Schedule of Diluted Weighted Average Number of Shares

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

For the Three Months Ended

March 31, 2026

March 31, 2025

For the Six Months Ended

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

Basic weighted average common shares outstanding

6 unchanged sentences

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

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.

the three and six months ended June 30, 2026, 1,248,008 shares 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 loss per share as the result would have

been anti-dilutive.

For the three and six months ended June 30, 2025, 484 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.

11 – Securities Transactions

11 unchanged sentences

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 %

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.

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 three months ended March 31, 2025 related to this promissory

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

Regalia Ventures is owned and controlled by Jay B.

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

board of directors until November 14, 2025.

Foreman, who served

as a member of the Company’s board of directors until November 14, 2025.

Group Stock Repurchase Transaction

14 unchanged sentences

of 10 % per year.

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

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

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

63 unchanged sentences

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

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 to equity.

Diagonal Financing Transactions

8 unchanged sentences

$ 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.

Company incurred and paid $ 1,000 and $ 4,000 of interest expense under the promissory note during the three and six months ended June

30, 2026, respectively.

On June 15, 2026, the Company paid off the promissory note in full.

Diagonal Loan #2

14 unchanged sentences

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.

Company incurred and paid $ 2,000 and $ 7,000 of interest expense under the promissory note during the three and six months ended June

30, 2026, respectively.

On June 15, 2026, the Company paid off the promissory note in full.

Capital Financing Transaction

6 unchanged sentences

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.

Company incurred and paid $ 1,000 and $ 4,000 of interest expense under the promissory note during the three and six months ended June

30, 2026, respectively.

On June 15, 2026, the Company paid off the promissory note in full.

Capital Financing Transaction

5 unchanged sentences

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.

Company incurred and paid $ 3,000 of interest expense under the promissory note during the three and six months ended June 30, 2026.

January 20, 2026, the Company paid off the promissory note in full.

Streeterville

1 unchanged sentence

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”)

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

24 unchanged sentences

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

Listing Rule 5635(d) provides that shareholder approval is required prior to the issuance of shares of the Company’s 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

4 unchanged sentences

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

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 to prepay.

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

At any time 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.

12 unchanged sentences

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 .

the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $ 531,000 and $ 3,836,000 , respectively,

under the First Pre-Paid Purchase as a result of Streeterville exercising its right to purchase an aggregate of 1,019,103 and 4,237,269

shares of the Company’s common stock, respectively.

During the three and six months ended June 30, 2026, the Company recognized

interest expense related to the First Pre-Paid Purchase of $ 19,000 and $ 88,000 , respectively.

As of June 30, 2026, the outstanding

principal balance of the First Pre-Paid Purchase was $ 554,000 , which is reflected in the condensed consolidated balance sheets net of

unamortized issuance costs of $ 104,000 .

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

3 unchanged sentences

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.

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”).

The secured 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

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

were placed in the DACA Account.

$ 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,

8 unchanged sentences

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.

the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $ 0 and $ 4,913,000 , respectively, under

the Second Pre-Paid Purchase as a result of Streeterville exercising its right to purchase an aggregate of nil and 6,447,017 shares of

the Company’s common stock, respectively, and recognized $ 0 and $ 45,000 , respectively, 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”).

5 unchanged sentences

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.

the three and six months ended June 30, 2026, the Company repaid an aggregate principal amount of $ 0 and $ 991,000 , respectively, under

the Third Pre-Paid Purchase as a result of Streeterville exercising its right to purchase an aggregate of nil and 1,132,410 shares of

the Company’s common stock, respectively, and recognized $ 0 and $ 2,000 , respectively, 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.

Purchase #4 provides for a fourth Pre-Paid Purchase in the principal amount of $ 10,355,000 , 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.

(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,

7 unchanged sentences

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 .

June 29, 2026, the Company entered into an exchange agreement (the “Exchange Agreement”) with Streeterville.

the Exchange Agreement, the Company and Streeterville agreed to partition a new Pre-Paid Purchase (the “Partitioned Pre-Paid Purchase”)

in the original principal amount of $ 3,500,000 (the “Partitioned Amount”) from Secured Pre-Paid Purchase #4 and reduce the

outstanding balance of Secured Pre-Paid Purchase #4 by an amount equal to the Partitioned Amount.

The parties then exchanged the resulting

Partitioned Pre-Paid Purchase for 3,500 shares (the “Exchange Shares”) of the Company’s newly created Series A Preferred

Stock, par value $ 1.00 per share (the “Series A Preferred Stock”).

June 29, 2026, in connection with the issuance of the Exchange Shares, the Company filed a Certificate of Designation of Preferences

and Rights of Series A Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware.

The Certificate of Designation designates 15,000 shares of the Company’s preferred stock, par value $ 1.00 per share, as Series

A Preferred Stock and provides that each share of Series A Preferred Stock has a stated value of $ 1,150 (the “Stated Value”).

Each share of Series A Preferred Stock accrues a preferred return on the Stated Value at a rate of 9 % per annum (the “Preferred

Return”) which compounds daily and is payable quarterly in cash or additional shares of Series A Preferred Stock at the Company’s

Upon the occurrence of an event of default under the Certificate of Designation, the Preferred Return will increase to 15%

per annum and the Stated Value will automatically increase by 15%, which increase may be applied up to three times for three separate

events of default.

Series A Preferred Stock is non-convertible and has no voting rights except in certain limited circumstances.

It is not entitled to participate

in dividends, distributions or payments to holders of the Company’s common stock and may be redeemed by the Company, at the sole

discretion of its board of directors, for a cash redemption price equal to 110% of the applicable liquidation amount.

The Series A Preferred

Stock ranks senior to all shares of the Company’s capital stock, including the Company’s common stock, with respect to dividends,

distributions and payments upon liquidation, dissolution and winding up.

The Certificate of Designation also contains covenants restricting

certain issuances of securities, changes to authorized shares, asset pledges, asset dispositions, reverse stock splits and fundamental

transactions.

Company accounted for the Exchange Agreement as a partial extinguishment of a portion of the Pre-Paid Purchase #4 in accordance with

The reacquisition price was measured using the fair value of the extinguished debt because it represented the more readily

determinable measure of fair value.

As a result, the Company derecognized the carrying amount of the extinguished debt of $ 3,100,000 ,

including the related allocated unamortized issuance costs, recognized the Series A Preferred Stock within permanent stockholders’

equity at $ 3,500,000 , and recorded a loss on debt extinguishment of $ 400,000 during the three and six months ended June 30, 2026.

Exchange Agreement represented a noncash financing transaction.

the three and six months ended June 30, 2026, the Company recognized interest expense related to the Fourth Pre-Paid Purchase of $ 240,000

and $ 349,000 , respectively.

Other than the reduction in principal resulting from the Exchange Agreement, the Company did not repay any

of the principal outstanding under the Fourth Pre-Paid Purchase during the three and six months ended June 30, 2026.

As of June 30, 2026,

the outstanding principal balance of the Fourth Pre-Paid Purchase was $ 6,855,000 , which is reflected in the condensed consolidated balance

sheets net of unamortized issuance costs of $ 783,000 .

12 – Derivative Liability

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

the six months ended June 30, 2025, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis.

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

these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs,

including the probability and expected date of stockholder approval.

Each of these

fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including

the probability and expected date of stockholder approval.

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

36 unchanged sentences

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 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:

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.

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

Schedule of Fair Value of the Derivative Liabilities

9 unchanged sentences

( 7,857,000 )

Balance at March 31, 2025

Balance at June 30, 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:

Company did not have any warrant liabilities outstanding at June 30, 2026 and December 31, 2025.

following table provides a roll-forward of the number of warrants exercised during the six months ended June 30, 2026 and 2025:

Schedule of Shares of Common Stock Underlying Warrants

3 unchanged sentences

Balance at December 31, 2024

Balance at March 31, 2025

Balance at June 30, 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.

Balance at June 30, 2026

Company did not issue any warrants during the three and six months ended June 30, 2026 and 2025.

13 – Income Taxes

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.

Company did not have any provision for income taxes for the three and six months ended June 30, 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 and six months ended June 30, 2026 and 2025.

14 – Segment Information and Revenue Disaggregation

21 unchanged sentences

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

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.

For the three and six months ended June 30, 2026,

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

For the three and six months ended June 30, 2025,

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

15 – Concentrations, Risks and Uncertainties

16 unchanged sentences

is concentrated with several large customers.

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 %

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

As of June 30, 2026, 56 % of accounts receivable were due from three 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 four largest customers collectively as a percentage of total net sales was 22 %

and 70 % of the Company’s revenue, respectively, for the six months ended June 30, 2026.

The loss of any of these customers could

3 unchanged sentences

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.

$ 187,000 and $ 451,000 during the three and six months ended June 30, 2025, respectively.

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.

for the three and six months ended June 30, 2025.

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

the three and six months ended June 30, 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

45 unchanged sentences

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

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

condensed consolidated statements of operations for the three and six month periods ended June 30, 2026 and 2025.

17 – Acquisition of SMCB

43 unchanged sentences

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

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.

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.

June 16, 2026, the Company and SemiCab, Inc entered into a second forbearance agreement pursuant to which:

(i) SemiCab, Inc.

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 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 date of the forbearance agreement with respect to the Company’s failure to make such

payment that occur at any time on or prior to July 16, 2026.

Forma Information

1 unchanged sentence

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

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

The pro forma results

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

The pro forma results for the six months ended

June 30, 2026 and 2025 reflect the combined performance of the Company and the SMCB business for those periods.

The unaudited pro forma

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

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 operations.

Schedule of Pro Forma Financial Information

March 31, 2026

March 31, 2025

Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

Six Months Ended

June 30, 2026

June 30, 2025

Operating loss from continuing operations

4 unchanged sentences

18 – Discontinued Operations

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

Singing Machine business for $500,000.

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 Singing Machine business for

The transaction closed on August 1, 2025.

4 unchanged sentences

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:

operations for the three and six months ended June 30, 2025:

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

For the Three Months Ended

March 31, 2025

For the Six Months Ended

June 30, 2025

Cost of Goods Sold

3 unchanged sentences

Total Operating Expenses

Loss From Operations

Gain/ (Loss) From Operations

( 1,322,000 )

Net Loss From Discontinued Operations

Net Gain/ (Loss) From Discontinued Operations

$ ( 1,322,000 )

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.

and six months ended June 30, 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 June 30, 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:

of cash flows for the three and six months ended June 30, 2025:

For the Three Months Ended

March 31, 2025

For the Six Months Ended

June 30, 2025

Net cash used in operating activities attributable to discontinued operations

$ ( 1,092,000 )

$ ( 2,013,000 )

Net cash provided by investing activities attributable to discontinued operations

2 unchanged sentences

$ ( 1,108,000 )

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.

$ ( 2,028,000 )

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

for the three and six months ended June 30, 2026 as the business had been sold on August 1, 2025.

19 – Subsequent Events.

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.

3(a)(10) Settlement Transaction

July 21, 2026, the Company entered into a settlement agreement and stipulation (the “Settlement Agreement”) with Continuation

Capital, Inc., a Delaware corporation (“CCI”), with respect to certain outstanding liabilities of the Company in the principal

amount of $ 1,928,014 (the “Claim Amount”) that CCI acquired from the former holders thereof.

to the Settlement Agreement, the Company agreed to issue CCI up to 5,000,000

shares of the Company’s common stock in one or more tranches until CCI has generated aggregate proceeds equal to 120% of the

Claim Amount.

On July 23, 2026, the Circuit Court of the Twelfth Judicial Circuit in and for Desoto County, Florida entered an order

approving the Settlement Agreement after a fairness hearing pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended.

The number of shares of common stock held by CCI at any given time cannot exceed 19.99 %

of the issued and outstanding shares of the Company’s common stock.

and Restated Employment Agreements

July 22, 2026, the Company entered into amended and restated employment agreements with Gary Atkinson, the Company’s Chief Executive

Officer, which agreement supersedes and replaces that certain amended and restated employment agreement entered into with Mr.

on February 23, 2026 (the “CEO Agreement”), and Alex Andre, the Company’s Chief Financial Officer and General Counsel,

which agreement supersedes and replaces that certain employment agreement entered into with Mr.

Andre on February 12, 2025 (the “CFO

Agreement” and together with the CEO Agreement, the “Employment Agreements”).

Employment Agreements harmonize the change in control treatment applicable to each of the Company’s executive officers.

furtherance thereof, each executive officer now has the right to receive a bonus if, and each time, a Change of Control (as defined

in the applicable Employment Agreement) occurs during the term of their employment in a lump sum payment equal to their Base Salary

and Annual Bonus (each as defined in the applicable Employment Agreement) for the year in which the Change of Control occurs.

Employment Agreements also include additional provisions designed to ensure that various payments that may in the future be made by

the Company to the executive officers fully comply with Sections 280G, 4999 and 409A of the Internal Revenue Code of 1986, as

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