What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-14 · 132 added, 159 removed, 137 unchanged (68% of the section changed)

13 unchanged sentences

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 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 1A.

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.

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.

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

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

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

marketing and advertising initiatives, and back-office support.

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

fast-moving consumer products companies as customers.

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

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

We also believe that our ability to improve truck

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

additional companies that can benefit from our service.

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

on May 2, 2025.

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

are complementary to our business.

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

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

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

the foregoing, in the event we complete additional acquisitions of controlling or non-controlling financial interests in other complementary

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

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

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

Accordingly, the completion

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

results of operations.

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

generated net sales of $3,005,000 for the three-month period ended June 30, 2026, compared to $1,152,000 for the three months ended June

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 $3,598,000 for the three months ended June 30, 2026, compared to $1,492,000 for

the three months ended June 30, 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 May 2, 2025.

Our operating expenses were $2,108,000 for the three months

ended June 30, 2026, compared to $868,000 for the three months ended June 30, 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 June 30, 2026.

generated net loss from continuing operations of $4,149,000 for the three months ended June 30, 2026, compared to a loss of

$1,235,000 for the three months ended June 30, 2025.

The increase in the net loss from continuing operations was mainly due to

administrative expenses incurred in the growth and development of our SemiCab business and the interest expense incurred by us on

the pre-paid purchases under the Streeterville Transaction.

We had total assets of $18,568,000 and $12,724,000 at June 30, 2026 and

December 31, 2025, respectively.

Net cash used in operating activities attributable to continuing operations was $6,592,000 for the

six months ended June 30, 2026, compared to $3,106,000 for the six months ended June 30, 2025.

of the Three-Month Periods Ended June 30, 2026 and 2025

sales consist of sales generated by our SemiCab business.

Net sales increased $1,853,000 to $3,005,000 for the three-month period ended

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

June 30, 2026, compared to $1,152,000 for the three-month period ended June 30, 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

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.

increased $2,106,000 to $3,598,000 for the three-month period ended June 30, 2026, compared to $1,492,000 for the three-month period

ended June 30, 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.

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 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.

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

Selling expenses were $49,000 for the three-month period ended June 30, 2026.

We did not incur any selling expenses for the

three-month period ended June 30, 2025.

and Administrative Expenses

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

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

and administrative expenses increased $1,191,000 to $2,059,000 for the three-month period ended June 30, 2026, compared to $868,000 for

the three-month period ended June 30, 2025.

The increase was due primarily to increases in expenses incurred in connection with the operation

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.

expenses consist primarily of interest expense, including the amortization of deferred debt costs, incurred in connection with our financing

transactions, as well as the loss on debt extinguishment related to the exchange of the partitioned pre-paid purchase for the Series

A preferred stock.

Other expenses increased $1,418,000 to $1,445,000 for the three-month period ended June 30, 2026, compared to $27,000

for the three-month period ended June 30, 2025.

The increase was attributable to an increase of $1,018,000 increase in interest expense,

including the amortization of deferred debt costs, associated with our recent financing transactions, and a $400,000 loss on debt extinguishment

recognized in connection with the exchange of the partitioned pre-paid purchase for the Series A preferred stock during the three-month

period ended June 30, 2026.

Loss Attributable to Non-Controlling Interest

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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

non-controlling interest of $320,000 for the three-month period ended June 30, 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

net loss attributable to non-controlling interest of $224,000 for the three-month period ended June 30, 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.

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

Vivek Sehgal between May 2, 2025 and June 30, 2025.

of the Six-Month Periods Ended June 30, 2026 and 2025

sales increased $4,130,000 to $5,405,000 for the six-month period ended June 30, 2026, compared to $1,275,000 for the six-month period

ended June 30, 2025.

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

of Goods Sold

of sales increased $5,054,000 to $6,675,000 for the six-month period ended June 30, 2026, compared to $1,621,000 for the six-month period

ended June 30, 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.

expenses were $82,000 for the six-month period ended June 30, 2026.

We did not incur any selling expenses for the six-month period ended

June 30, 2025.

and Administrative Expenses

and administrative expenses increased $3,769,000 to $5,693,000 for the six-month period ended June 30, 2026, compared to $1,924,000 for

the six-month period ended June 30, 2025.

The increase was due primarily to increases in expenses incurred in connection with the operation

of our SemiCab business and stock-based compensation expense.

expenses decreased $4,030,000 to $2,481,000 for the six-month period ended June 30, 2026, compared to $6,511,000 for the six-month period

ended June 30, 2025.

The decrease was due primarily to the loss of $6,468,000 on the change in fair value of warrants that we incurred

during the six-month period ended June 30, 2025 in connection with the public offering of securities that we completed on December 6,

2024, partially offset by the interest expense, including the amortization of deferred debt cost, associated with our recent financing

transactions.

Loss Attributable to Non-Controlling Interests

net loss attributable to non-controlling interest of $594,000 for the six-month period ended June 30, 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.

The net loss attributable to non-controlling interest of $327,000 for the six-month period ended June 30, 2025 represents

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

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

Kapoor and Vivek Sehgal between May 2, 2025 and June 30, 2025.

And Capital Resources

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the use of short- and long-term debt.

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.

As of June 30, 2026, our cash and restricted cash balance was $7,955,000.

cash used in operating activities attributable to continuing operations was $6,592,000 during the six-month period ended June 30, 2026,

compared to $3,106,000 during the six-month period ended June 30, 2025.

The increase of $3,486,000 was due primarily to decreases of

$6,468,000 for loss on the change in fair value of warrants recognized in connection with the public offering of securities that we completed

on December 6, 2024, and $2,550,000 for prepaid expenses and other current assets.

These decreases were partially offset by increases

of $1,482,000 for the amortization of debt discount and issuance costs and $2,754,000 for accounts payable and accrued expenses.

cash used in investing activities attributable to continuing operations was $267,000 during the six-month period ended June 30, 2026,

compared to $1,344,000 during the six-month period ended June 30, 2025.

The decrease of $1,077,000 was due primarily to decreases of

$1,172,000 for advances to SMCB under our loan agreement with them and $758,000 for repurchases of shares of our common stock, partially

offset by a decrease of $593,000 for cash received in connection with our acquisition of SMCB on May 2, 2025 and an increase of $248,000

for the capitalization of internal use software costs

cash provided by financing activities attributable to continuing operations was $8,668,000 for the six-month period ended June 30, 2026,

compared to $379,000 during the six-month period ended June 30, 2025.

The increase of $8,289,000 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

6 unchanged sentences

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.

On 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).

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

5 unchanged sentences

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.

May 14, 2026, we filed our Quarterly Report on Form 10-Q for the period ended March 31, 2026 wherein we reported stockholders’

equity of $3,168,000.

On May 21, 2026, we filed a Form 8-K where we stated that, as a result of the $3,168,000 of stockholders’

equity that we reported in that quarterly report, we believe that we had regained compliance with Nasdaq Listing Rule 5550(b)(1) for

continued listing on the Nasdaq.

On May 26, 2026, we received a letter from the Nasdaq notifying us that, based on our Form 8-K, dated

May 21, 2026, the Nasdaq had determined that we complied with Nasdaq Listing Rule 5550(b)(1).

June 16, 2026, we received a letter from the Nasdaq notifying us that, based upon the closing bid price of our common stock for the 30

consecutive business days from May 4, 2026 to June 15, 2026, we did not meet the minimum bid price requirement of $1.00 per share set

forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market.

The letter stated that we have a compliance

period of 180 calendar days, or until December 14, 2026, to regain compliance with the minimum bid price requirement.

If at any time

during this compliance period the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business

days, the Nasdaq will provide us with written confirmation of compliance and the matter will be closed.

The Nasdaq also stated that it

may, in its discretion, require us to satisfy the minimum bid price requirement for a period in excess of 10 consecutive business days

before determining that we have demonstrated an ability to maintain long-term compliance.

intend to actively monitor the closing bid price of our common stock and consider available options to regain compliance with the minimum

bid price requirement, including such actions as effecting a reverse stock split of our common stock.

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

5 unchanged sentences

Sheet Arrangements

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

of June 30, 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

12 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk

required for smaller reporting companies.

required for small 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