What changed in this filing

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Item 1A. Risk Factors

2025-04-15 compared with 2023-07-14 · 1165 added, 653 removed, 36 unchanged (98% of the section changed)

forth below and elsewhere in this Annual Report on Form 10-K and in the other documents we file with the SEC are risks and uncertainties

that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this

Annual Report.

RELATED TO OUR COMPANY AND FINANCIAL CONDITION

MAY ENCOUNTER DIFFICULTIES ACCESSING CAPITAL

currently have a three-year Credit with Fifth Third Bank for a $15.0 million facility (decreasing to $7.5 million in off-peak season)

on eligible accounts receivable that matures on October 14, 2025 .

The Credit Facility is

subject to a termination fee an amount equal to (i) 2.00% of the facility amount if such prepayment occurs two years or more prior to

the maturity date or (ii) 0.50% of the facility amount if such prepayment occurs less than two years, prior to the maturity date.

of March 31, 2023, we were in default under the Credit Agreement due to non-compliance with the fixed charge coverage ratio covenant

On May 19, 2023, we executed a Waiver and First Amendment agreement which provides for a waiver of previous defaults and

new covenants that are required.

We must comply monthly with minimum liquidity (defined as excess loan availability plus cash on hand)

of $2.5 million between February and July and $4.0 million between September and June.

We must also maintain pre-defined minimum operating

cash flows between February and August 2023, until we achieve a fixed charge ratio of 1.15 :

1.0 beginning in September 2023 throughout

the remaining term of the Credit Agreement.

of the date of filing of this Annual Report, we are in compliance with the covenants specified in the Waiver and First Amendment agreement.

There can be no assurances that we will remain in compliance with the new covenants or have the ability to obtain any new financing or

that we will be able to successfully enter into any arrangements upon terms that are acceptable to us in the future.

Should there be

a disruption in the current levels of these markets or a deterioration of our business, there can be no assurance that we will not experience

an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.

MAY NEED TO RAISE ADDITIONAL CAPITAL TO FUND OUR OPERATIONS IN FURTHERANCE OF OUR BUSINESS PLAN.

incurred a net loss of approximately $4.6 million during the year ended March 31, 2023.

If we are unable to achieve profitable operations, we may need to raise additional capital

in order to fund our operations in furtherance of our business plan.

Any proposed financing may include shares of common stock, shares

of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing

securities, equity investments from strategic development partners or some combination of each.

Any additional equity financings may

be financially dilutive to, and will be dilutive from an ownership perspective to, our stockholders, and such dilution may be significant

based upon the size of such financing.

Additionally, we cannot assure that such funding will be available on a timely basis, in needed

quantities, or on terms favorable to us, if at all.

ARE HEAVILY DEPENDENT ON OUR SENIOR MANAGEMENT, AND A LOSS OF A MEMBER OF OUR SENIOR MANAGEMENT TEAM COULD CAUSE OUR STOCK PRICE TO SUFFER .

we lose the services of Gary Atkinson, our Chief Executive Officer or Bernardo Melo, our Chief Revenue Officer, we may not be able to

find appropriate replacements on a timely basis, and our business could be adversely affected.

Atkinson and Melo have worked

at our company for 15 and 20 years, respectively, and are primarily responsible for all of our day-to-day operations.

Our existing operations

and continued future development depend to a significant extent upon the performance and active participation of these individuals.

we have entered into employment agreements with Messrs.

Atkinson and Melo, we cannot guarantee that we will be successful in retaining

the services of these individuals.

If we were to lose any of these individuals, we may not be able to find appropriate replacements on

a timely basis and our financial condition and results of operations could be materially adversely affected.

RELATED TO THE DEVELOPMENT, MANUFACTURE AND SHIPPING OF OUR PRODUCTS

WE ARE UNABLE TO DEVELOP NEW KARAOKE PRODUCTS, OUR REVENUES MAY NOT CONTINUE TO GROW.

karaoke industry is characterized by rapid technological change, frequent new product introductions and enhancements and ongoing customer

demands for greater performance.

In addition, the average selling price of any karaoke machine has historically decreased over its life,

and we expect that trend to continue.

As a result, our products may not be competitive if we fail to introduce new products or product

enhancements that meet evolving customer demands.

The development of new products is complex, and we may not be able to complete development

in a timely manner.

To introduce products on a timely basis, we must:

define and design new products to meet market demand;

features that continue to differentiate our products from those of our competitors;

our products to new manufacturing process technologies;

emerging technological trends in our target markets;

changes in end-user preferences with respect to our customers’ products;

products to market on a timely basis at competitive prices;

effectively to technological changes or product announcements by others.

believe that we will need to continue to enhance our karaoke machines and develop new machines to keep pace with competitive and technological

developments and to achieve market acceptance for our products.

At the same time, we need to identify and develop other products which

may be different from karaoke machines.

PRODUCTS ARE SHIPPED FROM CHINA AND ANY DISRUPTION OF SHIPPING COULD PREVENT OR DELAY OUR CUSTOMERS’ RECEIPT OF INVENTORY.

rely principally on four contract ocean carriers to ship substantially all of the products that we import to our warehouse facility in

Ontario, California.

Retailers that take delivery of our products in China rely on a variety of carriers to import those products.

disruptions in shipping, whether in California or China, caused by labor strikes, other labor disputes, terrorism, and international

incidents may prevent or delay our customers’ receipt of inventory.

If our customers do not receive their inventory on a timely

basis, they may cancel their orders or return products to us.

Consequently, our revenues and net income would be reduced and our results

of operations adversely affected.

MANUFACTURING OPERATIONS ARE LOCATED IN THE PEOPLE’S REPUBLIC OF CHINA, SUBJECTING US TO RISKS COMMON IN INTERNATIONAL OPERATIONS.

IF THERE IS ANY PROBLEM WITH THE MANUFACTURING PROCESS, OUR REVENUES AND NET PROFITABILITY MAY BE REDUCED.

currently use five factories in China to manufacture all of our karaoke products.

Our arrangements with these factories are subject to

the risks of doing business abroad, such as import duties, trade restrictions, work stoppages, and foreign currency fluctuations, limitations

on the repatriation of earnings and political instability, which could have an adverse impact on our margins.

Furthermore, we have limited

control over the manufacturing processes.

As a result, any difficulties encountered by our third-party manufacturers that result in product

defects, production delays, cost overruns or the inability to fulfill orders on a timely basis could adversely affect our revenues, profitability

and cash flow.

Also, since we do not have written agreements with any of these factories, we are subject to additional uncertainty if

the factories do not deliver products to us on a timely basis.

SUPPLY CHAIN MAY BE MATERIALLY ADVERSELY IMPACTED BY THE WORLDWIDE FINANCIAL MARKETS AND GLOBAL EVENTS

rely upon the facilities of our third-party manufacturers in China to manufacture our products and export our products throughout the

The COVID-19 pandemic resulted in significant governmental measures being implemented to control the spread of COVID-19, including,

among others, restrictions on manufacturing and the movement of employees in many regions of China during our fiscal year ended March

31, 2021 most of which were gradually repealed during the fiscal year ended March 31, 2023.

In late calendar 2021, the increased demand

for consumer electronics products and current economic recovery continued to increase worldwide demand for products using semiconductor

“chip” components in the production of most consumer electronics which has resulted in an international shortage of chips

available to fulfill demand.

As a result, we have experienced longer delivery lead times and some unavailability of these components

which delayed delivery of some of our products.

While we have seen the easing of COVID-19 restrictions and the impact on our business,

we cannot predict the impact of the resurgence of variants of COVID-19 and other factors affecting local and global economies, specifically

DEPEND ON THIRD PARTY SUPPLIERS FOR PARTS FOR OUR KARAOKE MACHINES AND RELATED PRODUCTS, AND IF WE CANNOT OBTAIN SUPPLIES AS NEEDED,

OUR OPERATIONS WILL BE SEVERELY DAMAGED.

growth and ability to meet customer demand depends in part on our capability to obtain timely deliveries of karaoke machines and our

electronic products.

We rely on third party suppliers to produce the parts and materials that are used to manufacture and produce these

If our suppliers are unable to provide our factories with the parts and supplies, they we will be unable to produce our products.

Currently there is a worldwide shortage of electronic chips due to the increased demand for semiconductors and we are currently competing

with large companies to obtain these parts and could see production and shipment delays.

We cannot guarantee that we will be able to

purchase the parts we need at reasonable prices or in a timely fashion.

If we are unable to anticipate any shortages of parts and materials

in the future, we may experience severe production problems and delivery delays, which would impact our sales.

DEPEND ON THE ABILITY OF OUR SUPPLIERS TO MANUFACTURE OUR PRODUCTS WITHOUT INFRINGING, MISAPPROPRIATING OF OTHERWISE VIOLATING THE INTELLECTUAL

PROPERTY OF PROPRIETARY RIGHTS OF OTHERS IN MANUFACTURING OUR PRODUCTS.

source our products from a variety of contract manufacturers.

We buy finished goods from our suppliers and generally do not source raw

materials and parts for manufacturing and assembly into the final product.

We rely on our contract manufacturers’ ability to secure

injected plastic, wood cabinets, integrated circuits, display panels, speaker drivers, and other components that are necessary for assembly

into our final products.

While we are not responsible to source raw materials, we rely on these suppliers to have all required licenses

or proprietary rights to the materials that are incorporated into the final product.

In addition, we rely on the representations of our

contract manufacturers that they are using materials and components that meet all necessary legal, safety, and compliance requirements.

If our suppliers do not have the proper licenses or rights or are not in compliance with all regulatory requirements, we may be named

a party or be subject to claims, including claims of infringement or violating the intellectual property or proprietary rights of third

parties with respect to our products.

RELATED TO OUR BUSINESS AND INDUSTRY

IN GOVERNMENT REGULATIONS RELATING TO INTERNATIONAL TARIFFS COULD SIGNIFICANTLY REDUCE OUR REVENUES, PRODUCT COST AND PROFITABILITY.

government administration and members of the U.S.

Congress have made public statements indicating possible significant changes in U.S.

trade policy and have taken certain actions that may impact U.S.

trade, including imposing tariffs on certain goods imported into the

United States.

Any changes in U.S.

trade policy could trigger retaliatory actions by affected countries, resulting in “trade wars,”

and increased costs for goods imported into the United States.

All of our products are manufactured and imported from China.

only our microphone products are currently subject to 7.5% tariffs currently in place.

Should the government decide to expand its list

of products to include our karaoke products that would subject our products to tariffs in the future, there could be a significant increase

in the landed cost of our products.

If we are unable to mitigate these increased costs through price increases we could experience reductions

in revenues, gross profit margin and results from operations.

SMALL NUMBER OF OUR CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR REVENUES, AND THE LOSS OF ONE OR MORE OF THESE KEY CUSTOMERS COULD

SIGNIFICANTLY REDUCE OUR REVENUES AND CASH FLOW.

rely on a few large customers to provide a substantial portion of our revenues.

Sales to our top five customers together comprised approximately

89% and 90% of our net sales for our fiscal years ended March 31, 2023 and 2022, respectively.

In our fiscal year ended March 31, 2023,

revenues from two of these customers represented greater than 10% of net sales, at 48% and 21% of total net sales.

In our fiscal year

ended March 31, 2022, revenues from three of these customers represented greater than 10% of net sales, at 37%, 18%, and 17% of total

We do not have long-term contractual arrangements with any of our customers and they can cancel their orders at any time prior

A substantial reduction in or termination of orders from any of our largest customers would decrease our revenues and cash

ARE SUBJECT TO THE RISK THAT SOME OF OUR LARGE CUSTOMERS MAY RETURN KARAOKE PRODUCTS THAT THEY HAVE PURCHASED FROM US AND IF THIS HAPPENS,

IT WOULD REDUCE OUR REVENUES AND PROFITABILITY.

our fiscal years ended March 31, 2023 and 2022, a number of our customers and distributors returned karaoke products that they had purchased

Our customers returned goods valued at approximately $5.0 million or 12.7% of our net sales in our fiscal year ended March 31,

2023 and approximately $3.6 million or 7.5% of our net sales in our fiscal year ended March 31, 2022.

The return of products is due to

a variety of reasons including defective units, customers’ overstock and buyer’s remorse.

The primary reason for the 5.2%

increase in returns was due to an increase in overstock returns from one major customer.

Our factories charge customary repair and freight

costs, which increase our expenses and reduce profitability.

If any of our customers were to increase the volume of their returned karaoke

products to us, it would reduce our revenues and profitability.

ARE SUBJECT TO PRESSURE FROM OUR CUSTOMERS RELATING TO PRICE REDUCTION AND FINANCIAL INCENTIVES AND IF WE ARE PRESSURED TO MAKE THESE

CONCESSIONS TO OUR CUSTOMERS, IT WILL REDUCE OUR REVENUES AND PROFITABILITY.

there is intense competition in the karaoke industry, we are subject to pricing pressure from our customers.

Many of our customers have

demanded that we lower our prices and threatened to buy our competitor’s products.

If we do not meet our customers’ demands

to lower our regular prices, we will not sell as many karaoke products.

We are also subject to pressure from our customers regarding

certain financial incentives, such as return credits or large cooperative (“co-op”) promotion incentives, which effectively

reduce our net sales and profit.

We gave co-op promotion incentives of approximately $2.3 million during our fiscal year ended March

31, 2023 and $1.7 million during our fiscal year ended March 31, 2022.

We have historically offered co-op promotion incentives to our

customers because it is standard practice in the retail industry.

EXPERIENCE DIFFICULTY FORECASTING THE DEMAND FOR OUR KARAOKE PRODUCTS AND IF WE DO NOT ACCURATELY FORECAST DEMAND, OUR REVENUES, NET

INCOME AND CASH FLOW MAY BE AFFECTED.

of our reliance on manufacturers in China for our machine production, our production lead times range from one to four months.

we must commit to production in advance of customers’ orders.

It is difficult to forecast customer demand because we do not have

any scientific or quantitative method to predict this demand.

Our forecasting is based on management’s general expectations about

customer demand, the general strength of the retail market and management’s historical experiences.

In past years we have overestimated

demand for our products which led to excess inventory in some of our products and caused liquidity problems that adversely affected our

revenues, net income and cash flow.

ARE SUBJECT TO THE COSTS AND RISKS OF CARRYING INVENTORY FOR OUR CUSTOMERS AND IF WE HAVE TOO MUCH INVENTORY, IT WILL AFFECT OUR CASH

FLOW FOR OPERATIONS.

of our customers place orders with us several months prior to the holiday season, but they schedule delivery two or three weeks before

the holiday season begins.

As such, we are subject to the risks and costs of carrying inventory during the time period between the placement

of the order and the delivery date, which reduces our cash flow.

As of March 31, 2023, we had approximately $9.6 million in inventory

as compared to $14.2 million in inventory as of March 31, 2022.

The primary reason for the decrease in inventory was due to the sale

of prior fiscal year excess inventory from late delivery of key products for the prior year’s holiday season due to global logistics

issues that resulted in lost sales and an increase in inventory as of March 31, 2022 of approximately $5.5 million.

If we are unable

to sell excess inventory in the future at historical or greater margins, our cash flow for operations will be negatively impacted.

ARE SUBJECT TO INSURANCE RISK OF LOSS FOR GOODS DAMAGED WHILE IN TRANSIT FROM THE MANUFACTURER TO THE CUSTOMER AND OUR WAREHOUSE.

of our goods are manufactured in China and are transported to customers and our warehouse in California via ocean vessel.

are subject to damages that may occur to these goods when they are in transit to customers or our warehouse.

Should substantial damage

incur while goods are in transit, we could experience a significant loss of revenue, inventory and incur significant out of pocket expenses

associated with destruction of the damaged goods, which could cause a significant loss from operations and reduction in cash flow.

we have taken significant measures to prevent damage incidents there can be no guarantee of damage incidents occurring in the future.

We have obtained insurance coverage for goods that are shipped direct import to our customers whose shipping terms are FOB shipping point

and for goods in transit to our California warehouse however, certain exclusions have been added that may prevent insurance coverage

of certain damaged incidents in the future.

BUSINESS IS SEASONAL AND THEREFORE OUR ANNUAL OPERATING RESULTS WILL DEPEND, IN LARGE PART, ON OUR SALES DURING THE RELATIVELY BRIEF

HOLIDAY SEASON.

of consumer electronics and toy products in the retail channel are highly seasonal, with a majority of retail sales occurring during

the period from September through December in anticipation of the holiday season, which includes Christmas.

A substantial majority of

our sales occur during our second fiscal quarter ending September 30 and our third fiscal quarter ending December 31.

Sales in our second

and third quarter, combined, accounted for approximately 62% and 81% of net sales in our fiscal years ended March 31, 2023 and, 2022,

respectively.

DISCRETIONARY SPENDING MAY AFFECT KARAOKE PURCHASES AND IS AFFECTED BY VARIOUS ECONOMIC CONDITIONS AND CHANGES.

of karaoke machines and music are considered discretionary for consumers.

Our success will therefore be influenced by a number of economic

factors affecting discretionary and consumer spending, such as employment levels, business, interest rates, and taxation rates, all of

which are not under our control.

Additionally, other extraordinary events such as terrorist attacks or military engagements, which adversely

affect the retail environment may restrict consumer spending and thereby adversely affect our sales growth and profitability.

DISRUPTION IN THE OPERATION OF OUR WAREHOUSE CENTER IN CALIFORNIA COULD IMPACT OUR ABILITY TO DELIVER MERCHANDISE TO OUR CUSTOMERS, WHICH

COULD ADVERSELY AFFECT OUR REVENUES AND PROFITABILITY.

significant amount of our merchandise is shipped to our customers from our warehouse located in Ontario, California.

Events such as fire

or other catastrophic events, any malfunction or disruption of our centralized information systems or shipping problems may result in

delays or disruptions in the timely distribution of merchandise to our customers, which could substantially decrease our revenues and

profitability.

PRODUCTION COSTS MAY INCREASE IF WE ARE REQUIRED TO MAKE PURCHASES USING THE CHINESE YUAN INSTEAD OF THE U.S.

majority of our products are currently manufactured in China.

During the fiscal year ended March 31, 2023, the Chinese local currency

had no material effect on us as all of our purchases are denominated in U.S.

However, in the event our purchases are required

to be made in Chinese local currency, the Yuan, we will be subject to the risks involved in foreign exchange rates.

In the future the

value of the Yuan may depend to a large extent on the Chinese government’s policies and China’s domestic and international

economic and political developments.

As a result, our production costs may increase if we are required to make purchases using the Yuan

instead of the U.S.

dollar and the value of the Yuan increases over time.

Any significant increase in the cost of manufacturing our products

would have a material adverse effect on our business and results of operations.

We sell our product to Canadian customers some of whom

require us to invoice them in Canadian Dollars.

We are subject to risks involved in the exchange rate between the Canadian and US dollar.

However, the exchange rate has been stable during our fiscal year ended March 31, 2023 and the associated exchange rates did not have

a material impact on our financial results.

Should the exchange rate between the Canadian and US Dollar become more volatile and sales

to Canadian customers increase, there could be a material adverse effect on our business.

PROFIT MARGIN MAY BE DECREASED DUE TO INCREASED PRICES OF RAW MATERIALS, SHIPPING COSTS AND COSTS ASSOCIATED WITH PRODUCTION.

in the price of oil, electronic chip components and shipping costs have and will continue to affect us in connection with the sourcing

and delivery of raw materials and services.

We do not expect to see significant increased cost in our finished goods during fiscal year

2024 as increases in the price of oil, inflation, costs of trans-oceanic shipping, drayage costs, electronic component costs and increases

in the cost of labor begin to stabilize.

These issues are common to all companies in the same type of business and if we are not able

to negotiate lower costs, reduce other expenses, or pass on some or all of these price increases to our customers, our profit margin

may be decreased.

RELATED TO OUR INTELLECTUAL PROPERTY

PRIMARILY RELY ON TRADE SECRET PROTECTION AND NON-DISCLOSURE AGREEMENTS TO PROTECT OUR PROPRIETARY INFORMATION, WHICH MAY NOT BE EFFECTIVE.

currently rely on trade secret protection and non-disclosure agreements with our employees, consultants and third-parties to protect

our confidential and proprietary information.

If we do not protect our intellectual property and other confidential information adequately,

competitors may be able to use our proprietary technologies and information and thereby erode any competitive advantages they provide

will be able to protect our proprietary rights from unauthorized use by third parties only to the extent these rights are effectively

maintained as confidential.

We expect to rely primarily on trade secret and contractual protections for our confidential and proprietary

information and we have taken security measures we believe are appropriate to protect this information.

These measures, however, may

not provide adequate protection for our trade secrets, know-how or other confidential information.

We seek to protect our proprietary

information by, among other things, entering into confidentiality agreements with employees, consultants and other third parties.

confidentiality agreements may not sufficiently safeguard our trade secrets and other confidential information and may not provide adequate

remedies in the event of unauthorized use or disclosure of this information.

Enforcing a claim that a party illegally disclosed or misappropriated

a trade secret or other proprietary information could be difficult, expensive and time-consuming and the outcome could be unpredictable.

In addition, trade secrets or other confidential information could otherwise become known or be independently developed by others in

a manner that could prevent legal recourse by us.

If any of our trade secrets or other confidential or proprietary information were disclosed

or misappropriated or if any such information was independently developed by a competitor, our competitive position could be harmed and

our business could suffer.

MAY BE FORCED TO LITIGATE TO ENFORCE OR DEFEND OUR INTELLECTUAL PROPERTY RIGHTS, OR THE INTELLECTUAL PROPERTY RIGHTS OF OUR LICENSORS.

may be forced to litigate to enforce or defend our intellectual property rights against infringement and unauthorized use by competitors.

In so doing, we may place our intellectual property at risk of being invalidated, held unenforceable, or narrowed in scope.

an adverse result in any litigation or defense proceedings may place pending applications at risk of non-issuance.

In addition, if any

licensor fails to enforce or defend its intellectual property rights, this may adversely affect our ability to develop and commercialize

our products that including licensing deals, as well as our ability to prevent competitors from making, using, and selling competing

Any such litigation could be very costly and could distract our management from focusing on operating our business.

The existence

or outcome of any such litigation could harm our business, results of operations and financial condition.

because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some

of our confidential and proprietary information could be compromised by disclosure during this type of litigation.

In addition, there

could be public announcements of the results of hearings, motions or other interim proceedings or developments.

If securities analysts

or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

Risk Factors.

investment in our common stock involves a high degree of risk.

You should carefully consider the following risk factors in addition to

other information in this report before purchasing our common stock.

The risks and uncertainties described below are those that we currently

deem to be material and that we believe are specific to us, our industry and our stock.

In addition to these risks, our business may

be subject to risks currently unknown to us.

If any of these or other risks actually occurs, our business may be adversely affected,

the trading price of our common stock may decline and you may lose all or part of your investment.

Related to Our Financial Condition

have a history of losses, we can provide no assurance that we will ever become profitable, and our auditors concluded that there is substantial

doubt about our ability to continue as a going concern.

incurred net losses available to common stockholders of $23,257,000 ended December 31, 2023, and had accumulated deficits of $49,172,000 and $25,915,000 as of December 31, 2024 and 2023, respectively.

In addition, net

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

Based upon this and our internally generated

cash flow projections, our auditors concluded that there is substantial doubt about our ability to continue as a going concern for the

next 12 months.

Our future profitability is dependent upon our ability to successfully execute upon our business plan.

We can provide

no assurance that we will be able to sustain or increase profitability on a quarterly or annual basis.

Accordingly, we may continue to

generate losses in the future and, in the extreme case, may need to discontinue operations.

will need to raise additional capital in the future, which capital may not be available or, if available, may not be available on acceptable

current cash resources will not be sufficient to sustain our current operations for the next 12 months.

As a result, we will need to

obtain additional capital through external sources of financing.

We may attempt to obtain additional capital through the sale of equity

securities or the issuance of short- and long-term debt.

If we raise additional funds by issuing shares of our common stock, our stockholders

will experience dilution.

If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock,

our stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of

our common stock.

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

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

or declaring dividends.

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

those of the securities held by our stockholders.

we are optimistic about our ability to raise sufficient funds to continue our operations for at least one year after the date of this

report, we have not made arrangements to obtain additional capital and can provide no assurance that additional financing will be available

in an amount or on terms acceptable to us, if at all.

Our ability to obtain additional capital will be subject to a number of factors,

including maintenance of our listing on the Nasdaq Stock Market (“Nasdaq”), market conditions and our operating performance.

These factors may make the timing, amount, terms or conditions of any proposed future financing transactions unattractive to us.

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

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

events, or otherwise execute upon our business plan.

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

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

Related to Our Company

growth could strain our personnel and infrastructure resources.

expect to enter a stage of rapid growth in our operations which could place a significant strain on our management, administrative, operational

and financial infrastructure.

Our future success will depend in part upon the ability of our management to manage growth effectively.

Our existing management systems, financial and management controls, and information and reporting systems and procedures may not be adequate

to support our expansion.

Our ability to manage our growth effectively will require us to continue to enhance these systems, controls

and procedures and to locate, hire, train and retain qualified management and operating personnel.

If we fail to successfully manage

our growth, we may be unable to execute upon our business plan, which could have an adverse effect on our business, financial condition

and results of operations.

acquisitions and other transactions that we complete in the future could prove difficult to integrate, disrupt our business, adversely

affect our operating results and dilute stockholder value.

July 3, 2024, we completed the acquisition of substantially all of the assets and the assumption of certain liabilities of SemiCab, Inc.,

which was the owner of the United States component of our AI logistics and distribution business.

We may continue to expand our business

through the acquisition of additional businesses in the future.

successfully execute any acquisition or development strategy, we need to identify suitable acquisition or development candidates, negotiate

acceptable acquisition or development terms, obtain appropriate financing, and successfully integrate any businesses and assets acquired.

Any acquisition or development transaction that we pursue, whether or not successfully completed, will subject us to numerous risks and

uncertainties, including:

ability to accurately assess the value, growth potential, strengths, weaknesses, contingent and other liabilities, and potential

profitability of the target businesses and assets;

ability to complete the transaction and integrate the operations, technologies, services and personnel of any businesses or assets

costs associated with the completion of the transaction and the integration of the businesses or assets acquired;

ability to generate sufficient revenue to offset the transaction costs and achieve projected economic and operating synergies;

diversion of financial and management resources from existing operations and potential loss of key personnel;

risks associated with entering new domestic markets and conducting operations where we have little or no prior experience;

possible negative impact of the transaction on our reputation and the reputation of the business that we acquire;

effect of any limitations imposed by federal and state tax laws on our ability to use all or a portion of our pre-transaction net

operating losses against post-transaction income.

we fail to properly evaluate and execute any acquisition or development transactions that we are currently pursuing or will pursue in

the future, our business, financial condition and results of operations could be seriously harmed.

Additionally, we may be limited in

our ability to evaluate such acquisitions as a result of incomplete or inaccurate information from the target businesses.

acquisitions may provide for additional contingent payments based on the achievement of performance targets or milestones.

must exercise considerable discretion when estimating the fair value of contingent payments.

Although these estimates are based on management’s

best knowledge of current events, the estimates could change significantly from period to period.

Any changes to the significant unobservable

inputs used, including a change in the forecast of net sales for the earn-out periods, may result in a change in the fair value of contingent

consideration, and could have a material adverse impact on our results of operations.

In addition, actual payments of contingent consideration

in the future could be different from the current estimated fair value of the contingent consideration.

Further, these arrangements can

impact or restrict the integration of acquired businesses and can, and frequently do, result in disputes, including litigation.

impact, restrictions or disputes could have a material adverse impact on our business and results of operations.

addition, acquisition and development transactions could result in us issuing equity securities or short- or long-term debt to finance

the transaction.

The issuance of additional equity securities would result in dilution to our stockholders.

The issuance of securities

exercisable or convertible into shares of our common stock would result in dilution to our stockholders in the event the securities are

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

Debt financing may involve agreements containing covenants

limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing equity securities, making capital

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

In addition, any equity or debt securities that

we issue may have rights, preferences and privileges senior to those of the securities held by our stockholders.

Future acquisition and

development transactions could also result in us assuming debt obligations and liabilities and incurring impairment charges related to

goodwill, investments and other intangible assets.

depend upon our executive officers and may not be able to retain or replace these individuals or recruit additional personnel, which

could harm our business.

believe that we have benefited substantially from the leadership and experience of our executive officers, including Gary Atkinson,

who is our Chief Executive Officer, Alex Andre, who is our Chief Financial Officer and General Counsel, and Bernardo Melo, who is

our Chief Revenue Officer.

Our executive officers may terminate their employment with us at any time without penalty, and we do not

maintain key person life insurance policies on any of our executive officers.

The loss of the services of any of our executive

officers could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to

replace such personnel on a timely basis.

In addition, any such departure could be viewed in a negative light by investors and

analysts, which could cause the price of our common stock to decline.

As our business expands, our future success will depend

greatly on our continued ability to attract and retain highly skilled and qualified executive-level personnel.

Our inability to

attract and retain qualified executive officers could impair our growth and have an adverse effect on our business, financial

condition and results of operations.

failure or inability to enforce our trademarks, trade secrets and other proprietary rights could adversely affect our competitive position

or the value of our brands.

registered trademarks for many of the signs, designs and expressions that identify the products and services that we use in

our business, including “The Singing Machine” and “SemiCab”.

We also have common law trademark rights for certain

of our proprietary marks and rely upon trade secrets to protect certain of our rights.

We believe that our trademarks, trade secrets

and other proprietary rights have significant value and are important to our business and competitive position.

We, therefore, devote

time and resources to the protection of these rights.

Our policy is to pursue registration of our important trademarks whenever feasible

and to oppose vigorously any infringement of our trademarks.

We protect our trade secrets and proprietary information, in part, by entering

into confidentiality agreements with our employees and consultants.

We also seek to preserve the integrity and confidentiality of our

proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology

cannot assure you that the protective actions that we have taken will successfully prevent unauthorized use or imitation of our intellectual

property and proprietary rights by other parties.

In the event third parties unlawfully use or imitate our intellectual property and

proprietary rights, we could suffer harm to our image, brands and competitive position.

If we commence litigation to enforce our intellectual

property and proprietary rights, we will incur significant legal fees and may not be successful in enforcing our rights.

cannot assure you that third parties will not claim infringement by us of their intellectual property and proprietary rights in the future.

Any such claim, whether or not it has merit, could be time-consuming and distracting for management to defend, result in costly litigation,

require us to enter into royalty or licensing agreements, or cause us to change existing menu items or delay the introduction of new

As a result, any such claim could have a material adverse effect on our business, financial condition and results of operations.

may not be able to protect our intellectual property rights throughout the world.

prosecuting and defending intellectual property rights on our products throughout the world is prohibitively expensive.

Competitors may

use our technologies in jurisdictions where we have not obtained intellectual property rights to develop their own products and, further,

may export otherwise infringing products to territories where we have intellectual property rights, but where enforcement is not as strong

as that in the U.S.

These products may compete with our products in jurisdictions where we do not have any issued or licensed patents

and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

prosecuting, and defending intellectual property rights on our products in international jurisdictions is prohibitively expensive.

may use our technologies in jurisdictions where we have not obtained intellectual property rights to develop their own products and,

further, may export otherwise infringing products to territories where we have intellectual property rights, but where enforcement is

not as strong as that in the U.S.

These products may compete with our products in jurisdictions where we do not have any issued or licensed

patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing.

companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

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cost and divert our efforts and attention from other aspects of our business.

RELATED TO OWNERSHIP OF OUR COMMON STOCK

WE DO NOT CONTINUE TO SATISFY THE NASDAQ CAPITAL MARKET CONTINUED LISTING REQUIREMENTS, OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ

CAPITAL MARKET.

listing of our common stock on the Nasdaq Capital Market is contingent on our compliance with the Nasdaq Capital Market’s conditions

for continued listing.

While we are currently in compliance with Nasdaq listing requirements, if we were to fail to meet a Nasdaq Capital

Market listing requirement, we may be subject to delisting by the Nasdaq Capital Market.

In the event our common stock is no longer listed

for trading on the Nasdaq Capital Market, our trading volume and share price may decrease and we may experience further difficulties

in raising capital which could materially affect our operations and financial results.

Further, delisting from the Nasdaq Capital Market

could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees and could

also trigger various defaults under our lending agreements and other outstanding agreements.

Finally, delisting could make it harder

for us to raise capital and sell securities.

You may experience future dilution as a result of future equity offerings.

In order to raise

additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable

for our common stock.

SECURITIES ISSUANCES COULD RESULT IN SIGNIFICANT DILUTION TO OUR STOCKHOLDERS AND IMPAIR THE MARKET PRICE OF OUR COMMON STOCK.

issuances of shares of our common stock could depress the market price of our common stock and result in dilution to existing holders

of our common stock.

Also, to the extent outstanding options and warrants to purchase our shares of our common stock are exercised or

options or other equity-based awards are issued or become vested, there will be further dilution.

The amount of dilution could be substantial

depending upon the size of the issuances or exercises.

Furthermore, we may issue additional equity securities that could have rights

senior to those of our common stock.

CERTAIN OF OUR STOCKHOLDERS CONTROL A SIGNIFICANT NUMBER OF SHARES OF OUR COMMON STOCK, THEY MAY HAVE EFFECTIVE CONTROL OVER ACTIONS

REQUIRING STOCKHOLDER APPROVAL

of the date of this Annual Report, Ault Alliance, Ault Lending and Milton C.

Ault, III may be deemed

to beneficially own an aggregate of 1,808,000 shares of our common stock or approximately 42.8% of our outstanding shares.

a result, these stockholders, acting together, have the ability to control the outcome of matters submitted to our stockholders for approval,

including the election of directors and any merger, consolidation or sale of all or substantially all of our assets.

In addition, these

stockholders, acting together, have the ability to control the management and affairs of our company.

Accordingly, this concentration

of ownership might harm the market price of our common stock by:

deferring or preventing a change in corporate control;

a merger, consolidation, takeover or other business combination involving us;

a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION ALLOW CONCENTRATION OF VOTING POWER, WHICH MAY, AMONG OTHER THINGS, DELAY OR FRUSTRATE

THE REMOVAL OF INCUMBENT DIRECTORS OR A TAKEOVER ATTEMPT, EVEN IF SUCH EVENTS MAY BE BENEFICIAL TO OUR STOCKHOLDERS.

of our certificate of incorporation may delay or frustrate the removal of incumbent directors and may prevent or delay a merger, tender

offer or proxy contest involving our company that is not approved by our Board of Directors, even if those events may be perceived to

be in the best interests of our stockholders.

Further, we may designate and issue separate classes of preferred stock that may entitle

their holder(s) to exercise significant control over us.

Consequently, anyone to whom or which these shares are or were issued could

have sufficient voting power to significantly influence if not control the outcome of all corporate matters submitted to the vote of

our common stockholders.

Those matters could include the election of directors, changes in the size and composition of our Board, and

mergers and other business combinations involving us.

In addition, through any such person’s control of our Board and voting power,

the affiliate may be able to control certain decisions, including decisions regarding the qualification and appointment of officers,

dividend policy, access to capital (including borrowing from third-party lenders and the issuance of additional debt or equity securities),

and the acquisition or disposition of assets by us.

In addition, the concentration of voting power in the hands of an affiliate could

have the effect of delaying or preventing a change in control of our company, even if the change in control could benefit our stockholders

and may adversely affect the future market price of our common stock should a trading market therefor develop.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US AND MAKE

A TAKEOVER MORE DIFFICULT TO COMPLETE, EVEN IF SUCH A TRANSACTION WERE IN THE STOCKHOLDERS’ INTEREST.

certificate of incorporation, bylaws and certain provisions of Delaware law could have the effect of making it more difficult or more

expensive for a third party to acquire, or discouraging a third party from attempting to acquire, control of our company, even when these

attempts may be in the best interests of our stockholders.

For example, we are governed by Section 203 of the Delaware General Corporation

In general, Section 203 prohibits a public Delaware corporation from engaging in a “business combination” with an “interested

stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder,

unless the business combination is approved in a prescribed manner.

A “business combination” includes mergers, asset sales

or other transactions resulting in a financial benefit to the stockholder.

An “interested stockholder” is a person who, together

with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock.

These provisions may have the effect of delaying, deferring or preventing a change in control of our company.

COMMON STOCK PRICE IS VOLATILE.

common stock is listed on the Nasdaq Capital Market.

In the past, our trading price has fluctuated widely, depending on many factors

that may have little to do with our operations or business prospects.

During the past 52-week period (through June 30, 2023), our stock

closed at prices between $9.37 per share and $1.05 per share, as reported on Nasdaq.com.

On July 11, 2023, the price of our common stock

closed at $1.79 per share.

markets, in general, have experienced, and continue to experience, significant price and volume volatility, and the market price of our

common stock may continue to be subject to similar market fluctuations unrelated to our operating performance or prospects.

This increased

volatility, coupled with depressed economic conditions, could continue to have a depressive effect on the market price of our common

The following factors, many of which are beyond our control, may influence our stock price:

status of our growth strategy including the development of new products;

announcements

of technological or competitive developments;

announcements

or expectations of additional financing efforts;

ability to market new and enhanced products on a timely basis;

in laws and regulations affecting our business;

of, or involvement in, litigation involving us;

developments affecting us, our customers or our competitors;

announcements

regarding patent or other intellectual property litigation or the issuance of patents to us or our competitors or updates with respect

to the enforceability of patents or other intellectual property rights generally in the US or internationally;

or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar

in the market’s expectations about our operating results;

operating results failing to meet the expectations of securities analysts or investors in a particular period;

in the economic performance or market valuations of our competitors;

or departures of our executive officers;

or perceived sales of our common stock by us, our insiders or our other stockholders;

price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

economic, industry, political and market conditions and overall fluctuations in the financial markets in the United States and abroad,

including as a result of ongoing COVID-19 pandemic.

IN OUR COMMON STOCK PRICE MAY SUBJECT US TO SECURITIES LITIGATION.

markets, in general, have experienced, and continue to experience, significant price and volume volatility, and the market price of our

common stock may continue to be subject to similar market fluctuations unrelated to our operating performance or prospects.

This increased

volatility, coupled with depressed economic conditions, could have a depressing effect on the market price of our common stock.

addition, the securities markets have, from time to time, experienced significant price and volume fluctuations that are not related

to the operating performance of particular companies.

Any of these factors could result in large and sudden changes in the volume and

trading price of our common stock and could cause our stockholders to incur substantial losses.

In the past, following periods of volatility

in the market price of a company’s securities, stockholders have often instituted securities class action litigation against that

If we were involved in a class action suit or other securities litigation, it would divert the attention of our senior management,

require us to incur significant expense and, whether or not adversely determined, have a material adverse effect on our business, financial

condition, results of operations and prospects.

POSSIBLE “SHORT SQUEEZE” DUE TO A SUDDEN INCREASE IN DEMAND OF OUR COMMON STOCK THAT LARGELY EXCEEDS SUPPLY MAY LEAD TO PRICE

VOLATILITY IN OUR COMMON STOCK.

may purchase our common stock to hedge existing exposure in our common stock or to speculate on the price of our common stock.

on the price of our common stock may involve long and short exposures.

To the extent aggregate short exposure exceeds the number of shares

of our common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase

our common stock for delivery to lenders of our common stock.

Those repurchases may in turn, dramatically increase the price of our common

stock until investors with short exposure are able to purchase additional common shares to cover their short position.

This is often

referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our common stock that are not

directly correlated to the performance or prospects of our company and once investors purchase the shares of common stock necessary to

cover their short position the price of our common stock may decline.

HAVE NOT PAID CASH DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY CASH DIVIDENDS IN THE FUTURE.

ANY RETURN ON INVESTMENT MAY BE LIMITED

TO THE VALUE OF OUR STOCK.

have never paid cash dividends on our stock and do not anticipate paying cash dividends on our stock in the foreseeable future.

of cash dividends on our stock will depend on our earnings, financial condition and other business and economic factors affecting us

at such time as the board of directors may consider relevant.

If we do not pay cash dividends, our stock may be less valuable because

a return on your investment will only occur if our stock price appreciates.

information technology systems or data, or those of our service providers or customers or users, could be subject to cyber-attacks or

other security incidents, which could result in significant liability, reputational damage and other adverse consequences to us.

ever-evolving threat landscape makes data security and privacy a critical priority.

We maintain processes for key risk identification,

mitigation efforts, and day-to-day management of risks, including cybersecurity risks.

In addition, our third-party vendors have experience

and expertise supporting mitigation of the potential cyber-attacks facing our organization and vulnerabilities facing our technology

infrastructure and potential cyber-attacks.

it is difficult to determine the potential impacts from a cyber-attack or other security incident, we may experience negative impacts

such as reputational harm, inability to retain existing customers or attract new customers, exposure to legal claims and government action,

among others.

In particular, given the interconnected nature of the supply chain and our significant presence in the industry, our AI

logistics and distribution business may be an attractive target for such attacks.

The impact of a cyber-attack or other security incident

may have a material adverse impact on our financial condition, results of operations, availability of our systems, and growth prospects,

which makes cybersecurity risk management of critical importance.

have processes and programs in place to meet our global compliance obligations and work with our employees and teams across the globe

to ensure security and data protection principles are integrated into the way we conduct our business.

Notwithstanding this, our operations

may be subject to successful breaches, employee malfeasance, or human or technological error.

Any such acts could result in:

access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems;

of sensitive, regulated, or confidential data including personal information and intellectual property;

loss of access to critical data or systems through ransomware, destructive attacks or other means;

delays, service or system disruptions or denials of service.

occurrence of any of these acts could have a material adverse effect on our business, financial condition and results of operations.

failure of our information technology systems could significantly disrupt the operation of our business.

rely on information technology systems and networks as part of our business.

As such, we could experience a material disruption to our

operations if our internal computer systems and servers fail or suffer security breaches.

The secure operation of our information technology,

or IT, systems and networks as well as the secure processing and maintenance of information is critical to our operations and business

Our ability to execute our business plan and to comply with regulatory requirements with respect to data control and data integrity

depends, in part, on the continued and uninterrupted performance of our IT systems.

These systems are vulnerable to damage from a variety

of sources, including telecommunications or network failures, malicious human acts and natural disasters.

Moreover, despite network security

and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar

disruptive problems.

Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our IT systems,

we may experience electronic break-ins, computer viruses, sustained or repeated system failures, or problems arising during the upgrade

of any of our IT systems that interrupt our ability to generate and maintain data.

The occurrence of any of the foregoing could have

a material adverse effect on our business, financial condition and results of operations.

rely on third parties for most of our management information systems and for other back-office functions.

use third-party vendors to provide, support and maintain most of our management information systems.

We also outsource certain accounting,

payroll and human resource functions to third-party service providers.

The parties that we utilize for these services may not be able

to handle the volume of activity or perform the quality of service necessary for our operations.

The failure of these parties to fulfill

their support and maintenance obligations or service obligations could disrupt our operations.

Furthermore, the outsourcing of certain

of our business processes could negatively impact our internal control processes.

Any such effects on our operations or internal controls

could have an adverse effect on our business, financial condition and results of operations.

to protect the integrity and security of personal information of our customers and employees could result in substantial costs, expose

us to litigation and damage our reputation.

receive and maintain certain personal information about our customers and employees.

The use of this information by us is regulated at

the federal and state levels.

If our security and information systems are compromised or our franchisees or employees fail to comply

with these laws and regulations and this information is obtained by unauthorized persons or used inappropriately, it could adversely

affect our reputation and results of operations and could result in litigation against us or the imposition of fines and penalties.

significant changes in U.S.

trade or other policies that block, or restrict imports or increase import tariffs could have a material

adverse effect on results of operations.

karaoke products are manufactured in southern China.

In recent years, the U.S.

government has implemented substantial changes to U.S.

trade policies, including import restrictions, increased import tariffs and changes in U.S.

participation in multilateral trade agreements,

such as the United States-Mexico-Canada Agreement to replace the former North American Free Trade Agreement.

government has

assessed supplemental tariffs on certain goods imported from China, resulting in China’s assessment of retaliatory tariffs on certain

imports of U.S.

goods into China and block imports from Myanmar.

In addition, the United States has assessed or proposed supplemental

tariffs and quantitative restrictions on U.S.

imports of certain products from other countries as well.

trade policy continues to

evolve in this regard.

Such changes could prevent or make it difficult or more expensive for us to obtain our products, which could affect

Further tariff increases could require us to increase prices, which likely would decrease customer demand for our products.

Retaliatory tariff and trade measures imposed by other countries could affect our ability to export products and therefore adversely

affect sales.

Any significant changes in current U.S.

trade or other policies that restrict imports or increase import tariffs could

have a material adverse effect upon results of our operations.

business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy

AND CAPITAL MARKETS RESULTING FROM THE CONFLICT IN UKRAINE OR ANY OTHER GEOPOLITICAL TENSIONS.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the

military conflict between Russia and Ukraine.

On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market

disruptions, including significant volatility in credit and capital markets.

Additionally,

Russia’s military interventions in Ukraine have led to sanctions and other penalties being levied by the U.S., European Union and

other countries against Russia.

and capital markets resulting from the conflict in Ukraine and the Middle East and other geopolitical tensions.

and global markets are experiencing volatility and disruption as a result of the escalation of geopolitical tensions and the start of

the military conflict between Russia and Ukraine.

On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has lead to

market disruptions, including significant volatility in credit and capital markets.

military interventions in Ukraine have led to sanctions and other penalties being levied by the U.S., European Union and other countries

against Russia.

Additional potential sanctions and penalties have also been proposed and/or threatened.

Russian military

actions and the resulting sanctions could adversely affect the global economy and financial markets.

In addition, the invasion of Ukraine

and the resulting sanctions imposed on Russia have resulted in increased volatility in the financial markets and the markets for certain

commodities including oil, which may significantly impact the manufacturers that we rely on, but is not expected to have any direct impact

we have not experienced any direct impact from the conflict in the Ukraine, the extent and duration of the military action, sanctions

and resulting market disruptions are impossible to predict, but could be substantial and could adversely affect our operating results

as they impact the global economy in the future.

WE ARE UNABLE TO COMPETE IN THE KARAOKE PRODUCTS CATEGORY, OUR REVENUES AND NET PROFITABILITY WILL BE REDUCED.

major competitors for karaoke machines and related products are Singsation®, Singtrix®, eKids®, Bonaok, Karaoke USA™,

Ion® Audio, licensed property karaoke products and other consumer electronics companies.

We believe that competition for karaoke

machines is based primarily on price, product features, reputation, delivery times, and customer support.

To the extent that we lower

prices to attempt to enhance or retain market share, we may adversely impact our operating margins.

Conversely, if we opt not to match

competitor’s price reductions we may lose market share, resulting in decreased volume and revenue.

To the extent our leading competitors

reduce prices on their karaoke machines, we must remain flexible to reduce our prices.

If we are forced to reduce our prices, it will

result in lower margins and reduced profitability.

Because of intense competition in the karaoke industry in the United States during

our fiscal year ended March 31, 2023, we expect that the intense pricing pressure in the low end of the market will continue in the karaoke

market in the United States in our fiscal year ending March 31, 2024.

In addition, we must compete with all the other existing forms

of entertainment including, but not limited to:

motion pictures, video arcade games, home video games, theme parks, nightclubs, television,

prerecorded tapes, CD’s, and DVD’s and streaming video.

INFLATION AND UNFAVORABLE ECONOMIC CONDITIONS COULD NEGATIVELY AFFECT OUR OPERATIONS AND RESULTS.

Russian military actions and

the resulting sanctions could adversely affect the global economy and financial markets.

In addition, the invasion of Ukraine and the

resulting sanctions imposed on Russia have resulted in increased volatility in the financial markets and the markets for certain commodities

including oil, which may significantly impact the manufacturers that we rely on.

Additionally,

the conflict in the Middle East between Israel and the government of Hamas in Gaza has caused disruptions in shipping lanes in the Red

Sea where some major cargo lines have opted to route their vessels away from the region which has increased the time required to reach

their destinations as well as increased time for vessels to return to their port of origin with empty containers.

Continued shipping

line disruptions and delays may impact the availability and cost of shipping containers during peak shipping season.

we have not experienced any direct impact from the conflicts in the Ukraine and the Middle East, the extent and duration of the military

action, sanctions and resulting market and shipping lane disruptions are impossible to predict but could be substantial and could adversely

affect our operating results as they impact the global economy in the future.

inflation and unfavorable economic conditions could negatively affect our business, financial condition and results of operations.

global or regional economic conditions may be triggered by numerous developments beyond our control, including inflation, geopolitical

events, health crises such as the COVID-19 pandemic, and other events that trigger economic volatility on a global or regional basis.

Those types of unfavorable economic conditions could adversely affect our business and financial results.

In particular, a significant

deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment levels, inflationary pressures

or disruptions to credit and capital markets, could lead to decreased consumer confidence and consumer spending more generally, thus

reducing consumer demand for our products.

For example, in 2022 and continuing into 2023, the United States has experienced a rapid increase

in inflation levels of approximately 6.5% year-over year in 2022 and approximately 4.0% year-over-year in 2023.

Such heightened inflationary

levels may negatively impact consumer disposable income and discretionary spending and, in turn, reduce consumer demand for our products

and increase our costs.

ARE EXPOSED TO THE CREDIT RISK OF OUR CUSTOMERS, WHO ARE EXPERIENCING FINANCIAL DIFFICULTIES, AND IF THESE CUSTOMERS ARE UNABLE TO PAY

US, OUR REVENUES AND PROFITABILITY WILL BE REDUCED.

In particular, a significant deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment

levels, inflationary pressures or disruptions to credit and capital markets, could lead to decreased consumer confidence and consumer

spending more generally, thus reducing consumer demand for our products.

Such heightened inflationary levels and economic conditions

may negatively impact consumer disposable income and discretionary spending, negatively impacting our business, financial condition and

results of operations.

are exposed to the credit risk of customers who are experiencing financial difficulties and if these customers are unable to pay us,

our revenue and results of operations will be adversely impacted.

sell products to retailers, including national chains, warehouse clubs, department stores, lifestyle merchants, specialty stores, and

direct mail catalogs and showrooms.

Deterioration in the financial condition of our customers could result in bad debt expense to us

and have a material adverse effect on our revenues and future profitability.

Deterioration in the financial condition of our customers could result in these customers not being

able to pay us for our products and services.

This would have a negative impact on our revenue and results of operations.

may have trouble hiring additional qualified personnel.

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Competition for qualified personnel could be intense due to the limited number of individuals

who possess the skills and experience required by such industry.

We may not be able to attract and retain quality personnel on favorable

terms, or at all.

In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel

have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers

own their product or service ideas.

Any of these difficulties could have a material adverse effect on our business, results of operations

and financial condition.

OF OUR INFORMATION TECHNOLOGY SYSTEMS COULD SIGNIFICANTLY DISRUPT THE OPERATION OF OUR BUSINESS.

any other business, we rely on e-mail and other digital communications methods as part of our normal operations.

As such, our internal

computer systems and servers could fail or suffer security breaches, possibly resulting in a material disruption to our operations.

secure operation of our IT networks and systems as well as the secure processing and maintenance of information is critical to our operations

and business strategy.

Our ability to execute our business plan and to comply with regulatory requirements with respect to data control

and data integrity depends, in part, on the continued and uninterrupted performance of our information technology systems, or IT systems.

These systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts

and natural disasters.

Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical

or electronic break-ins, computer viruses and similar disruptive problems.

Despite the precautionary measures we have taken to prevent

unanticipated problems that could affect our IT systems, there are no assurances that electronic break-ins, computer viruses and similar

disruptive problems, and/or sustained or repeated system failures or problems arising during the upgrade of any of our IT systems that

interrupt our ability to generate and maintain data will not occur.

The occurrence of any of the foregoing with respect to our IT systems

could have a material adverse effect on our business, results of operations or financial condition.

ARE SUBJECT TO VARIOUS CLAIMS AND LEGAL ACTIONS ARISING IN THE ORDINARY COURSE OF OUR BUSINESS.

are subject to various claims and legal actions arising in the ordinary course of our business.

Any such litigation could be very costly

and could distract our management from focusing on operating our business.

The existence of any such litigation could harm our business,

results of operations and financial condition.

Results of actual and potential litigation are inherently uncertain.

An unfavorable result

in a legal proceeding could adversely affect our reputation, financial condition and operating results.

who possess the skills and experience required by such an industry.

We may not be able to afford, attract and retain quality personnel

on favorable terms, or at all.

In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such

personnel have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former

employers own their product or service ideas.

Any of these events could have a material adverse effect on our business, financial condition

and results of operations.

industries in which we operate are subject to international, federal, state and local laws, compliance with which is both complex and

are subject to the U.S.

Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, customs laws, sanctions

laws and other laws governing our anticipated operations.

If we fail to comply with these laws, we could be subject to civil or criminal

penalties, other remedial measures, and legal expenses, which could adversely affect our business, results of operations and financial

operations are subject to certain anti-corruption laws, including the U.S.

Foreign Corrupt Practices Act (“FCPA”), and other

anti-corruption laws that apply in countries where we do business.

The FCPA and other anti-corruption laws generally prohibit us and

our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons

to obtain or retain business or gain some other business advantage.

We and our commercial partners operate in a number of jurisdictions

that pose a high risk of potential FCPA violations and we participate in collaborations and relationships with third parties whose actions

could potentially subject us to liability under the FCPA or local anti-corruption laws.

In addition, we cannot predict the nature, scope

or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws

might be administered or interpreted.

Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws of the countries in which

we do business.

The FCPA and other anti-corruption laws generally prohibit us and our employees and intermediaries from bribing, being

bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business

We and our commercial partners operate in several jurisdictions that pose a high risk of potential FCPA violations and we

participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the

FCPA or local anti-corruption laws.

are also subject to other laws and regulations governing our international operations, including regulations administered in the U.S.

and in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and

currency exchange regulations (collectively, “Trade Control Laws”).

can be no assurance that we are completely effective in ensuring our compliance with all applicable anticorruption laws, including the

FCPA or other legal requirements, such as Trade Control Laws.

Any investigation of potential violations of the FCPA, other anti-corruption

laws or Trade Control Laws by the United States, the European Union or other authorities could have an adverse impact on our reputation,

our business, results of operations and financial condition.

Furthermore, should we be found not to be in compliance with the FCPA, other

anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial

measures, as well as the accompanying legal expenses, any of which could have a material adverse effect on our reputation and liquidity,

as well as on our business, results of operations and financial condition.

SECURITIES ANALYSTS DO NOT PUBLISH RESEARCH OR REPORTS ABOUT OUR BUSINESS OR IF THEY PUBLISH NEGATIVE EVALUATIONS OF OUR STOCK, THE PRICE

OF OUR COMMON STOCK COULD DECLINE.

trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us

or our business.

We do not currently have and may never obtain research coverage by industry or financial analysts.

If no or few analysts

commence coverage of us, the trading price of our common stock could decrease.

Even if we do obtain analyst coverage, if one or more

of the analysts covering our business downgrade their evaluations of our stock, the price of our common stock could decline.

more of these analysts cease to cover our stock, we could lose visibility in the market for our common stock, which in turn could cause

our stock price to decline.

CHARTER PROVIDES FOR LIMITATIONS OF DIRECTOR LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS AND EMPLOYEES.

currency exchange regulations.

We cannot predict the nature, scope, or effect of future regulatory requirements to which our international

operations might be subject or the manner in which existing laws might be administered or interpreted.

If we fail to comply with these

laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our

business, financial condition, and results of operations.

can provide no assurance that we will be in full compliance with all applicable anticorruption laws, including the FCPA or other legal

requirements.

Any investigation of potential violations of the FCPA or other laws and regulations by the United States, the European

Union or other authorities could have an adverse impact on our reputation, our business, results of operations and financial condition.

Furthermore, should we be found not to be in compliance with the FCPA or other laws and regulations, we may be subject to criminal and

civil penalties, disgorgement and other sanctions and remedial measures, as well as the accompanying legal expenses, any of which could

have a material adverse effect on our business, financial condition and results of operations.

could be party to litigation that could adversely affect us by diverting management attention, increasing our expenses and subjecting

us to significant monetary damages and other remedies.

are subject to various claims and legal actions arising in the ordinary course of our business.

Such claims may be expensive to defend

against and may divert resources away from our operations, regardless of whether they are valid or whether we are ultimately found liable.

In the event we are found liable for any such claims, we could be required to pay substantial damages.

With respect to insured claims,

a judgment for monetary damages in excess of any insurance coverage that we have could result in us being required to pay substantial

Any adverse publicity resulting from these claims may also adversely affect our reputation, regardless of whether we are found

Any payments of damages or adverse publicity could have a material adverse effect on our business, financial condition and results

of operations.

charter provides limitations of director liability and indemnification of directors and officers and employees.

certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law.

4 unchanged sentences

or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation

payment of dividends or unlawful stock repurchases, or redemptions as provided in Section 174 of the Delaware General Corporation

from which the directors derived an improper personal benefit.

1 unchanged sentence

of equitable remedies such as injunctive relief or rescission.

bylaws provide that we will indemnify our directors, officers and employees to the fullest extent permitted by law.

Our bylaws also provide

that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding.

We believe that these provisions are necessary to attract and retain qualified persons as directors and officers.

limitation of liability in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors

for breach of their fiduciary duties.

They may also reduce the likelihood of derivative litigation against directors and officers, even

though an action, if successful, might provide a benefit to us and our stockholders.

Our results of operations and financial condition

may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification

OUR ACCOUNTING CONTROLS AND PROCEDURES ARE CIRCUMVENTED OR OTHERWISE FAIL TO ACHIEVE THEIR INTENDED PURPOSES, OUR BUSINESS COULD BE SERIOUSLY

evaluate our disclosure controls and procedures as of the end of each fiscal quarter, and annually review and evaluate our internal control

over financial reporting in order to comply with the Commission’s rules relating to internal control over financial reporting adopted

pursuant to the Sarbanes-Oxley Act of 2002.

Because of its inherent limitations, internal control over financial reporting may not prevent

or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls

may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

If we fail to maintain effective internal control over financial reporting or our management does not timely assess the adequacy of such

internal control, we may be subject to regulatory sanctions, and our reputation may decline.

OF OUR COMPETITORS ARE LARGER AND HAVE GREATER FINANCIAL AND OTHER RESOURCES THAN WE DO.

products compete and will compete with similar if not identical products produced by our competitors.

These competitive products could

be marketed by well-established, successful companies that possess greater financial, marketing, distribution personnel, and other resources

Using said resources, these companies can implement extensive advertising and promotional campaigns, both generally and in

response to specific marketing efforts by competitors.

They can introduce new products to new markets more rapidly.

In certain instances,

competitors with greater financial resources may be able to enter a market in direct competition with us, offering attractive marketing

tools to encourage the sale of products that compete with our products or present cost features that consumers may find attractive.

WE SHIP PRODUCTS THAT CONTAIN DEFECTS, THE MARKET ACCEPTANCE OF OUR PRODUCTS AND OUR REPUTATION WILL BE HARMED AND OUR CUSTOMERS COULD

SEEK TO RECOVER THEIR DAMAGES FROM US.

products are complex, and despite extensive testing, may contain defects or undetected errors or failures that may become apparent only

after our products have been shipped to our customers or after product features or new versions are released.

Any such defect, error

or failure could result in failure of market acceptance of our products or damage to our reputation or relations with our customers,

resulting in substantial costs for us and our customers as well as the cancellation of orders, warranty costs and product returns.

addition, any defects, errors, misuse of our products or other potential problems within or out of our control that may arise from the

use of our products could result in financial or other damages to our customers.

certificate of incorporation and bylaws provide that we will indemnify our officers and directors to the fullest extent permitted by

law and that we will advance expenses incurred by any such persons in advance of the final disposition of any action or proceeding.

believe that these provisions are necessary to attract and retain qualified persons as officers and directors.

limitation of liability in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our

directors for breach of their fiduciary duties.

It may also reduce the likelihood of derivative litigation being brought against our

officers and directors even though an action, if successful, might provide a benefit to us and our stockholders.

Our results of operations

and financial condition may be harmed to the extent we pay the costs of settlement and damage awards pursuant to these indemnification

insurance may not provide adequate levels of coverage against claims.

currently maintain insurance that we believe is appropriate for a business of our size and type.

However, there are types of losses we

may incur that cannot be insured against or that we believe are not economically reasonable to insure against.

Such losses could have

a material adverse effect on our business and results of operations.

Unanticipated changes in the actuarial assumptions and management

estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which

could have a material adverse effect on our business, financial condition and results of operations.

inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely

impact our business.

has been a marked increase in the use of social media platforms, including weblogs (blogs), social media websites, and other forms of

Internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons.

of our competitors are expanding their use of social media and new social medial platforms are rapidly being developed, potentially making

more traditional social media platforms obsolete.

As a result, we need to continuously innovate and develop our social media strategies

in order to maintain broad appeal with customers and brand relevance.

social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy

of the content posted.

Information posted on such platforms may be inaccurate or adverse to our interests, and we may have little or

no opportunity to redress or correct the information.

The dissemination of such information online, regardless of its accuracy, could

harm our business, reputation and brands.

risks associated with the use of social media include improper disclosure of proprietary information, personal identifiable information

and out-of-date information, as well as fraud, by our customers, employees, franchisees and business partners.

The inappropriate use

of social media by our customers, employees, franchisees or business partners could increase our costs, lead to litigation or result

in negative publicity that could damage our business, reputation and brands.

impairment in the carrying value of our fixed assets, intangible assets or goodwill could adversely affect our financial condition and

results of operations

evaluate the useful lives of our fixed assets and intangible assets to determine if they are definite- or indefinite-lived assets.

a determination on useful life requires significant judgments and assumptions regarding the expected life, future effects of obsolescence,

demand, competition, the level of required maintenance expenditures and the expected lives of other related groups of assets, as well

as other economic factors, such as the stability of the industry, legislative action that results in an uncertain or changing regulatory

environment and expected changes in distribution channels.

We cannot accurately predict the amount and timing of any impairment of assets.

Should the value of fixed assets or intangible assets become impaired, we will have to recognize an impairment charge for the related

In the event we recognize any impairment charges in the future, such charges may have a material adverse effect on our business,

financial condition and results of operations.

addition, we may be required to record goodwill in the event we acquire additional assets or businesses in the future.

Goodwill represents

the excess of cost over the fair value of identified net assets of business acquired.

We review any goodwill for impairment annually,

or whenever circumstances change in a way which could indicate that impairment may have occurred.

Goodwill is tested at the reporting

We identify potential goodwill impairments by comparing the fair value of the reporting unit to its carrying amount, which

includes goodwill and other intangible assets.

If the carrying amount of the reporting unit exceeds the fair value, this is an indication

that impairment may exist.

We calculate the amount of the impairment by comparing the fair value of the assets and liabilities to the

fair value of the reporting unit.

The fair value of the reporting unit in excess of the value of the assets and liabilities is the implied

fair value of the goodwill.

If this amount is less than the carrying amount of goodwill, impairment is recognized for the difference.

A significant amount of judgment is involved in determining if an indication of impairment exists.

Factors may include, among others:

significant decline in our expected future cash flows;

sustained, significant decline in our stock price and market capitalization

significant adverse change in legal factors or in the business climate;

unanticipated

testing for recoverability of a significant asset group within a reporting unit;

growth rates.

will be required to record a non-cash impairment charge if the testing performed indicates that goodwill has been impaired.

adverse weather conditions and other disasters could negatively impact our results of operations.

business could be negatively affected by adverse weather conditions and acts of God, such as regional winter storms, fires, floods, hurricanes,

tropical storms and earthquakes, and other disasters, such as pandemics, oil spills and nuclear meltdowns.

The occurrence of any such

events in the future could cause substantial damage to our business and subject us to substantial repair costs that could have a material

adverse effect on our business, financial condition and results of operations.

Related to Our Karaoke Business

we are unable to develop new karaoke products, our revenues may not continue to grow.

karaoke industry is characterized by rapid technological change, frequent new product introductions and enhancements and ongoing customer

demands for greater performance.

In addition, the average selling price of any karaoke machine has historically decreased over its life,

and we expect that trend to continue.

As a result, our products may not be competitive if we fail to introduce new products or product

enhancements that meet evolving customer demands.

The development of new products is complex, and we may not be able to complete development

in a timely manner.

To introduce products on a timely basis, we must:

define and design new products to meet market demand;

features that continue to differentiate our products from those of our competitors;

our products to new manufacturing process technologies;

emerging technological trends in our target markets;

changes in end-user preferences with respect to our customers’ products;

products to market on a timely basis at competitive prices;

effectively to technological changes or product announcements by others.

will need to continue to enhance our karaoke machines and develop new machines to keep pace with competitive and technological developments

and to achieve market acceptance for our products.

At the same time, we will need to continue to identify and develop other products

that may be different from our existing karaoke machines.

manufacturing operations are located in China, subjecting us to risks associated with the manufacturing and shipping of our products.

currently use several contract manufacturers in China to manufacture all our karaoke products.

Our arrangements with these contract manufacturers

are subject to the risks of doing business abroad, such as import duties, trade restrictions, work stoppages, and foreign currency fluctuations,

limitations on the repatriation of earnings and political instability, which could have an adverse impact on our margins.

we have limited control over the manufacturing processes.

As a result, any difficulties encountered by our third-party manufacturers

that result in product defects, production delays, cost overruns or the inability to fulfill orders on a timely basis could adversely

affect our revenues, profitability and cash flow.

Also, since we do not have written agreements with any of these contract manufacturers,

we are subject to additional uncertainty if the contract manufacturers do not deliver products to us on a timely basis.

rely principally on a limited number of contract ocean carriers to ship substantially all of our karaoke products that we import to our

outsourced warehouse facility in Chino, California.

Retailers that take delivery of our products in China rely on a variety of carriers

to import those products.

Any disruptions in shipping, whether in California or China, caused by labor strikes, other labor disputes,

terrorism, and international incidents may prevent or delay our customers’ receipt of our products.

If our customers do not receive

their products on a timely basis, they may cancel their orders or return the products to us.

This would negatively impact our revenue

and results of operations.

rely upon third party suppliers for the components that are incorporated into our karaoke products and if we were unable to obtain these

components as needed, our operations would be adversely affected.

growth and ability to meet customer demand depends in part on our ability to obtain timely deliveries of karaoke machines and our electronic

We rely on third party suppliers to manufacture the parts and materials that are incorporated into these products.

If our suppliers

are unable to provide our factories with the components needed, we will be unable to manufacture our products.

For example, there has

been recent worldwide volatility in the supply of electronic chips due to the increased demand for semiconductors and we are currently

competing with large companies to obtain these parts and could see production and shipment delays.

We cannot guarantee that we will be

able to purchase the components we need at reasonable prices or in a timely fashion.

If we are unable to anticipate and address any shortages

of parts and materials in the future, we may experience manufacturing and delivery delays, which would negatively impact our sales and

depend on the ability of our suppliers to manufacture our products without infringing, misappropriating or otherwise violating the intellectual

property rights or proprietary rights of others.

source our products from a variety of contract manufacturers.

We buy finished goods from our suppliers and generally do not source the

raw materials and components incorporated into the final products.

We rely on our contract manufacturers’ ability to secure injected

plastic, wood cabinets, integrated circuits, display panels, speaker drivers, and other components that are necessary for the manufacture

of our final products.

While we are not responsible for sourcing raw materials, we rely on these suppliers to have all required licenses

and proprietary rights to the materials that are incorporated into our final products.

In addition, we rely on the representations of

our contract manufacturers that they are using materials and components that meet all necessary legal, safety, and compliance requirements.

If our suppliers do not have the proper licenses or rights or are not in compliance with all regulatory requirements, we may be named

a party in disputes or be subject to claims, including claims of infringement or violating the intellectual property or proprietary rights

of third parties, with respect to our products.

in government regulations relating to international tariffs could significantly reduce our revenues, product cost and profitability.

government administration and members of the U.S.

Congress have recently implemented significant changes in U.S.

trade policy and taken

certain actions that are impacting our business, including imposing tariffs on certain goods imported into the United States.

these changes have triggered retaliatory actions by affected countries and may result in “trade wars” and increased costs

for goods imported into the United States.

All of our products are manufactured and imported from China and we sell our products in Canada

and other countries.

The implementation of tariffs has resulted in an increase in the cost of our products.

If we are unable to mitigate

these increased costs through price increases, we may experience lower sales which would negatively impact our revenue, gross profit

margin and results of operations.

small number of our customers account for a substantial portion of the revenue we generate from our karaoke business and the loss of

one or more of these key customers would negatively impact our revenue and cash flow.

rely on a few large customers to provide for a substantial portion of our revenue.

Sales to our top five customers and top three

customers collectively in our karaoke business comprised 79% and 81% of our revenue, respectively, for the year ended

December 31, 2024 and the nine- month transition period ended December 31, 2023, respectively.

We do not have long-term contractual

arrangements with any of our customers and they can cancel their orders at any time prior to delivery.

A reduction in or termination

of orders from any of these customers would negatively impact our revenue and cash flow.

customers may return karaoke products that they have purchased from us which would result in a reduction in our revenue and cash flow.

incur significant product returns from our customers and expect to incur additional returns in the returns.

The return of products is

due to a variety of reasons, including defective units, customers’ overstock and buyer’s remorse.

In addition, the factories

that we utilize for the manufacture of our products charge customary repair and freight costs, which increase our expenses and reduce

our cash flow.

If any of our customers increase the volume of their returned karaoke products to us, our revenue and cash flow would

be negatively impacted.

are subject to pressure from our customers relating to price reduction and financial incentives that negatively impact our revenue and

cash flow from sales of our karaoke products.

are subject to pricing pressure from our customers due to intense competition in the karaoke industry.

Many of our customers have demanded

that we lower our prices to remain competitive with other companies offering karaoke products.

If we do not meet our customers’

demands to lower our regular prices, we may not sell as many karaoke products.

Additionally, we are also subject to pressure from our

customers regarding certain financial incentives, such as return credits or large cooperative promotion incentives, which effectively

reduce our revenue and cash flow.

We have historically offered these co-op promotion incentives to our customers because it is standard

practice in the retail industry.

We incurred co-op promotion incentives of $2,100,000 and $2,600,000 for the year ended December 31,

2024 and the nine-month transition period ended December 31, 2023, respectively.

In the event we continue to experience pricing pressure

from our customers and continue to offer co-op promotion incentives to our customers, our revenue and cash flow will be negatively impacted.

we do not accurately forecast the demand for our karaoke products, our revenue, cash flow and results of operations will be adversely

production lead times range from one to four months due to our reliance on manufacturers in China for the production of our karaoke products.

Therefore, we must commit to production in advance of customers’ orders.

It is difficult for us to forecast customer demand because

we do not have any scientific or quantitative method to predict this demand.

Our forecasting is based on our general expectations about

customer demand, the general strength of the retail market and our historical experiences.

In past years we have overestimated demand

for our products, which led to excess inventory in some of our products.

In the event we fail to accurately forecast demand for our karaoke

products in the future, our revenue, cash flow and results of operations will be adversely affected.

are subject to the costs and risks of carrying inventory for our customers and if we have too much inventory, it will negatively affect

our cash flow from operations.

karaoke business is seasonal in nature.

Many of our customers place orders with us several months prior to the holiday season, but they

schedule delivery two or three months before the holiday season begins.

As such, we are subject to the risks and costs of carrying inventory

during the time period between the placement of the order and the delivery date, which reduces our cash flow.

If we are forced to maintain

excessive inventory levels in the future, we may incur higher storage costs which will have a material adverse effect on our cash flow

and results of operations.

are subject to insurance risk of loss for karaoke products that are damaged while in transit from the manufacturer to the customer and

our warehouse.

of our karaoke products are manufactured in China and are transported to customers and our warehouse in California via ocean vessel.

The risk of loss remains with us until the products are delivered.

As a result, we are subject to the risk that these products could

be damaged while they are in transit to customers or our warehouse.

While we have taken significant measures to reduce the likelihood

of our products being damaged, we cannot guarantee that our products won’t be damaged in the future.

We have obtained insurance

coverage for products that are shipped direct import to our customers and for goods in transit to our California warehouse.

Notwithstanding

this, certain exclusions apply that may prevent insurance from covering a loss.

In the event our products are damaged while in transit

in the future, we could experience a significant loss of revenue and inventory and incur significant out-of-pocket expenses, all of which

would have a negative impact on our cash flow and results of operations.

karaoke business is seasonal and therefore our annual operating results will depend, in large part, on our sales during the relatively

brief holiday season.

of consumer electronics and toy products in the retail channel are highly seasonal, with a majority of retail sales occurring during

the period of September through December in anticipation of the holiday season.

A substantial majority of our sales occur during our

fiscal quarters ended September 30 th and December 31 st .

Sales in these two quarters accounted for 79% and 91% of

our revenue for the year ended December 31, 2024 and the nine-month transition period ended December 31, 2023, respectively.

we fail to generate sufficient sales of our products during this period in future years, our revenue and results of operations will be

negatively adversely affected.

discretionary spending may affect karaoke purchases and is affected by various economic conditions and changes.

of karaoke machines and music are considered discretionary for consumers.

Our success will therefore be influenced by a number of economic

factors affecting discretionary and consumer spending, such as employment levels, business, interest rates, and taxation rates, none

which are under our control.

Additionally, other extraordinary events such as terrorist attacks or military engagements could occur which

may adversely affect the retail environment negatively impact consumer spending.

Any such events would have an adverse affect on our

revenue and results of operations.

our third-party logistics provider experiences disruptions to the operation of its distribution centers, it could have a material adverse

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

do not have our own warehouse or distribution facilities for our karaoke products, but instead rely upon a third-party logistics provider

that is responsible for warehousing and fulfilling our orders.

With the exception of direct import, all of our merchandise is shipped

from our suppliers to one of our provider’s distribution facilities and then packaged and shipped from our distribution facilities

to our customers.

The success of our business depends on our timely receipt of our products so that we can continuously bring new, on-trend

products online for sale.

The success of our business also depends on customer orders being timely processed and delivered to meet promised

delivery dates and satisfy our customers.

The efficient flow of our merchandise requires that we have adequate capacity and uninterrupted

service in our distribution facilities to support both our current level of operations.

Upgrading our existing arrangement or transferring

our operations to another third-party provider, if necessary, would require us to incur additional costs, which could be significant,

and may require us to obtain additional financing.

Our failure to provide adequate order fulfillment, secure additional distribution

capacity when necessary or retain a suitable third-party logistics provider could increase our costs, which in turn could have a material

adverse effect on our business, financial condition and results of operations.

addition, if our current provider encounters difficulties associated with its distribution facilities or if they were to shut down or

be unable to operate for any reason, including because of fire, natural disaster, power outage or other event, we could face inventory

shortages, resulting in “out-of-stock” conditions on our website and delays in shipments, resulting in lost revenue, significantly

higher costs and longer lead times distributing our merchandise.

production costs may increase if we are required to make purchases using the Chinese Yuan instead of the U.S.

of our karaoke products are currently manufactured in China.

During the year ended December 31, 2024 and the nine-month transition period

ended December 31, 2023, the Chinese local currency had no material effect on us as all of our purchases are denominated in the U.S.

If, in the future, our purchases are required to be made in Chinese local currency, the Yuan, we will be subject to the risks

involved in foreign exchange rates.

The value of the Yuan depends largely on the Chinese government’s policies and China’s

domestic and international economic and political developments.

As a result, our production costs may increase if we are required to

make purchases using the Yuan instead of the U.S.

dollar and the value of the Yuan increases over time.

Any significant increase in the

cost of manufacturing our products would have a material adverse effect on our business and results of operations.

also sell some of our karaoke products to Canadian customers, some of whom require us to invoice them in Canadian dollars.

This subjects

us to risks involved in the exchange rate between the Canadian and U.S.

The exchange rate has been stable during the year ended

December 31, 2024 and the nine-month transition period ended December 31, 2023, and the associated exchange rates did not have a material

impact on our financial results.

Should the exchange rate between the Canadian and U.S dollar become more volatile and sales to Canadian

customers increase, the use of Canadian dollars could have a material adverse effect on our business.

profit margin may be negatively impacted by higher raw material prices and higher production and shipping costs.

in the price of oil, electronic chip components and shipping costs have and will continue to affect the sourcing and delivery of the

raw materials and services used in the manufacture and shipping of our karaoke products.

If we are not able to negotiate lower costs,

reduce other expenses, or pass on some or all of these costs to our customers, our profit margin may be adversely affected.

we are unable to compete in the karaoke products category, our revenue, cash flows and results of operations will be negatively impacted.

major competitors for karaoke machines and related products are Singsation ® , Singtrix ® , eKids ® ,

Bonaok, Karaoke USA™, Ion ® Audio, licensed property karaoke product companies and other consumer electronics companies.

In addition, we compete with companies offering other forms of entertainment, including motion pictures, video arcade games, home video

games, theme parks, nightclubs, television, prerecorded tapes, CDs, DVDs and streaming video.

Many of our direct and indirect competitors

are well-established national and international companies that have been in business longer than we have, have greater consumer awareness

than we do, and have substantially greater capital, marketing and human resources than we do.

As our competitors expand their operations

and as new competitors enter the industry, we expect competition to intensify.

Increased competition could result in price reductions,

decreases in profitability and loss of market share by us.

are subject to intense pricing pressure for our karaoke products.

We expect that the intense pricing pressure existent in the market

for karaoke products will continue in the future.

We believe that competition for karaoke machines and other forms of entertainment is

based primarily on price, product features, reputation, delivery times, and customer support.

In the event we are unable to compete successfully

with our current and future competitors, our business, financial condition and results of operations could be materially and adversely

we ship products that contain defects, the market acceptance of our karaoke products and our reputation will be harmed and our customers

could seek to recover their damages from us.

products are complex and, despite extensive testing, may contain defects or undetected errors or failures that become apparent only after

our products have been shipped to our customers or after product features or new versions are released.

Any such defect, error or failure

could result in reduced market acceptance of our products, damage to our reputation, or damage to our relations with our customers, resulting

in the cancellation of orders, warranty costs and product returns.

In addition, any defects, errors, misuse of our products or other

potential problems within or out of our control that may arise from the use of our products could result in financial or other damages

to our customers.

Our customers could seek to have us pay for these losses.

Although we maintain product liability insurance, it may not be adequate.

Although we maintain product liability insurance, it may

not be adequate to cover us for these losses.

In the event we experience significant defects, errors or failures with our karaoke products,

or in the event we incur losses for financial and other damages suffered by our customers that are not covered by insurance, our business

and results of operations could be negatively impacted.

Related to Our AI Logistics and Distribution Business

transportation industry historically has experienced cyclical fluctuations in financial results that could negatively impact our business

and results of operations.

has experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles, interest rate fluctuations,

currency fluctuations, and other economic factors.

Many of these cyclical fluctuations are beyond SemiCab’s control.

in SemiCab’s business will negatively impact our revenues.

in freight volumes resulting from supply chain disruptions or other factors may impact working capital needs.

reduction in overall freight volumes in the marketplace may occur due to supply chain disruptions or overall economic conditions.

addition, a downturn in customer business cycles could cause a reduction in the volume of freight shipped by those customers and result

in a reduction in freight rates.

During 2023 and 2024, SemiCab experienced a decline in freight volumes as shippers struggled with elevated

inventory levels and consumer demand was negatively impacted by inflation and macroeconomic uncertainty.

As its volumes increase or SemiCab

increases freight rates charged to its customers, the resulting increase in revenues may increase its working capital needs due to its

business model, which generally has a higher length of days sales outstanding than days payables outstanding.

business is susceptible to numerous expense challenges which may impact operating results.

may not be able to appropriately adjust its expenses to changing market demands.

In periods of rapid change, it may be difficult to match

its staffing levels to its business needs.

Higher carrier prices may result in decreased adjusted gross profit margin and a need for

working capital.

Carriers can be expected to charge higher prices if market conditions warrant or to cover higher operating expenses.

SemiCab’s adjusted gross profits and income from operations may decrease if SemiCab is unable to increase its pricing to its customers.

Increased demand for over the road transportation services and changes in regulations may reduce available capacity and increase motor

carrier pricing.

In the event market conditions change and its contracted rates are below market rates, SemiCab may be required to provide

transportation services at a loss.

Changing fuel prices and interruptions in fuel supplies may also impact SemiCab, negatively impacting

its gross profit margin.

is dependent on third parties which may impact the provision of its services.

dependence on third parties to provide equipment and services may impact the delivery and quality of its transportation and logistics

SemiCab depends on independent third parties to provide trucking services and to report certain events to them, including but

not limited to, shipment status information and freight claims.

These independent third parties may not fulfill their obligations to

SemiCab, or SemiCab’s relationship with these parties may change, which may prevent SemiCab from meeting its commitments to its

SemiCab’s reliance on these third parties also could cause delays in reporting certain events, including recognizing

If SemiCab is unable to secure sufficient equipment or other transportation services from third parties to meet its commitments

to its customers, its operating results could be materially and adversely affected, and its customers could switch to its competitors

temporarily or permanently.

challenges in the transportation industry may impact SemiCab’s results of operations and operating cash flows.

transportation industry may also be significantly impacted by disruptions such as the availability of transportation equipment, as well

as factors such as labor shortages, fuel prices, shifts in consumer demand toward more locally sourced products, and regulatory changes.

These disruptions may impact the growth rates within the logistics industry and SemiCab’s ability to provide transportation services

for its customers, each of which may adversely impact its results of operations and operating cash flows.

faces substantial competition in the logistics and distribution industry.

in the digital freight industry is intense and broad-based.

SemiCab competes with traditional and non-traditional logistics companies,

including transportation providers that own equipment, third-party freight brokers, technology matching services, internet freight brokers,

carriers offering logistics services, and on-demand transportation service providers.

In addition, customers can offer in-house some

of the services SemiCab provides to them.

Increased competition could reduce the market opportunity for SemiCab’s services and

create downward pressure on freight rates.

Continued rate pressure may adversely affect SemiCab’s adjusted gross profits and income

from operations.

business may be adversely affected by seasonality.

business may be adversely impacted by seasonal changes or significant disruptions in the transportation industry.

Results of operations

for the industry generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season.

believes this historical pattern has been the result of, or influenced by, numerous factors, including national holidays, weather patterns,

consumer demand, economic conditions, and other similar and subtle forces.

Although seasonal changes in the transportation industry have

not had a significant impact on its cash flow or results of operations, SemiCab expects this trend to continue, and it cannot guarantee

it will not adversely impact SemiCab in the future.

relies on technology to operate its business.

has internally developed the majority of its operating systems and also relies on technology provided by third parties.

Its continued

success is dependent on its systems continuing to operate and meet the changing needs of its customers and users.

The continued automation

of existing processes and usage of third-party technology and cloud network capacity will require adaptation and adjustments that may

increase its exposure to cybersecurity risks and system availability reliance.

SemiCab relies on its technology staff and third-party

vendors to successfully implement changes to, and to maintain, its operating systems in an efficient manner.

If SemiCab fails to maintain,

protect, and enhance its operating systems, it may be at a competitive disadvantage and lose customers.

demonstrated by recent material and high-profile data security breaches, computer malware, viruses, computer hacking, and phishing attacks

have become more prevalent, and may occur on SemiCab’s operating systems.

SemiCab can offer no assurance that any future attacks

will have little to no impact on its business.

Furthermore, given the interconnected nature of the supply chain and its significant presence

in the industry, it may be an attractive target for such attacks.

The insurance coverage held by SemiCab may not apply to a particular

loss or it may not be sufficient to cover all liabilities to which we may be subject.

A loss for which SemiCab is not adequately insured

could materially affect its financial results.

it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, a significant impact on

the performance, reliability, security, and availability of SemiCab’s operating systems and technical infrastructure to the satisfaction

of its users may harm its reputation, impair its ability to retain existing customers or attract new customers, and expose it to legal

claims and government action, each of which could have a material adverse impact on its financial condition, results of operations, and

growth prospects.

international operations subject it to complex and ever-changing operational, financial, and data privacy risks .

provides services within foreign countries on an increasing basis.

Its business outside of the U.S.

is subject to various risks, including:

in managing or overseeing foreign operations and agents;

on the repatriation of funds because of foreign exchange controls;

currency fluctuations;

liability standards;

property laws of countries that do not protect its intellectual property rights, including but not limited to, its proprietary information

systems, to the same extent as the laws of the U.S;

related to non-compliance with laws, rules, and regulations in the countries in which it operates including the U.S.

Foreign Corrupt

Practices Act and similar regulations;

laws and regulations regarding the collection, use, processing, and transfer of personal information may impact its services by imposing

restrictions on processing, increase legal claim liability, and increase regulatory scrutiny and fines.

addition, foreign currency fluctuations could result in currency exchange gains or losses or could affect the book value of its assets

and liabilities.

Furthermore, SemiCab may experience unanticipated changes to its income tax liabilities resulting from changes in geographical

income mix and changing international tax legislation.

If SemiCab does not correctly anticipate changes in international economic and

political conditions and comply with applicable laws and regulations, its business and results of operations could be negatively impacted.

may not be able to hire and retain qualified employees .

continued success depends upon its ability to attract and retain motivated logistics and technology professionals.

In periods of rapid

change, it may be more difficult to match its staffing level to its business needs.

SemiCab cannot guarantee it will be able to continue

to hire and retain a sufficient number of qualified personnel to sustain the growth in its business.

In addition, macroeconomic factors

impacting the labor market may result in higher costs to hire and retain qualified personnel.

Because of its highly experienced employee

base, its employees are attractive targets for new and existing competitors.

Continued success depends in large part on its ability to

develop successful employees into managers and architects.

may fail in its efforts to expand its use of machine learning and AI technologies and may be subject to risks and liabilities in the

event it does expand its use of machine learning and AI technologies.

SemiCab fails to successfully integrate AI into its platform and business processes, or if it fails to keep pace with rapidly evolving

AI technological developments, including attracting and retaining talented AI developers and programmers and cybersecurity personnel,

it may face a competitive disadvantage.

At the same time, the use or offering of AI technologies may result in new or expanded risks

and liabilities, including enhanced government or regulatory scrutiny, litigation, privacy and compliance issues, ethical concerns, confidentiality,

reputational harm, and security risks.

It is not possible to predict all of the risks related to the use of AI.

Changes in laws, rules,

directives, and regulations governing the use of AI may adversely affect the ability of SemiCab to develop and use AI or subject SemiCab

to legal liability.

The cost of complying with laws and regulations governing AI could be significant Further, market demand and acceptance

of AI technologies are uncertain, there may be challenges to further incorporate AI into SemiCab’s processes.

Each of these risks

could adversely affect SemiCab’s business, financial condition, and results of operations.

have integrated, and may continue to integrate in the future, AI in our logistics and distribution services.

AI technology presents various

operational, compliance, and reputational risks and if any such risks were to materialize, our business and results of operations may

be adversely affected.

have integrated AI technologies into our logistics and distribution services.

We may continue to integrate AI technologies in new product

or service offerings.

Given that AI is a rapidly developing technology that is in its early stages of business use, it presents a number

of operational, compliance and reputational risks.

AI algorithms are currently known to sometimes produce unexpected results and behave

in unpredictable ways (e.g., “hallucinatory behavior”) that can generate irrelevant, nonsensical, fictitious, deficient,

offensive or factually incorrect content and results, which, if incorporated into our platform, may result in reputational harm to us

and be damaging to our brand.

Additionally, content, analyses or recommendations that are based on AI might be found to be biased, discriminatory

Data sets from which large language models learn are at risk of poisoning or manipulation by bad actors, resulting in offensive

or undesired output.

Similarly, the data set could contain copyrighted material resulting in infringing output.

AI output might present

ethical concerns or violate current and future laws and regulations.

expect that there will continue to be new laws or regulations concerning the use of AI technology, which might be burdensome for us to

comply with and may limit our ability to offer or enhance our existing tools and features or new offerings based on AI technology.

the use of AI technology involves complexities and requires specialized expertise.

We may not be able to attract and retain top talent

to support our AI technology initiatives.

If any of the operational, compliance or reputational risks were to materialize, our business

and results of operations may be adversely affected.

may be subject to risks associated with artificial intelligence and machine learning technology.

technological advances in AI and machine learning technology may pose risks to us.

Our use of AI could give rise to legal or regulatory

action, create liabilities, or materially harm our business.

While we aim to develop and use AI and machine learning technology responsibly

and attempt to mitigate ethical and legal issues presented by its use, we may ultimately be unsuccessful in identifying or resolving

issues before they arise.

Further, as the technology is rapidly evolving, costs and obligations could be imposed on us to comply with

new regulations.

also could be exposed to the risks of machine learning technology if third-party service providers or any counterparties, whether or

not known to us, also use machine learning technology in their business activities.

We will not be in a position to control the use of

such technology in third-party products or services.

Use by third-party service providers could give rise to issues pertaining to data

privacy, data protection, and intellectual property considerations.

business is dependent on a single customer .

derives almost all of its revenue from a single customer.

This customer accounted for 99% of its revenue for the year ended December

31, 2024 and the nine-month transition period ended December 31, 2023.

The sudden loss of this customer would materially and adversely

affect its operating results.

may be subject to a variety of claims arising from its transportation operations .

uses the services of thousands of third-party transportation companies in connection with its transportation operations.

time, the drivers employed and engaged by the motor carriers with which SemiCab contracts are involved in accidents, which may result

in serious personal injuries.

The resulting types and amounts of damages may be excluded by or exceed the amount of insurance coverage

maintained by the contracted motor carrier.

SemiCab contractually requires all motor carriers it works with to carry at least $1,000,000

in automobile liability insurance.

SemiCab also requires all contracted motor carriers to maintain workers’ compensation and other

insurance coverage as required by law.

Most contracted motor carriers have insurance exceeding these minimum requirements, as well as

cargo insurance in varying policy amounts.

Although these drivers are not employees of SemiCab and all of these drivers are employees,

owner-operators, or independent contractors of the contracted motor carriers, claims may be asserted against SemiCab.

Claims against

SemiCab may exceed the amount of its insurance coverage or may not be covered by insurance at all.

A material increase in the frequency

or severity of accidents, liability claims, workers’ compensation claims, or unfavorable resolutions of claims could materially

and adversely affect SemiCab’s operating results.

In addition, significant increases in insurance costs or the inability to purchase

insurance as a result of these claims could reduce its profitability.

SemiCab’s involvement in the transportation of certain goods,

including but not limited to, hazardous materials, could also increase its exposure in the event one of its contracted motor carriers

is involved in an accident resulting in injuries or contamination.

its customer contracts, SemiCab may agree to assume cargo liability up to a stated maximum.

Although SemiCab is not legally liable for

loss or damage to its customers’ cargo, from time to time, claims may be asserted against SemiCab for cargo losses.

SemiCab maintains

a broad contingent cargo liability insurance policy to help protect it against catastrophic losses that may not be recovered from the

responsible contracted carrier.

SemiCab also carries various liability insurance policies, including automobile and general liability

business is subject to numerous government regulations .

operations are regulated and licensed by various federal, state, and local transportation agencies in the U.S.

and similar governmental

agencies in foreign countries in which it operates.

SemiCab is subject to licensing and regulation as a property freight broker and

is licensed by the DOT to arrange for the transportation of property by motor vehicle.

The DOT prescribes qualifications for acting in

this capacity, including certain surety bonding requirements.

SemiCab also has and maintains other licenses as required by law.

failure to maintain required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation

of its operating permits and licenses

or regulatory changes could affect the economics of the transportation industry by requiring changes in operating practices or influencing

the demand for, and the cost of providing, transportation services.

SemiCab may experience an increase in operating costs, such as security

costs, as a result of governmental regulations that have been or will be adopted in response to terrorist activities and potential terrorist

No assurance can be given that SemiCab will be able to pass these increased costs on to its customers in the form of rate

increases or surcharges, and its operations and results of operations may be materially and adversely affected as a result.

Related to Ownership of Our Securities

may raise additional funds in the future through the issuance of equity securities or debt, which funding may be dilutive to stockholders

or impose operational restrictions on us.

December 6, 2024, we completed a public offering of an aggregate of 21,000 shares of our common stock, pre-funded warrants to purchase

up to 258,412 shares of common stock, Series A warrants to purchase up to 279,412 shares of common stock, and Series

B warrants to purchase up to 279,412 shares of common stock.

Immediately prior to the completion of the offering, we had 14,215,176 shares

of our common stock outstanding.

Additionally, due to price adjustment provisions contained in the Series A and Series B warrants, the

Series A warrants became exercisable into 1,133,652 shares of common stock and the Series B warrants became exercisable into 1,910,975

shares of our common stock.

All of the pre-funded warrants and Class B warrants were exercised in their entirety.

As a result of the offering,

shareholders who owned shares immediately prior to the completion of the offering experienced immediate and substantial dilution as a

result of the issuance of the shares of common stock on December 6, 2024 and the subsequent exercise of the pre-funded warrants and Class

may need to raise additional capital through the sale of equity securities or the issuance of short- and long-term debt during the next

12 months to fund our operations and growth.

If we raise additional funds by issuing shares of our common stock, our stockholders will

experience dilution.

If we raise additional funds by issuing securities exercisable or convertible into shares of our common stock, our

stockholders will experience dilution in the event the securities are exercised or converted, as the case may be, into shares of our

common stock.

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

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

or declaring dividends.

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

those of the securities held by our stockholders.

market price of our common stock is likely to be highly volatile and subject to wide fluctuations.

market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including:

in our annual or quarterly operating results;

in capital market conditions or other adverse economic conditions;

or downgrades by securities analysts following our stock;

in estimates of our future financial results by securities analysts following our stock;

achievement, or our failure to achieve, projected financial results;

sales of our stock by our officers, directors or significant stockholders;

perceptions of our business and prospects relative to other investment alternatives;

acquisitions,

joint ventures, capital commitments or other significant transactions by us or our competitors;

economic, legal and regulatory factors unrelated to our performance;

other risks and uncertainties set forth herein.

stock market experiences significant price and volume fluctuations that affect the market price of the stock of many companies and that

are often unrelated or disproportionate to the operating performance of these companies.

Market fluctuations such as these may seriously

harm the price of our common stock.

Further, securities Series Action suits have been filed against companies following periods of market

volatility in the price of their securities.

If such an action is instituted against us, we may incur substantial costs and a diversion

of management attention and resources, which would seriously harm our business, financial condition and results of operations.

the initiation of any such action could cause the price of our common stock to decline

quarterly and annual operating results may fluctuate due to increases and decreases in sales, raw material and supply costs, and other

quarterly and annual operating results may fluctuate significantly because of a variety of factors, including:

or decreases in sales of our products and services;

ability to operate effectively in new markets;

availability and costs for management and other personnel;

in consumer preferences and competitive conditions;

publicity relating to us, our vendors or the products we sell;

in the type and delivery of our raw materials and supplies;

consumer confidence and fluctuations in discretionary spending;

in raw material and supply costs, labor costs or other variable costs and expenses;

distractions or unusual expenses associated with our expansion plans;

impact of inclement weather, natural disasters, and other calamities;

conditions in the jurisdictions in which we operate and nationally.

a result of the factors discussed above, as well as the other factors set forth herein, our operating results for one fiscal quarter

or year are not necessarily indicative of results to be expected for any other fiscal quarter or year.

These fluctuations may cause future

operating results to fall below our estimates or the expectations of our stockholders or the investment community in general.

results of operations do not meet the expectations of our stockholders or the investment community, the price of our common stock may

common stock may be affected by price fluctuations, which could adversely impact the value of our common stock.

common stock has experienced, and is likely to experience, significant price and volume fluctuations in the future which could adversely

affect the market prices of our common stock without regard to our operating performance.

In addition, we believe that factors such as

quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause

the market price of our common stock to fluctuate substantially.

These fluctuations may also cause short sellers to periodically enter

the market in the belief that we will have poor results in the future.

We cannot predict the actions of market participants and, therefore,

can offer no assurances that the market for our common stock will be stable or appreciate over time.

sales practice requirements may limit a stockholder’s ability to buy and sell our securities.

June 30, 2020, the SEC implemented Regulation Best Interest requiring that “A broker, dealer, or a natural person who is an associated

person of a broker or dealer, when making a recommendation of any securities transaction or investment strategy involving securities

(including account recommendations) to a retail customer, shall act in the best interest of the retail customer at the time the recommendation

is made, without placing the financial or other interest of the broker, dealer, or natural person who is an associated person of a broker

or dealer making the recommendation ahead of the interest of the retail customer...” This is a significantly higher standard for

broker-dealers to recommend securities to retail customers than before under prior suitability rules of the Financial Industry Regulatory

Authority, Inc.

FINRA suitability rules do still apply to institutional investors and require that in recommending

an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.

Prior to recommending securities to their customers, broker-dealers must make reasonable efforts to obtain information about the customer’s

financial status, tax status, investment objectives and other information, and, for retail customers, determine that the investment is

in the customer’s “best interest,” and meet other SEC requirements.

Both SEC Regulation Best Interest and FINRA’s

suitability requirements may make it more difficult for broker-dealers to recommend that their customers buy speculative, low-priced

securities and may have the effect of reducing the level of trading activity in our securities.

As a result, fewer broker-dealers may

be willing to make a market in our common stock.

investment in our securities is speculative, and there can be no assurance of any return on any such investment.

are cautioned that an investment in the securities offered hereby is highly speculative and involves a significant degree of risk.

success of our business and the ability to achieve our business goals and objectives, as outlined in this prospectus, are subject to

numerous uncertainties, contingencies and risks.

As such, there is no assurance that investors will realize a return on their investment

or that they will not lose their entire investment.

Potential investors should carefully consider whether such a speculative investment

is suitable for their financial situation and investment objectives before purchasing securities.

identified material weaknesses in our internal control over financial reporting during the assessment of our internal control that we

performed in connection with the preparation of our audited consolidated financial statements included herein.

adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require management to complete an annual assessment of our

internal control over financial reporting.

During the preparation of our audited consolidated financial statements for the year ended

December 31, 2024, we identified several control deficiencies that have been classified as material weaknesses in our internal control

over financial reporting.

A material weakness is a control deficiency that results in a more than remote likelihood that a material misstatement

of our annual or interim financial statements will not be prevented or detected on a timely basis by our employees in the normal course

of their assigned functions.

Based on the material weaknesses identified, management concluded that our internal control over financial

reporting was not effective as of December 31, 2024.

management, in consultation with our independent registered public accounting firm, concluded that the following material weaknesses

existed in the following areas as of December 31, 2024:

lack sufficient resources in our accounting department restricting our ability to review and approve certain material journal entries

which increases the likelihood that a material misstatement of interim or annual financial statements might not be prevented.

evaluated our current process of review and approval of certain material journal entries and concluded this deficiency represented

a material weakness.

lack sufficient resources in our accounting department, which restricts our ability to review certain material reconciliations related

to financial reporting in a timely manner.

Due to our size and nature, segregation of all conflicting duties may not always be possible

and may not be economically feasible.

Management evaluated the impact of our failure to have proper segregation between the preparation,

review and approval of account reconciliations and concluded that this control deficiency represented a material weakness.

to resource restrictions, we have not established a three-way match of documents or other controls precise enough to detect a material

misstatement in revenue.

Management evaluated our current process of determining the occurrence of revenue and concluded this deficiency

represented a material weakness.

standards that must be met for management to assess internal control over financial reporting are complex and require significant documentation,

testing and possible remediation.

We may encounter problems or delays in completing the activities necessary to make future assessments

of our internal control over financial reporting and completing the implementation of any necessary improvements.

Future assessments

may require us to incur substantial costs and may require a significant amount of time and attention of management, which could seriously

harm our business, financial condition and results of operations.

we are unable to establish and maintain an effective system of internal control, we may not be able to accurately report our financial

results on a timely basis or prevent fraud.

internal control is necessary for us to provide reliable financial reports and prevent fraud.

If we cannot provide reliable financial

reports on a timely basis or prevent fraud, we may not be able to manage our business as effectively as we would if an effective internal

control environment existed, and our business and reputation with investors may be harmed.

We have not performed an in-depth analysis

to determine if undiscovered failures of internal controls exist and may in the future discover areas of our internal control environment

that need improvement.

If we are unable to establish and maintain an effective system of internal control, we may not be able to report

our financial results in an accurate and timely manner or prevent fraud.

are working on improving and simplifying our internal processes and implement enhanced controls to address the material weaknesses in

our internal control over financial reporting discussed above and to remedy the ineffectiveness of our disclosure controls and procedures.

We are addressing our accounting resource requirements to help remediate the segregation of duties and plan to implement a concise “three-way”

document matching procedure.

These material weaknesses will not be considered as remediated until the applicable remediated controls

are operating for a sufficient period and management has concluded, through testing, that these controls are operating effectively.

requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract

4 unchanged sentences

for financial reporting.

For example, Section 404 of the Sarbanes-Oxley Act requires that our management report on the effectiveness

of our internal controls structure and procedures for financial reporting.

Section 404 compliance may divert internal resources and will

take a significant amount of time and effort to complete.

If we fail to maintain compliance under Section 404, or if our internal control

over financial reporting continues to not be effective as defined under Section 404, we could be subject to sanctions or investigations

by the Nasdaq Stock Market, the SEC, or other regulatory authorities.

Furthermore, investor perceptions of our company may suffer, and

this could cause a decline in the market price of our common stock.

Any failure of our internal controls could have a material adverse

effect on our stated results of operations and harm our reputation.

If we are unable to implement these changes effectively or efficiently,

it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from

our independent auditors.

We may need to hire a number of additional employees with public accounting and disclosure experience in order

to meet our ongoing obligations as a public company, particularly if we become fully subject to Section 404 and its auditor attestation

requirements, which will increase costs.

Our management team and other personnel will need to devote a substantial amount of time to

new compliance initiatives and to meeting the obligations that are associated with being a public company, which may divert attention

from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

UNRESOLVED STAFF COMMENTS

Compliance with the Sarbanes-Oxley Act may divert internal resources and will take a significant amount of time

and effort to achieve.

If we fail to maintain compliance with the Sarbanes-Oxley Act, we could be subject to sanctions or investigations

by the Nasdaq, the SEC, or other regulatory authorities.

Furthermore, investor perceptions of us may decline as a result.

failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation.

we are unable to implement necessary changes effectively or efficiently, it could harm our operations, financial reporting or financial

results and could result in an adverse opinion on internal controls from our independent auditors.

We may need to hire a number of additional

employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company, particularly

if we become fully subject to the Sarbanes-Oxley Act and its auditor attestation requirements, which will increase costs.

Our management

team and other personnel will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations

that are associated with being a public company, which may divert attention from other business concerns and have a material adverse

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

we are not able to comply with the applicable continued listing requirements of the Nasdaq, it could delist us, which may adversely affect

the market price and liquidity of our common stock.

common stock currently trades on the Nasdaq under the symbol “RIME”.

For our common stock to continue trading on the Nasdaq,

we must meet continued listing standards mandated by the Nasdaq.

These continued listing standards include specifically enumerated criteria,

including maintaining a $1.00 minimum closing bid price and maintaining stockholder’s equity of at least $2,500,000.

to meet any of the continued listing standards of the Nasdaq, our common stock could be delisted.

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 $872,000 on June 30 th 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 13, 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 $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 8-K filed on November 13, 2024, the Nasdaq had determined that we were in compliance with the stockholders’

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

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

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

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

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

hearing before the Nasdaq hearings panel.

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

On that day, the closing

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

business days.

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

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

We will be subject to a mandatory

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

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

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

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

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

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

If our common stock were

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

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

listing market may limit our ability to make a market in our common stock and which may adversely affect the market price and liquidity

of our common stock.

laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies,

increase legal and financial compliance costs and make some activities more time consuming.

laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result,

may evolve over time as new guidance is provided by the courts and applicable government agencies.

This could result in continuing uncertainty

regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

If our efforts

to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities

related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be

adversely affected.

a “smaller reporting company” under applicable law, we are subject to lessened disclosure requirements, which could leave

our stockholders without information or rights available to stockholders of more mature companies.

are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

As a smaller reporting company, we are permitted

to comply with reduced disclosure obligations in our SEC filings compared to larger public companies.

This includes, but is not limited

to, simplified executive compensation disclosures, reduced financial statement requirements, and less stringent narrative disclosure

While these scaled disclosure requirements may reduce the burden on us and provide some cost savings, investors should be

aware that they may also receive less information about us than they would from a larger public reporting company.

The designation as

a smaller reporting company and the accompanying reduced disclosure requirements could make it more difficult for investors to fully

assess the value and risks of an investment in our securities.

Consequently, the designation as a smaller reporting company under the

SEC rules increases the risk to investors, as it may limit the amount of publicly available information to assess our performance, prospects,

and financial health.

Potential investors should consider the implications of these reduced disclosure requirements when making an investment

SEC rules governing the trading of “penny stocks” may limit the trading and liquidity of our common stock, which may affect

the trading price of our common stock.

common stock is a “penny stock” as defined under Rule 3a51-1 of the Exchange Act and is accordingly subject to SEC rules

and regulations that impose limitations upon the manner in which our common stock can be publicly traded.

These regulations require the

delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated

Under these regulations, certain brokers who recommend penny stocks to persons other than established customers or certain accredited

investors must make a special written suitability determination regarding the purchaser and receive the purchaser’s written agreement

to participate in the transaction prior to sale.

These regulations may have the effect of limiting the trading activity of our common

stock and reducing the liquidity of an investment in our common stock.

have never paid any dividends on our common stock and do not intend to pay any dividends on our common stock in the foreseeable future.

We intend to use any cash generated from our operations for reinvestment in the growth of our business.

Any determination to pay dividends

in the future will be made by our board of directors and will depend upon our results of operations, financial condition, contractual

restrictions and growth plan, restrictions imposed by applicable law, and other factors deemed relevant by our board of directors.

the realization of a gain on stockholders’ investments in our common stock will depend on the appreciation of the price of our

common stock.

We can provide no assurance that our common stock will appreciate in value or even maintain the price at which stockholders

purchased their shares.

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

What changed 10-K

Item 1A. Risk Factors