What changed in this filing

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Item 9A. Controls and Procedures

2025-04-15 compared with 2023-07-14 · 2115 added, 1887 removed, 287 unchanged (93% of the section changed)

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

management, under the supervision and with the participation of our Principal Executive Officer (our Chief Executive Officer) and Principal

Financial Officer (our Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures as of March

31, 2023, the end of our fiscal year covered by this report.

The term “disclosure controls and procedures,” as defined in

Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures

of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits

under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange

Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed

to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated

and communicated to the company’s management, including its principal executive and principal financial officers, or person performing

similar functions, as appropriate to allow timely decisions regarding required disclosure.

recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance

of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible

controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2023, our Chief Executive

Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and

15d-15(f) under the Exchange Act.

This rule defines internal control over financial reporting as a process designed by, or under the

supervision of Company management to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with U.S.

Management has assessed the effectiveness of our internal

control over financial reporting using the components established in the Internal Control-Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of the Treadway Commission.

system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of

financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

A material weakness is any deficiency, or combination of deficiencies, in internal control over financial reporting, such

that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will

not be prevented or detected on a timely basis.

upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting

was effective as of the year covered by this Annual Report.

Changes in Internal Controls

were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2023, that materially

affected, or were reasonably likely to materially affect the Company’s internal control over financial reporting.

Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal

of Disclosure Controls and Procedures

maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act

reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that

such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,

as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and

procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable

assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit

relationship of possible controls and procedures.

Our disclosure controls and procedures were designed to provide reasonable assurance

that the controls and procedures would meet management’s objectives.

of December 31, 2024, we carried out an evaluation of the effectiveness of our disclosure controls and procedures as defined by Rule

13a-15(e) under the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer

and Chief Financial Officer.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of

December 31, 2024, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are

required to disclose in reports that we file or submit under the Exchange Act is:

(i) recorded, processed, summarized and reported within

the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our

Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Report on Internal Control over Financial Reporting

management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining

adequate internal control over financial reporting.

Internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external

purposes in accordance with GAAP.

Internal control over financial reporting includes policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect

the transactions and dispositions of our assets;

reasonable assurance that transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance

with GAAP, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors;

reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could

have a material effect on our consolidated financial statements.

control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent

Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses

in judgment and breakdowns resulting from human failures.

Internal control over financial reporting also can be circumvented by collusion

or improper management override.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected

on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial

reporting process.

Therefore, it is possible to design safeguards to reduce, though not eliminate, this risk.

management used the framework set forth in the report entitled Internal Control – Integrated Framework (2013) published

by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal

control over financial reporting.

Management’s report was not subject to attestation by the Company’s independent registered

public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual

Based on this assessment, our management concluded that our internal control over financial reporting

was not effective at December 31, 2024, due to the existence of material weaknesses in our internal controls.

material weakness is a control deficiency, or a combination of control deficiencies, that results in a more than remote likelihood that

a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Our 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:

lacked 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.

lacked sufficient resources in our accounting department, which resulted in our ability to have proper segregation of duties between

the preparation, review and approval certain material reconciliations related to financial reporting in a timely manner.

to our lack of sufficient resource restrictions in our accounting department, we have not established a three-way match of documents

or other controls precise enough to detect a material misstatement in revenue.

remediate these material weaknesses, we intend to conduct a thorough review of the accounting department to ensure that the staff has

the appropriate training and experience.

We may hire one or more accounting persons to assist us with our accounting and financial reporting

We also intend to implement more comprehensive written policies and procedures that address separation of duties and proper

accounting and financial reporting.

Notwithstanding

the existence of these material weaknesses in our internal controls, we believe that our consolidated financial statements fairly present,

in all material respects, our balance sheets at December 31, 2024 and 2023, our statements of operations, stockholders’ deficit

and cash flows for the year ended December 31, 2024, and our statements of operations, stockholders’ equity and cash flows the nine-month period ended December 31, 2023 in conformity with GAAP.

annual report does not include an attestation report of our independent registered public accounting firm regarding internal control

over financial reporting.

Our management’s report was not subject to attestation by our independent registered public accounting

firm pursuant to rules of the SEC that permit us to provide only our management’s report in this annual report.

in Internal Control Over Financial Reporting

has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected,

or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

10b5-1 Trading Arrangements

the three-month period ended December 31, 2024, none of our officers or directors adopted or terminated a “Rule 10b5-1 trading

arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

following table sets forth certain information with respect to our executive officers, directors and significant employees as of the

date of this filing.

Executive Officer, Director

Revenue Officer, Director

Financial Officer

Counsel, Director

following information sets forth the backgrounds and business experience of our directors and executive officers:

Ault, III, was appointed to the Board of Directors as Executive Chairman in April 2023.

Ault has served as Executive Chairman

of the Board of Directors of Ault Alliance since January 2021.

Ault previously served as Chief Executive Officer of Ault Alliance

from December 2017 to January 2021 and as Executive Chairman from March to December 2017.

Ault is a seasoned business professional

and entrepreneur who has spent decades identifying value in various financial markets including equities, fixed income, commodities,

and real estate.

Ault has served as the Chairman of the Board of Ault Disruptive Technologies Corporation (“ADTC”), an

NYSE listed Special Purpose Acquisition Company, since its incorporation in February 2021.

On February 25, 2016, Mr.

Ault founded Alzamend

(“Alzamend”), a biotechnology firm dedicated to finding the treatment, prevention and cure for Alzheimer’s

Disease and served as its Chairman until its initial public offering, when he became Alzamend’s Chairman Emeritus and a consultant.

Ault has served as Chairman and Chief Executive Officer of Ault & Company, Inc., a Delaware holding company, since December 2015,

and as Chairman of Avalanche International Corp.

(“Avalanche”), a publicly traded Nevada company, which as such is not required

to file periodic reports, since September 2014.

Since January 2011, Mr.

Ault has been the Vice President of Business Development for

MCKEA Holdings, LLC, a family office.

Throughout his career, Mr.

Ault has consulted for publicly traded and privately held companies,

providing each of them the benefit of his diversified experience, that range from development stage to seasoned businesses.

Board has concluded that Mr.

Ault is qualified to serve on the Board and as Executive Chairman because of his significant business background.

Atkinson joined the Company in January 2008 and served as General Counsel and Corporate Secretary.

In November 2009, Mr.

was appointed as Interim Chief Executive Officer and was promoted as the Company’s permanent Chief Executive Officer in May, 2012.

Atkinson was appointed as a Director of the Company on August 11, 2022.

following chart sets forth certain information about each of our directors and executive officers.

Positions Held

Gary Atkinson

Chief Financial Officer, Secretary and Director

Chief Financial Officer and General Counsel

Bernardo Melo

Chief Revenue Officer and Director

Harvey Judkowitz

Mathieu Peloquin

believe that our board of directors should be composed of individuals with sophistication and experience in many substantive areas that

impact our business.

We believe that experience, qualifications or skills in the following areas are most important:

(i) organizational

leadership and vision;

(ii) strategic, financial and operational planning;

(iii) AI technology and consumer electronics industry experience;

(iv) corporate restructuring and performance enhancement;

(v) corporate finance;

and (vi) experience as a board member of other corporations.

These areas are in addition to the personal qualifications described in this section.

We believe that our current board members possess

the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for

these board members below.

principal occupations and business experience of our current directors are as follows:

Atkinson has served as our Chief Executive Officer since May 2012 and as a member of our board of directors since August 2022.

Atkinson served as our Interim Chief Executive Officer from November 2009 to May 2012 and as our General Counsel from January

2008 to November 2009.

Atkinson is a licensed attorney in Florida and Georgia.

He graduated from the University of Rochester with a Bachelor’s Degree in Economics and has been awarded a dual-degree J.D./M.B.A.

from Case Western Reserve University School of Law and Weatherhead School of Management.

Company believes that Mr.

Atkinson is qualified to serve on the Board of Directors because of his 15+ years of karaoke industry experience

and management experience.

Melo has been with the Company since February 2003.

Melo was appointed as Chief Revenue Officer on April 22, 2022 and has served

as the Vice President of Global Sales and Marketing (“VP of Sales”) since 2008.

Melo was appointed as a Director of the

Company on July 27, 2022.

During his tenure at the Company, Mr.

Melo has overseen the sales and operations of the music division as well

as managed the customer service department.

Before taking over the responsibility of VP of Sales, Mr.

Melo held dual roles with the Company

managing the operations, licensing and sales of the music division while concentrating on hardware sales for the Latin America and Canada

market as well as key U.S.

He graduated from the University of Rochester with

a bachelor’s degree in economics and received a Juris Doctorate and Masters in Business Administration from Case Western Reserve

University School of Law and Weatherhead School of Management.

believe that Mr.

Atkinson is qualified to serve on our board of directors because of his strong leadership, business acumen and analytical

skills along with his extensive experience in the consumer electronics industry.

Melo has served as our Chief Revenue Officer since April 2022 and served as our Vice President of Global Sales and Marketing from

2008 to April 2022.

He has also served as a member of our board of directors since July 2022.

Prior to that, Mr.

Melo held dual roles

with us managing the operations, licensing and sales of the music division while concentrating on hardware sales for the Latin America

and Canadian market as well as key U.S.

accounts such as Walmart.

Prior to joining the Company, Mr.

Melo held a consulting role for Rewards Network

formerly Idine.

Melo’s assignment during his tenure was improving their operational procedures while increasing efficiencies

and lowering operating cost.

Melo also worked at Coverall North America as Director of Sales managing a startup initiative for the

company covering 15 regional office and 40 sales reps across North America focusing on franchise sales.

Melo has over 16

years of sales, marketing and management experience.

Company believes that Mr.

Melo is qualified to serve on the Board of Directors because of his 16+ years in senior positions sales and

marketing experience as well as his karaoke industry and management experience.

Marquis joined the Company in June 2008 as Controller and Principal Accounting Officer and was appointed as the Company’s Chief

Financial Officer in May 2012.

For the past 27 years Mr.

Marquis has served as Controller and or Chief Financial Officer for several

manufacturing and distribution companies in the South Florida area.

Some of these companies include Computer Products, Inc (Artesyn Technologies

Inc), US Plastic Lumber Corp., Casi-Rusco, (division of Interlogix Inc.), DHF Industries, Inc and Ingear Fashions, Inc.

Marquis graduated

from Bryant University with a Bachelor’s Degree in Business Administration with a major in accounting.

Marquis is a Certified

Public Accountant in the state of Florida.

Nisser was appointed as director of the Company On April 5, 2023.

Nisser has served as President of Ault Alliance, Inc.

(“AAI)” since January 2021, as a member of the Board of Directors of Ault Alliance since September 2020 and as General Counsel

of Ault Alliance since May 2019.

Nisser previously served as Executive Vice President of Ault Alliance from May 2019 to January 2021.

Nisser has served as the President, General Counsel and on the Board of Directors of BitNile Metaverse, Inc., a Nasdaq listed company

that operates the BitNile.com metaverse platform, since March 2023.

Nisser is the Executive Vice President and General Counsel of

Nisser has served as the President, General Counsel and on the board of directors of ADTC since its incorporation in February

Nisser has served on the board of directors of Alzamend since September 1, 2020 and has served as its Executive Vice President

and General Counsel since May 1, 2019.

From October 31, 2011 through April 26, 2019, Mr.

Nisser was an associate and subsequently a partner

with Sichenzia Ross Ference LLP (“SRF”), a law firm based in New York City.

While with SRF, his practice was concentrated

in national and international corporate law, with a particular focus on U.S.

securities compliance, public as well as private M&A,

equity and debt financings and corporate governance.

Nisser drafted and negotiated a variety of agreements related to reorganizations,

share and asset purchases, indentures, public and private offerings, tender offers and going private transactions.

Nisser also represented

clients’ special committees established to evaluate M&A transactions and advised such committees’ members with respect

to their fiduciary duties.

Nisser is fluent in French and Swedish as well as conversant in Italian.

Nisser received his B.A.

from Connecticut College in 1992, where he majored in International Relations and Economics.

He received his LLB from the University

of Buckingham School of Law in 1999.

Board has concluded that Mr.

Nisser is qualified to serve on the board of directors because of his extensive legal experience involving

complex transactions and comprehensive knowledge of securities laws and corporate governance requirements applicable to listed companies.

Cragun was appointed as a director of the Company on July 27, 2022.

Cragun has served as the Chief Financial Officer AAI since

August 2020, and from October 2018 until August 2020, served as the Chief Accounting Officer of AAI.

Since June 2021, Mr.

Cragun has served on a part-time basis as the Senior Vice President of Financial of Alzamend, and between December 2018 and June 2021,

he served as Chief Financial Officer.

He served as a CFO Partner at Hardesty, LLC, a national executive services firm since October 2016.

His assignments at Hardesty included serving as CFO of CorVel Corporation, a $1.1 billion market cap publicly traded company (NASDAQ:

CRVL) and a nationwide leader in technology driven, healthcare-related, risk management programs and of RISA Tech, Inc.

a private structural

design and optimization software company.

Cragun was also CFO of two NASDAQ-listed companies, Local Corporation, from April 2009

to September 2016, which operated Local.com, a U.S.

top 100 website, and Modtech Holdings, Inc., from June 2006 to March 2009, a supplier

of modular buildings.

Prior thereto, he had financial leadership roles with increasing responsibilities at MIVA, Inc., ImproveNet, Inc.,

NetCharge Inc., C-Cube Microsystems, Inc, and 3-Com Corporation.

Cragun has served on the board of directors and is the chairman

of the audit committee of Verb Technology Company, Inc., a Nasdaq listed software-as-a-service applications platform developer, since

September 2018.

Cragun began his professional career at Deloitte.

Cragun holds a Bachelor of Science degree in accounting from

Colorado State University-Pueblo.

Cragun’s industry experience is vast, with extensive experience in fast-growth environments

and building teams in more than 20 countries.

Cragun has led multiple financing transactions, including IPOs, PIPEs, convertible

debt, term loans and lines of credit.

Board has concluded that Mr.

Cragun is qualified to serve on the Board of Directors because of his experience with multiple financing

transactions including IPO’s, PIPEs, convertible debt and lines of credit.

Turner was appointed as a director of the Company on July 27, 2022 and as General Counsel, on a part-time basis, in April 2023.

Turner has served as the Deputy General Counsel and VP of Legal Affairs at Ault Alliance, Alzamend and Avalanche since April 2021.

Prior to joining AAI, Mr.

Turner spent approximately 19 years, including the last 10 as a partner, at SRF.

Turner has significant

practice involving corporate and securities law, including public and private equity and debt offerings, mergers and acquisitions, corporate

governance and securities law compliance.

Turner received B.A.

degrees from Elmira College in political science and international

relations, and his J.D.

degree from American University, Washington College of Law, where he was a member of the American University

International Law Review.

Board has concluded that Mr.

Turner is qualified to serve on the board of directors because of his extensive legal experience involving

complex transactions and comprehensive knowledge of securities laws and corporate governance requirements applicable to listed companies.

Judkowitz has served as a Director of the Company since March 29, 2004 and is the chairman of the Audit Committee.

He is licensed

as a CPA in New York and Florida.

From 1988 to the present date, Mr.

Judkowitz has conducted his own CPA practices.

He has served as

the Chairman and CEO of UniPro Financial Services, a diversified financial services company up until the company was sold in September

He was formerly the President and Chief Operating Officer of Photovoltaic Solar Cells, Inc.

Company believes that Mr.

Judkowitz is qualified to serve on the Board of Directors because he is a qualified CPA with over 19+ years’

experience on the Board.

Kling was appointed as a Director of the Company on May 9, 2017.

Kling has spent his entire career in the toy industry, most

notably serving as CEO of View-Master, the iconic stereoscopic toy company, which later purchased Ideal Toy from CBS and later became

View-Master Ideal, publicly traded on the Nasdaq.

View-Master Ideal later acquired California Plush Toys and the entire group was later

acquired by Tyco Toys in 1989.

Kling later went into private M&A consulting and sat on the board of Russ Berrie & Co (currently

known as Kids Brands, Inc.) for 21 years advising on the acquisition of several toy companies.

Kling has also served on the Board

of Crown Crafts, a large distributor of infant, toddler, and juvenile consumer products and on the board of Lancit Media Entertainment,

a children’s and family media production company (formerly listed on the Nasdaq).

Kling has been involved in many

major toy company acquisitions of brands such as Melissa & Doug and Brio.

Company believes that Mr.

Kling is qualified to serve on the Board of Directors because of his success and relationships in the toy industry

and his deep understanding of consumer products and market awareness of mergers and acquisitions in the toy industry.

Peloquin was appointed as a Director of the Company on December 1, 2021.

Peloquin was appointed Senior Vice-President, Marketing

and Communications at Stingray in 2013 and oversees marketing, communication strategies, content and investor relations.

brings more than 20 years of experience as an expert marketer, strategist and inspiring leader.

Prior to joining Stingray, Mr.

was Vice President of Marketing at Transcontinental Media Inc.

and Vice President of Transcontinental Media Inc.’s Digital Marketing

Solutions Group from 2010 to 2013.

He also held several executive positions at Reader’s Digest Magazines Canada Limited and co-founded

Equinox Marketing Services.

Peloquin is a CPA, CMA and holds a Bachelor of Commerce from the School of Management of the Université

du Québec à Montréal.

Company believes that Mr.

Peloquin is qualified to serve as a member of the Board of Directors due to his extensive business experience.

Foreman was appointed as Director of the Company on May 23, 2022.

Foreman has been a veteran of the toy industry for over

Foreman started his career at Fable Toys as a territory sales rep for the Jersey Shore and within ten years became SVP

for Galoob Toys, where he was primarily responsible for developing the direct import business.

He has founded multiple toy companies

over his career, including co-founding Play-By-Play Toy’s and Novelties and more recently Play Along Toys, a leading toy company,

which was subsequently sold to Jakks Pacific in 2004.

Foreman later went on to found his third start up which became Basic Fun!,

now the makers of Tonka™ trucks, Carebears™, K’NEX™, Lincoln Logs™, Playhut™.

Foreman serves

as CEO of Basic Fun!, which role he has had since he founded the company in 2009.

He has also served on the boards of directors of the

Toy Association and Licensing Merchandisers association.

He currently chairs the Toy Industry trade show committee which is responsible

for the world famous NY Toy Fair.

Company believes that Mr.

Foreman is qualified to serve as a member of the Board of Directors because of his extensive history and experience

believe that Mr.

Melo is qualified to serve as a member of our board of directors because of his sales and marketing expertise as well

as his significant experience in the consumer electronics industry.

Judkowitz has served as a member of our board of directors since March 2004 and serves as the Chairman of our Audit Committee.

is licensed as a certified professional accountant in New York and Florida and has owned his own accounting firm since 1988.

served as the Chief Executive Officer and Chairman of our board of directors of UniPro Financial Services, a diversified financial services

company, up until the company was sold in September 2005.

Prior to that he served as the President and Chief Operating Officer of Photovoltaic

Solar Cells, Inc., a producer of photovoltaic solar cells.

believe that Mr.

Judkowitz is qualified to serve as a member of our board of directors because of his organizational leadership and management

skills and his accounting expertise.

Kling has served as a member of our board of directors since May 2017.

Kling has spent his entire career in the toy industry.

Kling most recently served as an M&A consultant and served as a member of the board of directors of Russ Berrie & Co (currently

known as Kids Brands, Inc.), a designer, importer, marketer and distributor of infant and juvenile consumer products, for 21 years advising

on the acquisition of several toy companies.

Kling also served as a member of the board of directors of Crown Crafts, a large distributor

of infant, toddler, and juvenile consumer products, and Lancit Media Entertainment, a children’s, and family media production company

that was formerly listed on the Nasdaq.

Prior to that, he served as the Chief Executive Officer of View-Master Ideal, an iconic stereoscopic

toy company that was publicly traded on the Nasdaq and which was later acquired by Tyco Toys in 1989.

Kling has been involved

in many major toy company acquisitions of brands such as Melissa & Doug and Brio.

believe that Mr.

Kling is qualified to serve as a member of our board of directors because of his success and relationships in the toy

industry, his deep understanding of consumer products, and his experience with mergers and acquisitions in the toy industry.

Peloquin has served as a member of our board of directors since December 2021.

Peloquin has served as the Senior Vice-President,

Marketing and Communications at Stingray Group since 2013 and oversees marketing, communication strategies, content and investor relations.

Prior to joining Stingray Group, Mr.

Peloquin served as the Vice President of Marketing at Transcontinental Media Inc.

and Vice President

of Transcontinental Media Inc.’s Digital Marketing Solutions Group from 2010 to 2013.

He also held several executive positions

at Reader’s Digest Magazines Canada Limited and co-founded Equinox Marketing Services.

Peloquin is a certified public account,

certified management accountant, and holds a Bachelor of Commerce from the School of Management of the Université du Québec

believe that Mr.

Peloquin is qualified to serve as a member of our board of directors because of his more than 20 years of experience

as an expert marketer, strategist, and inspiring leader.

Foreman has served as a member of our board of directors since May 2022.

Foreman has served as the Chief Executive Officer

of Basic Fun!, which sells children’s toys under the Tonka™, Carebears™, K’NEX™, Lincoln Logs™, and

Playhut™ brands, since he founded the company in 2009.

Prior to that, he founded several toy companies, including Play-By-Play

Toy’s and Novelties, a designer and distributor of stuffed toys, and more recently Play Along Toys, a leading toy company which

was subsequently sold to Jakks Pacific in 2004.

He currently chairs the Toy Industry trade show committee which is responsible for the

world-famous NY Toy Fair, and has also served on the boards of directors of the Toy Association and Licensing Merchandisers association.

believe that Mr.

Foreman is qualified to serve as a member of our board of directors because of his extensive history and experience

in the toy business, including his deep knowledge of licensing, operations, sales and marketing, M&A, and capital markets.

Nominating Committee is responsible for identifying individuals qualified to become directors.

The Nominating Committee seeks to identify

director candidates based on input provided by a number of sources, including (1) the Nominating Committee members, (2) our other directors,

(3) our stockholders, (4) our Chief Executive Officer or Chairman, and (5) third parties such as professional search firms.

In evaluating

potential candidates for director, the Nominating Committee considers the entirety of each candidate’s credentials.

Qualifications

for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing

composition of the Board of Directors.

Nominating and Corporate Governance Committee is responsible for identifying individuals qualified to become directors.

The Nominating

and Corporate Governance Committee seeks to identify director candidates based on input provided by several sources, including:

of our Nominating and Corporate Governance Committee, (ii) our other directors, (iii) our stockholders, (iv) our Chief Executive Officer

and Chairman of our board of directors, and (v) third parties such as professional search firms.

In evaluating potential candidates for

director, the Nominating Committee considers the entirety of each candidate’s credentials.

Qualifications for consideration as

a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of

our board of directors.

However, at a minimum, candidates for director must possess:

2 unchanged sentences

ability to make independent analytical inquiries;

willingness and ability to devote adequate time and resources to diligently perform Board and committee duties;

willingness and ability to devote adequate time and resources to diligently perform board of directors and committee duties;

appropriate and relevant business experience and acumen.

4 unchanged sentences

expert” as such term is defined by the Securities and Exchange Commission (the “SEC”) in Item 401 of Regulation

the person would qualify as an “independent director”, as such term is defined in the Nasdaq Stock Market Rules;

importance of continuity of the existing composition of the Board of Directors to provide long term stability and experienced oversight;

importance of diversified Board membership, in terms of both the individuals involved and their various experiences and areas of

the person would qualify as an “independent director”, as such term is defined in the Nasdaq’s stock market rules;

importance of continuity of the existing composition of our board of directors to provide long term stability and experienced oversight;

importance of diversification among our board of directors, in terms of both the individuals involved and their various experiences

and areas of expertise.

of the Board of Directors

members of our Audit Committee are Messrs.

Judkowitz, Kling and Foreman, with Mr.

Judkowitz serving as the Chairperson.

Judkowitz, Kling and Foreman.

Judkowitz serves as the Chairperson of our Audit Committee.

Each of Messrs.

Judkowitz, Kling and Foreman is independent under the rules and regulations of the SEC and the listing standards of the Nasdaq Stock

Market applicable to audit committee members.

Judkowitz, Kling and Foreman is independent under the rules and regulations of the SEC and the listing standards of the

Nasdaq applicable to audit committee members.

Our board of directors has determined that Mr.

Judkowitz qualifies as an audit committee

financial expert within the meaning of SEC regulations and meet the financial sophistication requirements of the Nasdaq Stock Market.

Audit Committee has the responsibility for, among other things, (i) selecting, retaining and overseeing our independent registered public

financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of the Nasdaq.

Audit Committee has the responsibility for, among other things:

(i) selecting, retaining and overseeing our independent registered public

accounting firm, (ii) obtaining and reviewing a report by independent auditors that describe the accounting firm’s internal quality

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auditors standards and responsibilities, strategy, scope and timing of audits, any significant risks, and results, (iv) ensuring the

integrity of the Company’s financial statements, (v) reviewing and discussing with the Company’s independent auditors any

other matters required to be discussed by PCAOB Auditing Standard No.

1301, (vi) reviewing, approving and overseeing any transaction

between the Company and any related person and any other potential conflict of interest situations, (vii) overseeing the Company’s

internal audit department, (v) reviewing, approving and overseeing related party transactions, and (viii) establishing and overseeing

procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls

or auditing matters and the confidential, anonymous submission by Company employees of concerns regarding questionable accounting or

auditing matters.

The Audit Committee charter can be found online at https://singingmachine.com/pages/governance.

integrity of our financial statements, (v) reviewing and discussing with our independent auditors any other matters required to be discussed

by PCAOB Auditing Standard No.

1301, (vi) reviewing, approving and overseeing any transaction between us and any related person and any

other potential conflict of interest situations, (vii) overseeing our internal audit department, (viii) reviewing, approving and overseeing

related party transactions, and (ix) establishing and overseeing procedures for the receipt, retention and treatment of complaints received

by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees

of concerns regarding questionable accounting or auditing matters.

The Audit Committee charter can be found online at https://ir.algoholdings.com/investor-governance.

members of our Compensation Committee are Messrs.

Judkowitz, Kling and Foreman, with Mr.

Kling serving as the Chairperson.

Our Compensation

Committee has the responsibility for, among other things, (i) reviewing and approving the chief executive officer’s compensation

based on an evaluation in light of corporate goals and objectives, (ii) reviewing and recommending to the Board the compensation of all

other executive officers, (iii) reviewing and recommending to the Board incentive compensation plans and equity plans, (iv) reviewing

and discussing with management the Company’s Compensation Discussion and Analysis and related information to be included in the

annual report on Form 10-K and proxy statements, and (v) reviewing and recommending to the Board for approval procedures relating to

Say on Pay Votes.

The Compensation Committee charter can be found online at https://singingmachine.com/pages/governance.

Judkowitz, Kling and Foreman.

Kling serving as the Chairman of our Compensation

Our Compensation Committee has the responsibility for, among other things, (i) reviewing and approving the chief executive

officer’s compensation based on an evaluation in light of corporate goals and objectives, (ii) reviewing and recommending to the

Board the compensation of all other executive officers, (iii) reviewing and recommending to the Board incentive compensation plans and

equity plans, (iv) reviewing and discussing with management compensation information and related information to be included in this report

and proxy statements, and (v) reviewing and recommending to the board of directors for approval procedures relating to say on pay votes.

The Compensation Committee charter can be found online at https://ir.algoholdings.com/investor-governance.

and Corporate Governance Committee

members of our Nominating and Corporate Governance Committee are Messrs.

Judkowitz, Kling and Foreman, with Mr.

Foreman serving as the

Our Nominating and Corporate Governance Committee has the responsibility relating to assisting the Board in, among other

things, (i) identifying and screening individuals qualified to become members of our board of directors, consistent with criteria approved

by our board of directors, (ii) recommending to the Board the approval of nominees for director, (ii) developing and recommending to

our board of directors a set of corporate governance guidelines, and (iv) overseeing the evaluation of our board of director.

The Nominating

and Corporate Governance Committee charter can be found online at https://singingmachine.com/pages/governance.

Judkowitz, Kling and Foreman.

Foreman serves as the Chairman

of our Nominating and Corporate Governance Committee.

Our Nominating and Corporate Governance Committee has the responsibility relating

to assisting the Board in, among other things, (i) identifying and screening individuals qualified to become members of our board of

directors, consistent with criteria approved by our board of directors, (ii) recommending to the Board the approval of nominees for director,

(ii) developing and recommending to our board of directors a set of corporate governance guidelines, and (iv) overseeing the evaluation

of our board of director.

The Nominating and Corporate Governance Committee charter can be found online at https://ir.algoholdings.com/investor-governance.

members of our Executive Committee are Messrs.

Foreman, Judkowitz, Peloquin and Atkinson.

Atkinson serves as the Chairman of

our Executive Committee.

Our Executive Committee has the responsibility for evaluating critical matters on behalf of our full board of

This includes but is not limited to:

(i) reviewing our monthly financial and operational performance, (ii) reviewing and recommending

prospective capital markets activities, including equity offerings, debt issuances, and other financings, (iii) evaluating and recommending

potential business development activities such as strategic partnerships, joint ventures, mergers, acquisitions, and divestitures, and

(iv) other strategic initiatives.

Atkinson has served as our Chief Executive Officer since May 2012 and as a member of our board of directors since August 2022.

background appears above under “ – Board of Directors” .

Andre has served as our Chief Financial Officer and General Counsel since February 2025.

Andre brings us nearly 25 years of executive

management, financial, legal and operational experience.

He most recently served as the Chief Financial Officer of Lemnature AquaFarms

Corporation, a plant-based ingredients manufacturer for the food, beverage and nutrition markets, from October 2022 to September 2023.

Prior to that, Mr.

Andre served as the Chief Financial Officer and General Counsel of M.H.

Enterprises, Inc., the owner and franchisor

of the Teriyaki Madness ® restaurant brand, from March 2021 to September 2022.

Before that, he served as the Chief Financial

Officer of ARC Group, Inc., a national, multi-brand, multi-unit restaurant holding company, from July 2019 to March 2021, and as its

General Counsel from October 2019 to March 2021.

Earlier in his career, Mr.

Andre served as an accountant for KPMG LLP before serving

as a corporate & securities attorney for regional and international law firms.

Melo has served as our Chief Revenue Officer since April 2022 and as a member of our board of directors since July 2022.

His background

appears above under “ – Board of Directors” .

Family Relationships

is no family relationship between any director and executive officer or among any directors or executive officers.

Board does not have a formal policy regarding board diversity for our board of directors as a whole nor for each individual member, the

nominating and corporate governance committee does consider such factors as gender, race, ethnicity, experience and area of expertise,

as well as other individual attributes that contribute to the total diversity of viewpoints and experience represented on the board of

required by the Nasdaq Rules that were approved by the SEC in August 2021, the Company is providing information about the gender and

demographic diversity of its directors in the format required by Nasdaq Rules.

The information in the matrix below is based solely on

information provided by our directors about their gender and demographic self-identification.

Directors who did not answer or indicated

that they preferred not to answer a question are shown under “did not disclose demographic background” or “did not

disclose gender” below.

Diversity Matrix (as of July 6, 2023)

Number of Directors

Gender Identity

Demographic Background

American or Black

Native or Native American

Hawaiian or Pacific Islander

or More Races or Ethnicities

Not Disclose Demographic Background

in Certain Legal Proceedings

as set forth below, our directors and executive officers have not been involved in any of the following events during the past ten years:

of our directors and executive officers have been involved in any of the following events during the past ten years that we consider

to be material to an evaluation of their respective abilities or integrity:

bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer

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fraud in connection with any business entity;

subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated,

of any self-regulatory organization, any registered entity or any equivalent exchange, association,

entity or organization that has disciplinary authority over its members or persons associated

with a member.

June 23, 2015, Local Corporation, a Delaware corporation, filed a voluntary petition for reorganization under Chapter 11 of the US Bankruptcy

Cragun, a Director of the Company, was chief financial officer of Local Corporation at the time of filing.

have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, and principal accounting

Our Code of Ethics is available on our website at https://singingmachine.com/pages/governance .

WITH SECTION 16(A) OF THE EXCHANGE ACT

subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,

any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members

or persons associated with a member.

have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer

or controller, and persons performing similar functions.

Our Code of Ethics is designed to deter wrongdoing and promote:

(i) honest and

ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and

in other public communications that we make;

(iii) compliance with applicable governmental laws, rules and regulations;

(iv) prompt internal

reporting of violations of the code to an appropriate person or persons identified in the code;

and (v) accountability for adherence

Our Code of Ethics is available on our website at https://ir.algoholdings.com/investor-governance.

16(a) Beneficial Ownership Reporting Compliance

16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than 10% of the outstanding shares

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solely upon a review of Forms 3, Forms 4, and Forms 5 furnished to us pursuant to Rule 16a-3 under the Exchange Act, we believe that

all such forms required to be filed pursuant to Section 16(a) of the Exchange Act during the year ended March 31, 2023 were timely filed,

as necessary, by the officers, directors, and security holders required to file such forms except for as set forth in the Delinquent

Section 16(a) section below.

Section 16(a) Reports

Gary Atkinson filed a late Form 4 on June 23, 2022 with respect to one transaction;

Bernardo Melo filed a late Form 4 on June 23, 2022 with respect to one transaction;

Lionel Marquis filed a late Form 4 on June 23, 2022 with respect to one transaction;

Foreman filed a late Form 4 on June 30, 2022 with respect to one transaction.

all such forms required to be filed pursuant to Section 16(a) of the Exchange Act during the year ended December 31, 2024 were timely

filed by the officers, directors, and security holders required to file such forms.

Trading Policy and Procedures

have adopted an insider trading policy governing the purchase, sale, and/or other dispositions of our securities by us and our officers,

directors and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and all

listing standards applicable to us.

Each of our executive officers, directors and employees is required to read and sign our insider

trading policy.

A copy of our insider trading policy is attached hereto as Exhibit 19.1.

the policy, directors, executive officers, employees and other related persons may not:

(i) buy, sell or engage in other transactions

in our shares of common stock while they are aware of material non-public information;

(ii) buy or sell securities of other companies

while aware of material non-public information about those companies that they became aware of as a result of business dealings between

us and those companies;

or (iii) disclose material non-public information to any unauthorized persons outside of us.

The policy restricts

trading and other transactions for a limited group of our employees (including executives and directors) to defined window periods that

follow our quarterly and annual earnings releases.

Additionally, our executive management will also issue notices of black-out trading

periods if they are aware of material transactions that they anticipate closing in the near future.

Executive Compensation.

Compensation Table

following table provides information regarding the compensation earned by or paid to our named executive officers with respect to the

years ended March 31, 2023 and 2022.

following table provides information regarding the compensation earned by or paid to our named executive officers during our fiscal years

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

and Principal Position

Incentive Plan Comp

Non-Qualified

Deferred Compensation Earnings

Gary Atkinson

Year / Period

Chief Executive Officer

Lionel Marquis

Richard Perez (2)

Chief Financial Officer

Lionel Marquis (3)

Former Chief Financial Officer

Bernardo Melo

Chief Revenue Officer

Atkinson earned an annual salary of $215,000 for the fiscal year ended 2023 and $156,075

for the fiscal year ended March 31, 2022.

Marquis earned an annual salary of $210,000 for the fiscal year ended 2023 and $154,514 for

the fiscal year ended March 31, 2022.

Melo earned an annual salary of $215,000 for the fiscal year ended 2023 and $163,004 for

the fiscal year ended March 31, 2022.

compensation consisted of our 401(k) match benefit.

Option and Stock Awards at Fiscal Year-End

of 401(k) matching contributions that we made during the respective years.

Perez was appointed as our Chief Financial Officer on January 3, 2024 and was terminated as our Chief Financial Officer on February 13, 2025.

Marquis resigned as our Chief Financial Officer on December 31, 2023.

Option and Stock Awards

following table sets forth information with respect to outstanding grants of options to purchase our common stock under stock option

awards issued with Board of Directors approval to the named executive officers as of the fiscal year ended March 31, 2023:

and Principal Position

of Securities Underlying Unexercised Options (#) Exercisable

of Securities Underlying Unexercised Options (#) Unexercisable

Incentive Plan Awards:

awards issued to the named executive officers as of December 31, 2024:

Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Equity Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options (#)

Exercise Price ($)

Expiration Date

of Shares or Units of Stock That Have Not Vested (#)

Value of Shares or Units of Stock That Have Not Vested ($)

Incentive Plan Awards:

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units of Stock That Have Not Vested ($)

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Incentive Plan Awards:

Equity Incentive Plan Awards:

Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Gary Atkinson, CEO - Other stock

option awards

- Other stock option awards

Lionel Marquis, CFO - Other stock option awards

- Other stock option awards

Bernardo Melo, VP Sales - Other stock option

- Other stock option awards

April 22, 2022, we entered into employment agreements with each of our Chief Executive Officer and Chief Revenue Officer (the “Employment

Agreements”).

Effective December 28, 2022 we entered into an employment agreement with our Chief Financial Officer.

employment agreements for Messrs.

Atkinson and Melo are for a term of three years with automatic renewals for successive one-year terms,

Gary Atkinson

Lionel Marquis

Bernardo Melo

April 22, 2022, we entered into employment agreements with Gary Atkinson to serve as our Chief Executive Officer and Bernardo Melo to

serve as our Chief Revenue Officer.

The agreements are for a term of three years with automatic renewals for successive one-year terms,

unless either party provides notice of its intention not to extend.

Marquis’s employment agreement terminates on the close

of business on December 31, 2023.

to the Employment Agreements, as compensation for their service as executives of the Company, the executives will receive:

salary per annum (the “Base Salary”), set forth below and commensurate benefits, as described in the Employment Agreement;

(2) eligibility, subject to their continued employment with the Company, to earn an annual bonus (the “Annual Bonus”);

eligibility, also subject to their continued employment with the Company, to participate in the Company’s 2023 Equity Incentive

Plan, or any successor plan, subject to the terms of such plan;

and (4) entitlement, also subject to the executives’ continued

employment with the Company, to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses

incurred by them in connection with the performance of their duties for the Company and the Company’s expense reimbursement policies

and procedures.

executives’ base salaries are as follows:

$215,000, with an automatic increase to $225,000 on the first anniversary of the Employment Agreement;

provided the Company

remains profitable.

$210,000, terminating on December 31, 2023.

$215,000 with an automatic increase to $225,000 on the first anniversary of the Employment Agreement;

provided the Company

remains profitable.

addition to the payment of accrued amounts due to the executives, the Employment Agreements for Messrs.

Atkinson and Melo each provide

for the payment of severance to the Executives in a lump sum payment equal to two times the sum of the executive’s base salary

and annual bonus for the year in which the termination occurs, in the event of the termination of the Agreement by the Company without

Cause (as defined in the Employment Agreement), or upon the Company’s election not to renew the Employment Agreement or by the

executive for Good Reason (as defined in the Employment Agreement).

The Employment Agreements provide for payments to the executive of

certain amounts in the event of the executive’s death or disability (as defined in the Employment Agreement).

the event Messrs.

Atkinson’s or Melo’s employment is terminated by the executive for Good Reason (as defined in the Employment

Agreement) on account of its failure to renew the Employment Agreement or without Cause (as defined in the Employment Agreement”)

within twelve months of a Change in Control (as defined in the Employment Agreement), the executive shall be entitled to receive a lump

sum payment equal to two times the base salary and annual bonus for the year in which the termination takes place.

of severance under the Employment Agreement is conditioned upon Messrs.

Atkinson’s and Melo’s execution of a release in favor

of the Company.

Employment Agreements superseded the change of control agreements previously entered into by the Company in January 2014 with each of

its three executive officers.

to the change of control agreement (“CIC Agreement”) entered into by the Company in January 2014 and subsequent to the change

in control of the Company that occurred in August 2022, Mr.

Marquis’ employment agreement included acknowledgement by the Company

that he was entitled to receive bonus cash compensation of $400,000.

This bonus is to be paid in accordance with the section in his Employment

Agreement pertaining to the Change in Control Compensation even if terminated by the Company for any reason.

Payments are to be made

$200,000 on December 31, 2022;

$100,000 on April 30, 2023;

$100,000 on December 31, 2023.

April 22, 2022, our Board of Directors approved a Bonus Plan (the “Bonus Plan”) for our

executive officers.

Bonus Plan offers a cash bonus, stock options, and stock grants to the executives based on the Company’s EBITDA at its fiscal year

The value of the cash bonus and number of stock options and grants increases based on the Company’s percentage of net sales.

The Bonus Plan also provides for a one-time option grant to the executives upon the successful listing of the Company’s shares

of common stock on the Nasdaq Stock Market, LLC.

following table sets forth with respect to the named director, compensation information inclusive of equity awards and payments made

during the year ended March 31, 2023.

Earned or Paid in Cash

Incentive Plan Compensation ($)

Deferred Comepnsation Earnings

Other Compensation

As compensation for their service as executives, the executives will

each receive:

(i) a base salary per annum of $215,000 that automatically increases to $225,000 on the first anniversary of the effective

date (the “Base Salary”);

(ii) eligibility to earn an annual bonus (the “Annual Bonus”);

(iii) eligibility to

participate in our 2022 Equity Incentive Plan, or any successor plan.

the event the employment of the executives is terminated by us without “Cause” or by the executives for “Good Reason”

(as each such defined in the Employment Agreements), Messrs.

Atkinson and Melo will receive severance in a lump sum payment equal to

two times the sum of the executive’s base salary and annual bonus for the year in which the termination occurs.

The Employment

Agreements also provides for payments to the executive of certain amounts in the event of the executive’s death or disability (as

defined in the Employment Agreement).

February 13, 2025, we entered into an employment agreement with Alex Andre to serve as our Chief Financial Officer and General Counsel.

Under the terms of the agreement, we agreed to pay Mr.

Andre an annual base salary of $275,000 which automatically increases to $300,000

on the six-month anniversary of the effective date.

Andre is eligible to receive an annual bonus of up to 30% of his annual base

Andre received a non-qualified stock option to purchase 23,818 shares of our common stock and a restricted stock award for

23,818 shares of our common stock on February 13, 2025.

The option has a ten-year term, subject to any earlier termination following

cessation of Mr.

Andre’s service with us, and an exercise price per share equal to the closing price of our common stock as reported

by the Nasdaq on February 13, 2025.

The restricted stock award and option shall each vest over four years as follows:

(a) 25% of the

shares underlying the restricted stock award and option shall vest on the first anniversary of the grant date;

and (b) six and one-quarter

percent (6.25%) of the shares underlying the restricted stock award and option shall vest each quarter thereafter, subject to Mr.

continued service with us through each applicable vesting date.

April 22, 2022, our Board of Directors approved a bonus plan for our executive officers.

Under the plan, our executive officers are eligible

to receive a cash bonus, stock options, and stock grants based on our earnings before interest, taxes, depreciation and amortization

(“EBITDA”) for the applicable fiscal year.

The value of the cash bonus and number of shares of stock underlying stock options

and stock grants increases as the ratio of EBITDA to net sales increases.

following table sets forth all compensation earned or paid to our directors who served during all or a portion of the year ended December

Harvey Judkowitz

Mathieu Peloquin

Gary Atkinson

Bernardo Melo

James Turner (2)

Kenneth Cragun (2)

to Note 1 “Stock Based Compensation” in the Notes to the Consolidated Financial Statements included elsewhere in this Annual

Report for the relevant assumptions used to determine the valuation of our option awards.

As of March 31, 2023 the aggregate number of stock awards held by Messrs.

Judkowitz, Kling and Foreman is 12,295 and 1,140, respectively.

The aggregate stock awards held by both Messrs.

Foreman and Peloquin is 617.

As of March 31, 2023 the aggregate number of Company stock options held by Messrs.

Judkowitz, Kling and Foreman is 5,669, 4,335, and

1,667, respectively and Messrs.

Peloquin, Turner and Cragun is 1,667, 667 and 667, respectively.

our fiscal year ended March 31, 2023, our compensation package for our non-employee directors consisted of grants of stock options, cash

payments, stock issuances and reimbursement of costs and expenses associated with attending our board meetings.

compensate our directors as follows:

initial grant of 667 stock options with an exercise price determined as the closing price on the day of joining the board.

vest in one year and expire in ten years while they are board members or the lesser of five years or remaining life of the stock

option once they are no longer board members.

Henry Nisser (2)

the grant date fair value of the awards calculated in accordance with ASC Topic 718, Compensation – Stock Compensation .

A summary of the assumptions made in the valuation of these awards is provided herein under Item 7.

Management’s Discussion

and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and in our consolidated financial

statements beginning on page F-1 of this report.

September 5, 2024, Messrs.

Turner, Cragun and Nisser resigned from our board of directors.

compensate the members of our board of directors as follows:

annual cash payment of $15,000 for each completed full year of service or prorated for a partial year.

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The stock price at grant will be determined at the closing price on the day of the annual stockholder meeting.

annual grant of 667 stock options with an exercise price determined as the closing price on the day of the annual stockholder meeting.

If the annual meeting is held less than 6 months after the board member first joined the board he or she will not receive another

option grant.

$1,000 fee for each board meeting and annual meeting attended.

Committee meetings and telephone board meetings will be compensated

with a $250 fee.

for with a $500 fee.

expenses are reimbursed for attending board, committee and annual meetings or when their presence at a location away from home is

Equity Incentive Plan

April 12, 2022, our Board of Directors adopted the 2022 Equity Incentive Plan, or the 2022 Plan.

The 2022 Plan provides for the issuance

of equity incentive awards, such as stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance

awards and other stock or cash-based awards collectively, the “Awards.” Awards may be granted under the 2022 Plan to the

Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.

maximum number of shares of common stock initially available for issuance under the 2022 Plan was 233,334 shares of common stock and

thereafter an annual increase shall be added as of the first day of the Company’s fiscal year beginning in 2023, equal to the least

of (i) 5% of the outstanding common stock on a fully diluted basis as of the end of the Company’s immediately preceding fiscal

year, (ii) 33,334 shares, and (iii) a lesser amount as determined by the Board of Directors.

Effective April 1, 2023, there were 33,334

additional shares that were allotted to the 2022 Plan based on the annual plan increase.

As of the date of filing of this Annual Report,

the total shares available for issuance under the 2022 Plan are 158,915.

shares of common stock subject to stock awards granted under the 2022 Plan that lapse, terminate, expire prior to exercise, are canceled

or are forfeited, shall again become available for issuance under the 2022 Plan.

Shares subject to a stock award under the 2022 Plan

shall not again be made available for issuance or delivery under the 2022 Plan if such shares are (i) shares tendered by a participant

or retained by the Company as full or partial payment to the Company for the exercise or purchase price of an award or (ii) shares used

to satisfy tax withholding obligations in connection with an award.

Notwithstanding

any other provision of the 2022 Plan to the contrary, unless the plan administrator determines otherwise with respect to a particular

award, in the event of a change of control, if and to the extent an outstanding award is not converted, assumed, substituted for or replaced

by the successor company, then such award will terminate upon effectiveness of the change of control.

Prior to the change of control,

the plan administrator may approve accelerated vesting and/or lapse of forfeiture or repurchase restrictions with respect to all or a

portion of the unvested portions of such awards, any such determinations to be made by the plan administrator in its sole discretion.

A change in control includes:

acquisitions of beneficial ownership of more than 50% of our total voting power;

change in the composition of the board of directors during any two-year period such that the individuals who, as of the beginning

of such two-year period, constitute the board of directors cease for any reason to constitute at least a majority of the board, as

defined in the 2022 Plan;

consummation of a company transaction, as defined in the 2022 Plan.

Board of Directors may amend, suspend or terminate the 2022 Plan or a portion of it at any time;

however, to the extent required by applicable

law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the 2022 Plan.

The 2022 Plan is scheduled

to terminate automatically in ten (10) years following the earlier of (a) the date the Board of Directors adopted the 2022 Plan and (b)

the date the stockholders approved the 2022 Plan.

January 1, 2001, we adopted a voluntary 401(k) plan.

All employees with at least one year of service are eligible to participate in our

We make a matching contribution of 100% of salary deferral contributions up to 3% of pay, plus 50% of salary deferral contributions

from 3% to 5% of pay for each payroll period.

The amounts charged to earnings for contributions to this plan and administrative costs

during the years ended March 31, 2023 and 2022 totaled approximately $74,000 and $70,000, respectively.

All employees with at least 90 days of service are eligible to participate in our

We make a matching contribution of 100% of the first three percent of salary deferral contributions, plus 50% of the next

two percent of salary deferral contributions, for each payroll period.

The matching contributions that we make are vested in full immediately.

and Practices related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information

have a strict policy of not granting securities to our executive officers, directors and employees when material nonpublic information

is known or a material transaction is anticipated to occur.

timing of equity award grants is determined with consideration to a variety of factors, including but not limited to, the achievement

of pre-established performance targets, market conditions and internal milestones.

We do not follow a predetermined schedule for the

granting of equity awards.

Instead, each grant is considered on a case-by-case basis to align with our strategic objectives and to ensure

the competitiveness of our compensation packages.

determining the timing and terms of an equity award, our board of directors and compensation committee consider material nonpublic information

to ensure that such grants are made in compliance with applicable laws and regulations.

Procedures utilized by our board of directors

and compensation committee to prevent the improper use of material nonpublic information in connection with the granting of equity awards

include consultation with legal counsel and, where appropriate, the delay of the grant of applicable equity awards until the public

disclosure of such material nonpublic information has been completed.

are committed to maintaining transparency in its executive compensation practices and to making equity awards in a manner that is not

influenced by the timing of the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

We regularly review our policies and practices related to equity awards to ensure that they meet the evolving standards of corporate

governance and continue to serve the best interests of us and our stockholders.

the year ended December 31, 2024, no securities were granted to our named executive officers within four business days prior to, or one

business day following, the filing or furnishing of a periodic or current report by us that disclosed material nonpublic information.

Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters.

following table sets forth certain information regarding the beneficial ownership of our common stock as of July12, 2023, unless otherwise

noted below, for the following:

person or entity known to own beneficially more than 5% of our outstanding common stock as of the date indicated in the corresponding

of the named executive officers:

current directors and executive officers as a group.

ownership is based on 4,220,259 shares of our common stock issued and outstanding.

In computing the number and percentage of shares beneficially

owned by a person, shares of common stock subject to convertible securities and options currently convertible or exercisable, or convertible

or exercisable within 60 days of July 12, 2023 are counted as outstanding, but these shares are not counted as outstanding for computing

the percentage ownership of any other person.

used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934

as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power

(including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding,

relationship or otherwise, including a right to acquire such power(s) during the next 60 days.

Unless otherwise noted below, and subject

to applicable property laws, to our knowledge each person has sole investment and sole voting power over the shares shown as beneficially

owned by them.

Unless otherwise noted, the principal address of each of the directors and officers listed below is c/o The Singing Machine

Company, Inc., 6301 NW 5 th Way, Suite 2900, Fort Lauderdale, FL 33309.

of Beneficial Owner

Stock Benefically Owned

of Common Stock

and Officers:

following table and the notes thereto set forth, as of April 14, 2025, certain information with respect to the beneficial ownership of:

(i) each of our named executive officers, (ii) each of our directors, (iii) each of our named executive officers and directors as a group,

and (iv) each person or group that is known to us to be the beneficial owner of more than five percent of our common stock.

is based upon information supplied by our officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC.

Where information regarding stockholders is based on Schedules 13D and 13G, the number of shares owned is as of the date for which information

was provided in such schedules.

beneficial owners and number of securities beneficially owned have been determined in accordance with Rule 13d-3 under the Exchange Act

and, in accordance therewith, includes all shares of our common stock that may be acquired by such beneficial owners within 60 days of

April 14, 2025 upon the exercise or conversion of any options, warrants or other convertible securities.

Unless otherwise indicated and

subject to community property laws where applicable, we believe that each person or entity named below has sole voting and investment

power with respect to the shares of common stock indicated as beneficially owned by that person or entity, subject to the matters set

forth in the footnotes to the table below, and has an address of c/o Algorhythm Holdings, Inc., 6301 NW 5 th Way, Suite 2900,

Fort Lauderdale, FL 33309.

Name and Address of Beneficial Owner

of Beneficial

Ownership (1)

Gary Atkinson (2)

Lionel Marquis (1)

Alex Andre (3)

Bernardo Melo (2)

3 unchanged sentences

Jay Foreman (2)

Kenneth Cragun (1)

James Turner (1)

All Executive Officers and Directors as a Group

owners of more than 5%:

Ault Alliance, Inc.

Stingray Group Inc.

Represents less than 1%

as to the person indicated, the following outstanding stock options to purchase shares of the Company’s Common Stock issued

under 2022 Plan and other stock option awards, which will be vested and exercisable within 60 days of the record date:

25,001 options

held by Gary Atkinson, 31,833 options held by Bernardo Melo, 16,500 options held by Lionel Marquis, 5,669 options held by Harvey

Judkowitz, 4,335 options held by Joseph Kling, 1,667 options held by both Mathieu Peloquin and Jay Foreman, and 667 options held

by both Kenneth Cragun and James Turner.

shares of common stock owned by Ault Lending.

Ault Lending is a wholly-owned subsidiary of Ault Alliance.

Ault, the Executive

Chairman of Ault Alliance, is deemed to have voting and investment power with respect to the securities held of record by Ault Lending.

upon the Form 4 filed with the Securities and Exchange Commission on May 25, 2023 by Mr.

Ault, which reflects that the shares are

owned by Ault Lending, which is a wholly owned subsidiary of Ault Alliance.

Ault, the Executive Chairman of Ault Alliance, is

deemed to have voting and dispositive power with respect to the securities held by Ault Lending.

The address of Ault Alliance is

11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141.

of March 31, 2023, Eric Boyko indirectly controlled approximately 57.5% of the combined voting power of Stingray’s outstanding

As a result, Eric Boyko may be deemed to share beneficial ownership of the shares of common stock and the Stingray Warrants

held by Stingray.

The address of Stingray Group Inc.

is 730 Wellington Street, Montréal, Québec H3C 1T4.

holder may not exercise the warrants to the extent such exercise would cause the security holder, together with its affiliates, to

beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding common stock following such

exercise, excluding for purposes of such determination shares of common stock issuable upon exercise of such securities which have

not been so exercised.

Authorized For Issuance Under Equity Compensation Plans

April 12, 2022, our Board of Directors approved the 2022 Plan.

The 2022 Plan provides for the issuance of equity incentive awards, such

as stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance awards and other stock or cash-based

awards collectively, the “Awards.” Awards may be granted under the 2022 Plan to the Company’s employees, officers,

directors, consultants, agents, advisors and independent contractors.

maximum number of shares of common stock initially available for issuance under the 2022 Plan is 233,333 shares of common stock and thereafter

an annual increase shall be added as of the first day of the Company’s fiscal year beginning in 2023, equal to the least of (i)

5% of the outstanding common stock on a fully diluted basis as of the end of the Company’s immediately preceding fiscal year, (ii)

333,334 shares, and (iii) a lesser amount as determined by the Board of Directors.

The shares of common stock subject to stock awards

granted under the 2022 Plan that lapse, terminate, expire prior to exercise, are canceled or are forfeited, shall again become available

for issuance under the 2022 Plan.

Effective April 1, 2023, there were 33,334 additional shares that were allotted to the 2022 Plan based

on the annual plan increase.

As of the date of filing of this Annual Report, the total shares available for issuance under the 2022 Plan

following table summarizes our equity compensation plan information as of March 31, 2023:

of Securities to be issued upon exercise of outstanding options,

–average exercise price of outstanding option,

warrants and rights

of securities remaining available for future issuance under equity compensation Plans

Equity compensation plans approved

by security holders

Equity compensation plans not approved by security

All officers and directors as a group (7 persons)

Less than one percent.

This table has been prepared based on 2,394,829 shares of our common stock outstanding on April 14, 2025.

Includes for the applicable person the following outstanding stock options to purchase shares of our common stock that are underlying

stock option awards issued under the 2022 Plan and other stock option awards which will be vested and exercisable within 60 days of April

(i) 101 shares of common stock underlying stock options held by Gary Atkinson, (ii) 118 shares of common stock underlying stock

options held by Bernardo Melo, (iii) 29 shares of common stock underlying stock options held by Harvey Judkowitz, (iv) 22 shares of common

stock underlying stock options held by Joseph Kling, and (v) 83 shares of common stock underlying stock options held by each of Mathieu

Peloquin and Jay Foreman.

Includes a restricted stock award for 23,818 shares of common stock for which Mr.

Andre holds the voting rights.

Equity Incentive Plan

April 12, 2022, our board of directors approved The Singing Machine Company, Inc.

2022 Equity Incentive Plan.

The plan provides for the

issuance of equity incentive awards, such as stock options, stock appreciation rights, stock awards, restricted stock, stock units, performance

awards and other stock or cash-based awards, to our employees, officers, directors, consultants, agents, advisors, and independent contractors.

maximum number of shares of common stock that was initially available for issuance under the plan was 1,167 shares of common stock.

the first day of each of our fiscal years thereafter, this number is increased by the lesser of:

(i) five percent of the number of shares

of our common stock that were outstanding on the last day of our immediately preceding fiscal year, calculated on a fully diluted, (ii)

167 shares, and (iii) such lesser number as our board of directors may determine.

Any shares of common stock underlying awards that lapse,

terminate, expire prior to exercise, are canceled or are forfeited are added to the number of shares of commons stock available for issuance

under the plan.

of December 31, 2024, there were 1,500 shares of common stock authorized for issuance under the plan.

Of this amount, awards representing

1,183 shares of common stock had been granted under the plan and 317 shares remained available for issuance under the plan.

following table summarizes our equity compensation plan information as of December 31, 2024.

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

average exercise price of outstanding options, warrants and rights

available for

future issuance

under equity compensation

plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders:

Equity compensation plans not approved by security holders:

Certain Relationships and Related Transactions, and Director Independence.

transaction may be a related person transaction if any of our directors, executive officers, owners of more than 5% of our common stock,

or their immediate family were involved in a transaction in which the Company was or is to be a participant, and the amount involved

exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets at yearend for the last two completed fiscal

The Company engaged in the following related persons transactions since the beginning of the Company’s last fiscal year

or any currently proposed transaction:

To/From Related Parties

our fiscal year ended March 31, 2023, the Company did business with Stingray who is part of a group of investors who participated in

the Private Placement and have acquired a minority interest in the Company (see Note 10 – August 2021 Private Placement).

31, 2023, the Company had approximately $0.2 million due from Stingray for music subscription reimbursement.

Debt and Note Payable

conjunction with the Crestmark Facility and IHC Facility, the parties entered into a subordination agreement on debt due to Starlight

Marketing Development, Ltd.

(a former related party) of approximately $803,000.

On June 1, 2020 the remaining amount due on the subordinated

debt of approximately $803,000 was converted to a note payable (“subordinated note payable”) which bore interest at 6%.

part of the agreement to convert the subordinated debt to a note payable it was agreed that interest expense would be accrued at the

same 6% interest rate on the unpaid principal retroactively from the date that previously scheduled payments had been missed.

fiscal 2023, interest expense was approximately $17,000 on the subordinated note payable.

part of the new Credit Agreement with Fifth Third that the Company entered into on October 14, 2022, the subordinated note in the amount

of $352,659, was paid in full on October 26, 2022.

Company has a music subscription sharing agreement with Stingray.

For the fiscal year ended March 31, 2023, the Company received music

subscription revenue of approximately $0.7 million.

This amount was included as a component of net sales in the accompanying consolidated

statements of operations.

transaction may be a related person transaction if any of our directors, executive officers, owners of more than five percent of our

common stock, or their immediate family were involved in a transaction in which we were or are to be a participant, and the amount involved

exceeds the lesser of $120,000 or one percent of the average of our total assets at the end of our last two completed fiscal years.

engaged in the following related persons transactions since the beginning of our last fiscal year or any currently proposed transaction.

Ventures Stock Transactions

November 20, 2023, we entered into a stock purchase agreement with Regalia Ventures pursuant

to which we sold 5,495 shares of our common stock to Stingray Group at a purchase price

of $182 per share.

Net proceeds from the transaction were approximately $950,000, net of transaction fees of approximately $50,000 .

On November 1, 2024, we entered into a stock repurchase agreement with Regalia Ventures pursuant to which we agreed to repurchase

the 5,495 shares for $472,527.

On February 18, 2025, the date of the closing of the transaction, we issued a promissory note to Stingray

Group in the amount of $472,527.

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

Regalia Ventures is owned and controlled by Jay

Foreman, who serves as a member of our board of directors.

Group Stock Transactions

November 20, 2023, we entered into a stock purchase agreement with Stingray Group pursuant

to which we sold 5,495 shares of our common stock to Stingray Group at a purchase price

of $182 per share.

Net proceeds from the transaction were approximately $950,000, net of transaction fees of approximately $50,000 .

On December 3, 2024, we entered into a stock repurchase agreement with Stingray Group

pursuant to which we agreed to repurchase the 5,495 shares for $285,714.

We agreed to issue a promissory note to Stingray Group in the

principal amount of the purchase price of the shares at the closing of the transaction.

On February 18, 2025, the date of the closing

of the transaction, we issued a promissory note to Stingray Group in the amount of $285,714.

On April 3, 2025, we paid off the note in

Mathieu Peloquin is the Senior Vice-President, Marketing and Communications of Stingray Group and serves as a member of our board

of directors.

Holdings Music Subscription Agreement

have a music subscription sharing agreement with Stingray Group.

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

ended December 31, 2023, we received music subscription revenue of 780,000 and $602,000, respectively.

As of December 31, 2024 and 2023,

we had $212,000 and $269,000, respectively, due from Stingray Group for music subscription reimbursement.

Mathieu Peloquin is the Senior

Vice-President, Marketing and Communications of Stingray Group and serves as a member of our board of directors.

We determined that SMCB, which

is a subsidiary of SemiCab, Inc., is a VIE as we provide financial support to SMCB.

While not contractually obligated, SMCB currently

relies on our reimbursement of certain costs under a intercompany services agreement (“MSA”) whereby SMCB agrees to provide

IT software development services to SemiCab, Inc.

US operations.

In exchange, under the MSA, we grant intellectual property rights to

SMCB to use the software platform in India.

Compensation for services is invoiced and paid on a monthly or quarterly basis as agreed

by both parties, with rates subject to periodic review and revision.

The agreement is for a term of two years ending on April 1, 2025

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

The agreement automatically

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

As a result of this relationship and the financial support provided by us

under the loan agreement described below, SMCB has been determined to be a VIE.

We further determined that we

are not the primary beneficiary of SMCB because we do not have the power to direct or control SMCB’s significant activities related

to its business.

Accordingly, we have not consolidated SMCB’s results of operations and financial position in our consolidated financial

Pursuant to the terms of the asset

purchase agreement that we entered into on June 11, 2024, we entered into an option agreement that granted SemiCab Holdings the right

to acquire all of the issued and outstanding equity securities of SMCB for 1,605 shares of our common stock.

We did not exercise this

right and the option agreement expired on August 31, 2024.

Loan Agreement

We are a party to a loan

agreement with SMCB dated March 22, 2024.

Under the loan agreement, we agreed to loan up to $2,500,000 to SMCB.

The loans are anticipated to be made in tranches.

Disbursements

of any tranches are fully at our discretion.

Each tranche has a repayment period of

The loans can be repaid at any time prior to the five- year maturity date without penalty.

Interest on the loans accrues

at a rate of six percent per year and is payable quarterly.

As of December 31, 2024, we

had made aggregate advances to SMCB in the amount of $1,777,000.

During the year ended December 31, 2024, SMCB charged

$637,000 for services to us that were performed under the MSA, which charges offset amounts due under the loan with SMCB.

As a result, as of December 31, 2024, a total of $1,140,000 of loans were outstanding under the loan agreement, and a total of $1,360,000 remained available for future borrowings under the loan agreement as of December 31, 2024.

As of December 31,

2024, SMCB had not made any interest payments due under the loan agreement.

As a result, the loans were in default as of December

performed the credit risk assessment of the collectability of the notes receivable from SMCB at December 31, 2024 pursuant to ASC 326-20.

Due to uncertainties associated with the loans, we accrued a reserve in the amount of $439,000 as of December 31,

Approval or Ratification of Transactions With Related Persons

believe that the terms of all of the above transactions are commercially reasonable and no less favorable to us than we could have obtained

from an unaffiliated third party.

Our policy requires that all related parties recuse themselves from negotiating and voting on behalf

of our Company in connection with related party transactions.

While we do not maintain a written policy with respect to related party

transactions, our board of directors routinely reviews potential transactions with those parties we have identified as related parties

prior to the consummation of the transaction.

Each transaction is reviewed to determine that a related party transaction is entered into

by us with the related party pursuant to normal competitive negotiation.

We also generally require that all related parties recuse themselves

from negotiating and voting on behalf of the Company in connection with related party transactions.

– Chairman of committee

– Member of committee

believe that the terms of all of our transactions with related parties are commercially reasonable and no less favorable to us than we

could have obtained from an unaffiliated third party.

Our audit committee is charged with the responsibility to review, approve and oversee

any transaction between us and any related parties and to develop policies and procedures for the audit committee’s approval of

related-party transactions.

While we do not maintain a formal written policy with respect to related-party transactions, our audit committee

and board of directors routinely review potential transactions that we have identified as related parties prior to the consummation of

the transaction to ensure that the transaction is commercially reasonable and reflects market terms.

Each transaction is reviewed to

determine that a related party transaction is entered into by us with the related party pursuant to normal competitive negotiation and

on terms no more favorable than with an unrelated third party.

We also generally require, unless prohibited by law, that all related

parties recuse themselves from negotiating and voting on behalf of us in connection with proposed transactions to which they would be

Principal Accountant Fees and Services.

LLP served as our independent registered public accounting firm for the years ended March 31, 2023 and 2022.

LLP’s PCAOB firm ID is 274.

following is a summary of the fees billed to the Singing Machine by our independent registered public accounting firm for professional

services rendered for Fiscal 2023 and Fiscal 2022:

All Other Fees

Fees - Consists of fees billed for professional services rendered for the audit of the Singing Machine’s consolidated financial

statements, review of the interim consolidated financial statements included in quarterly reports, reviews of registration statements,

and services that were provided by EisnerAmper, LLP, respectively.

Other Fees - Consists of fees for products and services other than the services reported above including component auditor services provided

in connection with the audit of Ault Alliance, our parent company.

LLP served as our independent registered public accounting firm for the year ended December 31, 2024 and for part of our nine-month

transition period ended December 31, 2023.

EisnerAmper LLP served as our independent registered public accounting firm for part of

our nine-month transition period ended December 31, 2023.

We paid audit fees of

$ 404,000 to Marcum LLP for services

performed for the year ended December 31, 2024, and $215,000 for services performed for our nine-month transition period ended December 31, 2023.

We paid audit fees of $31,000 to EisnerAmper LLP for services

performed for our nine- month transition period ended December 31, 2023.

Audit Fees consist of

fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual

consolidated financial statements, the review of our interim consolidated financial statements included in our quarterly reports,

the review of our registration statements and services that are normally provided by our principal accountant in connection with

statutory and regulatory filings or engagements.

on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

4 unchanged sentences

generally subject to a specific budget.

The auditors and management are required to periodically report to the Audit Committee regarding

Our auditors and management are required to periodically report to the Audit Committee regarding

the extent of services provided by the auditors in accordance with this pre-approval and the fees for the services performed to date.

The Audit Committee may also pre-approve particular services on a case-by-case basis.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

The following financial statements for The Singing Machine Company, Inc.

and Subsidiaries are filed as a part of this report:

Balance Sheets— March 31, 2023 and 2022.

Statements of Operations —Years ended March 31, 2023 and 2022.

Statements of Cash Flows—Years ended March 31, 2023 and 2022.

Statements of Shareholders’ Equity—Years ended March 31, 2023 and 2022.

Exhibits, Financial Statement Schedules.

following consolidated financial statements and reports of our independent registered public accounting firms are filed as part of this

report and incorporated by reference in Item 8.

Financial Statements and Supplementary Data of this report:

of Independent Registered Public Accounting Firm.

● Consolidated

Balance Sheets at December 31, 2024 and 2023.

● Consolidated

Statements of Operations for the Year Ended December 31, 2024 and the Nine-Month Period Ended

December 31, 2023.

● Consolidated

Statements of Stockholders’ Deficit for the Year Ended December 31, 2024 and the Nine-Month

Period Ended December 31, 2023.

● Consolidated

Statements of Cash Flows for the Year Ended December 31, 2024 and the Nine-Month Period Ended

December 31, 2023.

to Consolidated Financial Statements.

are omitted because of the absence of conditions under which they are required or because the information is included in the financial

statements or notes thereto.

Agreement, dated May 23, 2022, by and between the Singing Machine and Aegis Capital Corp.

(incorporated by reference to the Singing

Machine’s Current Report on Form 8-K filed with the SEC on May 27, 2022)

At-The-Market

Issuance Sales Agreement, dated February 15, 2023, by and between Singing Machine and Aegis Capital Corp.

(incorporated by reference

to the Singing Machine’s Current Report on Form 8-K filed with the SEC on February 17, 2023).

of Incorporation of the Singing Machine filed with the Delaware Secretary of State on February 15, 1994 and amendments through April

15, 1999 (incorporated by reference to Exhibit 3.1 in the Singing Machine’s registration statement on Form SB-2 filed with

the SEC on March 7, 2000).

of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on September 29, 2000 (incorporated by reference

to Exhibit 3.1 in the Singing Machine’s Quarterly Report on Form 10-QSB for the period ended September 30, 1999 filed with

the SEC on November 14, 2000).

Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on March 27, 2001 (incorporated

by reference to Exhibit 3.13 in the Singing Machine’s registration statement on Form SB-2 filed with the SEC on April 11, 2001).

Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on April 4, 2001 (incorporated

by referenced to Exhibit 3.12 in the Singing Machine’s registration statement on Form SB-2 filed with the SEC on April 11,

of Correction to Corrected Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on

April 20, 2001 (incorporated by reference to the Singing Machine’s Annual Report on Form 10-K filed with the SEC on July 14,

of Amendment to the Certificate of Incorporation filed with the Delaware Secretary of State on January 27, 2006 (incorporated by

reference to the Singing Machine’s Annual Report on Form 10-K filed with the SEC on July 14, 2022).

for Renewal and Revival of Charter filed with Delaware Secretary of State on September 25, 2012 (incorporated by reference to the

Singing Machine’s Annual Report on Form 10-K filed with the SEC on July 14, 2022).

of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 19, 2022 (incorporated by reference

to the Singing Machine’s Current Report on Form 8-K filed with the SEC on May 25, 2022).

By-Laws of the Singing Machine (incorporated by reference to Exhibit 3.14 in the Singing Machine’s Annual Report on Form 10-KSB

for the year ended March 31, 2001 filed with the SEC on June 29, 2001).

of Registrant’s Securities (incorporated by reference to the Singing Machine’s Annual Report on Form 10-K filed with

the SEC on July 14, 2022).

for Lakeside Plaza executive offices dated July 31, 2011 by and between The Singing Machine Company, Inc.

and Lakeside IV, LLC (incorporated

by reference to the Singing Machine’s Current Report on Form 10-K filed with the SEC on June 29, 2011).

for Ontario, CA warehouse dated January 31, 2013 by and between The Singing Machine Company, Inc.

and Majestic-CCCIV Partners (incorporated

by reference to the Singing Machine’s Current Report on Form 10-K filed with the SEC on June 28, 2013).

Change of Control Agreement dated January 3, 2014 by and between The Singing Machine Company, Inc.

and Gary Atkinson, Bernardo Melo,

and Lionel Marquis ((incorporated by reference to the Singing Machine’s Current Report on Form 10-K filed with the SEC on June

Amendment to Standard Industrial Lease dated June 15, 2020 (incorporated by reference to the Singing Machine’s Annual Report

on Form 10-K filed with the SEC on August 13, 2020).

Redemption Agreement, dated as of August 5, 2021, by and among The Singing Machine Company, Inc., Koncepts International, Ltd.

Treasure Green Holdings, Ltd.

(incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed with the

SEC on August 12, 2021).

of Securities Purchase Agreement (incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed with

the SEC on August 12, 2021).

of Common Stock Purchase Warrant (incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed with

the SEC on August 12, 2021).

of Pre-Funded Common Stock Purchase Warrant (incorporated by reference to the Singing Machine’s Current Report on Form 8-K

filed with the SEC on August 12, 2021).

Singing Machine 2022 Equity Incentive Plan (incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed

with the SEC on April 18, 2022)

Agreement by and between The Singing Machine Company, Inc.

and Gary Atkinson (incorporated by reference to the Singing Machine’s

Current Report on Form 8-K filed with the SEC on April 22, 2022).

Agreement by and between The Singing Machine Company, Inc.

and Lionel Marquis (incorporated by reference to the Singing Machine’s

Current Report on Form 8-K filed with the SEC on April 22, 2022).

Agreement by and between The Singing Machine Company, Inc.

and Bernardo Melo (incorporated by reference to the Singing Machine’s

Current Report on Form 8-K filed with the SEC on April 22, 2022).

of Indemnification Agreement to be entered into with the Registrant and each of its officers and directors (incorporated by reference

to the Singing Machine’s Current Report on Form 8-K filed with the SEC on May 27, 2022).

and Security Agreement by and among The Singing Machine Company, Inc., SMC Logistics, Inc.

and Fifth Third Bank, dated October 14,

2022 (incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed with the SEC on October 20, 2022).

Agreement by and between The Singing Machine Company, Inc.

and Lionel Marquis (incorporated by reference to the Singing Machine’s

Current Report on Form 8-K filed with the SEC on January 6, 2023).

and First Amendment to Credit and Security Agreement by and among The Singing Machine Company, Inc., SMC Logistics, Inc.

Third Bank, dated May 19, 2023 (incorporated by reference to the Singing Machine’s Current Report on Form 8-K filed with the

SEC on May 25, 2023).

of subsidiaries of The Singing Machine Company Inc.

(incorporated by reference to The Singing Machine’s Registration Statement

on Form S-1 filed with the SEC on April 13, 2022)

Consent of EisnerAmper LLP

Certification

of Gary Atkinson, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

Certification

of Lionel Marquis, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

Statement Schedules

financial statement schedules have been omitted because the required information is either not applicable or has been presented in the

consolidated financial statements.

documents set forth below are filed as exhibits to this report.

Where so indicated, exhibits that were previously filed with the SEC

are incorporated by reference herein.

Underwriting Agreement, dated May 23, 2022, by and between Algorhythm Holdings and Aegis Capital Corp.

(incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on May 27, 2022)

At-The-Market Issuance Sales Agreement, dated February 15, 2023, by and between Algorhythm Holdings and Aegis Capital Corp.

(incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on February 17, 2023).

Asset Purchase Agreement dated June 11, 2024, between Algorhythm Holdings, SemiCab, Inc.

and SemiCab Holdings, LLC (incorporated by reference to Exhibit 2.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on June 12, 2024).

Amendment No.

1 to Asset Purchase Agreement dated July 1, 2024, among Algorhythm Holdings, SemiCab, Inc.

and SemiCab Holdings LLC (incorporated by reference to Exhibit 2.2 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on July 5, 2024).

Certificate of Incorporation of Algorhythm Holdings filed with the Delaware Secretary of State on February 15, 1994 and amendments through April 14, 1999 (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings’ registration statement on Form SB-2 filed with the SEC on March 7, 2000).

Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on September 29, 2000 (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings’ Quarterly Report on Form 10-QSB for the period ended September 30, 1999 filed with the SEC on November 14, 2000).

Corrected Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on March 27, 2001 (incorporated by reference to Exhibit 3.13 in Algorhythm Holdings’ registration statement on Form SB-2 filed with the SEC on April 11, 2001).

Corrected Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on April 4, 2001 (incorporated by referenced to Exhibit 3.12 in Algorhythm Holdings’ registration statement on Form SB-2 filed with the SEC on April 11, 2001) .

Certificate of Correction to Corrected Certificate of Amendment to Certificate of Incorporation filed with the Delaware Secretary of State on April 20, 2001 (incorporated by reference to Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on July 14, 2022).

Certificate of Amendment to the Certificate of Incorporation filed with the Delaware Secretary of State on January 27, 2006 (incorporated by reference to Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on July 14, 2022).

Certificate for Renewal and Revival of Charter filed with Delaware Secretary of State on September 25, 2012 (incorporated by reference to Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on July 14, 2022).

Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on May 19, 2022 (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on May 25, 2022).

Amended By-Laws of Algorhythm Holdings (incorporated by reference to Exhibit 3.14 in Algorhythm Holdings’ Transition Report on Form 10-KTSB for the year ended March 31, 2001 filed with the SEC on June 29, 2001).

Certificate of Amendment of Certificate of Incorporation dated August 27, 2024 (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on September 6, 2024).

Amendment No.

1 to Amended By-laws, effective October 18, 2024 (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on October 21, 2024).

Certificate of Amendment to the Certificate of Incorporation filed with the Delaware Secretary of State on January 14, 2025 (incorporated by reference to Exhibit 3.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on January 17, 2025).

Description of Registrant’s Securities (incorporated by reference to Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on July 14, 2022).

Lease for Lakeside Plaza executive offices dated July 31, 2011 by and between Algorhythm Holdings and Lakeside IV, LLC (incorporated by reference to Algorhythm Holdings’ Current Report on Form 10-KT filed with the SEC on June 29, 2011).

Lease for Ontario, CA warehouse dated January 31, 2013 by and among Algorhythm Holdings, Majestic-CCCIV Partners and NM Majestic Holdings, LLC (incorporated by reference to Algorhythm Holdings’ Current Report on Form 10-KT filed with the SEC on June 28, 2013).

First Amendment to Standard Industrial Lease dated June 15, 2020 by and among Algorhythm Holdings, Majestic-CCCIV Partners and NM Majestic Holdings, LLC (incorporated by reference to Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on August 13, 2020).

The Singing Machine 2022 Equity Incentive Plan (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on April 18, 2022)

Employment Agreement by and between Algorhythm Holdings and Gary Atkinson (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on April 22, 2022).

Employment Agreement by and between Algorhythm Holdings and Bernardo Melo (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on April 22, 2022).

Form of Indemnification Agreement to be entered into with the Registrant and each of its officers and directors (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on May 27, 2022).

Amended and Restated Employment Agreement by and between Algorhythm Holdings and Lionel Marquis (incorporated by reference to Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on January 6, 2023).

Agreement of Lease by and between MICS Nomad, LLC and OAC 111 Flatiron, LLC and OAC Adelphi, LLC, dated August 1, 2023 (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on August 24, 2023).

Form of Stock Purchase Agreement dated November 20, 2023 (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on November 22, 2023).

Loan Agreement by and between Algorhythm Holdings and Oxford Commercial Finance dated March 28, 2024 (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2024).

Revolving Credit Note dated March 28, 2024 (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2024).

Security Agreement by and between Algorhythm Holdings and Oxford Commercial Finance dated March 28, 2024 (incorporated by reference to Exhibit 10.3 in the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2024).

Operating Agreement between Algorhythm Holdings, SemiCab Holdings, LLC and SemiCab, Inc.

(incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on June 12, 2024).

At-The-Market Issuance Sales Agreement by and between Algorhythm Holdings and Ascendiant Capital Markets, LLC, dated June 26, 2024 (incorporated by reference to Exhibit 1.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on June 27, 2024).

Amendment to At-The-Market Issuance Sales Agreement by and between Algorhythm Holdings and Ascendiant Capital Markets, LLC, dated July 8, 2024 (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on July 9, 2024).

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 in the Company’s Form 8-K filed with the SEC on October 24, 2024).

Form of Original Issue Discount Senior Secured Note (incorporated by reference to Exhibit 10.2 in the Company’s Form 8-K filed with the SEC on October 24, 2024).

Form of Guarantee (incorporated by reference to Exhibit 10.3 in the Company’s Form 8-K filed with the SEC on October 24, 2024)

Stock Repurchase Agreement dated November 1, 2024 (incorporated by reference to Exhibit 10.1 in the Company’s Form 8-K filed with the SEC on November 7, 2024)

Form of Series A Warrant dated December 4, 2024 (incorporated by reference to Exhibit 4.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Form of Series B Warrant dated December 4, 2024 (incorporated by reference to Exhibit 4.2 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Form of Pre-Funded Warrant dated December 4, 2024 (incorporated by reference to Exhibit 4.3 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Form of Securities Purchase Agreement dated December 4, 2024 (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Placement Agency Agreement dated December 4, 2024 (incorporated by reference to Exhibit 10.2 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Stock Repurchase Agreement dated December 3, 2024 (incorporated by reference to Exhibit 10.3 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 6, 2024).

Form of Securities Purchase Agreement dated December 17, 2024 (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 18, 2024).

Placement Agency Agreement dated December 17, 2024 (incorporated by reference to Exhibit 10.2 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on December 18, 2024).

Employment Agreement, dated February 12, 2025, between Algorhythm Holdings, Inc.

and Alex Andre (incorporated by reference to Exhibit 10.1 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on February 18, 2025).

Stock Option, dated February 13, 2025, issued by Algorhythm Holdings, Inc.

to Alex Andre (incorporated by reference to Exhibit 10.2 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on February 18, 2025).

Restricted Stock Award, dated February 13, 2025, issued by Algorhythm Holdings, Inc.

to Alex Andre (incorporated by reference to Exhibit 10.3 in Algorhythm Holdings’ Current Report on Form 8-K filed with the SEC on February 18, 2025).

Algorhythm Holdings Insider Trading Policy

List of subsidiaries of Algorhythm Holdings (incorporated by reference to Exhibit 21 in the Company’s Registration Statement on Form S-1 filed with the SEC on November 12, 2024).

Consent of Marcum LLP

Certification of Gary Atkinson, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

Certification of Alex Andre, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

Certifying Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

Certifying Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

Algorhythm Holdings Clawback Policy (incorporated by reference to Exhibit 97 in Algorhythm Holdings’ Transition Report on Form 10-KT filed with the SEC on April 15, 2024).

XBRL Instance Document.

11 unchanged sentences

Form 10-K Summary.

accordance with the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, The Singing Machine Company, Inc.

duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SINGING MACHINE COMPANY, INC.

July 14, 2023

accordance with the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, Algorhythm Holdings, Inc.

has duly caused

this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HOLDINGS, INC.

April 15, 2025

Gary Atkinson

1 unchanged sentence

Executive Officer)

July 14, 2023

Lionel Marquis

Financial Officer

April 15, 2025

Financial Officer & General Counsel

Financial and Accounting Officer)

accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on

behalf of The Singing Machine Company, Inc.

behalf of Algorhythm Holdings, Inc.

and in the capacities and on the dates indicated.

Board Chairman

Gary Atkinson

Executive Officer and Director

Executive Officer)

LIONEL MARQUIS

Financial Officer

Financial Officer)

BERNARDO MELO

Revenue Officer and Director

Revenue Officer)

Mathieu Peloquin

(Principal Executive Officer)

Financial Officer and General Counsel

(Principal Financial Officer)

Harvey Judkowitz

KENNETH CRAGUN

SINGING MACHINE COMPANY, INC.

AND SUBSIDIARIES

Mathieu Peloquin

Bernardo Melo

Holdings, Inc.

to Financial Statements

of Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets

Statements of Operations

Statements of Cash Flows

Statements of Shareholders’ Equity

to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets at December 31, 2024 and 2023

Consolidated Statements of Operations for the Year Ended December 31, 2024 and the Nine-Month Period Ended December 31, 2023

Consolidated Statements of Stockholders’ Deficit for the Year Ended December 31, 2024 and the Nine-Month Period Ended December 31, 2023

Consolidated Statements of Cash Flows for the Year Ended December 31, 2024 and the Nine-Month Period Ended December 31, 2023

Notes to Consolidated Financial Statements

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders of

Singing Machine Company, Inc.

the Shareholders and Board of Directors of

Holdings, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheets of The Singing Machine Company, Inc.

and Subsidiaries (the “Company”)

as of March 31, 2023 and 2022, and the related consolidated statements of operations, cash flows, and shareholders’ equity for

each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion,

the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31,

2023 and 2022, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity

with accounting principles generally accepted in the United States of America.

have audited the accompanying consolidated balance sheets of Algorhythm Holdings, Inc.

(the “Company”) as of December 31,

2024 and 2023, the related consolidated statements of operations, shareholders’ (deficit) equity, and cash flows for the year ended

December 31, 2024 and the nine month transition period from April 1, 2023 through December 31, 2023, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the

year ended December 31, 2024 and the nine month transition period from April 1, 2023 through December 31, 2023, in conformity with accounting

principles generally accepted in the United States of America .

Paragraph – Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully

described in Note 2, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and

sustain its operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The financial statements do not include any

adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

5 unchanged sentences

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit s

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an

opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

12 unchanged sentences

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Consideration

described in Note 3 to the consolidated financial statements, the Company provides for variable consideration estimated at the expected

value or at the most likely amount depending on the type of consideration.

Estimated amounts are included in the transaction price to

the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated

with the variable consideration is resolved.

Variable consideration primarily includes reserves for sales returns and accruals for promotional

The Company estimates variable consideration under its return programs for goods returned from the customer for various reasons,

whereby a sales return reserve is recorded based on historic return amounts, specific events as identified and management estimates.

The Company selectively participates in retailer’s promotional incentives to maximize sales of the Company’s products on

the retail floor or to assist in developing consumer awareness of new product launches, by providing marketing allowances to their customers.

The Company’s reserve for sales returns were approximately $0.9 million as of March 31, 2023.

The Company’s accrual for promotional

incentives was approximately $1.1 million as of March 31, 2023.

identified management’s estimates for variable consideration as a critical audit matter due to the fact that there was significant

judgment required by management with respect to measurement uncertainty, as the calculation of these reserves and allowances includes

assumptions such as product sell through at retailers, as well historical product sales used to predict future sales in evaluating the

net realizable value of inventory returns.

This in turn led to a high degree of auditor judgment, subjectivity and effort in applying

the procedures related to those assumptions.

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

for Sales Returns:

discussed in Note 3 to the consolidated financial statements, the Company estimates the sales value of goods to be returned from our

allowance programs for goods returned from the customer for various reasons, whereby a reserve for sales returns is recorded based on

historic return amounts, specific events as identified and management estimates.

identified management’s estimate for sales returns as a critical audit matter due to the fact that there was significant judgment

required by management with respect to measurement uncertainty, as the calculation of estimated sales returns includes assumptions such

as historical product returns and margins experience used to predict future returns.

This in turn led to a high degree of auditor judgment,

subjectivity and effort in applying the procedures related to those assumptions.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

We obtained an understanding and evaluated the design of controls over the Company’s estimates for variable consideration.

Our procedures also included, among others,(1) recalculating the sales return reserve based on our review of returns received subsequent

to year end and the net realizable value of the returned goods based on historical margins and product sales projections;

(2) recalculating

the Company’s promotional incentive accrual based on specific customer arrangements and programs along with supporting documentation

from those customers;

(3) performing a sensitivity analysis of the Company’s variable consideration by recalculating using our

independent assumptions;

(4)evaluating the Company’s ability to accurately estimate the sales return reserve by comparing historically

recorded reserves to the actual amount that was ultimately claimed by the retailers;

and (5) analyzing year over year trends in the reserve

and allowance in comparison with revenue trends to further evaluate reasonableness of the estimate and consistency with expectations.

described in Note 3 to the consolidated financial statements, the Company’s inventories are stated at the lower of cost or net

realizable value.

The Company maintains its inventory at the lower of cost or net realizable value based primarily on the age of the

inventory, estimated required sell-through time and whether items are selling below cost.

In determining appropriate inventory reserve

percentages, the Company evaluates a number of factors including its historical write off experience, the specific products affected,

its historic recovery percentages on various methods of liquidations, as well as forecasts of future sales.

Inventories, net, and the

inventory reserve at March 31, 2023, totaled $9.6 million and $0.9 million, respectively.

identified the valuation of inventory as a critical audit matter due to the significant judgments necessary to identify and record the

inventory at the lower of cost or net realizable value timely.

This in turn led to a high degree of auditor judgement, subjectivity and

effort in, performing audit procedures to evaluate management’s estimates of the net realizable value for the inventory on-hand

as of the reporting date.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated

financial statements.

We obtained an understanding and evaluated the design of controls over the Company’s inventory valuation.

Our procedures related to management’s estimates of the net realizable value of the inventory on-hand as of the reporting date

included the following, among others, (1) evaluating of the appropriateness and consistency of management’s methodology and assumptions

used in determining the inventory reserve;

(2) obtaining the Company’s inventory at the lower of cost or net realizable value calculation

and testing the mathematical accuracy;

(3) testing the accuracy and completeness of the underlying data used in the calculation of the

Company’s net realizable value;

and (4) selecting a sample of inventory items, evaluating historical sales performance relative

to management’s conclusions on the ability to sell through the inventory on-hand at the forecasted levels as well as testing sales

subsequent to year-end to evaluate the Company’s ability to accurately estimate the inventory reserve relative to the net realizable

EisnerAmper LLP

Our procedures also included, among others, (1) evaluating the estimated sales return reserve based on historical sales returns experience;

(2) evaluating the Company’s

ability to accurately estimate the sales return reserve by comparing historically recorded reserves to the actual amount that was ultimately

claimed by the retailers;

and (3) evaluating the impact of returns and notification from customers regarding returns subsequent to year-end

on the estimated sales returns reserve.

have served as the Company’s auditor since 2023.

Singing Machine Company, Inc.

Philadelphia,

Holdings, Inc.

and Subsidiaries

BALANCE SHEETS

Current Assets

Accounts receivable, net

of allowances of $ 165,986 and $ 122,550 , respectively

Due from Crestmark Bank

Accounts receivable related

party - Stingray Group, Inc.

Accounts receivable related

party - Ault Alliance, Inc.

Inventories, net

Prepaid expenses and other

December 31, 2024

December 31, 2023

Current Assets

financing costs

Accounts receivable, net of allowances of $ 274,000 and

Accounts receivable, related party

Accounts receivable

Note receivable - related party

Note receivable

Returns asset

Prepaid expenses and other current assets

Total Current Assets

Property and equipment, net

Deferred financing costs, net of current

Deferred tax assets

Operating leases - right of use assets

Other non-current

Liabilities and Shareholders’

Other non-current assets

Intangible assets, net

Liabilities and Shareholders’ Equity

Current Liabilities

1 unchanged sentence

Accrued expenses

Due to related party -

Starlight Consumer Electronics Co., Ltd.

Due to related party -

Starlight R&D, Ltd.

Revolving lines of credit

Refunds due to customers

Refund due to customer

Customer prepayments

Reserve for sales returns

Current portion of finance

Current portion of installment

Current portion of operating

lease liabilities

Subordinated note payable - Starlight Marketing Development, Ltd.

Warrant liability

Current portion of notes payable to related parties

Notes payable

Other current liabilities

Total Current Liabilities

Finance leases, net of current portion

Installment notes, net of current portion

Operating lease liabilities,

net of current portion

Notes payable to related parties, net of current portion

Operating lease liabilities, net of current portion

Other liabilities

Total Liabilities

Commitments and Contingencies

Shareholders’ Equity

Preferred stock, $ 1.00

Shareholders’ (Deficit) Equity

Preferred stock, $ 1.00 par value;

1,000,000 shares authorized;

no shares issued and outstanding

Common stock $ 0.01 par

Common stock $ 0.01 par value;

100,000,000 shares authorized;

3,184,439 shares issued, 3,167,489 shares outstanding and 1,221,209 shares issued and outstanding,

470,825 and 32,090 shares issued and outstanding at December 31, 2024 and 2023.

Additional paid-in capital

Subscriptions receivable

Accumulated deficit

( 49,172,000 )

( 25,915,000 )

Shareholders’ Equity

Liabilities and Shareholders’ Equity

Non-controlling interest

( 1,036,000 )

Total Algorhythm Holdings Shareholders’ (Deficit) Equity

( 10,521,000 )

Total Liabilities and Shareholders’ (Deficit) Equity

notes to the consolidated financial statements

Singing Machine Company, Inc.

Holdings, Inc.

and Subsidiaries

STATEMENTS OF OPERATIONS

the Twelve Months Ended

of Goods Sold

Nine Months Ended

December 31, 2024

December 31, 2023

Cost of Goods Sold

Operating Expenses

Selling expenses

General and administrative

Operating Expenses

(Loss) Income from Operations

General and administrative expenses

Impairment of goodwill

Total Operating Expenses

Loss from Operations

( 13,925,000 )

Other Income (Expense),

Gain from Paycheck Protection

Plan loan forgiveness

Gain - related party

Gain from Employee Retension

Credit Program refund

Gain from settlement of

accounts payable

Loss from extinguishment

( 6,143,000 )

Other (Expense) Income

Change in fair value of warrant liability

Loss on issuance of warrants

( 8,889,000 )

Interest expense

Other Income (Expense), net

(Loss) Income Before Income

Tax (Provision)

( 1,887,000 )

Tax (Provision)

Total Other Expense

( 10,442,000 )

(Loss) Income

Loss Before Income Tax Benefit

( 24,367,000 )

Net (Loss) Income per Common

Weighted Average Common

and Common Equivalent Shares:

( 6,398,000 )

Income Tax Provision

( 24,367,000 )

( 6,398,000 )

Net Loss Attributable to Non-controlling Interest

Net Loss Available to Common Stockholders

$ ( 23,257,000 )

$ ( 6,398,000 )

Loss per common share

Basic and diluted

Weighted Average Common and Common

Equivalent Shares:

Basic and diluted

notes to the consolidated financial statements

Singing Machine Company, Inc.

Holdings, Inc.

and Subsidiaries

STATEMENTS OF CASH FLOWS

the Twelve Months Ended

Cash flows from operating

OF SHAREHOLDERS’ (DEFICIT) EQUITY

the Year Ended December 31, 2024 and Nine Months Ended December 31, 2023

Additional Paid in

Non-Controlling

Balance at March 31, 2023

$ ( 19,517,000 )

Adjustments to reconcile

net (loss) income to net cash used in operating activities:

Amortization of deferred

financing costs

Change in inventory reserve

Change in allowance for

Loss from disposal of property

and equipment

( 6,398,000 )

Sale of common stock, net of offering costs

Stock based compensation

Change in net deferred

Loss on debt extinguishment

Paycheck Protection Plan

loan forgiveness

Gain - related party

Gain from extinguishment

of accounts payable

Changes in operating assets

and liabilities:

Accounts receivable

Due from banks

Accounts receivable - related

Balance at December 31, 2023

$ ( 25,915,000 )

Prepaid expenses and other

current assets

Other non-current assets

Accounts payable

$ ( 25,915,000 )

Accrued expenses

Due to related parties

Customer deposits

Refunds due to customers

Reserve for sales returns

lease liabilities, net of operating leases - right of use assets

cash used in operating activities

( 1,110,000 )

Cash flows from investing

of property and equipment

cash used in investing activities

Cash flows from financing

Proceeds from Issuance

of stock - net of transaction expenses

Proceeds from Issuance

of stock - at the market offering

Payment of redemption and

retirement of treasury stock

( 23,257,000 )

Net (payment) proceeds

from revolving lines of credit

( 24,367,000 )

Payment of deferred financing

Payment of early termination

fees on revolving lines of credit

Payments on installment

Proceeds from exercise

of stock options

Proceeds from exercise

of pre-funded warrants

Proceeds from exercise

of common warrants

Payment on subordinated

on finance leases

cash provided by financing activities

Net change in cash

at beginning of year

at end of period

Supplemental disclosures

of cash flow information:

paid for interest

paid for income taxes - SMC (Comercial Offshore de Macau) Limitada

purchased under capital lease

of common stock and warrants for stock issuance expenses

leases - right of use assets and lease liabilities at inception of lease

Sale of common stock and pre-funded warrants, net of offering cost

Stock based compensation

Common stock issued for purchase of SemiCab Inc

Subsidiary interests issued for purchase of SemiCab Inc

Repurchase of common shares - related parties

Issuance of common stock with debt

Balance at December 31, 2024

$ ( 1,036,000 )

$ ( 49,172,000 )

$ ( 10,521,000 )

$ ( 1,036,000 )

$ ( 49,172,000 )

$ ( 10,521,000 )

notes to the consolidated financial statements

Singing Machine Company, Inc.

Holdings, Inc.

and Subsidiaries

STATEMENTS OF SHAREHOLDERS’ EQUITY

the twelve months ended March 31, 2023 and 2022

Subscriptions

Balance at March

STATEMENTS OF CASH FLOWS

Nine Months Ended

December 31, 2024

December 31, 2023

Cash flows from operating activities

$ ( 24,367,000 )

Issuance of stock

Issuance of pre-funded warrants

Payment of stock issuance expenses

Issuance of stock for stock issuance expenses

Redemption and retirement of treasury shares

$ ( 6,398,000 )

to reconcile net loss to net cash (used in), provided by operating activities:

Amortization of intangible assets

Impairment of goodwill from purchase of SemiCab Inc

Impairment on note receivable - SCMB

Reduction in SMCB loan in exchange for services

Provision for estimated cost of returns

( 1,364,000 )

Change in fair value of warrant liability

Loss on issuance of warrants

Amortization of debt discount and issuance costs

Provision for inventory obsolescence

Reserve for sales returns

Credit losses

Non-cash effect on termination of operating lease

Net gain from disposal of property and equipment

Stock based compensation

Amortization of right of use assets

Changes in operating assets and liabilities:

Accounts receivable

( 5,241,000 )

Issuance of common stock - directors

Issuance of common stock - non-employee

Employee compensation-stock option

Exercise of stock options

Balance at March 31, 2022

Accounts receivable - related parties

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

( 4,540,000 )

Accrued expenses

( 1,076,000 )

Prepaids from customers

Refunds due to customers

( 2,392,000 )

Net income (Loss)

Operating lease liabilities

Net cash (used in) provided by operating activities

( 8,556,000 )

Cash flows from investing activities

Purchase of property and equipment

Pre Acquistion advances to SemiCab

Cash received from purchase of SemiCab Inc

Disposal of property and equipment

Advances to SMCB

( 1,777,000 )

Issuance of common stock

Payment of stock issuance expenses

Issuance of common stock - at the market offering

Exercise of pre-funded warrants

Exercise of common stock warrants

Issuance of common stock - directors

Issuance of common stock - officers

Issuance of common stock - non-employee

Employee compensation-stock option

Rounding of common stock

issued due to reverse split

at March 31, 2023

Net cash used in investing activities

( 2,245,000 )

Cash flows from financing activities

Proceeds from sale of common stock and warrants, net of offering costs

Payments on merchant cash advances payable

Proceeds from issuance of senior secured notes, net of discounts

Payment of senior secured notes

( 2,353,000 )

Payment of debt issuance costs

Net cash provided by financing activities

Net change in cash

Cash at beginning of year

Cash at end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

Non-Cash investing and financing cash flow information:

Common stock and subsidiary interests issued for purchase of SemiCab Inc

Right of use assets exchanged for lease liabilities

Issuance of common stock with debt

Repurchase of common shares - related parties

Effect of extinguishment of advances to SemiCab Inc.

notes to the consolidated financial statements

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

1 - BASIS OF PRESENTATION

Singing Machine Company, Inc., a Delaware corporation (the “Company,” “SMC”, “The Singing Machine”),

and wholly-owned subsidiaries SMC (Comercial Offshore De Macau) Limitada (“Macau Subsidiary”), SMC Logistics, Inc.

SMC-Music, Inc.

(“SMCM”) and SMC (HK) Limited (“SMH”), are primarily engaged in the development, marketing, and

sale of consumer karaoke audio equipment, accessories and musical recordings.

The products are sold directly to distributors and retail

EQUITY EVENTS

February 15, 2023, The Singing Machine Company, Inc.

(the “Company”), entered into an At-The-Market Issuance Sales Agreement

(the “Sales Agreement”) with Aegis Capital Corp, as sales agent (the “Agent”), pursuant to which the Company

may offer and sell, from time to time, through the Agent (the “Offering”), up to approximately $ 1.8 million in shares of

its common stock.

Any shares offered and sold in the Offering were issued pursuant to the Company’s Registration Statement on Form

S-3 (File No.

333-269183) filed with the Securities and Exchange Commission (the “SEC”) on January 11, 2023 (the “Registration

Statement”) and declared effective by the SEC on January 20, 2023, and the prospectus supplement relating to the Offering filed

with the SEC on February 15, 2023.

the terms of the Sales Agreement, the Agent was entitled to a commission at a rate of 3.0 % of the gross proceeds from each sale of shares

under the Sales Agreement.

The Company also reimbursed the Agent for certain expenses incurred in connection with the Sales Agreement

and has agreed to provide indemnification and contribution to the Agent with respect to certain liabilities, including liabilities under

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

February 15, 2023, the Company launched an At-The-Market (“ATM”) offering pursuant to the Sales Agreement.

During the fiscal

year ended March 31, 2023, the Company received total net proceeds from the ATM of approximately $ 36,000 on sales of 14,230 shares of

common stock at an average price of $ 2.56 per share.

Subsequent to March 31, 2023, the Company received total net proceeds from the ATM

of approximately $ 1.7 million on sales of 1,052,770 shares of common stock at an average price of $ 1.64 per share.

The offering closed

on May 12, 2023.

2 – LIQUIDITY

Company reported a net loss of approximately $ 4.6 million and used cash in operating activities of approximately $ 0.3 million for the

fiscal year ended March 31, 2023.

On October 14, 2022 the Company entered into the Credit Facility with Fifth Third Bank, as Lender replacing

the existing credit facilities with Crestmark Bank (“Crestmark”) and Iron Horse Credit (“IHC”) that were terminated

by the Company on October 13, 2022.

The Credit Facility provides for a three-year secured revolving credit facility in an aggregate principal

amount of up to $ 15,000,000 decreased to $ 7,500,000 during the period of January 1 through July 31 of each year.

The Credit Facility

matures on October 14, 2025.

of March 31, 2023 the Company was in default under the Credit Facility due to non-compliance with the fixed charge coverage ratio covenant

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

and new covenants that are required.

The Company 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.

The Company must also maintain pre-defined

minimum operating cash flows between February and August, 2023 until the Company achieves a fixed charge ratio of 1.15 :

1.0 beginning

in September 2023 and throughout the remaining term of the agreement.

As of this filing, the Company is in compliance with the amended

February 15, 2023 the Company launched an At-The-Market (“ATM”) offering pursuant to the Sales Agreement with Aegis Captial

During the fiscal year ended March 31, 2023, the Company received total net proceeds from the ATM of approximately $ 36,000 on sales

of 14,230 shares of common stock at an average price of $ 2.56 per share.

After March 31, 2023, the Company received total net proceeds

from the ATM of approximately $ 1.7 million on sales of 1,052,770 shares of common stock at an average price of $ 1.64 per share.

closed on May 12, 2023.

Company believes that our cash on hand, proceeds received from the ATM subsequent to March 31, 2023, working capital (net of cash), cash

expected to be generated from our operating forecast, along with the availability of cash from our credit facilities (See Note 6 –

BANK FINANCING) will be adequate to meet the Company’s liquidity requirements for at least twelve months from the filing of this

As of the date of this filing, the Company has cash on hand of $ 1.6 million and availability under the Credit Facility of approximately

$ 1.8 million.

While the Company is optimistic that it will be successful in these efforts to achieve our plan, there can be no assurances

that we will be successful in doing so.

As such, the Company has a continued support letter from its parent company, Ault Alliance, through

July 14, 2024.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

1 – Nature of Business

Holdings, Inc.

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

(“AI”) technology and consumer electronics holding company with two primary business units – SemiCab and Singing

SemiCab is an AI-enabled software logistics business operated through the Company’s subsidiary, SemiCab Holdings,

Singing Machine is a home karaoke consumer products business that designs and distributes karaoke products globally to

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

Company’s operations include its wholly-owned subsidiaries, SMC Logistics, Inc., a California corporation (“SMCL”),

SMC-Music, Inc., a Florida corporation (“SMCM”), SMC (HK) Limited, a Hong Kong company (“SMH”), The Singing Machine

Company, Inc., a Delaware corporation (“Singing Machine”), MICS Hospitality Holdings, Inc., a Delaware corporation (“MICS

Hospitality”), MICS Hospitality Management, LLC, a Delaware limited liability company (“MICS Hospitality Management”),

and MICS Nomad, LLC, a Delaware limited liability company (“MICS NY”), and its 80 %-owned subsidiary, SemiCab Holdings, LLC,

a Nevada limited liability company (“SemiCab Holdings”).

During 2023, the Company’s board of directors approved

a change in the Company’s fiscal year end from March 31 to December 31.

Effective September 5, 2024, the

Company’s Certificate of Incorporation was amended to change the name of the Company from “The Singing Machine Company, Inc.”

to “Algorhythm Holdings, Inc.”

On January 13, 2025, the Company’s

stockholders voted to authorize the Company’s board of directors to effect a reverse stock split of the Company’s outstanding

shares of common stock at a specific ratio within a range of 1-for-10 to a maximum of 1-for-250 and to amend the Company’s certificate

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

On January 14, 2025, the Company’s

board of directors approved a reverse stock split of 1-for-200 ratio and approved the filing of a certificate of amendment to the Company’s

certificate of incorporation to effect the reverse stock split and to increase the Company’s authorized shares of common stock from

100,000,000 to 800,000,000.

The reverse stock split took effect on Monday February 10, 2025.

All current and prior year balances have

been adjusted to reflect the reverse stock split.

2 – Liquidity, Going Concern and Management Plans

of December 31, 2024, the Company’s cash balance was $ 7,550,000 .

This will not be sufficient to fund its planned operations for

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

The Company has a recent history of recurring operating

losses and decreases in working capital.

These factors create substantial doubt about the Company’s ability to continue as a going

concern for at least one year after the date that the Company’s audited consolidated financial statements are issued.

consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going

Accordingly, the consolidated financial statements have been prepared under the assumption that the Company will continue as

a going concern and that the realization of assets and satisfaction of liabilities and commitments will continue in the ordinary course

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

It may attempt to obtain additional

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

The Company has not made arrangements to obtain additional

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

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

position, cash flow and outflow forecasts, and obligations and debts.

Although management has a recent history of successful capital

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

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

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

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3 – Summary of Significant Accounting Policies

of Presentation

accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the

United States of America (“GAAP”).

of Consolidation

accompanying consolidated financial statements include the accounts of the Company, its Macau and Hong Kong subsidiaries, SMCL, and SMCM.

All inter-company accounts and transactions have been eliminated in consolidation for all periods presented.

Singing Machine makes estimates and assumptions in the ordinary course of business relating to sales returns and allowances, warranty

reserves, inventory reserves and reserves for promotional incentives that affect the reported amounts of assets and liabilities and of

contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses

during the reporting period.

Future events and their effects cannot be determined with absolute certainty;

therefore, the determination

of estimates requires the exercise of judgment.

Historically, past changes to these estimates have not had a material impact on the Company’s

accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries SMCL, SMCM, SMH, Singing

Machine”, MICS Hospitality, MICS, MICS Hospitality Management, MICS NY, and its eighty percent ( 80 %)-owned subsidiary, SemiCab

All intercompany accounts and transactions have been eliminated in consolidation for all periods presented.

Company evaluates its business relationships with related parties to identify potential Variable Interest Entities (“VIEs”)

under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation .

The Company will consolidate any VIE in which it is deemed to be the primary beneficiary of the VIE.

The Company will be deemed to be

the primary beneficiary of the VIE if the Company has a controlling financial interest in the VIE.

A controlling financial interest has

the following characteristics:

(i) the power to direct the activities of the VIE that most significantly impact its economic performance;

and (ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the right to receive benefits from the VIE

that could be significant to the VIE.

If both characteristics are met and, then the Company will consolidate that VIE into its consolidated

financial statements.

However, circumstances could change which may alter future expectations.

COLLECTIBILITY

OF ACCOUNTS RECEIVABLE

Singing Machine’s allowance for doubtful accounts is based on management’s estimates of the creditworthiness of its customers,

current economic conditions and historical information, and, in the opinion of management, is believed to be in an amount sufficient

to respond to normal business conditions.

Management sets 100 % reserves for customers in bankruptcy and other allowances based upon historical

collection experience.

The Company is subject to chargebacks from customers for co-op program incentives, defective returns, return freight

and handling charges that are deducted from open invoices and reduce collectability of open invoices.

Should business conditions deteriorate

or any major customer default on its obligations to the Company, this allowance may need to be significantly increased, which would have

a negative impact on operations.

CURRENCY TRANSLATION

functional currency of the Macau and Hong Kong subsidiaries is the Hong Kong dollar.

The financial statements of the subsidiary are translated

dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues,

costs, and expenses.

Net gains and losses resulting from foreign exchange transactions are recorded in the statements of operations and

translations would be recorded in a separate component of shareholders’ equity.

Any such amounts were not material during the periods

Concentration

of Credit Risk

times, the Company maintains cash in United States bank accounts that are in excess of the Federal Deposit Insurance Corporation insured

The Company maintains cash balances in foreign financial institutions.

The amounts at foreign financial institutions at March

31, 2023 and 2022 were approximately $ 0.2 million and $ 0.1 million, respectively.

The Company regularly monitors the financial stability

of this financial institution and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

in March and April 2023, certain U.S.

government banking regulators took steps to intervene in the operations of certain financial institutions

due to liquidity concerns, which caused general heightened uncertainties in financial markets.

While these events have not had a material

direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and

financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing

arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

instruments, which potentially subject the Company to concentrations of credit risk, consist of accounts receivable.

are comprised primarily of electronic karaoke equipment, microphones and accessories, and are stated at the lower of cost or net realizable

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

prescribed by ASC 810, if the Company holds a variable interest in an entity that is a VIE, but the Company is not the entity’s primary

beneficiary, then the Company must disclose the methodology (e.g., significant judgments and assumptions made) that it used to determine

that it is not the primary beneficiary of the VIE.

Additional information required includes information about the types of involvement

considered significant, and those considered in the determination of whether the reporting entity is the primary beneficiary.

if the Company provides or intends to provide financial or other support, whether explicitly or implicitly, to the VIE when not contractually

required to, the Company must disclose the type and amount of the support along with the primary reasons for providing the support.

qualitative and quantitative information about the Company’s involvement with the VIE must be disclosed, including the nature,

purpose, size, and activities of the VIE and how the VIE is financed.

Company determined that SMCB Solutions Private Limited, an Indian Company (“SMCB”), is a VIE because the Company

provides financial support to SMCB in the form of a loan agreement to fund SMCB’s operations.

The Company further determined that it is not the primary beneficiary of SMCB because the

Company does not have the power to direct or control SMCB’s significant activities related to its business.

Accordingly, the

Company has not consolidated SMCB’s results of operations and financial position in its consolidated financial

Reclassification

of Prior Periods Presentation

prior period amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect

on the reported results of operations.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions.

These estimates and

assumptions affect the reported amounts of assets, liabilities, revenues and expenses.

Actual results could differ materially from these

Estimates are assessed each period and updated to reflect current information.

Significant estimates include allowance for

credit losses, provision for excess and obsolete inventory, reserve for sales returns, co-op promotion incentives, accruals relating

to litigation, goodwill, share-based compensation expense and warrant liability.

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

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

Maker (“CODM”) for the purposes of ASC 280.

The CODM concluded that the Company operates two reportable segments.

consists of its SemiCab business and the other segment consists of its Singing Machine business.

The CODM manages the Company’s

operations and business separately for each operating segment and uses net loss to allocate resources, making operating

decisions and evaluating financial performance.

The CODM also uses net loss, along with non-financial inputs and qualitative

information, to evaluate the Company’s performance, establish compensation, monitor budget versus actual results, and decide the

level of investment in various operating activities and other capital allocation activities.

See Note 15 – Segment Information

and Revenue Disaggregation – Segment Information .

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Receivable and Allowances for Expected Credit Losses

Company recognizes credit losses in accordance with Accounting Standards Update 2016-13, Financial Instruments – Credit Losses

(Topic 326) .

The Company recognizes an allowance

for credit losses at the time a receivable is recorded based on its estimate of expected credit losses and adjusts this estimate over

the life of the receivable as needed.

The Company evaluates specific identified risks and the aggregation and risk characteristics of

a receivable pool and develops loss rates that reflect historical collections, current forecasts of future economic conditions over the

time horizon the Company is exposed to credit risk, and payment terms or conditions that may materially affect future forecasts.

amounts are written-off when determined to be uncollectible.

is comprised primarily of electronic karaoke equipment, microphones, and accessories, and are stated at the lower of cost or net realizable

value, as determined using the first in, first out method.

Inventories also include an estimate for the net realizable value of expected

future inventory returns due to warranty and allowance programs.

As of both March 31, 2023 and 2022 the estimated amounts for these future

inventory returns were approximately $ 0.6 million.

The Company reduces inventory on hand to its net realizable value on an item-by-item

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sales results when the estimated net realizable value of specific inventory items declines below cost.

Management regularly reviews the

Company’s investment in inventories for such declines in value.

As of March 31, 2023 and 2022 the Company had inventory reserves

of approximately and $ 0.9 million and $ 0.4 million, respectively for estimated excess and obsolete inventory.

Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the

carrying amounts may not be recoverable.

If the undiscounted future cash flows attributable to the related assets are less than the carrying

amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with Financial Accounting Standards

Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-05, “Accounting for the Impairment or Disposal

of Long-Lived Assets.”

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2023 and 2022

AND EQUIPMENT

In addition, the Company reports

an estimated amount for the net realizable value of expected future inventory returns (returns asset) related to the Company’s

defective allowance, overstock, and warranty policies.

Substantially

all of the Company’s inventory consists of finished goods.

and Equipment, Net

and equipment are stated at cost, less accumulated depreciation.

Expenditures for repairs and maintenance are charged to expense as incurred.

Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using accelerated

and straight-line methods.

VALUE OF FINANCIAL INSTRUMENTS

follow FASB ASC 825, “Financial Instruments”, which requires disclosures of information about the fair value of certain financial

instruments for which it is practicable to estimate that value.

For purposes of this disclosure, the fair value of a financial instrument

is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale

or liquidation.

carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, accrued expenses,

customer deposits, refunds due to customers, and due to related parties approximates fair value due to the relatively short period to

maturity for these instruments.

The carrying amounts on the notes payable, finance leases and installment notes approximate fair value

either due to the relatively short period to maturity or the related interest is accrued at a rate similar to market rates.

amounts on the revolving line of credit approximates fair value due the relatively short period to maturity and related interest accrued

at market rates.

RECOGNITION AND RESERVE FOR SALES RETURNS

Company recognizes revenue in accordance with FASB ASC 606, “Revenue from Contracts with Customers”.

All revenue is generated

from contracts with customers.

The Company recognizes revenue when the control of the goods sold is transferred to the customer, in an

amount, referred to as the transaction price, that reflects the consideration to which the Company is expected to be entitled in exchange

for those goods.

Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to their estimated useful lives using straight-line

Company determines if an arrangement contains a lease at the inception of a contract.

Right-of-use assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments

arising from the lease.

Right-of-use assets and lease liabilities are recognized at the commencement date.

The liability is equal to

the present value of the remaining minimum lease payments.

The asset is based on the liability, subject to certain adjustments.

leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result

in a front-loaded expense pattern (similar to capital leases under the prior accounting standard).

As the interest rate implicit in the

Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease

The Company utilizes the implicit rate for its finance leases.

Company accounts for business combinations using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations.

The Company allocates the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed

based upon their estimated fair values on the acquisition date.

Any excess of the purchase price over the fair value of the net assets

acquired is recorded as goodwill.

The purchase price allocation process requires management to make significant estimates and assumptions

at the acquisition date with respect to intangible assets.

The allocation of the consideration transferred in certain cases may be subject

to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition

Direct transaction costs associated with the business combination are expensed as incurred.

The Company includes the results of

operations of the business that it has acquired in its consolidated results prospectively from the date of acquisition.

Company evaluates its goodwill for impairment in accordance with FASB Accounting Standards Update (“ASU”) 350, Intangibles

– Goodwill and Other .

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value

of the net identified tangible and intangible assets acquired.

The Company tests the recorded amount of goodwill for impairment on an

annual basis on December 31 or more frequently if there are indicators that the carrying amount of goodwill exceeds its carried value.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Lived and Intangible Assets

Company reviews long-lived assets and intangible assets for impairment in accordance with ASC Topic 360, Property, Plant and Equipment

The Company reviews long-lived assets and intangible assets for impairment

whenever events or changes in business circumstances indicate that the carrying amount of the assets might not be recoverable.

Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the

business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes

in the use of the assets.

If an impairment review is performed to evaluate a long-lived asset or intangible asset for

recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition

of the asset to its carrying value.

An impairment loss is recognized when the estimated undiscounted future cash flows expected to

result from the use of the asset is less than its carrying amount.

The impairment loss would be based on the excess of the carrying

value of the impaired asset over its fair value, determined based on discounted cash flows.

The Company had no impairment

loss related to long-lived assets or intangible assets for the year ended December 31, 2024 or the nine months ended December 31,

Value Measurements

accordance with ASC 820, Fair Value Measurements and Disclosures , fair value is defined as the exit price, or the amount that

would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of

the measurement date.

guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes

the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs include those that

market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent

of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants

would use in valuing the asset or liability.

The guidance establishes three levels of inputs that may be used to measure fair value:

Quoted market prices in active markets for identical assets or liabilities.

Inputs other than Level 1 that are observable, either directly or indirectly, such as

quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or model-derived valuations.

All significant inputs used in the Company’s valuations

are observable or can be derived principally from or corroborated with observable market

data for substantially the full term of the assets or liabilities.

Level 2 inputs also include

quoted prices that were adjusted for security-specific restrictions which are compared to

output from internally developed models such as a discounted cash flow model.

Unobservable inputs that are supported by little or no market activity and that are significant

to the fair value of the assets or liabilities.

carrying amounts of financial instruments carried at cost, including cash, accounts receivables and accounts receivable

– related party, trade payables advances and notes payables and notes payable – related party approximate their fair value

due to the short-term maturities of such instruments.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to

the fair value measurement.

Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s

specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”)

and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial

instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements

for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether

the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control,

among other conditions for equity classification.

Finally, the Company determines if the warrants meet the definition of a derivative

based on their contractual terms.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant

issuance, as of each subsequent quarterly period end date while the warrants are outstanding and at interim dates if circumstances warrant

such analysis.

issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component

of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification,

the warrants are required to be recorded at their initial fair value on the date of issuance, and at each balance sheet date thereafter.

Changes in the estimated fair value of the liability classified warrants are recognized as a non-cash gain or loss on the consolidated

statements of operations.

The Company also evaluates if changes in contractual terms or other considerations would result in the reclassification

of outstanding warrants from liabilities to stockholders’ equity (or vice versa).

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers .

All revenue is generated from contracts

with customers.

The Company recognizes revenue when the control of the goods sold is transferred to the customer, in an amount, referred

to as the transaction price, that reflects the consideration to which the Company expected to be entitled in exchange for those goods.

The Company determines revenue recognition utilizing the following five steps:

(1) identification of the contract with

a customer, (2) identification of the performance obligations in the contract (promised goods or services that are distinct), (3) determination

of the transaction price, (4) allocation of the transaction price to the performance obligations, and (5) recognition of revenue when,

(i) identification of the contract with a customer;

identification of the performance obligations in the contract (promised goods or services that are distinct);

(iii) determination of

the transaction price;

(iv) allocation of the transaction price to the performance obligations;

and (v) recognition of revenue when,

or as, the Company transfers control of the product or service for each performance obligation.

Company selectively participates in a retailer’s co-op promotion incentives to maximize sales of the Company’s products on

the retail floor or to assist in developing consumer awareness of new product launches, by providing marketing fund allowances to our

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Company’s performance obligations are established when a customer submits a purchase order notification and the Company accepts

The Company identifies performance obligations as the delivery of the requested product or service in appropriate quantities

and to the location specified in the customer’s contract and/or purchase order.

Revenue from sales of products is recognized at

a point in time when the Company transfers control to the customer, typically at the time when the product is delivered or shipped, at

which time, title passes to the customer and there are no further performance obligations with regard to the product.

Company selectively participates in retailers’ co-op promotion incentives to maximize sales of the Company’s products on

the retail floor and to assist in developing consumer awareness of new product launches by providing marketing fund allowances to its

As these co-op promotion initiatives are not a distinct good or service and the Company cannot reasonably estimate the fair

value of the benefit it receives from these arrangements, the cost of these allowances at the time they are offered to the customers

are recorded as a reduction to net sales.

Co-op promotion incentives were approximately $ 2.3 million during fiscal 2023 and $ 2.0 million

during fiscal 2022.

Company’s contracts with customers consist of one performance obligation (the sale of the Company’s products).

is recorded as a reduction to net sales.

Co-op promotion incentives were $ 2,059,000 during the year ended December 31, 2024 and $ 2,648,000

during the nine months ended December 31, 2023.

Company’s contracts with customers consist of one performance obligation, which is the sale of its products.

The Company’s

contracts have no financing elements, payment terms are less than 120 days and have no further contract asset or liability obligations

once control of goods is transferred to the customer.

Revenue is recorded in the amount of consideration the Company expects to receive

for the sale of these goods.

contracts have no financing elements.

Payment terms are generally less than 120 days and have no further contract asset or liability

obligations once control of goods is transferred to the customer.

Revenue is recorded in the amount of consideration the Company expects

to receive for the sale of these goods.

incurred in fulfilling contracts with customers include administrative costs associated with the procurement of goods are included in

general and administrative expenses, in-bound freight costs are included in the cost of goods sold and accrued sales representative commissions

are included in selling expenses in the accompanying consolidated statements of operations as our underlying customer agreements are

are included in selling expenses in the accompanying consolidated statements of operations as the Company’s underlying customer agreements are

less than one year.

the Company has no overstock return privileges in its vendor agreements with its customers, the Company does provide for variable consideration

contingent upon the occurrence of uncertain future events.

Variable consideration is estimated at the expected value or at the most likely

amount depending on the type of consideration.

Estimated amounts are included in the transaction price to the extent it is probable that

a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration

The Company estimates variable consideration under our return allowance programs for goods returned from the customer for

various reasons, whereby a sales return reserve is recorded based on historic return amounts, specific events as identified and management

Company’s reserve for sales returns were approximately $ 0.9 million and $ 1.0 million as of March 31, 2023 and 2022, respectively.

Company disaggregates revenues by product line and major geographic region as most of its revenue is generated by the sales of karaoke

hardware and the Company has no other material business segments (See NOTE 14 – SEGMENT INFORMATION).

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

for Sales Returns and Returns Asset

the Company has no overstock return privileges in its vendor agreements with its customers, it does accept defective returns, warranty

exchanges and overstock from seasonal customers.

The Company estimates the sales value of goods to be returned from its allowance programs

for goods returned from the customer for various reasons, whereby a reserve for sales returns is recorded based on historic return amounts,

specific events as identified and management estimates.

The Company’s reserve for sales returns was $ 3,355,000 and $ 3,390,000 as

of December 31, 2024 and 2023, respectively.

The Company estimates the net realizable value of these expected future sales returns.

net realizable value of these estimated returns is classified as return assets as part of current assets on the Company’s consolidated

financial statements.

The Company’s return assets were $ 1,621,000 and $ 1,919,000 as of December 31, 2024 and 2023, respectively.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

fiscal 2023 and 2022 revenue was derived from five different major product lines.

Disaggregated approximate revenue from these product

lines consisted of the following:

OF DISAGGREGATION OF REVENUE

Revenue by Product Line

Karaoke Machines

Microphones and Accessories

SMC Kids Toys

Licensed Products

Music Subscriptions

and Handling Costs

1 unchanged sentence

fulfill the Company’s promise to transfer the goods.

For Fiscal 2023 and 2022 shipping and handling expenses were approximately

$ 0.5 million and $ 0.9 million, respectively.

These expenses are classified as a component of selling expenses in the accompanying consolidated

statements of operations.

Company follows the provisions of FASB ASC 718-20, “Compensation – Stock Compensation Awards Classified as Equity”.

ASC 718-20 requires all share-based payments to employees including grants of employee stock options, be measured at fair value and expensed

in the consolidated statements of operations over the service period (generally the vesting period).

The Company uses the Black-Scholes

option valuation model to value stock options.

Employee stock option compensation expense in fiscal years ended March 31, 2023 and 2022

includes the estimated fair value of options granted, amortized on a straight-line basis over the requisite service period for the entire

portion of the award.

For the fiscal years ended March 31, 2023 and 2022, the stock option expense was approximately $ 237,000 and $ 22,000 ,

respectively.

fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions

outlined below.

The expected volatility is based upon historical volatility of our stock and other contributing factors.

term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees.

the year ended March 31, 2023:

expected dividend yield of 0 % , risk-free interest rate between 2.63 % and 3.21 % , respectively, with

volatility between 166.1 % and 196.3 % , respectively with an expected term of three years .

the year ended March 31, 2022:

expected dividend yield of 0 % , risk-free interest rate between 0.43 % and 0.96 % , respectively, with

volatility between 149.5 % and 157.0 % , respectively with an expected term of three years .

Company’s directors were issued shares of stock as compensation for their service.

For the years ended March 31, 2023 and 2022,

the stock compensation expense to directors was $ 20,000 and $ 5,000 , respectively.

AND DEVELOPMENT COSTS

research and development costs are charged to results of operations as incurred.

These expenses are shown as a component of general and

administrative expenses in the consolidated statements of operations.

For both years ended March 31, 2023 and 2022, these amounts totaled

approximately $ 0.1 million.

Company follows the provisions of FASB ASC 740 “Accounting for Income Taxes.” Under the asset and liability method of ASC

740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial

statement carrying amounts of existing assets and liabilities and their respective tax base.

Deferred tax assets and liabilities are

measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to

be recovered or settled.

Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income

in the period that includes the enactment date.

If it is more likely than not that some portion of a deferred tax asset will not be realized,

a valuation allowance is recognized.

Fiscal 2023, the Company was eligible to receive payroll tax refunds from the Employee Retention Credit program (“ECR”).

The ECR program was established under the Consolidated Appropriations (CARES) Act in 2021 to assist employers who suffered financial

losses during the COVID pandemic but kept employees on their payrolls during 2020 and 2021.

The Company received approximately $ 0.7 million

in payroll tax refunds (net of approximately $ 0.1 million in processing fees) from the ECR program in Fiscal 2023 that were recorded

as other income in the accompanying consolidated financial statements.

As these were considered tax refunds and not credits, the Company

recorded an income tax payable of approximately $ 91,000 due to amendments to the 2020 and 2021 returns to account for refunds of payroll

taxes received in Fiscal 2023 from the ERC program for those periods.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

Shipping and handling expenses were $ 592,000 and $ 561,000 for the year ended

December 31, 2024 and the nine months ended December 31, 2023, respectively.

These expenses are classified as a component of selling

expenses in the Company’s consolidated statements of operations.

Company has granted stock options, warrants, restricted stock awards and restricted stock units to employees, non-employee consultants

and non-employee members of its board of directors.

The Company also has an equity incentive plan that provides for the issuance of equity

incentive awards, such as stock options, warrants, stock appreciation rights, stock awards, restricted stock, stock units, performance

awards and other stock or cash-based awards to the Company’s employees, officers, directors, consultants, agents, advisors and

independent contractors.

Company measures the compensation cost associated with all share-based payments based on grant date fair values.

The fair value of each

stock option and stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements.

The Company generally uses the Black-Scholes option pricing model to estimate the fair value of its stock options and stock purchase

The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the Company’s

stock price and several assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends.

grants of stock options, the Company uses a blend of historical and implied volatility for traded options on its stock to estimate the

expected volatility assumption required in the Black-Scholes model.

The Company’s use of blended volatility estimates in computing

the expected volatility assumption for stock options is based on its belief that while the implied volatility is representative of expected

future volatility, the historical volatility over the expected term of the award is also an indicator of expected future volatility.

The Company utilizes a blended volatility estimate that consists of implied volatility and historical volatility in order to estimate

the expected volatility assumption of the Black-Scholes model.

expected term of stock options granted is estimated using historical experience.

The risk-free interest rate assumption is based on observed

interest rates appropriate for the expected terms of the Company’s stock options and stock purchase rights.

The dividend yield

assumption is based on the Company’s history and expectation of no dividend payouts.

The Company estimates forfeitures at the time

of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

estimates its forfeiture rate assumption for all types of share-based compensation awards based on historical forfeiture rates related

to each category of award.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

costs associated with grants of restricted stock awards and restricted stock units are measured at fair value, which has historically

been the closing price of the Company’s common stock on the date of grant.

Company recognizes share-based compensation expense over the requisite service period of each individual award, which generally equals

the vesting period, using the straight-line method for awards that contain only service conditions.

For awards that contain performance

conditions, the Company recognizes the share-based compensation expense on a straight-line basis for each vesting tranche, when achievement

of that tranche is considered probable.

Company evaluates the assumptions used to value stock awards on the grant date.

If there are any modifications or cancellations of the

underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned share-based compensation

Company follows the provisions of FASB ASC 740, Accounting for Income Taxes (“ASC 740”).

Under the asset and liability

method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between

the financial statement carrying amounts of existing assets and liabilities and their respective tax base.

Deferred tax assets and liabilities

are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected

to be recovered or settled.

Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in

income in the period that includes the enactment date.

If it is more likely than not that some portion of a deferred tax asset will not

be realized, a valuation allowance is recognized.

Company recognizes a liability for uncertain tax positions.

An uncertain tax position is defined as a position in a previously filed

tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is

reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The Company may recognize

the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination

by the taxing authorities, based on the technical merits of the position.

The Company measures the tax benefits recognized based on the

largest benefit that has a greater than 50% likelihood of

realized upon ultimate resolution.

of March 31, 2023 and 2022 there were no uncertain tax positions that resulted in any adjustment to the Company’s provision for

income taxes.

tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and that is reflected

in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The Company may recognize the tax benefit

from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing

authorities, based on the technical merits of the position.

The Company measures the tax benefits recognized based on the largest benefit

that has a greater than 50% likelihood of being realized upon ultimate resolution.

of December 31, 2024 and 2023, there were no uncertain tax positions that resulted in any adjustment to the Company’s provision

for income taxes.

The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes.

Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions.

OF EARNINGS (LOSS) PER SHARE

of dilutive shares for fiscal years ended March 31, 2023 and 2022 are as follows:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNING PER SHARE

Basic weighted average common shares

Effect of dilutive stock

Diluted weighted average

of common shares outstanding

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

Diluted net income

(loss) per share reflects the potential dilution assuming shares of common stock were issued upon the exercise of outstanding in-the-money

options and the proceeds thereof were used to purchase shares of the Company’s common stock at the average market price during

the period using the treasury stock method.

For the fiscal year ended March 31, 2023, options to purchase 53,675 shares of common stock

and 902,113 common stock warrants were excluded in the calculation of diluted net income (loss) per share as the result would have been

anti-dilutive.

the fiscal year ended March 31, 2022, pre-funded warrants to purchase 561,111 shares of common stock were included in basic weighted

average shares outstanding as deemed outstanding.

Options to purchase 8,891 shares of common stock were included in the calculation

of diluted net income per share.

For the fiscal year ended March 31, 2022, options and warrants to purchase approximately 56,000

shares of common stock were excluded in the calculation of diluted net income (loss) per share as the result would have been

anti-dilutive.

The Company currently has no liabilities recorded for accrued interest or penalties related to uncertain tax provisions.

Loss Per Common Share

loss available to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average

number of shares that were outstanding during the period.

Diluted net loss available to common stockholders reflects the potential dilution

that could occur if securities or other contracts to acquire common stock were exercised or converted into common stock.

dilutive securities are excluded from the diluted net loss available to common stockholders computation in loss periods as their effect

would be anti-dilutive.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Accounting Pronouncements

June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326) .

This ASU represents

a significant change in the current accounting model by requiring immediate recognition of management’s estimates of current expected

credit losses.

Under the prior model, losses were recognized only as they were incurred, which delayed recognition of expected losses

that might not yet have met the threshold of being probable.

amendments in ASU 2016-03 for smaller reporting companies are effective for the Company beginning April 1, 2023, including interim periods

within that fiscal year.

The Company adopted ASU 2016-13 on April 1, 2023.

The adoption of ASU 2016-13 did not result in any material

effects to the consolidated financial statements or related disclosures.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

November 2023, the FASB issued Accounting Standards Update (“ASU ”) 2023- 07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU

2023-07”), that requires disclosure of significant segment expenses that are regularly reviewed by the chief operating decision

maker and included within each reported measure of segment profit or loss.

The standard also requires disclosure of the composition of

other segment items included in the measure of segment profit or loss that are not separately disclosed.

All disclosure requirements

under ASU 2023-07 are also required for public entities with a single reportable segment.

The ASU is effective for the Company’s

Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent interim periods, with early adoption permitted.

Company adopted ASU 2023-07 effective December 31, 2024 with additional disclosures detailed in

the subsequent notes.

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

ASU 2023-09 is intended to enhance the usefulness of income tax disclosures by requiring entities to disclose specific rate reconciliations,

amount of income taxes separate by federal and individual tax jurisdictions, and the amount of income (loss) from continuing operations

before income tax expense (benefit) disaggregated between federal, state and foreign.

ASU 2023-09 is effective for the Company for its

fiscal year beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the impact of adopting this

standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement

– Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) .

This ASU requires disclosure on

an annual and interim basis, in the notes to the financial statements, of disaggregated information about specific categories underlying

certain income statement expense line items.

The guidance is effective for annual periods beginning after December 15, 2026, and interim

periods with annual reporting periods beginning after December 15, 2027, on a retrospective basis.

The Company is currently evaluating

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

November 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20) .

This ASU clarifies

the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

Adoption can be on a prospective

or retrospective basis.

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

related disclosures.

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

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

4 – Business Combination

June 11, 2024, the Company, its wholly-owned subsidiary, SemiCab Holdings, SemiCab, Inc., Ajesh Kapoor and Vivek Sehgal entered into

an asset purchase agreement pursuant to which the Company agreed to purchase substantially all of the assets, and assume certain specified

liabilities, of SemiCab, Inc.

On July 3, 2024 (the “Acquisition Date”), the parties completed the acquisition and, on that

date, the Company issued 3,209 shares of the Company’s common stock and a 20 % membership interest in SemiCab Holdings to SemiCab,

The Company acquired SemiCab, Inc.’s business to diversify the Company’s business.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

4 – INVENTORIES, NET

are comprised of the following components:

Finished Goods

Inventory in Transit

Estimated Amount of

Future Returns

Inventory Reserve

Total Inventories

5 - PROPERTY AND EQUIPMENT

summary of property and equipment is as follows:

SUMMARY OF PROPERTY AND EQUIPMENT

Pursuant to the terms of the asset

purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement that granted SemiCab Holdings

the right to acquire all of the issued and outstanding equity securities of SMCB, which is a subsidiary of SemiCab, Inc., for 1,605 shares

of the Company’s common stock.

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

connection with the asset purchase agreement, effective July 3, 2024, SemiCab Holdings entered into employment agreements with Ajesh

Kapoor and Vivek Sehgal.

Kapoor’s agreement is for a term of three years with an annual base salary of $ 140,000

for 2024, $ 240,000

for 2025, and $ 300,000

Sehgal’s agreement is for a term of three

years with an annual base salary of $ 105,000

for 2024, $ 210,000

for 2025, and $ 240,000

Both executives’ salaries are subject to annual

review by the board of managers of SemiCab Holdings.

value of the consideration paid by the Company to SemiCab, Inc.

for the SemiCab business was $ 983,000 .

The 3,209 shares issued to SemiCab, Inc.

were valued at $ 494,000 on the Acquisition Date based on the trading price of the

Company’s common stock on the Acquisition Date discounted for a lack of marketability.

The Company recognized a

non-controlling interest at fair value as of the Acquisition Date in the amount of $ 74,000 ,

representing the value of the 20 %

membership interest in SemiCab Holdings that was issued to SemiCab, Inc.

in the transaction.

The 20 % membership interest was valued at the Acquisition Date based on the fair value of the implied value of SemiCab Holdings based on the

value of the Company’s common stock issued on the Acquisition Date.

The Company recorded a measurement

period adjustment during the fourth quarter of 2024 that reduced the value of finite lived intangible assets acquired in the

transaction by $ 1,050,000 .

This had the effect of increasing goodwill by $ 1,050,000 .

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

following table presents the allocation of the consideration transferred to the assets acquired and liabilities assumed based on their

of Consideration Transferred to the Assets Acquired and Liabilities Assumed

Consideration:

Equity consideration

Fair value of non-controlling interest

Total equity consideration

Effective extinguishment of advances to SemiCab,

Total consideration

Identifiable net assets acquired:

Accounts receivable

Prepaid expenses and other current assets

Property and equipment, net

Other non-current assets

Customer relationships (nine 9 year estimated useful life)

Trade name (nine 9 year estimated useful life)

Developed technology (six 6 year estimated useful life)

Accounts payable and accrued expenses

( 2,679,000 )

Merchant cash advances payable

Notes payable to related parties

Other current liabilities

Net assets acquired

( 3,395,000 )

5 – Property and Equipment, Intangible Assets and Goodwill

summary of the Company’s property and equipment at December 31, 2024 and 2023 is as follows:

Schedule of Property and Equipment

Computer and office equipment

Furniture and fixtures

Warehouse equipment

Molds and tooling

Property and equipment gross

Accumulated depreciation

expense for both fiscal years ended 2023 and 2022 was approximately $ 0.2 million.

6 – FINANCING

and Security Agreement with Fifth Third Bank, National Association:

October 14, 2022 the Company entered into the Credit Agreement with Fifth Third, as Lender replacing the Company’s credit facilities

with Crestmark and IHC that were terminated by the Company on October 13, 2022.

The Credit Agreement provides for a three-year secured

revolving credit facility in an aggregate principal amount of up to $ 15,000,000 decreased to $ 7,500,000 during the period of January

1 through July 31 of each year.

The Credit Agreement matures on October 14, 2025 .

Costs associated with closing of the Credit Agreement

of approximately $ 254,000 were deferred and are being amortized over a three-year period.

During the fiscal years ended March 31, 2023

and 2022, the Company incurred amortization expense of approximately $ 39,000 and $ 0 , respectively associated with the amortization of

deferred financing costs from the Credit Agreement.

revolving credit facility bears interest of (a) the Prime Rate plus 0.50 % or (b) the 30-day Term SOFR rate plus 3.00 % (subject in each

case to a floor of 0.50 % ), depending on the type of loan requested by the Company.

“Term SOFR” means the forward-looking

SOFR rate administered by CME Group, Inc.

(or other administrator selected by Fifth Third) and published on the applicable Bloomberg

LP screen page (or such other commercially available source providing such quotations as may be selected by Fifth Third), fixed by the

administrator thereof two business days prior to the commencement of the applicable Interest Period (provided, however, that if Term

SOFR is not published for such Business Day, then Term SOFR shall be determined by reference to the immediately preceding Business Day

on which such rate is published), rounded upwards, if necessary, to the next 1/8th of 1% and adjusted for reserves if Fifth Third is

required to maintain reserves with respect to the relevant Loans, all as determined by Lender in accordance with the Credit Agreement

and Fifth Third’s loan systems and procedures periodically in effect.

An Unused Line Fee of 0.35 % per annum of the excess of the

Revolving Credit Facility over the average monthly balance of outstanding revolving loans, payable monthly.

The obligations under the

Credit Agreement are secured by all of the assets of the Company and SMC, presently owned or later acquired, and all cash and non-cash

proceeds thereof (including, without limitation, insurance proceeds).

During the fiscal years ended March 31, 2023 and 2022, the Company

incurred interest expense of approximately $ 33,000 and $ 0 , respectfully.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

Property and equipment

expense was $ 192,000 and $ 287,000 for the year ended December 2024 and nine months ended December 31, 2023, respectively.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

summary of the Company’s intangible assets at December 31, 2024 and 2023 is as follows:

Schedule of Intangible Assets

Customer relationships

Developed technology

Intangible assets gross

Accumulated amortization

Intangible assets net

expense was $ 30,000 for

the year ended December 31, 2024.

The Company did not have any intangible assets or goodwill at December 31, 2023.

Company tested the recorded amount of goodwill for impairment on December 31, 2024 to see if the carrying amount of goodwill

exceeded its carried value.

The Company calculated a market-based valuation utilizing inputs classified as level 3 on the fair value

hierarchy by multiplying one by projected 2025 revenue for the SemiCab business.

The Company determined that, as a result of the

SemiCab generating less revenue than anticipated, an impairment charge of $ 3,592,000

should be recorded as of December 31, 2024.

The following table presents the changes in the value of the

goodwill recognized in connection with the acquisition of SemiCab business:

Schedule of Changes in Goodwill

Balance at January 1, 2024

Goodwill from acquisition of SemiCab, Inc.

on July 3, 2024

Impairment of goodwill

( 3,592,000 )

Balance at December 31, 2024

6 – Notes Payable to Related Parties

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

Company had accrued interest payable of $ 6,000 as of December 31, 2024 that was included as a component of accrued expenses on the Company’s

consolidated balance sheets.

The Company incurred interest expense on these loans of $ 36,000 for the year ended December 31, 2024.

terms of each loan are summarized in the table below:

of Notes Payable to Related Parties Loan

Balance as of December 31, 2024

current portion of notes payable to related parties

Notes payable to related parties, net of current portion

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

to the loans described above that were in default at December 31, 2024 pursuant to which the maturity dates of the loans were extended

to February 1, 2026.

As a result of the execution of the waivers and amendments, the Company cured the defaults that had existed at December

31, 2024 due to non-payment on the original maturity dates of the notes.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

7 – Credit Facilities and Other Financing Arrangements

Third Bank Asset-Backed Revolving Credit Facility

October 14, 2022, the Company entered into a loan and security agreement with Fifth Third Financial Corporation.

The credit agreement

Receivable advance rate up to an 85% against eligible Accounts Receivable assuming dilution is under 5% of sales, plus

advance of up to 85% of the Net Orderly Liquidation Value of eligible inventory as determined by an appraiser satisfactory to Fifth

Third, with a sublimit to be determined based on Fifth Third’ s continuing due diligence.

The inventory advance rate will increase

to 95% of the Net Orderly Liquidation Value of eligible inventory from April through June (or another 3-month time frame to be determined

based on Fifth Third’s continuing due diligence) each year to support seasonal working capital needs.

Company must maintain a Minimum Fixed Charge Coverage of 1.05 to 1.

may also include reasonable limitations on dividends, distributions, and management fees.

first Fixed Charge Coverage test will be the period from close to September 30, 2022, building to a trailing twelve months.

of March 31, 2023, the Company was in default under the Credit Facility due to non-compliance with the fixed charge coverage ratio covenant

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

and new covenants that are required.

The Company 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.

The Company must also maintain pre-defined

minimum operating cash flows between February and August, 2023 until the Company achieves a fixed charge ratio of 1.15 :

1.0 beginning

in September 2023 and throughout the remaining term of the agreement.

of this filing the Company was in compliance with the amended covenants and there was approximately $ 0.7 million borrowed against the

Credit Agreement with an additional availability of $ 1.8 million.

Intercreditor

Revolving Credit Facility Crestmark Bank and Iron Horse Credit:

June 16, 2020, the Company entered into a two-year Credit and Security Agreement for a $ 2.5 million financing facility, with IHC on eligible

accounts receivable and inventory.

Also, on June 16, 2020, the Company entered into a two-year Loan and Security Agreement for a $ 10.0

million financing facility with Crestmark on eligible accounts receivable.

On October 14, 2022, the Company entered into the Credit Agreement

with Fifth Third, as Lender replacing the Company’s credit facilities with Crestmark and IHC that were terminated by the Company

on October 13, 2022.

the fiscal years ended March 31, 2023 and 2022 the Company incurred approximately $ 8,000 and $ 45,000 respectively in amortization costs

for deferred financing charges associated with the closing of the Credit and Security agreements with Crestmark and IHC.

also incurred interest expense of approximately $ 0.4 million and $ 0.5 million for the fiscal years ended March 31, 2023 and 2022, respectively.

total cost to exit the Intercreditor Revolving Credit Facility with Crestmark and IHC was approximately $ 0.2 million and was recorded

as a loss from extinguishment of debt as a component of Other (Expenses) Income, net in the accompanying consolidated statements

of operations.

Payable Payroll Protection Plan

May 5, 2020, the Company received loan proceeds from Crestmark in the amount of approximately $ 444,000 under the Paycheck Protection

Program (the “PPP”).

The PPP was established as part of the Coronavirus Aid, Relief and Economic Security Act, which provided

for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

loans and accrued interest may be forgivable to the extent the Company uses the loan proceeds for eligible purposes, including payroll,

benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness may be reduced if the borrower terminates

employees or reduces salaries during the eligible period.

The unforgiven portion of the PPP loan was payable over two years at an interest

rate of 1%, with a deferral of payments until a forgiveness application was accepted and reviewed by the Small Business Administration

(“SBA”), and the SBA provided Crestmark with the loan forgiveness amount.

In June 2021 the Company received notification

from the SBA that the loan had been forgiven in its entirety and we were notified by Crestmark that the debt was discharged.

years ended March 31, 2023 and 2022, a gain of approximately $ 0 and $ 448,000 (including principal and interest), respectively from the

forgiveness of the loan was included in other income and expenses in the accompanying consolidated statements of operations.

Notes Payable

June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC (“Dimension”) to finance an ERP

System project over a term of 60 months at a cost of approximately $ 365,000 .

As of March 31, 2023, the Company had executed three installment

notes totaling approximately $0.4 million for payments issued to the project vendor.

The installment notes have 60-month terms with interest

rates of 7.58 % , 8.55 % and 9.25 % , respectively.

The installment notes are payable in monthly installments of $ 7,459 which include principal

and interest.

For the fiscal years ended March 31, 2023 and 2022, there was an outstanding balance on the installment notes of approximately

$ 0.1 million and $ 0.2 million, respectively.

For the fiscal years March 31, 2023 and 2022, the Company incurred interest expense of approximately

$ 15,000 and $ 21,000 , respectively.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

established a secured asset-backed revolving credit facility that was comprised of a maximum $ 15,000,000 revolving credit facility.

under the credit facility was determined monthly by a borrowing base comprised of a percentage of eligible accounts receivable and eligible

inventory of the Company.

The Company’s obligations under the credit agreement are secured by a continuing security interest in

all property of each loan party, subject to certain excluded collateral.

associated with the closing of the credit agreement of $ 254,000 were deferred and amortized over life of the loan.

During the nine months

ended December 31, 2023, the Company incurred amortization expense of $ 215,000 associated with the amortization of deferred financing

costs from the credit agreement.

under the credit facility took the form of base rate loans at interest rates of the greater of either:

the Prime Rate plus 0.50%, or (b) the Secured Overnight Financing Rate 30-day term rate plus 3%, subject to a minimum of 0.050% in either

The Company incurred interest expense of 43,000 for the nine

months ended December 31, 2023.

May 19, 2023, the Company executed a Waiver and First Amendment agreement which provided for a waiver of previous defaults and instituted

new covenants.

On November 17, 2023, the Company voluntarily terminated the credit agreement as the Company could not comply with the

debt coverage financial covenant effective September 30, 2023.

There was no balance outstanding on the credit agreement as of the termination

Credit Facility

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

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

$ 2,000,000 revolving credit facility.

Availability under the credit facility was determined monthly by a borrowing base comprised of

a percentage of eligible accounts receivable of the borrowers.

The Company’s obligations under the credit agreement were secured

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

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

As of the date of

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

During the year ended December 31, 2024, the Company incurred interest

expense of $ 77,000 for financing costs associated with the credit agreement.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Debt/Note Payable

conjunction with the Crestmark Facility and IHC Facility, the parties entered into a subordination agreement on related party debt due

to Starlight Marketing Development, Ltd.

(former related party) of approximately $ 803,000 .

On June 1, 2020, the remaining amount due

on the subordinated debt of approximately $ 803,000 was converted to a note payable (“subordinated note payable”) which bears

interest at 6 % .

As part of the agreement to convert the subordinated debt to a note payable it was agreed that interest expense would

be accrued at the same 6 % interest rate on the unpaid principal retroactively from the date that previously scheduled payments had been

During both fiscal years ended March 31, 2023 and 2022, interest expense was approximately $ 17,000 on the subordinated note payable

and the related party subordinated debt.

of March 31, 2023 and March 31, 2022, the remaining amount due on the note payable was approximately $ 0 and $ 353,000 , respectively.

remaining amount due on the subordinated note payable was classified as a current liability as of March 31, 2022 on the consolidated

balance sheets.

As part of the new Credit Agreement with Fifth Third that the Company entered into on October 14, 2022, the subordinated

note was subsequently paid in full on October 26, 2022.

Capital Merchant Cash Advance

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

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

had entered into on March 22, 2024.

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

in the amount of $ 300,000 .

Repayment terms consisted of weekly payments

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

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

The Company incurred $ 105,400 of interest expense under this financing agreement during the year ended December 31, 2024.

As of December

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

Advance Merchant Cash Advance

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

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

had entered into on May 8, 2024.

initial amount borrowed was $ 215,000 ,

with net proceeds to SemiCab, Inc.

in the amount of $ 204,300 .

Repayment terms consisted of weekly payments in the amount of $ 11,100 for

28 weeks for a total repayment of $ 312,000 .

The effective interest rate for the borrowings is 18 %

The Company incurred $88,800 of interest expense under this financing agreement during the year ended December 31, 2024.

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

8 – Commitments and Contingencies

are not a party to, and our property is not the subject of, any material legal proceedings.

Company determines if an arrangement contains a lease at the inception of a contract.

Right-of-use assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments

arising from the lease.

Right-of-use assets and lease liabilities are recognized at the commencement date.

The liability is equal to

the present value of the remaining minimum lease payments.

The asset is based on the liability, subject to certain adjustments.

leases result in straight-line expense (similar to operating leases under the prior accounting standard) while finance leases result

in a front-loaded expense pattern (similar to capital leases under the prior accounting standard).

As the interest rate implicit in the

Company’s operating leases is not readily determinable, the Company utilizes its incremental borrowing rate to discount the lease

The Company utilizes the implicit rate for its finance leases.

have operating lease agreements for offices and a warehouse facility in Florida, California and Hong Kong expiring in various years through

entered into an operating lease agreement, effective October 1, 2017, for our corporate headquarters located in Fort Lauderdale, Florida

where we lease approximately 6,500 square feet of office space.

The lease expires on March 31, 2024 .

The base rent payment is approximately

$ 9,950 per month, subject to annual adjustments.

entered into an operating lease agreement, effective June 1, 2013, for 86,000 square feet of warehouse space in Ontario, California for

our logistics operations.

On June 15, 2020, we executed a three-year lease extension which will expire on August 31, 2023.

does not intend to renew the lease agreement and has signed a service agreement with a third-party logistics company to provide domestic

and Canadian warehousing services effective September 1, 2023.

The base rent payment is approximately $ 69,300 per month for the remaining

term of the lease.

entered into an operating lease agreement, effective October 15, 2022, for our administrative office located in Hong Kong where we lease

approximately 1,890 square feet of office space.

The lease expires on October 14, 2025 .

The base rent payment is approximately $ 4,900

per month for the entire term of the lease.

expense for our operating leases is recognized on a straight-line basis over the lease terms.

February 2023, we entered into a financing leasing arrangement with Wells Fargo Equipment Finance to finance the leasing of two used

forklifts in the amount of approximately $ 55,000 .

The lease requires monthly payments in the amount of approximately $ 1,075 per month

over a total lease term of 60 months which commenced on February 1, 2023.

The agreement has an effective interest rate of 6.5 % and the

Company has the option to purchase the equipment at the end of the lease term for one dollar.

As of March 31, 2023 and March 31, 2022,

the remaining amounts due on this financing leasing arrangement was approximately $ 53,000 and $ 0 , respectively.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

Company is subject to claims, suits and other proceedings from time to time in the ordinary course of business that could result in fines,

civil penalties, or other adverse consequences.

In accordance with the provisions of ASC Topic 450, Contingencies, the Company

records a liability when it believes that it is probable that a loss has been incurred and the amount can be reasonably estimated.

the Company determines that it is probable that a loss has been incurred and the loss or range of loss can be estimated, the Company

discloses the estimated amount of the loss.

The Company evaluates developments in its legal matters that could affect the amount of liability

that has been previously accrued and makes adjustments as appropriate.

Significant judgment is required to determine both likelihood

of there being and the estimated amount of a loss related to such matters.

Capital Labs Settlement Agreement

May 18, 2023, SemiCab, Inc.

entered into an installment business loan agreement with Efficient Capital Labs, Inc.

pursuant to which SemiCab, Inc.

borrowed the principal amount of $ 1,000,000 .

Repayments were originally scheduled to begin in June 2023

in equal installments of $ 91,667 for 13 months with an effective interest rate of 17.97 %.

The loan had a maturity date of May 17, 2024 .

On May 18, 2024, SemiCab, Inc.

defaulted on the loan for non-payment.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

July 1, 2021, we entered into a long-term capital leasing arrangement with Union Credit Corporation to finance the leasing of a used

forklift in the amount of approximately $ 24,000 .

The lease require monthly payments in the amount of approximately $ 755 per month over

a total lease term of 36 months which commenced on July 1, 2021.

The agreement has an effective interest rate of 9.9 % and the Company

has the option to purchase the equipment at the end of the lease term for one dollar.

As of March 31, 2023 and March 31, 2022, the remaining

amounts due on this capital leasing arrangement was approximately $ 11,000 and $ 18,000 , respectively.

the fiscal years ended March 31, 2023 and 2022, the Company incurred interest expense of $ 2,055 and $ 1,160 , respectively, on these finance

balance sheet information related to leases as of March 31, 2023 is as follows:

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

Operating lease - right-of-use

Finance leases as a component of property and

equipment, net of accumulated depreciation of $ 8,798

Current portion of operating

Current portion of finance

Operating lease liabilities,

net of current portion

Finance leases, net of

current portion

statement of operations information related to leases for the fiscal year ended March 31, 2023 is as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

Operating lease expense as a component

of general and administrative expenses

Finance lease cost

Depreciation of leased

assets as a component of depreciation

Interest on finance lease

liabilities as a component of interest expense

cash flow information related to leases for the fiscal year ended March 31, 2023 is as follows:

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for amounts included

in the measurement of lease liabilities:

Operating cash flow paid

for operating leases

Financing cash flow paid

for finance leases

Lease term and Discount

Weighted average remaining

lease term (months)

May 18, 2024, SemiCab, Inc.

entered into a settlement agreement with ECL pursuant to which SemiCab, Inc.

agreed to pay ECL $ 946,666 as

(i) $ 25,000 on or before May 20, 2024;

(ii) $ 75,000 on or before June 3, 2024;

and (iii) $ 84,666 on or before the first business

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

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

As of December

31, 2024, the remaining unpaid balance of the settlement was $ 325,000 and was included as a component of accrued expenses on the Company’s

consolidated balance sheets.

The Company was in compliance with the terms of the settlement at December 31, 2024.

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

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

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

(“Regalia Ventures”) for alleged breach of fiduciary duty in approving a recent above-market private placement

equity transaction.

The complaint alleges that the Company and its board of directors followed an inadequate process in evaluating

the private placement transaction that the Company completed in November 2023 and that the Company and its board of directors

entered into the transaction with an intent to dilute Ault’s ownership stake in the Company.

Ault Lending is seeking the

following relief from the Court:

(i) declarations that the defendant directors breached their fiduciary duties;

and that Stingray

Group and Regalia Ventures aided and abetted those breaches;

(ii) rescission of the

Company’s sale of shares to Stingray Group and Regalia Ventures ;

damages and attorney’s fees.

The Company filed a motion to dismiss the complaint.

Based on the Company’s assessment of

the facts underlying the claims, the uncertainty of the litigation and the preliminary stage of the case, the Company cannot

reasonably estimate the potential loss or range of loss that may result from this action.

Flatiron & OAC Adelphi Litigation

August 23, 2023, MICS NY entered into an Agreement of Lease (the “Lease Agreement”) with OAC 111 Flatiron, LLC and OAC Adelphi,

LLC (the “Landlord”), pursuant to which MICS NY agreed to lease approximately 10,000 square feet of ground floor retail space

and a portion of the basement underneath the ground floor retail space in the property located at 111 West 24 th Street, New

York, New York (the “Premises”).

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

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

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

lease were impaired.

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

off during the year ended December 31, 2024.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

July 26, 2024, the Landlord filed a civil action in the Supreme Court of

the State of New York against MICS NY and the Company (“the Defendants”)

for alleged breach of lease, seeking monetary damages including unpaid rent, future unpaid rent, and other expenses related to the lease.

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

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

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

Pursuant to the settlement agreement, the Company made the first payment of $ 150,000 on September 25, 2024 and a final payment of $ 100,000 on October 25, 2024.

The remaining lease liability was written off upon settlement, resulting in a loss upon termination of the lease of

$ 4,000 , net of the write off of the related lease asset discussed above.

On October 29, 2024, the Landlord

filed a discontinuance with prejudice.

Yonder Liability

to the asset purchase agreement with SemiCab, Inc., the Company assumed a judgement against SemiCab, Inc.

regarding damages resulting

from contract breach for IT subscription-based services.

On March 28, 2020, SemiCab, Inc.

entered into a service contract and agreement

with Blue Yonder, Inc.

(“Blue Yonder”) for certain IT subscription-based services.

The original term of the agreement was for three years, at a price of $ 100,000 per year, for a total of $ 300,000 .

June 21, 2023, Blue Yonder filed a lawsuit claiming damages in the amount of $ 275,000 with the Maricopa County Superior Court in Arizona.

The suit was found in favor of Blue Yonder in the amount of $ 509,119 , subject to two separate milestone payments that would otherwise

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

The first milestone payment for $ 175,000 and

was due on July 1, 2024 and was not made.

In the event this payment is made, the remaining settlement shall be deemed satisfied.

payment is not made, the Company shall owe a total of $ 225,000 by October 1, 2024.

In the event this payment is made, the remaining settlement

shall be deemed satisfied.

If neither payment is made, Blue Yonder shall be entitled to execute the full $ 509,119 beginning January 1,

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

A liability of $ 509,119 has been recorded as a component

of accrued expenses on the accompanying consolidated balance sheets.

February 11, 2025, Blue Yonder filed a civil action in the Superior Court of the State of Arizona against the Company for breach of contract and to enforce a stipulated judgment entered against SemiCab, Inc.

in connection with the liabilities related

to Blue Yonder that the Company assumed when it acquired SemiCab, Inc.’s business.

Blue Yonder alleges that, because the Company assumed these liabilities, Blue Yonder can enforce the judgment against the Company.

judgement was in the amount of $ 509,119 .

The Company have retained counsel to represent them in this matter.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

9 – Operating Leases

Finance leases

Company is a party to various operating leases with rent ranging from $ 4,900

All of the leases have remaining terms of less than one year.

Lease expense for the Company’s operating leases is

recognized on a straight-line basis over the lease terms.

following table presents supplemental information about the Company’s operating leases and future minimum annual lease payments

under its operating leases as of December 31, 2024.

balance sheet information related to leases as of December 31, 2024 and 2023 is as follows:

Schedule of Supplemental Information Related To Leases

December 31, 2024

December 31, 2023

Operating lease - right-of-use assets

Current portion of operating leases

Operating lease liabilities, net of current portion

statement of operations information related to operating leases is as follows:

of Operating Lease Term and Discount Rate

Twelve Months Ended

Nine Months Ended

December 31, 2024

December 31, 2023

Operating lease expense as a component of general and administrative expenses

Supplemental cash flow information related to operating leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flow paid for operating leases

Lease term and Discount Rate

Weighted average remaining lease term (years)

Weighted average discount rate

Operating leases

Finance leases

maturities of operating and finance lease liabilities outstanding as of March 31, 2023 are as follows:

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING AND FINANCE LEASES

2027 and beyond

Total Minimum Future Payments

Imputed Interest

Present Value of Lease

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

The following

table summarizes information regarding lease maturities and balance due as follows:

of Operating Lease Lease Maturities and Balance Due

Payments due by period

Total operating lease liabilities

operating lease liabilities

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

8 – SHAREHOLDERS’ EQUITY

10 – Stock Compensation Expense

Incentive Plan

April 12, 2022, the Board of Directors approved The Singing Machine Company, Inc.

2022 Equity Incentive Plan, or the 2022 Plan.

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

2022 Equity Incentive Plan.

plan provides for the issuance of equity incentive awards, such as stock options, stock appreciation rights, stock awards, restricted

stock, stock units, performance awards and other stock or cash-based awards collectively, the “Awards.” Awards may be granted

under the 2022 Plan to the Company’s employees, officers, directors, consultants, agents, advisors and independent contractors.

maximum number of shares of common stock initially available for issuance under the 2022 Plan is 233,334 shares of common stock and thereafter

an annual increase shall be added as of the first day of the Company’s fiscal year beginning in 2023, equal to the least of (i)

5% of the outstanding common stock on a fully diluted basis as of the end of the Company’s immediately preceding fiscal year, (ii)

33,334 shares, and (iii) a lesser amount as determined by the Board of Directors.

The shares of common stock subject to stock awards

granted under the 2022 Plan that lapse, terminate, expire prior to exercise, are canceled or are forfeited, shall again become available

for issuance under the 2022 Plan.

Shares subject to a stock award under the 2022 Plan shall not again be made available for issuance or delivery under the 2022 Plan if such shares are

stock, stock units, performance awards and other stock or cash-based awards to the Company’s employees, officers, directors, consultants,

agents, advisors and independent contractors.

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

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

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

preceding fiscal year;

(ii) 167 shares;

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

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

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

to a stock award under the equity plan do not become available for issuance or delivery again under the equity plan if such shares are:

(i) shares tendered by a participant or retained by the Company as full or partial payment to the Company for the exercise or purchase

price of an award or (ii) shares used to satisfy tax withholding obligations in connection with an award.

Notwithstanding

any other provision of the 2022 Plan to the contrary, unless the plan administrator determines otherwise with respect to a particular

award, in the event of a change of control, if and to the extent an outstanding award is not converted, assumed, substituted for or replaced

by the successor company, then such award will terminate upon effectiveness of the change of control.

Prior to the change of control,

the plan administrator may approve accelerated vesting and/or lapse of forfeiture or repurchase restrictions with respect to all or a

portion of the unvested portions of such awards, any such determinations to be made by the plan administrator in its sole discretion.

A change in control includes:

acquisitions of beneficial ownership of more than 50% of our total voting power;

change in the composition of the board of directors during any two-year period such that the individuals who, as of the beginning

of such two-year period, constitute the board of directors cease for any reason to constitute at least a majority of the board, as

defined in the 2022 Plan;

consummation of a company transaction, as defined in the 2022 Plan.

Board of Directors may amend, suspend or terminate the 2022 Plan or a portion of it at any time;

however, to the extent required by applicable

law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the 2022 Plan.

The 2022 Plan is scheduled

to terminate automatically in ten (10) years following the earlier of (a) the date the Board of Directors adopted the 2022 Plan and (b)

the date the stockholders approved the 2022 Plan.

STOCK OPTIONS

the years ended March 31, 2023 and 2022 the Company issued the following stock options:

the fiscal year ended March 31, 2023, the Company issued 667 , 4,000 and 1,334 stock options, respectively, under the 2022 Plan at an

exercise price of $ 2.35 , $ 8.11 and $ 7.40 per share, respectively, to directors as compensation for their service.

the fiscal year ended March 31, 2023 the Company issued 33,334 and 3,667 stock options, respectively, from the 2022 Plan at an exercise

price of $ 4.00 per share and $ 8.65 per share to the Company’s officers as incentive compensation for the successful up-listing

of the Company’s common stock on the Nasdaq Capital Market and compensation related to their Fiscal 2022 annual incentive plan.

June 28, 2022 and August 16, 2022, the Company issued 61,750 and 3,000 stock options, respectively, from the 2022 Plan to all employees

(excluding Company officers) who had one year or more of service to the Company under an Employee Incentive Plan at an exercise price

of $ 8.11 and $ 8.65 per share, respectively.

August 23, 2021, the Company issued 1,334 Board approved stock options to two members of our Board of Directors at an exercise price

of $ 8.70 per share pursuant to our annual director compensation plan for the fiscal year ended March 31, 2022.

December 1, 2021, the Company issued 667 Board approved stock options to a new member of our Board of Directors at an exercise price

of $ 8.10 per share pursuant to our annual director compensation plan for the fiscal year ended March 31, 2022.

December 22, 2021 the Company issued 1,667 Board approved stock options to our Chief Revenue Officer at an exercise price of $ 8.10 per

share pursuant to his compensation plan for the fiscal year ended March 31, 2021.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

price of an award;

or (ii) shares used to satisfy tax withholding obligations in connection with an award.

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

provided, however, that to

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

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

(i) the date the Company’s board

of directors adopted the plan;

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

of December 31, 2024, there were 1,500

shares of common stock authorized for issuance under the plan.

Of this amount, awards representing 1,183

shares of common stock had been granted under the plan and 317

shares remained available for issuance under the plan.

The Company did not issue any share-based compensation during the year ended

December 31, 2024 or the nine months ended December 31, 2023.

There were 33

shares forfeited during the year ended December 31, 2024 and the nine months ended December 31, 2023, respectively.

There were 351 and 384 shares of common stock underlying share-based awards that were outstanding at December

31, 2024 and 2023, respectively.

share-based compensation expense for the year ended December 31, 2024 and the nine months ended December 31, 2023 includes the estimated

fair value of share-based awards granted, amortized on a straight-line basis over the requisite service period for the entire portion

of the award.

For the year ended December 31, 2024 and the nine months ended December 31, 2023, the Company recognized share-based compensation

expense of $ 69,000 and $ 110,000 , respectively.

of December 31, 2024, there was an unrecognized expense of $ 33,000

remaining on stock options currently vesting over time with approximate weighted average of six

months remaining until these options are fully vested.

The vested options as of December 31, 2024, had no

intrinsic value.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the assumptions

outlined below.

The expected volatility is based upon historical volatility of our stock and other contributing factors.

term is based upon observation of actual time elapsed between date of grant and exercise of options for all employees.

The following

inputs were used to value each option grant:

the fiscal year ended March 31, 2023:

expected dividend yield of 0 %, risk-free interest rate between 2.63 % and 3.21 %, respectively

with volatility between 166.1 % and 196.3 % respectively with an expected term of three years .

the fiscal year ended March 31, 2022:

expected dividend yield of 0 %, risk-free interest rate between 0.43 % and 0.96 %, respectively

with volatility between 149.5 % and 157.0 % respectively with an expected term of three years .

summary of stock option activity for each of the years presented is summarized below.

SUMMARY OF STOCK OPTION ACTIVITY

Average Exercise Price

Average Contractual Life

Average Exercise Price

Average Contractual Life

Stock Options:

Balance at beginning

at end of year *

exercisable at end of year

following table summarizes information about employee stock options outstanding at March 31, 2023:

OF EMPLOYEE STOCK OPTIONS OUTSTANDING

of Exercise Price

Outstanding at

Average Remaining

Exercisable at

* Total number of

options outstanding as of March 31, 2023 includes 23,343 options issued to six current and three former directors as compensation, 73,334

options issued to Company officers as compensation and 64,750 options issued to employees as part of an Employee Stock Incentive Plan.

of March 31, 2023, there was unrecognized expense of approximately $ 380,000 remaining on options currently vesting over time with approximately

25 months remaining until these options are fully vested.

vested options as of March 31, 2023 had no intrinsic value.

As of March 31, 2023, there were 125,581 shares under the 2022 Plan available

to be issued.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

Equity Compensation

the year ended December 31, 2024, the Company issued 3,873 shares of its common stock to three vendors as payment for consulting services

rendered and issued 472 shares of common stock to Vivek Sehgal as bonus compensation earned under his employment agreement with SemiCab

The Company recognized compensation expense of $ 478,000 during the year ended December 31, 2024 in connection with these share

issuances, all of which was recorded in general and administrative expenses in the Company statement of operations.

11 – Net Loss Per Share

computations of basic and dilutive loss per share of commons stock outstanding for the year ended December 31, 2024 and the nine months

ended December 31, 2023 are as follows:

of Basic and Diluted Loss Per Share

December 31, 2024

Nine Months Ended

December 31, 2023

Net loss available to common shareholders

$ ( 23,257,000 )

$ ( 6,398,000 )

Basic and fully diluted weighted average shares of common stock outstanding

Basic and fully diluted net loss per share of common stock

computation of the fully diluted weighted average number of shares of common stock outstanding for the year ended December 31, 2024 and

the nine months ended December 31, 2023 is as follows:

Diluted Weighted Average Number of Shares

December 31, 2024

Nine Months Ended

December 31, 2023

Basic weighted average common shares outstanding

Effect of dilutive stock options

Diluted weighted average of common shares outstanding

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

Diluted net loss

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

upon the exercise of the options and warrants and the proceeds thereof were used to purchase shares of the Company’s common stock

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

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

per private placement and public offering as disclosed in Note 10 and Note 11, common warrants and pre-funded warrants issued and outstanding

as of March 31, 2023 are as follows:

SCHEDULE OF COMMON STOCK WARRANTS ISSUED AND OUTSTANDING

of Common Warrants

Average Exercise Price

of Pre-Funded Warrants

Average Exercise Price

Warrants outstanding at April 1,

Warrants issued

Warrants exercised

Warrants outstanding

at March 31, 2023

Warrants exercisable

at March 31, 2023

of March 31, 2023, the Company’s warrants by expiration date were as follows:

OF WARRANTS EXPIRATION

of CommonWarrants

September 15, 2026

with the opening of trading on the Nasdaq Stock Market on May 24, 2022, the exercise price of certain warrants issued by the Company

pursuant to the terms of that certain Securities Purchase Agreement dated August 5, 2021, was adjusted so that the exercise price is

The warrants are not subject to further adjustment except for customary adjustments for stock dividends and splits, subsequent

rights offerings, pro-rata distributions and fundamental transactions, as set forth in the warrants.

STOCK ISSUANCES

the years ended March 31, 2023 and 2022 the Company issued the following common stock shares:

June 28, 2022 the Company issued 2,468 shares of its common stock to four members of our Board of Directors at $ 8.11 per share, pursuant

to our annual director compensation plan for the fiscal year ending March 31, 2023.

August 19, 2022 the Company issued 10,000 shares of its common stock to investor relations firms at $ 9.37 per share pursuant to a vendor

agreement for investor relation services performed.

August 19, 2022 the Company issued 3,335 shares of its common stock to the Company’s officers at $ 9.37 per share to pursuant an

incentive bonus compensation agreement relating to the Company’s Fiscal 2022 performance.

May 17, 2021 the Company issued 667 shares of its common stock to a former member of the Board of Directors who exercised stock options

at an average exercise price of $ 7.20 per share.

August 20, 2021 the Company issued 575 shares of its common stock to our Board of Directors at $ 8.70 per share, pursuant to our annual

director compensation plan for the fiscal year ending March 31, 2022.

December 31, 2021 the Company issued 2,000 shares of its common stock to a member of the Board of Directors who exercised stock options

at an average exercise price of $ 4.50 per share.

9 – AUGUST 2021 STOCK REDEMPTION

August 5, 2021, the Company entered into the Redemption Agreement with koncepts and Treasure Green, pursuant to which the Company redeemed

654,105 shares of common stock of the Company.

The closing of the transaction set forth in the Redemption Agreement took place on August

10, 2021, at which time the Redeemed Shares were assigned and transferred back to the Company in consideration of a payment by the Company

of approximately $ 7.2 million to koncepts and Treasure Green.

The Redeemed Shares were retired and returned to the unissued authorized

capital of the Company.

to the Redemption Agreement, neither koncepts nor Treasure Green remained stockholders of the Company.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

the year ended December 31, 2024, 536 shares of common stock underlying stock options and 563,335 shares of common stock underlying warrants

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

months ended December 31, 2023, 569 shares of common stock underlying stock options and 4,511 shares of common stock underlying warrants

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

12 – Securities Transactions

2023 Private Placement

On November 20,

2023, the Company entered into an agreement to sell $ 2,000,000 of

common stock through a private placement of common stock with Stingray Group and Jay Foreman, both of which were existing

shareholders with representation on the Company’s board of directors.

The shares of common stock were sold at $ 182 per

share of common stock.

A total of 10,990 shares

of common stock were issued to them by the Company.

Net proceeds from the transaction were approximately $ 1,900,000 ,

net of transaction fees of approximately $ 100,000 .

During the six-month period after the closing date, the investors had the right to make a written request for registration under the

Securities Act of all or any portion of the shares purchased.

Neither of them exercised this right.

February 15, 2023, the Company entered into an at-the-market issuance sales agreement with Aegis Capital Corp as sales agent pursuant

to which the Company could offer and sell, from time to time, through the sales agent, up to $ 1,800,000 in shares of the Company’s

common stock.

For the nine months ended December 31, 2023, the Company received net proceeds of $ 1,654,000 from the sale of its common

stock in this offering after payment of $ 146,000 for brokerage commissions and administrative fees to the agent.

The at-the-market issuance

sales agreement was terminated on May 12, 2023.

Ventures Stock Repurchase Transaction

November 1, 2024, the Company entered into a stock repurchase agreement with Regalia Ventures pursuant to which the Company agreed

to repurchase the 5,495

shares from Regalia Ventures at a price per share equal to the higher of:

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

trading day immediately preceding the date of the repurchase agreement;

or (ii) the highest volume weighted average price (VWAP) of

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

The shares of

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

agreement dated November 20, 2023.

The Company recorded an accrued liability in the amount of the repurchase price, which was $ 472,527 ,

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

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

On February 18, 2025, the date of the closing of the transaction,

the Company issued a promissory note to Regalia Ventures in the amount of $ 472,527 ,

which was the principal amount of the purchase price.

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

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

Regalia Ventures is owned and controlled by Jay B.

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

Group Stock Repurchase Transaction

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

Group pursuant to which the Company agreed to repurchase the 5,495

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

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

trading day immediately preceding the date of the repurchase agreement;

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

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

The shares of common stock to be

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

November 20, 2023.

The Company recorded an accrued liability in the amount of the repurchase price, which was $ 285,714 ,

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

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

On February 18, 2025, the date of the closing of the transaction,

the Company issued a promissory note to Stingray Group in the amount of $ 285,714 ,

which was the principal amount of the purchase price.

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

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

Mathieu Peloquin is the Senior Vice-President, Marketing and

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

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

10 – AUGUST 2021 PRIVATE PLACEMENT

August 5, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with large institutional

investors and the strategic investor for private placement of (i) 550,000 shares of its common stock (the “Shares”) together

with Common Warrants to purchase up to 550,000 shares of common stock with an exercise price of $ 10.50 per share, and (ii) 561,111 pre-funded

warrants (“Pre-Funded Warrants”) with each Pre-Funded Warrant exercisable for one share of common stock at an exercise price

of $ 0.01 per share, together with Common Warrants to purchase up to 561,111 shares of common stock at an exercise price of $ 10.50 per

share (the “Private Placement”).

Common Warrants and Pre-Funded Warrants are collectively referred to as (the “Warrants”).

The Warrants are exercisable at

any time at the option of the holder, have a term of 5 years from the issuance date and provide for cashless exercise under certain conditions.

The Company determined that the Warrants meet the conditions for equity classification.

Shares issuable upon exercise of the Warrants

are hereinafter referred to as the “Warrant Shares”.

The exercise price and number of the Warrant Shares are subject to anti-dilution

and other adjustments for certain stock dividends, stock splits, subsequent rights offerings, pro rata distributions or certain equity

structure changes.

to the terms of the Purchase Agreement, on September 3, 2021, the Company filed a registration statement providing for the resale by

the purchasers of the Shares and Warrant Shares sold in the Private Placement, which registration statement became effective on September

Additionally, under the terms of the Purchase Agreement, the Company was obligated to use its reasonable best efforts to submit

an application to have the Company’s common stock listed on a national exchange by December 31, 2021, and to use its reasonable

best efforts to have the Shares and Warrant Shares listed on such national exchange as soon as practicable following the submission of

such application.

As indicated, the Common Stock was approved to list on the Nasdaq Capital Market under the symbol “MICS”

and began trading on the Nasdaq Capital Market on May 24, 2022.

closing of the Private Placement took place on August 10, 2021, when the Shares and Warrants were delivered to the purchasers and funds,

in the amount of approximately $ 9.8 million, were received by the Company.

Approximately $ 7.2 million of the funds was used to execute

the Redemption Agreement (See Note 9 – August 2021 Stock Redemption).

(“Stingray” or the “strategic investor”), a leading music, media and technology is part of the group

of investors who participated in the Private Placement and have acquired a minority interest in the Company.

Stingray is a long-standing

business partner with the

that provides our customers with music content from their extensive library of expertly produced and licensed karaoke content and is

now a related party (see Note 15- Related Party Transactions).

connection with the Private Placement, on July 6, 2021, the Company entered into a Placement Agency Agreement with A.G.P./Alliance Global

Partners (“AGP”), which provided for AGP to serve as the exclusive placement agent, advisor or underwriter (the “placement

agent services”).

Pursuant to the Placement Agency Agreement, upon closing of the Private Placement, the Company paid AGP placement

fees of $ 0.6 million (representing 7% of the gross proceeds raised in the Private Placement excluding proceeds raised from the strategic

investor, plus 3.5% of the aggregate gross proceeds raised from the strategic investor), and issued AGP warrants to purchase 44,445 shares

of the Company’s common stock (the “Advisor Warrants”) (representing 5 % of the aggregate number of Shares and Pre-Funded

Warrants sold in the Private Placement, excluding the Shares sold to the strategic investor).

The Advisor Warrants have the same exercise

price ($ 10.50 ) and terms as the Common Warrants issued in the Private Placement.

The Company estimated the fair value of the Advisor

Warrants to be approximately $ 0.4 million using the Black-Scholes Model based on the following input assumptions:

common stock price

of $ 9.90 , expected life of the warrants of 2.5 years;

stock price volatility of 168 %;

dividend yield of 0 %;

and the risk-free interest

rate of 2.65 %.

addition to the placement fees paid to AGP, the Company incurred additional offering costs for direct incremental legal, consulting,

accounting and filing fees related to the Private Placement of approximately $ 0.4 million, of which one consultant was issued 1,905

shares of restricted common stock with an aggregate fair value of approximately $ 0.2 million and a cash payment of $ 0.1 million.

offering costs related to the Private Placement amounted approximately $ 0.8 million of which was payment of stock issuance expenses,

which is recorded as an offset to additional paid in capital in the accompanying consolidated statements of shareholders’ equity.

11 – PUBLIC OFFERING AND NASDAQ UPLISTING

May 23, 2022, the Company entered into the Underwriting Agreement with Aegis Capital Corp., who acted as the sole Underwriter, in a firm

commitment underwritten public offering pursuant to which the Company sold to the Underwriter 1,000,000 shares of common stock, par value

$ 0.01 per share for gross proceeds of $ 4.0 million prior to deducting underwriting discounts and commissions and other estimated offering

expenses of approximately $ 0.6 million.

The price to the public in the offering was $ 4.00 per Share, before underwriting discounts and

The offering closed on May 26, 2022.

The Company received net proceeds of approximately $ 3.4 million which was used for

working capital.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

2024 Private Placement

October 22, 2024, the Company entered into a securities purchase agreement pursuant to which the Company agreed to issue and sell to

each purchaser:

(i) an original issue discount senior secured note with a principal amount equal to such purchaser’s subscription

amount divided by 0.85, and (ii) a number of shares of the Company’s common stock equal to (x) 11,500, multiplied by (y) such purchaser’s

subscription amount, and divided by (z) $2,000,000.

No interest would accrue on the notes unless and until an event of default occurred,

upon which interest would accrue at a rate of 14% per year.

The notes had a maturity date of January 22, 2025.

Offering closed on October 24, 2024.

At closing, the Company issued an aggregate of 11,500

shares of its common stock and notes in the aggregate principal amount of $ 2,352,941

to the purchasers for total proceeds of $ 2,000,000

net of original issue discount of $ 352,941 .

The Company recorded amortization of original issue discount in the amount of $ 352,941

during the year ended December 31, 2024, which was recorded in interest expense in other expense in the Company’s statement of

shares of common stock were valued at $ 943,000

on the date of issuance and were recorded as a debt issuance cost, fully amortized

to interest expense during the year ended December 31, 2024.

The Company repaid the notes in full during the 2024 year.

Univest Securities served as the placement

agent in the offering and received seven percent of the gross proceeds received by the Company and reimbursement of the legal fees

of its counsel.

2024 Public Offering

December 4, 2024, the Company entered into a securities purchase agreement in connection with a public offering of an aggregate of

21,000 shares of its 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.

Each share of common

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

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

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

The exercise price of each pre-funded warrant is $ 2.00

Each Series A warrant is exercisable for one share of common stock and has an initial exercise price equal to $ 34.00 .

Each Series B warrant is exercisable for one share of common stock and has an initial exercise price equal to $ 68.00 .

The Series A and B warrants have a term of five and two and one-half years, respectively, from the date the issuance of the warrants

was approved by shareholders.

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

before deducting placement agents’ fees and other offering expenses.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

to the terms of the Underwriting Agreement, the Company agreed to issue to the Underwriter warrants to purchase up to 100,000 shares

of Common Stock representing 10.0 % of the Shares sold in this offering, excluding any Shares sold through the over-allotment option.

The warrants are exercisable six months from the commencement of sales under the offering, have an exercise price of $ 5.00 per share

and expire five years from the date of issuance.

The Company estimated the fair value of these warrants to be approximately $ 244,000

using the Black-Scholes Model based on the following input assumptions:

common stock price of $ 2.90 , expected life of the warrants of

stock price volatility of 176 %;

dividend yield of 0 %;

and the risk-free interest rate of 2.63 %.

May 24, 2022, the Company’s common stock was approved to list on the Nasdaq Capital Market under the symbol “MICS”

and began trading on the Nasdaq Capital Market on May 24, 2022.

12 – AT-THE MARKET PUBLIC OFFERING

February 15, 2023, we entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Aegis Capital Corp,

as sales agent (the “Agent”), pursuant to which we could offer and sell, from time to time, through the Agent (the “ATM

Offering”), up to approximately $ 1.8 million in shares of its common stock.

Shares offered and sold in the ATM Offering were issued

pursuant to the registration statement on Form S-3 (File No.

333-269183) filed with the Securities and Exchange Commission (the “SEC”)

on January 11, 2023 and declared effective by the SEC on January 20, 2023, and the prospectus supplement relating to the ATM Offering

filed with the SEC on February 15, 2023.

During the fiscal year ended March 31, 2023, we received total net proceeds from the ATM Offering

of approximately $ 36,000 on sales of 14,230 shares of common stock at an average price of $ 2.56 per share.

Through May 12, 2023, we received

total net proceeds from the ATM Offering of approximately $ 1.7 million on sales of 1,052,770 shares of common stock at an average price

of $ 1.64 per share.

The Sales Agreement has been terminated.

13 - INCOME TAXES

Company files separate tax returns in the United States and in Macau.

The Macau Subsidiary has received approval from the Macau government

to operate its business as a Macau Offshore Company (MOC), and was exempt from the Macau income tax for the fiscal year ended March 31,

For the fiscal years ended March 31, 2023 and 2022, the Macau Subsidiary recorded a tax provision of approximately $ 34,000 and

$ 0 , respectively.

Federal net operating loss carryforward is subject to an IRS Section 382 limitation.

As of March 31, 2023 and 2022, the Company

had net deferred assets of $ 0.0 million and $ 0.9 million, respectively.

For the fiscal ended March 31, 2023 we determined our effective

tax rate to be approximately ( 28.6 %) and we recorded a tax provision of approximately $ 1.0 million which included a full valuation allowance

of approximately $ 2.1 million for deferred tax assets that will more likely than not, expire prior to being realized.

the fiscal year ended March 31, 2022, the Company determined its effective tax rate to be approximately 20.0 % and the Company recorded

a tax provision of approximately $ 0.1 million, which was net of a valuation reserve of approximately $ 78,000 for deferred tax assets

that will most likely expire prior to being realized.

The Company also recorded an income tax receivable of approximately $ 13,000 due

to the availability of net operating loss carrybacks and alternative minimum tax credits that were realized for the year ended March

The income tax receivable was included as a component of prepaid expenses and other current assets on the accompanying consolidated

balance sheet as of March 31, 2022.

income tax provision (benefit) for federal, foreign, and state income taxes in the consolidated statements of operations consisted of

the following components for 2023 and 2022:

OF PROVISION FOR INCOME TAXES

Income tax (benefit) provision:

Total current Federal

and State tax

Total Deferred Federal

Total income tax provision

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

pre-funded warrants are immediately exercisable upon issuance and may be exercised at any time until all pre-funded warrants are exercised

The Series A and B warrants will be exercisable

only upon receipt of such shareholder approval as may be required by the applicable rules and regulations of the Nasdaq to permit the

exercise of the Series A and B warrants, after which the Series A warrants will be exercisable

for a period of five years and the Series B warrants will be exercisable for two and one-half years.

The pre-funded warrants and Series

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

and contain customary terms regarding the treatment of such pre-funded warrants or the Series A and B warrants in the event of a fundamental

transaction, which include but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all

of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of common

stock of the Company.

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

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

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

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

to the greater of the lowest daily volume weighted average price during the reset period or the floor price ($ 6.844 per share), with

a proportional increase in the number of warrant shares.

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

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

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

a cash exercise.

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

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

Company assessed the pre-funded warrants under ASC 480 and ASC 815 and determined that the pre-funded warrants met the requirements to

be classified in stockholders’ equity.

The Company assessed the Series A and B warrants under ASC 480 and ASC 815 and determined

that the Series A and B warrants will be classified as

liabilities as they do not meet the requirements to be considered indexed to the Company’s

own stock, due to (a) the adjustment to the exercise price tied to shareholder approval, and (b) the potential change in the settlement

amount of the Series B warrants upon an alternative cashless exercise election.

Additionally, the Company concluded at issuance that

it would not have sufficient authorized and available shares of common stock to settle the Series A and B warrants.

See Note 13 –

Derivative Liability .

At inception, the estimated fair value of the Series A warrants was $ 5,900,000

and the Series B warrants was $ 11,000,000 ,

for a total estimated fair value of $ 16,900,000 .

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

which the Company recorded as a loss upon issuance of warrants.

The Company also expensed approximately $ 900,000

of issuance costs incurred in the offering, resulting in a total loss on issuance of $ 8,889,000 .

The estimated fair values of the Series A and B warrants have been recorded as a derivative liability at issuance and at December

In the Company’s consolidated statement of operations for the year ended December 31, 2024, the Company recognized a

gain of $ 334,000

for the change in the fair value measurement of the warrant liability.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

United States and foreign components of income (loss) before income taxes are as follows:

OF INCOME LOSS BEFORE INCOME TAX

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

January 14, 2025, the Company’s stockholders approved the issuance of the Series A and B warrants that had been issued by the Company

in the public offering of securities that the Company had completed on December 6, 2024, at which time all of the Series A and B warrants

became exercisable.

This approval triggered the adjustment to the exercise price.

In connection with this approval, the holders of the

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

shares of common stock

and no additional proceeds received by the Company.

Direct Offering

December 18, 2024, the Company sold 120,337 shares of its common stock to accredited investors in a registered direct offering at a purchase

price of $ 16.62 per share.

The Company engaged Univest Securities to serve as its exclusive placement agent in connection with the offering.

The Company agreed to pay Univest Securities a cash fee equal to eight percent of the aggregate gross proceeds received in the offering.

It also agreed to reimburse Univest Securities for various expenses incurred in connection with the offering.

The Company received net

proceeds of $ 1,665,000 from the offering after deducting placement agent fees and other offering expenses of $ 335,000 .

13 – Derivative Liability

the year ended December 31, 2024, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis.

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

Each of these

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

the probability and expected date of stockholder approval.

The key inputs for each of these warrant liabilities were as follows:

of Derivative Warrant Liabilities

Warrant Liability – Series A Warrants

Issuance Date

December 31, 2024

Stock price on valuation date

Exercise price

Number of warrants

Remaining term (years)

Annual equity volatility

Annual volume volatility

Risk-free interest rate

Expected stockholder approval date

January 14, 2025

Expected stockholder approval probability

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Warrant Liability – Series B Warrants

Issuance Date

December 31, 2024

Stock price on valuation date

Exercise price

Number of warrants

Remaining term (years)

Annual equity volatility

Annual volume volatility

Risk-free interest rate

Expected stockholder approval date

January 14, 2025

Expected stockholder approval probability

following table details the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis

and their fair value hierarchy as of December 31, 2024:

of fair value on a recurring basis

December 31, 2024

Warrant liabilities

Total liabilities

following table provides a roll-forward of the fair value of the derivative liabilities described above:

of fair value of the Derivative Liabilities

Series A Warrants

Series B Warrants

Total Warrant Liabilities

Balance at December 31, 2023

Loss (gain) on change in fair value

Balance at December 31, 2024

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

The following table provides a roll-forward of the

number of shares of common stock underlying warrants issued during the year ended December 31, 2024 and the nine months ended December 31, 2023:

of Shares of Common Stock Underlying Warrants

Pre-Funded Warrants

Series A Warrants

Series B Warrants

Other Warrants

Balance at March 31, 2023

Balance at December 31, 2023

Balance at December 31, 2024

The Company did not issue any warrants during the

nine month transition period ended December 31, 2023 and did not have any warrants outstanding as of December 31, 2023.

14 – Income Taxes

Company’s loss before income taxes for the year ended December 31, 2024 and the nine months ended December 31, 2023 is as follows:

of Loss Before Income Taxes

United States

2 unchanged sentences

$ ( 24,367,000 )

actual tax provision differs from the “expected” tax for the years ended March 31, 2023 and 2022 (computed by applying the

Federal Corporate tax rate of 21 percent to income before taxes) as follows:

OF TAX PROVISION

Expected tax (benefit) provision

$ ( 6,398,000 )

State income taxes, net of Federal income tax

Permanent differences

Permanent difference in ERC income

Tax rate differential on foreign earnings

Change in valuation allowance

Tax provision

tax effects of temporary differences that give rise to significant portions of deferred tax assets and (liabilities) are as follows:

Company did not have any provision for income taxes for the year ended December 31, 2024 or the nine months ended December 31, 2023.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

Company’s net deferred tax assets as of December 31, 2024 and 2023 are as follows:

of Deferred Tax Assets and Liabilities

December 31, 2024

December 31, 2023

NOL Federal Carryforward

State NOL Carryforward

Inventory differences to Inventory valuation

Stock option compensation expense

Right of use liabilty

Business interest limitation

Inventory differences

Impairment of GoodWIll

Stock option compensation expense (SFAS 123R)

Intangibles - Semi Cab

ROU Liability

Section 163(j)

Allowance for doubtful accounts

1 unchanged sentence

Accrued vacation

Deferred Tax Assets Gross

valuation allowance

( 8,039,000 )

( 3,600,000 )

Net deferred tax asset

Depreciable and amortizable assets

Right of use asset

( 1,000,000 )

Warrant Liability

Prepaid expenses

Net deferred tax liability

$ ( 176,000 )

$ ( 1,103,000 )

Net Deferred Tax Assets and Liabilities

Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable to or refundable

by tax authorities in the current fiscal year.

The Company also recognizes federal, state and foreign deferred tax liabilities or assets

based on the Company’s estimate of future tax effects attributable to temporary differences and carryforwards.

The Company records

a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment,

are not expected to be realized.

Company performed an analysis in accordance with the provisions of ASC 740, which requires an assessment of both positive and negative

2 unchanged sentences

the realizability of the deferred tax assets included an evaluation of the pattern and timing of the reversals of temporary differences

and the length of carryback and carryforward periods available under the applicable federal and state laws;

and the amount and timing

of future taxable income.

On March 31, 2023, the Company evaluated the realizability of its deferred tax assets in accordance with accounting

principles generally accepted in the United States of America and concluded that a valuation allowance of approximately $ 2.1 million

against deferred tax assets was necessary.

The recognition of the remaining net deferred tax asset and corresponding tax benefit is based

upon the Company’s conclusions regarding, among other considerations, the Company’s history of earnings, cumulative net loss

during the past three years and projected earnings for fiscal year 2024 and in the future.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

and the length of carryback and carryforward periods available under the applicable federal, state and foreign laws;

and the amount and

timing of future taxable income.

The Company evaluated the realizability of its deferred tax assets as of December 31, 2024 and 2023

in accordance with accounting principles generally accepted in the United States of America and concluded that a valuation allowance

against all of the Company’s deferred tax assets was necessary based upon the Company’s conclusions regarding, among other

considerations, the Company’s recent history of losses and projected losses for fiscal year 2024 and in the future.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

March 31, 2022, the Company has federal tax net operating loss carryforwards in the amount of approximately $ 1.1 million that begin to

expire in the year 2025.

The net operating loss carryforward is subject to an IRS Section 382 limitation that limited the amount available

to use beginning in Fiscal 2020 to approximately $ 0.15 million per year.

In addition, the Company has state tax net operating loss carryforwards

of approximately $ 3.4 million that will begin to expire beginning in 2024.

These tax net operating loss carryforwards may be subject

to adjustment based on future changes in ownership.

14 - SEGMENT INFORMATION

Company operates in one segment.

Sales by geographic region for the period presented are as follows:

SCHEDULE OF REVENUE BY GEOGRAPHICAL REGION

THE FISCAL YEARS ENDED

North America

United Kingdom

geographic area of sales is based primarily on where the product was delivered.

15 - EMPLOYEE BENEFIT PLANS

Company has a 401(k) plan for its employees to which the Company makes contributions at rates dependent on the level of each employee’s

contributions.

Contributions made by the Company are limited to the maximum allowable for federal income tax purposes.

The amounts charged

to operations for contributions to this plan and administrative costs during the fiscal years ended March 31, 2023 and 2022 totaled approximately

$ 74,000 and $ 70,000 , respectively.

The amounts are included as a component of general and administrative expense in the accompanying

consolidated statements of operations.

The Company does not provide any post-employment benefits to retirees.

16 - CONCENTRATIONS OF CREDIT RISK, CUSTOMERS, AND SUPPLIERS

Company derives a majority of its revenues from retailers in the United States.

The Company’s allowance for doubtful accounts is

based upon management’s estimates and historical experience and reflects the fact that accounts receivable are concentrated with

several large customers.

At March 31, 2023, 79 % of accounts receivable were due from three customers in North America that individually

owed over 10 % of total accounts receivable.

At March 31, 2022, 53 % of accounts receivable were due from four customers in North America

that individually owed over 10 % of total accounts receivable.

derived from our top three customers in 2023 and 2022 were 69 % and 72 % of total revenue, respectively.

Revenues from customers representing

greater than 10 % of total net sales were derived from top two customers in Fiscal 2023 and top three customers in Fiscal 2022 as percentage

of the net sales were 48 % and 21 % and 37 %, 18 %, and 17 %, respectively.

The loss of any of these customers could have an adverse impact

on the Company.

Macau and Hong Kong subsidiaries recorded net sales of approximately $ 1.0 million and $ 3.4 million in fiscal 2023 and 2022, respectively.

Company is dependent upon foreign companies for the manufacture of all its electronic products.

The Company’s arrangements with

manufacturers are subject to the risk of doing business abroad, such as import duties, trade restrictions, work stoppages, foreign currency

fluctuations, political instability, and other factors, which could have an adverse impact on its business.

The Company believes that

the loss of any one or more of their suppliers would not have a long-term material adverse effect because other manufacturers with whom

the Company does business would be able to increase production to fulfill their requirements.

However, the loss of certain suppliers

in the short-term could adversely affect business until alternative supply arrangements are secured.

SINGING MACHINE COMPANY, INC AND SUBSIDIARIES

actual tax provision differs from the “expected” tax for the year ended December 31, 2024 and the nine months ended December

31, 2023 (computed by applying the U.S.

Federal Corporate tax rate of 21% to income before taxes) as follows:

of Tax Provision

December 31, 2024

December 31, 2023

Expected tax expense (benefit)

$ ( 5,117,000 )

$ ( 1,344,000 )

State income taxes, net of Federal income tax effect

( 1,574,000 )

Permanent differences

Permanent difference loss on issuance of warrants

Tax rate differential on foreign earnings

Change in valuation allowance

Actual tax (benefit) provision

December 31, 2024 and 2023, the Company had federal tax net operating loss carryforwards in the amount of $ 19,452,000

and $ 6,149,000 ,

respectively, that begin to expire in the year 2025.

The net operating loss carryforward is subject to an IRS Section 382 limitation

that limited the amount available to use beginning in fiscal 2020 to $ 150,000

In addition, the Company had state tax net operating loss carryforwards during those periods of $ 23,100,000

and $ 2,453,000 ,

respectively that began to expire in 2024.

These tax net operating loss carryforwards may be subject to further adjustment based on

future changes in ownership.

December 31, 2024, the Company evaluated the realizability of its deferred tax assets in accordance with GAAP and concluded that a valuation

allowance of $ 8,039,000 against deferred tax assets is necessary.

The change in valuation allowance increased $ 4,439,000 to

$ 8,039,000 as of December 31, 2024 from $ 3,600,000 as of December 31, 2023.

The recognition of the remaining net deferred tax asset and corresponding

tax benefit is based upon the Company’s conclusions regarding, among other considerations, the Company’s current and anticipated

customers, contracts and product introductions, and recent operating results.

15 – Segment Information and Revenue Disaggregation

previously detailed in Note 3 – Summary of Significant Accounting Policies – Segment Reporting , pursuant to ASC 280,

the Company’s Chief Executive Officer serves as the Company’s Chief Operating Decision Maker (“CODM”) for the

purposes of ASC 280.

The CODM concluded that the Company operates two reportable segments.

One segment consists of its Singing Machine business

and the other segment consists of its SemiCab business.

The CODM manages the Company’s operations and business separately

for each operating segment and uses net sales and net loss to allocate resources, making operating decisions and evaluating financial

The CODM also uses net sales and net loss, along with non-financial inputs and qualitative information, to evaluate the

Company’s performance, establish compensation, monitor budget versus actual results, and decide the level of investment in various

operating activities and other capital allocation activities.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

fiscal years 2023 and 2022, manufacturers in the People’s Republic of China accounted for 100 % of the Company’s total product

purchases, including all of the Company’s hardware purchases.

In 2018 the U.S.

government-imposed tariffs of up to 25% on certain

goods imported from China.

All of our products are manufactured and imported from China however, only our microphones are currently subject

to a 7.5% tariff 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.

are unable to mitigate these increased costs through price increases, we could experience reductions in revenues, gross profit margin

and results from operations.

17 – RELATED PARTY TRANSACTIONS

TO/FROM RELATED PARTIES

our fiscal year ended March 31, 2023 and 2022, the Company did business with Stingray who is part of a group of investors who participated

in the Private Placement and have acquired a minority interest in the Company (see Note 10 – August 2021 Private Placement).

both March 31, 2023 and 2022, the Company had approximately $ 0.2 million due from Stingray for music subscription reimbursement.

Company has a music subscription sharing agreement with Stingray.

For the fiscal years ended March 31, 2023 and 2022 the Company received

music subscription revenue of approximately $ 0.7 million and $ 0.5 million, respectively.

These amounts were included as a component of

net sales in the accompanying consolidated statements of operations.

18 – RESERVE FOR SALES RETURNS

return program for defective goods is negotiated with each of our wholesale customers on a year-to-year basis.

Customers are either allowed

to return defective goods within a specified period of time after shipment (between 6 and 9 months) or granted a “defective allowance”

consisting of a fixed percentage (between 1% and 5%) off of invoice price in lieu of returning defective products.

The Company does make

exceptions to this return policy and accordingly records a sales return reserve based on historic return amounts, specific exceptions

as identified and management estimates.

Company records a sales reserve for its return goods programs at the time of sale for estimated sales returns that may occur.

The liability

for defective goods is included in the reserve for sales returns on the consolidated balance sheets.

in the Company’s reserve for sales returns are presented in the following table:

SCHEDULE OF RESERVE FOR SALES RETURNS

Reserve for sales returns at beginning

of the fiscal year

Provision for estimated sales returns

Sales returns received

following table details the revenues, significant expenses and other segment items regularly provided to the CODM:

of Details the Revenue, Significant expenses and Other Segment

Ended December 31, 2024

Months Ended December 31, 2023

Adjusted cost of revenues

Adjusted sales and marketing

Adjusted general and administrative (1)

Adjusted depreciation and amortization

Share based compensation

Impairment of goodwill

Impairment of note receivable

Change in fair value of warrant liability

Gain on disposal of fixed assets

Loss on issuance of warrants

Interest expense

Segment net loss

$ ( 18,818,000 )

$ ( 5,549,000 )

Reserve for sales returns

at end of the year

19 – DAMAGED GOODS INCIDENT RECOVERY

the fiscal years ended March 31, 2023 and 2022 we recognized a gain of approximately $ 49,000 and $ 339,000 as other income on the accompanying

consolidated statements of operations due to settlement of accounts payable by a manufacturer’s representative of a factory that

caused a damaged goods incident in Fiscal 2020.

20 – RESERVES

reserves and allowances for years ended March 31, 2023 and 2022 are presented in the following table:

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

Allowance for

Year ended March 31, 2023

Reserves deducted from assets to which they

Allowance for

doubtful accounts

$ ( 24,367,000 )

Inventory reserve

$ ( 6,398,000 )

Year ended March 31, 2022

Reserves deducted from assets to which they

Allowance for doubtful

Inventory reserve

$ ( 6,398,000 )

Total segment assets

Excludes depreciation and amortization, share-based compensation, impairment of goodwill and impairment of a note receivable.

The following reconciles total segment assets to consolidated

total assets as of December 31, 2024:

Schedule of Reconcilation of Segment Assets to Consolidated

Total segment assets

The Company only had one reportable segment for the nine months

ended December 31, 2023, which consisted of its Singing Machine business.

As the Company only had one reportable segment, the measure

of segment assets at December 31, 2023 is reported on the balance sheet as total consolidated assets.

Disaggregation

Company disaggregates revenues by product line and major geographic region as most of its revenue is generated by the sales of karaoke

by product line is as follows:

of Revenue by Product Line

December 31, 2024

Nine Months Ended

December 31, 2023

Classic Karaoke Machines

Licensed Products

Kids Youth Electronics

Microphones and Accessories

Music Subscriptions

Logistics Services

Total Net Sales

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

by geographic region is as follows:

of Revenue by Geographical Region

December 31, 2024

Nine Months Ended

December 31, 2023

North America

Europe and United Kingdom

Total Net Sales

geographic area of sales is based primarily on where the product was delivered.

The Company’s accounts receivable balance, net of an allowance of

$ 139,182 , was$ 7,305,920 as of December 31, 2022.

16 – Concentrations, Risks and Uncertainties Bank Liquidity and Financial Stability

times, the Company maintains cash in United States bank accounts that are more than the Federal Deposit Insurance Corporation insured

The Company maintains cash balances in foreign financial institutions.

The Company regularly monitors the financial stability

of this financial institution and believes that it is not exposed to any significant credit risk in cash and cash equivalents.

in March and April 2023, certain U.S.

government banking regulators took steps to intervene in the operations of certain financial institutions

due to liquidity concerns, which caused general heightened uncertainties in financial markets.

While these events have not had a material

direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and

financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing

arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

Trade Policies

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 the Company’s business, including imposing tariffs on certain goods imported into the United

Some of 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 the Company’s products are manufactured and imported from China

and the Company sells its products in Canada and other countries.

The implementation of tariffs has resulted in an increase in the cost

of the Company’s products.

If the Company is unable to mitigate these increased costs through price increases, it may experience

lower sales which would negatively impact its revenue, gross profit margin and results of operations.

Concentration

Company derives a majority of its revenues from sales of its products in North America by retailers.

The Company’s allowance for

credit losses is based upon management’s estimates and historical experience and reflects the fact that accounts receivable is

concentrated with several large customers.

At December 31, 2024, 68 % of accounts receivable were due from three customers in North America

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

On December 31, 2023, 82 % of accounts receivable

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

derived from the Company’s top five customers and top three customers collectively as a percentage of total net sales was 79 %

of our revenue, respectively, for the year ended December 31, 2024 and the nine months ended December 31, 2023, respectively.

Revenues from customers representing greater than 10% of total net sales were derived from top four customers for the year ended

December 31, 2024 as percentage of the net sales were 26 %, 22 %, 16 %

and 12%, respectively.

Revenues from customers representing greater than 10% of total net sales were derived from top three

customers for the nine months ended December 31, 2023 as percentage of the net sales were 48 %, 21 %

The loss of any of these customers could have an adverse impact on the Company.

HOLDINGS, INC AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2024 and 2023

17 – Related Party Transactions

Group Subscription Payments

Company has a music subscription sharing agreement with Stingray Group.

For the year ended December 31, 2024 and the nine months ended

2023, the Company received music subscription revenue of $ 780,000 and $ 612,000 , respectively, from Stingray Group.

As of December 31,

2024 and 2023, the Company had $ 212,000 and $ 269,000 , respectively, due from Stingray Group for music subscription reimbursement.

Company determined that SMCB, which is a subsidiary of SemiCab, Inc., is a VIE as the Company provides financial support to SMCB.

While not contractually obligated, SMCB currently

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

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

In exchange, under the MSA, the Company grants

intellectual property rights to SMCB to use the software platform in India.

Compensation for services is invoiced and paid on a monthly

or quarterly basis as agreed by both parties, with rates subject to periodic review and revision.

The agreement is for a term of two years ending on April 1, 2025 and automatically renews for additional 12-month

periods unless prior notice is given by the terminating party.

The agreement automatically renewed for an additional 12-month period on

April 1, 2025.

As a result of this relationship and the financial support provided by the Company to SMCB under the loan agreement described

below to fund SMCB’s operations, SMCB

has been determined to be a VIE.

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

SMCB’s significant activities related to its business.

Accordingly, the Company has not consolidated SMCB’s results of operations

and financial position in its consolidated financial statements.

Pursuant to the terms of the asset

purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement that granted SemiCab Holdings

the right to acquire all of the issued and outstanding equity securities of SMCB for 1,605 shares of the Company’s common stock.

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

Loan Agreement

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

Under the loan agreement, the Company agreed to loan up to

The loans are anticipated to be made in tranches.

Disbursements of any tranches are fully at the discretion of the Company.

Each tranche has a repayment period of five years.

The loans can be repaid at any

time prior to the five-year maturity date without penalty.

Interest on the loans accrues at a rate of six percent per year and is

payable quarterly.

of December 31, 2024, the Company had made aggregate advances to SMCB in the amount of $ 1,777,000 .

During the year ended December

31, 2024, SMCB charged $ 637,000

for services to the Company that were performed under the MSA, which charges offset amounts due under the loan with SMCB.

result, as of December 31, 2024, a total of $ 1,140,000

of loans were outstanding under the loan agreement, and a total of $ 1,360,000 remained available for future borrowings under the

loan agreement as of December 31, 2024.

As of December 31, 2024, SMCB had not made any interest payments due under the loan

As a result, the loans were in default as of December 31, 2024.

Company performed the credit risk assessment of the collectability of the notes receivable from SMCB at December 31, 2024 pursuant to

Due to uncertainties associated with the loans, the Company accrued a reserve in the amount of $ 439,000 as of December

The reserve was included within general and administrative

expenses in the Company’s statement of operations.

to December 31, 2024, the Company made additional advances to SMCB in the aggregate amount of $ 500,000 under the loan agreement.

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 9A. Controls and Procedures