What changed in this filing

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Item 1. Financial Statements

2025-08-19 compared with 2025-05-15 · 510 added, 343 removed, 576 unchanged (60% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2025

June 30, 2025

December 31, 2024

17 unchanged sentences

Warrant liability

Promissory notes payable,net

Current portion of promissory note payable - SemiCab, Inc.

Promissory note payable

Current portion of notes payable to related parties

2 unchanged sentences

Notes payable to related parties, net of current portion

Promoissory note payable - SemiCab, Inc., net of current portion

Total Liabilities

4 unchanged sentences

no shares issued and outstanding at

March 31, 2025 and December 31, 2024

June 30, 2025 and December 31, 2024

Common stock, $ 0.01 par value;

1 unchanged sentence

2,514,571 and 470,825

shares issued and outstanding at March 31, 2025 and December 31, 2024

shares issued and outstanding at June 30, 2025 and December 31, 2024

Additional paid-in capital

5 unchanged sentences

( 1,036,000 )

Treasury stock, 10,990 and - 0 - shares reserved at March 31, 2025 and 2024

Treasury stock, 10,990 and 0 shares reserved at June 30, 2025 and December 31, 2024

Total Algorhythm Holdings Shareholders’ Equity (Deficit)

1 unchanged sentence

Total Liabilities and Shareholders’ Equity (Deficit)

See notes to the condensed

consolidated financial statements

notes to the condensed consolidated financial statements

Holdings, Inc.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF OPERATIONS

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

For the Three Months Ended

March 31, 2025

March 31, 2024

For the Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Cost of Goods Sold

2 unchanged sentences

General and administrative expenses

Operating lease impairment expense

Total Operating Expenses

2 unchanged sentences

( 3,592,000 )

( 8,441,000 )

Other Expenses

7 unchanged sentences

( 10,103,000 )

Income Tax Provision

( 8,486,000 )

Income Tax Benefit

( 6,119,000 )

( 10,103,000 )

( 8,486,000 )

Net loss attributable to non-controlling interest

Net Loss Available to Common Stockholders

Net Loss Available to Common Shareholders

$ ( 585,000 )

$ ( 6,119,000 )

Loss per common share

$ ( 9,776,000 )

$ ( 8,486,000 )

Income (Loss) Per Common Share

Basic and diluted

2 unchanged sentences

Basic and diluted

See notes to the condensed

consolidated financial statements

notes to the condensed consolidated financial statements

Holdings, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

the Three Months Ended March 31, 2025 and 2024

Non-Controlling

at December 31, 2024

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

the Three Months Ended June 30, 2025 and 2024 (Unaudited)

Additional Paid-in

Balance at March 31, 2025

$ ( 1,139,000 )

1 unchanged sentence

$ ( 58,363,000 )

Stock-based compensation

Common stock issued for acquisition of SMCB

Balance at June 30, 2025

$ ( 1,363,000 )

$ ( 758,000 )

of Series B warrants

Reclassification

of Series A warrants to equity

of common stock from related parties

at March 31, 2025

$ ( 58,948,000 )

Balance at March 31, 2024

$ ( 28,282,000 )

( 6,119,000 )

at December 31, 2023

( 6,119,000 )

Stock-based compensation

Balance at June 30, 2024

$ ( 34,401,000 )

$ ( 872,000 )

the Six Months Ended June 30, 2025 and 2024 (Unaudited)

Additional Paid-in

Balance at December 31, 2024

$ ( 1,036,000 )

at March 31, 2024

$ ( 49,172,000 )

$ ( 10,521,000 )

( 9,776,000 )

( 10,103,000 )

Exercise of Series B warrants

Stock-based compensation

Reclassification of Series A warrants to equity

Common stock issued for acquisition of SMCB

Repurchase of common stock from related parties

Balance at June 30, 2025

$ ( 1,363,000 )

$ ( 758,000 )

$ ( 58,948,000 )

$ ( 1,363,000 )

$ ( 758,000 )

$ ( 58,948,000 )

Balance at December 31, 2023

$ ( 25,915,000 )

( 8,486,000 )

Net income (loss)

( 8,486,000 )

Stock-based compensation

Balance at June 30, 2024

$ ( 34,401,000 )

$ ( 872,000 )

$ ( 34,401,000 )

$ ( 872,000 )

notes to the condensed consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

March 31, 2025

March 31, 2024

For the Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

For the Six Months Ended

June 30, 2025

June 30, 2024

Cash flows from operating activities

4 unchanged sentences

Reduction in SMCB loan in exchange for services

Provision for estimated cost of returns

Gain on allowance for credit loss

Change in fair value of warrant liability

Provision for estimated cost of returns

Provision for inventory obsolescence

Credit losses

Impairment expense

Reserve for sales returns

( 2,834,000 )

( 1,217,000 )

Stock-based compensation

1 unchanged sentence

Accounts receivable

Due from banks

Accounts receivable - related parties

Accounts receivable

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

4 unchanged sentences

Refunds due to customers

Prepaids from customers

Other liabilities

3 unchanged sentences

Cash flows from investing activities

Purchase of property and equipment

Repurchase of shares of common stock

Cash received from acquisition of SMCB

Advances to SMCB

( 1,172,000 )

Net cash used in investing activities

( 1,359,000 )

Cash flows from financing activities

Repayment of note payable to related party

Net cash used in financing activities

Proceeds from issuance of promissory notes, net

Net cash provided by (used in) financing activities

Net change in cash

8 unchanged sentences

Common stock issued for exercise of Series B warrants

Repurchase of common stock from related parties in exchange for promissory note

See notes to the condensed

consolidated financial statements

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

Common stock issued for acquisition of SMCB

Promissory note issued for acquisition of SMCB

notes to the condensed consolidated financial statements

1 – Nature of Business

9 unchanged sentences

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”).

Company, Inc., a Delaware corporation (“SMC”), 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 subsidiaries, SemiCab Holdings, LLC, a Nevada limited

liability company (“SemiCab Holdings”) and SMCB Solutions Private Limited, an Indian Company (“SMCB”).

September 5, 2024, the Company’s Certificate of Incorporation was amended to change the name of the Company from “The Singing

8 unchanged sentences

All current and prior year balances have been adjusted to reflect the reverse stock split.

May 2, 2025, the Company and SemiCab Holdings entered into an equity purchase agreement with SemiCab Inc.

pursuant to which:

Holdings purchased 9,999 shares of the issued and outstanding equity shares, Rs.

10 par value, of SMCB, representing 99.99% of the issued

and outstanding equity shares of SMCB, for $ 1,750,000 , the payment of which was evidenced by the issuance of a promissory note by the

Company to the SemiCab, Inc., and (ii) the Company purchased the 20 % membership interest in SemiCab Holdings then held by SemiCab, Inc.

for aggregate consideration consisting of 119,742 shares of the Company’s common stock.

The acquisition was completed on May 2,

2 – Liquidity, Going Concern and Management Plans

Concern Analysis

of March 31, 2025, the Company’s cash balance was $ 3,296,000 .

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.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

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

of June 30, 2025, the Company’s cash balance was $ 1,134,000 .

This will not be sufficient to fund the Company’s planned operations

for at least one year after the date the condensed 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 condensed consolidated financial statements

condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue

as a going concern.

Accordingly, the condensed 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 of business.

Company plans to finance operations by obtaining additional capital through external sources of financing.

10 unchanged sentences

of Presentation

accompanying unaudited financial statements for the three months ended March 31, 2025 and 2024 have been prepared in accordance with

accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information

and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC.

Accordingly, they do not include all of the information

and disclosures required by US GAAP for complete consolidated financial statements.

accompanying unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025 and 2024 have been

prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) applicable

to interim financial information and the requirements of Form 10-Q and Article 8 of Regulation S-X of the SEC.

Accordingly, they do not

include all of the information and disclosures required by US GAAP for complete consolidated financial statements.

the opinion of management, the condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals)

2 unchanged sentences

for the full year.

The condensed consolidated balance sheet as of March 31, 2025 and condensed financial statement information for the

three months ended March 31, 2025 and 2024 are unaudited whereas the condensed consolidated balance sheet as of December 31, 2024 is

derived from the audited consolidated balance sheet as of that date.

The condensed consolidated financial statements and notes hereto

should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report

on Form 10-K for the year ended December 31, 2024.

The condensed consolidated balance sheet as of June 30, 2025 and condensed financial statement information for the

three and six months ended June 30, 2025 and 2024 are unaudited, whereas the condensed consolidated balance sheet as of December 31,

2024 is derived from the audited consolidated balance sheet as of that date.

The condensed consolidated financial statements and notes

hereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual

report on Form 10-K for the year ended December 31, 2024.

There have been no changes to the Company’s significant accounting policies

as disclosed on the Company’s annual report on Form 10-K for the year ended December 31, 2024.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment

12 unchanged sentences

Accounting Pronouncements

December 2023, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income

Taxes (Topic 740):

December 2023, the FASB issued

Accounting Standards Update (“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

The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and related

ASU 2023-09 is intended to enhance the usefulness of income tax disclosures by requiring entities to disclose specific rate reconciliations,

the amount of income taxes separated by federal and individual tax jurisdictions, and the amount of income (loss) from continuing operations

before income tax expense (benefit) disaggregated among federal, state and foreign.

ASU 2023-09 is effective for the Company for its

fiscal year beginning January 1, 2025.

The adoption of ASU 2023-09 did not have a material impact on the

Company’s consolidated financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income—Expense Disaggregation Disclosures

9 unchanged sentences

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.

Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06.

Adoption can be on a prospective

2 unchanged sentences

related disclosures.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810).

This ASU provides that

a reporting entity involved in a business combination effected primarily by the exchange of equity interests must consider the factors

in ASC 805-10-55-12 through 55-15 to determine which entity is the accounting acquirer regardless of whether the legal acquiree is a

Variable Interest Entity (“VIE”).

The amendments in ASU 2025-03 must be applied prospectively to any business combination

that occurs after the initial adoption date.

ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim

periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on its

consolidated financial statements and related disclosures.

May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers

(Topic 606) , which clarifies the guidance in both ASC 718 and ASC 606 on the accounting for share-based payment awards that are granted

by an entity as consideration payable to its customer.

The ASU is intended to reduce diversity in practice and improve existing guidance,

primarily by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service

conditions associated with share-based consideration payable to a customer.

In addition, the ASU clarifies that the guidance in ASC 606

on the variable consideration constraint does not apply to share-based consideration payable to a customer “regardless of whether

an award’s grant date has occurred” (as determined under ASC 718).

ASU 2025-04 is effective for fiscal years beginning after

December 15, 2026, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating

the impact of this standard on its consolidated financial statements and related disclosures.

4 – Variable Interest Entities

Company determined that SMCB Solutions Private Limited, an Indian Company (“SMCB”), is a Variable Interest Entity (“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 statements.

Company determined that SMCB was a VIE because the Company provided financial support to SMCB in the form of a loan agreement to fund

SMCB’s operations.

The Company further determined that it was not the primary beneficiary of SMCB because the Company did not have

the power to direct or control SMCB’s significant activities related to its business.

Accordingly, the Company had not consolidated

SMCB’s results of operations and financial position in its condensed consolidated financial statements prior to May 2, 2025.

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

As a result, on May 2,

2025, the Company consolidated SMCB’s results of operations and financial position in its condensed consolidated financial statements.

A discussion of this transaction is set forth herein in Note 17 – Acquisition of SMCB

5 – Property and Equipment, Intangible Assets and Goodwill

summary of the Company’s property and equipment at March 31, 2025 and December 31, 2024 is as follows:

Schedule of Property and Equipment

summary of the Company’s property and equipment at June 30, 2025 and December 31, 2024 is as follows:

of Property and Equipment

Computer and office equipment

4 unchanged sentences

Property and equipment

expense was $ 33,000 and $ 52,000 for the three months ended March 31, 2025 and 2024, respectively.

summary of the Company’s intangible assets at March 31, 2025 and December 31, 2024 is as follows:

Schedule of Intangible Assets

expense was $ 31,000 and $ 64,000 for the three and six months ended June 30, 2025, respectively, and $ 53,000 and $ 105,000 for the three

and six months ended June 30, 2024, respectively.

summary of the Company’s intangible assets at June 30, 2025 and December 31, 2024 is as follows:

of Intangible Assets

Customer relationships

3 unchanged sentences

Intangible assets net

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

expense was $ 15,000 for the three months ended March 31, 2025.

The Company did not have any intangible assets or goodwill at March 31,

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 no impairment of goodwill needed to

be recorded during the three months ended March 31, 2025.

There was no change in goodwill during the three months ended March 31, 2025.

expense was $ 17,000 and $ 32,000 for the three and six months ended June 30, 2025, respectively.

The Company did not have any intangible

assets or goodwill during the six months ended June 30, 2024.

June 30, 2025, the Company tested the amount of goodwill that it recorded in connection with the acquisition of SemiCab, Inc.’s

business on July 3, 2025 for impairment 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 no impairment of goodwill needed to be recorded with respect to that goodwill during

the six months ended June 30, 2025.

Accordingly, the balance of that goodwill was $ 786,000 on June 30, 2025.

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

In connection with the

acquisition, the Company recorded additional goodwill in the amount of $ 3,632,000 .

As a result, the balance of the Company’s goodwill

was $ 4,418,000 on June 30, 2025.

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 $ 5,000 as of March 31, 2025 that was included as a component of accrued expenses on the Company’s

Company had accrued interest payable of $ 5,000 as of June 30, 2025 that was included as a component of accrued expenses on the Company’s

condensed consolidated balance sheets.

The Company incurred interest expense on these loans of $ 15,000 for the three months ended March

The Company incurred interest expense on these loans of $ 15,000 and $ 31,000 for the three and

six months ended June 30, 2025, respectively.

terms of each loan are summarized in the table below:

of Notes Payable to Related Parties Loan

Balance as of March 31, 2025

Balance as of June 30, 2025

current portion of notes payable to related parties

Notes payable to related parties, net of current portion

of December 31, 2024, the loans described above that were issued between April 17, 2023 and Mary 17, 2023 were in default.

of December 31, 2024, the loans described above that were issued between April 17, 2023 and May 17, 2023 were in default.

to December 31, 2024, the Company entered into waivers and amendments with each of the note holders who are parties to those loans to

4 unchanged sentences

Securities Transactions .

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

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

pursuant to which, in part,

the Company issued a promissory note to SemiCab, Inc.

in the principal amount of $ 1,750,000 .

A discussion of this transaction and the

terms of the promissory note is set forth herein in Note 17 – Acquisition of SMCB .

7 – Credit Facilities and Other Financing Arrangements

7 unchanged sentences

by a continuing security interest in all property of each Loan Party, subject to certain excluded collateral.

As of March 31, 2024, there

As of June 30, 2024, there

was no availability under the Credit Facility as there were no eligible accounts receivable.

10 unchanged sentences

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 effective interest rate for the borrowings was 15 % per year.

As of December 31, 2024, the merchant cash advance had been repaid in full.

8 unchanged sentences

the amount of $ 11,100 for 28 weeks for a total repayment of $ 312,000 .

The effective interest rate for the borrowings is 18 % per year.

The effective interest rate for the borrowings was 18 % per year.

As of December 31, 2024, the merchant cash advance had been repaid in full.

10 unchanged sentences

of there being and the estimated amount of a loss related to such matters.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

Capital Labs Settlement Agreement

15 unchanged sentences

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 March 31,

2025 and December 31, 2024, the remaining unpaid balance of the settlement was $ 73,000 and $ 325,000 , respectively, 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 March 31, 2025.

connection with the acquisition of SemiCab, Inc.’s business, the Company assumed this settlement liability.

The final payment of

the settlement was made during the six months ended June 30, 2025.

Accordingly, there was no unpaid balance at June 30, 2025.

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

condensed consolidated balance sheets.

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

2 unchanged sentences

for alleged breach of fiduciary duty in approving a recent above-market private placement equity transaction.

The complaint alleged

that the Company and its board of directors followed an inadequate process in evaluating the private placement transaction that the Company

The complaint alleged 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

7 unchanged sentences

and (iii) damages and attorney’s fees.

On April 30, 2025, Ault Lending filed a motion with the court requesting that the claims be dismissed

without prejudice and on that same date, the court approved the dismissal of the claims without prejudice.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

On April 30, 2025, Ault Lending filed a motion with the court requesting

that the claims be dismissed without prejudice and on that same date, the court approved the dismissal of the claims without prejudice.

Flatiron & OAC Adelphi Litigation

42 unchanged sentences

A liability of $ 509,119 has been recorded as a component

of accrued expenses on the accompanying consolidated balance sheets.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

of accrued expenses on the accompanying condensed 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

5 unchanged sentences

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

The outcome of this matter is

On August 1, 2025, the Company

filed an answer to the complaint and counterclaims against Blue Yonder for breach of contract.

The outcome of this matter is uncertain.

9 – Stock Compensation Expense

5 unchanged sentences

agents, advisors and independent contractors.

of March 31, 2025, there were 1,500 shares of common stock authorized for issuance under the plan.

of June 30, 2025, there were 1,667 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 484 shares remained available for issuance under the plan.

did not issue any share-based awards under the plan during the three months ended March 31, 2025 and 2024, and no shares were forfeited

during the three months ended March 31, 2025.

As a result, as of March 31, 2025, there were 317 shares of common stock available for

issuance under the plan.

of March 31, 2025, there was an unrecognized expense of $ 80,000 remaining on stock options currently vesting over time with an approximate

weighted average of three months remaining until the options would be fully vested.

The vested options outstanding as of March 31, 2025,

had no intrinsic value.

did not issue any share-based awards under the plan during the six months ended June 30, 2025 and 2024, and no shares were forfeited

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

of June 30, 2025, there was an unrecognized expense of $ 60,000 remaining on stock options currently vesting over time with an approximate

weighted average of three years and nine months remaining until the options would be fully vested.

The vested options outstanding as

of June 30, 2025, had no intrinsic value.

10 – Net Loss Per Share

computations of basic and dilutive loss per share of commons stock outstanding for the three months ended March 31, 2025 and 2024 are

computations of basic and dilutive loss per share of commons stock outstanding for the three and six months ended June 30, 2025 and 2024

are as follows:

of Basic and Diluted Loss Per Share

Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Net loss available to common shareholders

1 unchanged sentence

$ ( 6,119,000 )

$ ( 9,776,000 )

$ ( 8,486,000 )

Basic and diluted weighted average of common stock outstanding

Basic and diluted loss per common share

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

computation of the fully diluted weighted average number of shares of common stock outstanding for the three months ended March 31, 2025

Loss per common share

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

30, 2025 and 2024 is as follows:

Diluted Weighted Average Number of Shares

Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Basic weighted average common shares outstanding

Effect of dilutive stock options

Effect of dilutive stock options and warrants

Diluted weighted average of common shares outstanding

4 unchanged sentences

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

the three months ended March 31, 2025, 488 shares of common stock underlying stock options and 1,138,163 shares of common stock underlying

warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive.

For the three

months ended March 31, 2024, 454 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.

the three and six months ended June 30, 2025, 484 shares of common stock underlying stock options, respectively, and 1,138,163 shares

of common stock underlying warrants were excluded from the calculation of diluted net loss per share as the result would have been anti-dilutive.

For the three and six months ended June 30, 2024, 543 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.

11 – Securities Transactions

15 unchanged sentences

rate of 10 % per year.

The Company incurred $ 1,000 for interest expense for the three months ended March 31, 2025 related to this promissory

The Company incurred $ 1,000 for interest expense for the six months ended June 30, 2025 related to this promissory

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

2 unchanged sentences

as a member of the Company’s board of directors.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

Group Stock Repurchase Transaction

12 unchanged sentences

of 10% per year.

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

The Company incurred $ 3,000 for interest expense for the six months ended June 30, 2025 related to this promissory note.

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

9 unchanged sentences

fees and other offering expenses.

Series A and B warrants were exercisable only upon

receipt of such shareholder approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market, LLC (the

“Nasdaq”) to permit the exercise of the Series A and B warrants .

The 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, which was $ 6.844

per share, with a proportional increase in the number of warrant shares.

Series A and B warrants were exercisable only upon receipt

of such shareholder approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market, LLC (the “Nasdaq”)

to permit the exercise of the Series A and B warrants .

The 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, which was $ 6.84 per share, with a proportional increase in the number

of warrant shares.

Company assessed the Series A and B warrants under ASC 480 and ASC 815 and determined that the Series A and B warrants needed to be classified

1 unchanged sentence

as they did 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.

(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 12 – Derivative Liability .

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

January 13, 2025, the Company’s stockholders approved the issuance of the Series A and B warrants, at which time all of the Series

4 unchanged sentences

liability reflected on the Company’s consolidated balance sheet at December 31, 2024 was reclassified to additional paid-in capital

on the Company’s condensed consolidated balance sheet at March 31, 2025.

on the Company’s condensed consolidated balance sheet at June 30, 2025.

Company recognized a loss of $ 6,468,000 for the change in the fair value measurement of the warrant liability as of the date the warrant

liability was reclassified to equity.

Diagonal Financing Transactions

June 17, 2025, the Company entered into a securities purchase agreement with 1800 Diagonal Lending, LLC (“1800 Diagonal”)

pursuant to which the Company issued a promissory note to 1800 Diagonal in the principal amount of $ 120,000 .

The note is subject to a

one-time interest charge of 12 %, or approximately $ 14,000 , and is payable in 12 monthly installments of $ 11,000 commencing on July 15,

The security purchase agreement has a contingent default feature that the Company has determined to be nominal and is not applicable

unless an event of default occurs.

The Company received net proceeds of $ 84,000 after deductions of $ 15,000 for original issue discount,

$ 16,000 for placement agent fees and $ 5,000 for legal and due diligence fees.

June 17, 2025, the Company entered into a second securities purchase agreement with 1800 Diagonal pursuant to which the Company issued

a promissory note to 1800 Diagonal in the principal amount of $ 240,000 .

The note is subject to a one-time interest charge of 12 %, or

approximately $ 29,000 .

An initial payment of $ 134,000 is due on December 15, 2025.

Thereafter, the remainder is payable in six monthly

installments of $ 22,000 commencing on January 15, 2026.

The security purchase agreement has a contingent default feature that the Company

has determined to be nominal and is not applicable unless an event of default occurs.

The Company received net proceeds of $ 189,000 after

deductions of $ 30,000 for original issue discount, $ 16,000 for placement agent fees and $ 5,000 for legal and due diligence fees.

Capital Financing Transaction

June 17, 2025, the Company entered into a securities purchase agreement with Boot Capital, LLC (“Boot Capital”) pursuant

to which the Company issued a promissory note to Boot Capital in the principal amount of $ 120,000 .

The note is subject to a one-time

interest charge of 12 %, or approximately $ 14,000 , and is payable in 12 monthly installments of $ 11,000 commencing on July 15, 2025.

security purchase agreement has a contingent default feature that the Company has determined to be nominal and is not applicable unless

an event of default occurs.

The Company received net proceeds of $ 105,000 after deductions of $ 15,000 for original issue discount.

12 – Derivative Liability

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

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

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

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

including the probability and expected date of stockholder approval.

Each of these

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

the probability and expected date of stockholder approval.

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

of Derivative Warrant Liabilities

Warrant Liability – Series

Warrant Liability – Series A Warrants

January 17, 2025

December 31, 2024

Stock price on valuation date

6 unchanged sentences

Expected stockholder approval date

January 13, 2025

January 14, 2025

Expected stockholder approval probability

13 unchanged sentences

The Company adjusted the Series A Warrants to

fair value upon reclassification and reclassified that value to additional paid-in capital during the three months ended March 31, 2025.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

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

March 31, 2025:

fair value upon reclassification and reclassified that value to additional paid-in capital during the six months ended June 30, 2025.

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

of Fair Value of the Derivative Liabilities

Warrant Liabilities

Series A Warrants

Series B Warrants

Total Warrant Liabilities

Balance at December 31, 2024

5 unchanged sentences

( 7,857,000 )

Balance at March 31, 2025

following table provides a roll-forward of the number of shares of common stock underlying warrants issued during the three months ended

March 31, 2025:

Balance at June 30, 2025

following table provides a roll-forward of the number of shares of common stock underlying warrants issued during the six months ended

June 30, 2025:

of Shares of Common Stock Underlying Warrants

Series A Warrants

Series B Warrants

Other Warrants

Balance at December 31, 2024

Balance at March 31, 2025

Company did not issue any warrants during the three months ended March 31, 2024 and did not have any warrants outstanding as of March

Balance at June 30, 2025

Company did not issue any warrants during the three and six months ended June 30, 2024 and did not have any warrants outstanding as of

June 30, 2024.

13 – Income Taxes

Company’s income tax provision for the three months ended March 31, 2024, was approximately $ 52,000 due to income taxes due on

amended federal tax returns filed for 2020 and 2021 which took into account the one-time refunds received from the Employee Retention

Company’s income tax provision for the three and six months ended June 30, 2024, was approximately $ 52,000 due to income taxes

due on amended federal tax returns filed for 2020 and 2021 which took into account the one-time refunds received from the Employee Retention

Credit program.

The Company did not have any provision for income taxes for the three months ended March 31, 2025.

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

Company’s income tax expense differs from the expected tax expense based on statutory rates primarily due to full valuation allowance

for all of its subsidiaries for the three months ended March 31, 2025 and 2024.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

for all of its subsidiaries for the three and six months ended June 30, 2025 and 2024.

14 – Segment Information and Revenue Disaggregation

12 unchanged sentences

of Details the Revenue, Significant expenses and Other Segment

Three Months Ended March 31, 2025

Three Months Ended March 31, 2024

Singing Machine

Months Ended June 30, 2025

Months Ended June 30, 2024

Six Months Ended June 30,

Adjusted cost of revenues

2 unchanged sentences

Adjusted depreciation and amortization

Adjusted impairement of ROU lease

Share based compensation

11 unchanged sentences

$ ( 8,467,000 )

$ ( 1,636,000 )

$ ( 10,103,000 )

$ ( 8,486,000 )

Total segment assets

1 unchanged sentence

and amortization, share-based compensation, impairment of goodwill and impairment of a note receivable.

following reconciles total segment assets to consolidated total assets as of March 31, 2025:

following reconciles total segment assets to consolidated total assets as of June 30, 2025:

Schedule of Reconcilation of Segment Assets to Consolidated

2 unchanged sentences

for the SemiCab segment.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

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:

Company disaggregates revenues by product line and major geographic region.

Company’s product lines consist of AI-enabled software logistics services and home karaoke consumer products.

Revenue by product

line for the three and six months ended June 30, 2025 and 2024 was as follows:

of Revenue by Product Line

Three Months Ended

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Karaoke machines

Licensed products

Kids youth electronics

and accessories

Microphones and accessories

Music subscriptions

of the Company’s sales during the three months ended March 31, 2025 and 2024 were in North America.

The geographic area of sales

is based primarily on where the product was delivered.

Logistics services

Total revenue

geographic region of sales is based primarily on where the product and services were delivered.

Revenue by geographic region for the

three and six months ended June 30, 2025 and 2024 was:

of Revenue by Revenue by Geographic Region

Geographic Area

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Three Months Ended

Six Months Ended

Geographic Area

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

North America

15 – Concentrations, Risks and Uncertainties

11 unchanged sentences

arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

Trade Policies

12 unchanged sentences

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.

As of March 31, 2025, 61 % of accounts receivable were due from two customers in North America

that each individually owed more than 10% of the Company’s total accounts receivable.

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.

derived from the Company’s top four customers and top three customers collectively as a percentage of total net sales was 85 % and

84 % of our revenue, respectively, for the three months ended March 31, 2025 and 2024, respectively.

Revenues from customers representing

greater than 10% of total net sales that were derived from the Company’s top four customers as a percentage of total net sales

for the three months ended March 31, 2025 was 31 %, 25 %, 15 %, and 13 %.

Revenues from customers representing greater than 10% of total

net sales that were derived from our top two customers as a percentage of total net sales for the three months ended March 31, 2024,

were 60 % and 14 %.

The loss of any of these customers could have an adverse impact on the Company.

Company derives a majority of its revenue from sales by retailers of its home karaoke consumer products in North America sales of its

AI-enabled software logistics services in India.

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.

As of June 30,

2025, 17 % of accounts receivable were due from one customer in North America and 16 % of accounts receivable were due from one customer

in India that each individually owed more than 10% of the Company’s total accounts receivable.

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

derived from the Company’s top customer and top three customers collectively as a percentage of total net sales was 11 % and 66 %

of the Company’s revenue, respectively, for the three months ended June 30, 2025 and 2024, respectively.

Revenue derived from the

Company’s top three customers collectively as a percentage of total net sales was 37 % and 71 % of the Company’s revenue, respectively,

for the six months ended June 30, 2025 and 2024, respectively.

The loss of any of these customers could have an adverse impact on the

from customers representing greater than 10% of total net sales that were derived from the Company’s top customer as a percentage

of total net sales for the three months ended June 30, 2025 was 11%.

Revenue from customers representing greater than 10% of total net

sales that were derived from the Company’s top three customers as a percentage of total net sales for the three months ended June

30, 2024 was 39 %, 14 %, and 13 %.

Revenue from customers representing greater than 10% of total net sales that were derived from the Company’s

top three customers as a percentage of total net sales for the six months ended June 30, 2025 was 10 %, 11 % and 16 %.

Revenue from customers

representing greater than 10% of total net sales that were derived from the Company’s top three customers as a percentage of total

net sales for the six months ended June 30, 2024 was 50 %, 11 %, and 10 %.

The loss of any of these customers could have an adverse impact

on the Company.

16 – Related Party Transactions

1 unchanged sentence

Company has a music subscription sharing agreement with Stingray Group.

For the three months ended March 31, 2025 and 2024, the Company

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

received music subscription revenue of $ 187,000 and $ 451,000 , respectively, from Stingray Group.

As of March 31, 2025 and December 31,

2024, the Company had $ 357,000 and $ 212,000 , respectively, due from Stingray Group for music subscription reimbursement.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

Company determined that SMCB, which is a subsidiary of SemiCab, Inc., is a VIE as the Company provides financial support to SMCB.

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

For the three and six months ended June

30, 2024, the Company received music subscription revenue of $ 109,000 and $ 349,000 , respectively, from Stingray Group.

As of June 30,

2025 and December 31, 2024, the Company had $ 124,000 and $ 212,000 , respectively, due from Stingray Group for music subscription reimbursement.

Company determined that SMCB, which was a subsidiary of SemiCab, Inc.

prior to the SemiCab Holdings’ acquisition of 99.99 % of the

equity shares of SMCB on May 2, 2025, was 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.

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 prior to May 2, 2025.

Company further determined that it was not the primary beneficiary of SMCB because the Company did 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.

and financial position in its condensed consolidated financial statements.

to the terms of the asset purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement

10 unchanged sentences

December 31, 2024, a total of $ 1,140,000 was outstanding under the loan agreement.

During the three months ended March 31, 2025, the

Company made advances to SMCB in the amount of $ 672,000 .

During the three months ended March 31, 2025, SMCB charged $ 172,000 for services

to the Company that were performed under the MSA, which charges offset amounts due under the loan with SMCB.

As a result, as of March

31, 2025, a total of $ 1,640,000 of loans were outstanding under the loan agreement, and a total of $ 860,000 remained available for future

borrowings under the loan agreement as of March 31, 2025.

As of March 31, 2025, SMCB had not made any interest payments due under the

loan agreement.

As a result, the loans were in default as of March 31, 2025.

Holdings, Inc.

and Subsidiaries

to Condensed Consolidated Financial Statements

31, 2025 and 2024 (Unaudited)

During the period beginning January 1, 2025 and ending

May 2, 2025, the date the Company acquired 99.99 % of the equity shares of SMCB, the Company made advances to SMCB in the amount of $ 1,172,000 .

During the same period, SMCB charged $ 304,000 for services to the Company that were performed under the MSA, which charges offset amounts

due under the loan with SMCB.

As a result, as of May 2, 2025, a total of $ 2,008,000 of loans were outstanding under the loan agreement,

and a total of $ 492,000 remained available for future borrowings under the loan agreement as of May 2, 2025.

As of May 2, 2025, SMCB

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

As a result, the loans were in default as of May 2, 2025.

May 2, 2025, the loan payable of $ 2,008,000 of SMCB and the loan receivable of $ 2,008,000 of the Company were eliminated in consolidation.

As a result, no such loans payable and loans receivable were outstanding on the Company’s condensed consolidated balance sheet

at June 30, 2025.

Also on May 2, 2025, revenue generated by SMCB for services performed by SMCB under the MSA of $ 304,000 , and expenses

for the Company for services performed by SMCB under the MSA of $ 304,000 , during the period commencing January 1, 2025 and ending May

2, 2025 were eliminated in consolidation on May 2, 2025.

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

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

17 – Acquisition of SMCB

1 unchanged sentence

pursuant to which:

Holdings purchased 9,999

shares of the issued and outstanding equity shares, Rs.

par value, of SMCB, representing 99.99% of the issued and outstanding

equity shares of SMCB, for $ 1,750,000 ,

the payment of which amount was evidenced by the issuance of a promissory note by the Company to the SemiCab, Inc., and (ii) the Company

purchased the 20 % membership interest in SemiCab Holdings then held by SemiCab, Inc.

for aggregate consideration consisting of 119,742

shares of the Company’s common stock.

The acquisition was completed on May 2, 2025 (the “Closing Date”).

The promissory

note provides that $ 1,500,000 is due and payable by the Company on the first anniversary of the Closing Date and the remaining $ 250,000

is due and payable by the Company on the 18-month anniversary of the Closing Date.

The promissory note bears interest at six percent

The Company completed the acquisition to expand its AI logistics and distribution into India.

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

Kapoor and Vivek Sehgal pursuant to which Mr.

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

SemiCab Holdings and Mr.

Holdings purchased 9,999 shares of the issued and outstanding equity shares, Rs.

10 par value, of SMCB, representing 99.99% of the issued

and outstanding equity shares of SMCB, for $ 1,750,000 , the payment of which amount was evidenced by the issuance of a promissory note

by the Company to the SemiCab, Inc., and (ii) the Company purchased the 20 % membership interest in SemiCab Holdings then held by SemiCab,

for aggregate consideration consisting of 119,742 shares of the Company’s common stock.

The acquisition was completed on May

2, 2025 (the “Closing Date”).

The promissory note provides that $ 1,500,000 is due and payable by the Company on the first

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

The promissory note bears interest at six percent per annum.

The Company completed the acquisition to expand its AI logistics and

distribution into India.

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

and Vivek Sehgal pursuant to which Mr.

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

Holdings and Mr.

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

Pursuant to the terms of the

employment agreements, SemiCab Holdings granted Messrs.

Kapoor and Sehgal a membership interest in SemiCab Holdings of 15 %

and five percent, respectively.

Of these amounts, one quarter of each such grant vested in full on the date of grant, and the

remaining amounts vest evenly over three years.

Pursuant to the terms of the employment agreements,

SemiCab Holdings granted Messrs.

Kapoor and Sehgal a membership interest in SemiCab Holdings of 15 % and five percent, respectively.

these amounts, one quarter of each such grant vested in full on the date of grant, and the remaining amounts vest evenly over three years.

Company has performed a preliminary valuation analysis of the fair market value of SMCB assets acquired and liabilities assumed.

the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities.

The following

table summarizes the allocation of the preliminary purchase price as May 2, 2025, the date the acquisition was completed:

of Business Acquisition

Consideration:

Promissory note

119,742 shares of common stock

Assumption of debt

Identifiable net assets acquired:

Cash and cash equivalents

Accounts receivable, net

Prepaid expenses and other current assets

Property and equipment, net

Other non-current assets

Accounts payable and accrued expenses

Other current liabilities

Net assets acquired

preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma balance sheet

and income statement.

The fair values of assets and liabilities acquired represent the Company’s estimates of fair values as of

the acquisition date.

Management believes that the fair values recognized for the assets and liabilities acquired are based on reasonable

estimates and assumptions.

The final purchase price allocation will be determined when the Company has completed the detailed valuations

and necessary calculations.

The final allocation could differ materially from the preliminary allocation used in the transaction accounting

The final allocation may include:

(i) changes in fair values of property and equipment, (ii) changes in allocations to goodwill,

and (iii) other changes to assets and liabilities.

Forma Information

unaudited pro forma financial information below presents the effects of the equity purchase agreement as though it had been completed

on January 1, 2024.

unaudited pro forma financial information below presents the effects of the acquisition as though it had been completed on January 1,

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

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

The pro forma results for

the three months ended March 31, 2025 and 2024 reflect the combined performance of the Company and SMCB for that period.

The unaudited

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

However, actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial information.

This selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not intended

to represent what the actual consolidated results of operations would have been had the equity purchase agreement occurred on January

1, 2024, nor does it attempt to forecast future consolidated results of operations.

The pro forma results

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

The pro forma results for the six months ended

June 30, 2025 and 2024 reflect the combined performance of the Company and the SMCB business for that period.

The unaudited pro forma

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

actual results may differ materially from the assumptions used in the accompanying unaudited pro forma financial information.

This selected

unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not intended to represent

what the actual consolidated results of operations would have been had the acquisition date occurred on January 1, 2024, nor does it

attempt to forecast future consolidated results of operations.

of Pro Forma Financial Information

June 30, 2025

June 30, 2024

Six Months Ended

June 30, 2025

June 30, 2024

Operating loss from continuing operations

Net loss available to common stockholders

pro forma results for the three months ended March 31, 2025, include a net increase in operating expenses of $ 20,000 for

amortization of stock compensation expense associated with the membership interests granted to Ajesh Kapoor and Vivek Sehgal under

their respective amended and restated employment agreements.

The pro forma results for the three months ended March 31, 2024,

include a net increase in operating expenses of $ 40,000 , consisting of legal expenses of approximately $ 20,000 associated with the

acquisition of SMCB and $ 20,000 associated with the membership interests granted to Ajesh Kapoor and Vivek Sehgal under their

respective amended and restated employment agreements.

( 4,539,000 )

( 8,689,000 )

$ ( 11,313,000 )

$ ( 8,735,000 )

Subsequent Events

Capital Financing Transaction

July 2025, the Company entered into a business loan and security agreement with Agile Capital Funding, LLC (“Agile Funding”)

pursuant to which it issued a promissory note to Agile Funding in the principal amount of $ 368,000 .

The note is subject to a one-time interest charge of $ 162,000 and is payable in 28 weekly installments of $ 19,000 commencing on July

The Company received net proceeds of $ 350,000 after deductions of $ 18,000 for administrative agent fees.

of Singing Machine Business

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

(“Stingray USA”)

pursuant to which Stingray USA purchased substantially all of the assets, and assumed most of the liabilities, associated with the Company’s

Singing Machine business for $500,000.

The transaction closed on August 1, 2025.

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

What changed 10-Q

Item 1. Financial Statements