美國
證券交易委員會
華盛頓，DC 20549
表格
| 根據1934年證券交易法第13或15（d）節提交的季度報告書 |
截至季度結束
或者
| 根據1934年證券交易法第13或15（d）節提交的過渡報告書 |
對於從______________到______________的過渡期
委員會
文件編號：
（公司章程中指定的準確公司名稱）
（或其他轄區 （組織）的註冊地點 |
（國稅局僱主 108 Gateway Blvd |
| (主要 執行人員之地址) | (郵政 編 碼) | （註冊人電話號碼，包括區號） |
根據法案第12(b)條註冊的證券:
| A類無面值普通投票股 | 交易符號 | 在每個交易所註冊的名稱 | ||
請勾選標記以指示註冊者是否（1）在過去12個月內（或註冊者需要提交這些報告的更短時間內）已提交證券交易所法案第13或15（d）節要求提交的所有報告，及 （2）是否已被提交要求過去90天的提交要求所制約。
√ 是
表明在過去的12個月內（或者註冊人被要求在更短的時間內提交這些報告的時間）已通過電子方式提交了根據規則
405¤T法規提交所有交互式數據文件的文件。
請在複覈標記中清楚地註明註冊人是大型快速提交者、快速提交者、非快速提交者、小型報告公司還是新興增長公司。有關「大型快速提交者」、「快速提交者」、「小型報告公司」和「新興增長公司」的定義，請參見交易所法案120億.2規則:
| 大型加速文件提交人 | ☐ | 加速歸檔者 ☐ |
| ☒ | 較小的報告公司 | |
| 新興成長型企業 |
如果是新興成長型企業，請打勾，以表明註冊人已選擇不使用遵守《證券交易法》第13(a)條所規定的任何新的或修訂後的財務會計準則的延長過渡期。 ☐
請勾選適用的圓圈，表示註冊登記者是否是空殼公司(根據交易所法案第12b-2條的定義)。是 ☐ 否
截至2024年11月19日，發行人的普通股數量爲 公司的普通股票總額爲$ 每股面值，尚有流通。
ALGORHYTHM 控股有限公司。
目錄
| 頁碼 | ||
| 第一部分：財務信息 | ||
| 項目 1. | 基本報表 | 3 |
| 2024年9月30日（未經審計）和2023年12月31日的簡明合併資產負債表 | 3 | |
| 2024年9月30日和2023年三個月及九個月的簡明合併利潤表（未經審計） | 4 | |
| 截至2024年和2023年9月30日的三個月和九個月的縮減合併股東（虧損）權益報表（未經審計） | 5 | |
| 2024年9月30日截至的壓縮合並現金流量表和2023年（未經審計） | 6 | |
| 未經審計的簡明合併財務報表註釋 | 7 | |
| 項目 2. | 分銷計劃 | 22 |
| 項目 3. | 有關市場風險的定量和定性披露 | 28 |
| 項目 4. | 控制和程序 | 28 |
| 第二部分.其他信息 | ||
| 項目 1. | 法律訴訟 | 29 |
| Interest expense, net | 風險因素 | 30 |
| 項目 2. | 未註冊的股票股權銷售和籌款用途 | 30 |
| 項目 3. | 對優先證券的違約 | 30 |
| 項目 4. | 礦山安全披露 | 30 |
| 項目5。 | 其他信息 | 30 |
| 項目 6. | 展示資料 | 31 |
| 簽名 | 32 | |
| 2 |
第I部分。財務信息
項目1.基本報表
ALGORHYTHM 控股公司及其子公司
彙編簡明資產負債表
| 2024年9月30日 | 2023年12月31日 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金 | $ | $ | ||||||
| 應收賬款，扣除$（2024年）和$（2023年）的撥備 | ||||||||
| 銀行存款 | ||||||||
| 關聯方應收賬款 | ||||||||
| 存貨 | ||||||||
| 應收退貨資產 | ||||||||
| 預付費用及其他流動資產 | ||||||||
| 流動資產合計 | ||||||||
| 物業和設備，淨值 | ||||||||
| 租賃權-使用權益資產 | ||||||||
| 其他非流動資產 | ||||||||
| 無形資產-淨額 | ||||||||
| 商譽 | ||||||||
| 總資產 | $ | |||||||
| 負債和股東權益 | ||||||||
| 流動負債 | ||||||||
| 應付賬款 | $ | $ | ||||||
| 應計費用 | ||||||||
| 顧客退款 | ||||||||
| 客戶預付款 | ||||||||
| 銷售退貨準備金 | ||||||||
| 應付商戶現金墊款 | ||||||||
| 應付票據 | ||||||||
| 應付與關聯方的票據流動部分 | ||||||||
| 經營租賃負債流動部分 | ||||||||
| 其他流動負債 | ||||||||
| 總流動負債 | ||||||||
| 其他負債 | ||||||||
| 應付款項（關聯方），減去流動部分 | ||||||||
| 經營租賃負債，淨值超過流動資產 | ||||||||
| 總負債 | ||||||||
| 承諾和事後約定 | ||||||||
| 股東權益（赤字） | ||||||||
| 優先股，$0.0001 面值； 授權股份數; 已發行且在外流通的股份 | ||||||||
| 普通股 $ 面值； 授權股份數; issued and 於2024年9月30日的流通股份和其它 issued and outstanding at December 31, 2023. | ||||||||
| 追加實收資本 | ||||||||
| 累積赤字 | ( | ) | ( | ) | ||||
| 非控制權益 | ( | ) | ||||||
| 總Algorhythm控股股東權益 | ||||||||
| 負債合計和股東權益總計 | $ | $ | ||||||
見 簡明合併財務報表注
| 3 |
ALGORHYTHM 控股公司及其子公司
精簡 合併損益表
(未經審計)
| 截至三個月結束 | 截至九個月結束 | |||||||||||||||
| 2024年9月30日 | 2023年9月30日 | 2024年9月30日 | 2023年9月30日 | |||||||||||||
| 淨銷售額 | $ | $ | $ | $ | ||||||||||||
| 銷售成本 | ||||||||||||||||
| 毛利潤 | ||||||||||||||||
| 運營費用 | ||||||||||||||||
| 銷售費用 | ||||||||||||||||
| 一般和行政費用 | ||||||||||||||||
| 經營租賃提前終止的淨（收益）損失 | ( | ) | ||||||||||||||
| 總營業費用 | ||||||||||||||||
| 來自運營的收入（虧損） | ( | ) | ( | ) | ||||||||||||
| 其他（費用）收益 | ||||||||||||||||
| 固定資產處置收益 | ||||||||||||||||
| 員工留任信貸計劃退款所得 | ||||||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收支（費用）淨額 | ( | ) | ( | ) | ( | ) | ||||||||||
| 所得稅減免前的收入（虧損） | ( | ) | ( | ) | ||||||||||||
| 所得稅收益（準備金） | ( | ) | ||||||||||||||
| 聯合淨利潤（損失） | ( | ) | ( | ) | ||||||||||||
| 歸屬於非控制性權益的淨（收入）損失 | ||||||||||||||||
| 可分配給普通股股東的淨利潤（損失） | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| 每普通股的收入（損失） | ||||||||||||||||
| 基本和攤薄 | $ | $ | $ | ) | $ | ) | ||||||||||
| 加權平均普通股和普通股 | ||||||||||||||||
| 等值股份： | ||||||||||||||||
| 基本和攤薄 | ||||||||||||||||
見 簡明合併財務報表注
| 4 |
ALGORHYTHM 控股公司及其子公司
綜合股東（赤字）權益簡明綜合財務報表
截至2024年和2023年9月30日的三個月
(未經審計)
| 普通股 | 額外支付資本 | 股東權益 | 累計 | |||||||||||||||||||||
| 股份 | 金額 | 資本 | 利息 | 虧損 | 總計 | |||||||||||||||||||
| 2024年6月30日餘額 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| 淨利潤（虧損） | - | ( | ) | |||||||||||||||||||||
| 普通股的銷售，減去發行成本 | ||||||||||||||||||||||||
| 基於股票的補償 | ||||||||||||||||||||||||
| 發行普通股以購買SemiCab Inc | ||||||||||||||||||||||||
| 發行子公司股份給非控制權益 | - | |||||||||||||||||||||||
| 其他 | - | ( | ) | |||||||||||||||||||||
| 2024年9月30日的結餘 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 普通股 | 額外付款 | 非控制性 | 累積 | |||||||||||||||||||||
| 股票 | 金額 | 資本 | 利息 | 赤字 | 總計 | |||||||||||||||||||
| 截至 2023 年 6 月 30 日的餘額 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| 淨收入 | - | |||||||||||||||||||||||
| 基於股票的薪酬 | - | |||||||||||||||||||||||
| 其他 | - | ( | ) | |||||||||||||||||||||
| 2023 年 9 月 30 日的餘額 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
截至2024年和2023年9月30日的九個月
(未經審計)
| 普通股 | 額外付款 | 非控制性 | 累積 | |||||||||||||||||||||
| 股票 | 金額 | 資本 | 利息 | 赤字 | 總計 | |||||||||||||||||||
| 2023 年 12 月 31 日的餘額 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| 淨虧損 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| 出售普通股，扣除發行成本 | ||||||||||||||||||||||||
| 基於股票的薪酬 | ||||||||||||||||||||||||
| 爲收購半導體公司而發行的普通股 | ||||||||||||||||||||||||
| 向非控股權益發行子公司股票 | - | |||||||||||||||||||||||
| 其他 | - | ( | ) | |||||||||||||||||||||
| 截至 2024 年 9 月 30 日的餘額 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| 截至2022年12月31日的餘額 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| 淨虧損 | - | ( | ) | ( | ) | |||||||||||||||||||
| 出售普通股，扣除發行成本 | ||||||||||||||||||||||||
| 出售普通股認股權證 | ||||||||||||||||||||||||
| 基於股票的薪酬 | - | |||||||||||||||||||||||
| 2023 年 9 月 30 日的餘額 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
查看 基本報表附註。
| 5 |
ALGORHYTHM 控股公司及其子公司
簡明綜合現金流量表
(未經審計)
| 截至九個月結束 | ||||||||
| 2024年9月30日 | 2023年9月30日 | |||||||
| 經營活動現金流量 | ||||||||
| 淨虧損 | $ | ( | ) | $ | ( | ) | ||
| 調整爲淨損失到經營活動現金流量淨使用： | ||||||||
| 折舊費 | ||||||||
| 無形資產攤銷 | ||||||||
| 預計退貨成本的賠償 | ||||||||
| 存貨貶值準備 | ||||||||
| 信用損失 2016年6月，FASB發佈了會計準則更新No.2016-13，金融工具-信用損失（主題326）：測量攤銷成本基礎上金融工具的信用損失，該標準引入了預期信用損失方法來測量按攤銷成本基礎計量的金融資產上的信用損失，取代了先前的已發生損失計量方法。2019年11月，FASB發佈了ASU 2019-10，強調了採納時間表。對於較小的報告實體，主題326對於從2022年12月15日開始的年度報告有效，包括這些財政年度的中間時段，在2023年4月1日對於公司進行有效。此標準的採納對公司的財務報表沒有產生實質性影響。 | ||||||||
| 終止營運租賃的獲利 | ( | ) | ||||||
| 出售房地產和設備所得的淨利潤 | ( | ) | ||||||
| 基於股票的補償 | ||||||||
| 租賃資產攤銷 | ||||||||
| 淨遞延稅資產的變化 | ||||||||
| 運營資產和負債的變化： | ||||||||
| 應收賬款 | ( | ) | ||||||
| 來自銀行的到期款 | ( | ) | ( | ) | ||||
| 應收賬款-關聯方 | ( | ) | ||||||
| 存貨 | ( | ) | ( | ) | ||||
| 預付費用及其他流動資產 | ( | ) | ||||||
| 其他非流動資產 | ( | ) | ||||||
| 應付賬款 | ||||||||
| 應計費用 | ( | ) | ( | ) | ||||
| 向客戶退款 | ( | ) | ||||||
| 銷售退貨準備金 | ( | ) | ( | ) | ||||
| 營運租賃負債 | ( | ) | ||||||
| 在經營租賃終止結算中支付提前終止費 | ( | ) | ||||||
| 經營活動中提供的淨現金流量（流出） | ( | ) | ||||||
| 投資活動現金流量 | ||||||||
| 購置固定資產等資產支出 | ( | ) | ( | ) | ||||
| 從購買SemiCab Inc收到的現金 | ||||||||
| 處置房地產和設備 | ||||||||
| 投資活動中使用的淨現金 | ( | ) | ( | ) | ||||
| 籌資活動現金流量 | ||||||||
| 股票出售所得款淨額，扣除發行費用 | ||||||||
| 商家現金預付款的支付 | ( | ) | ||||||
| 通過循環信貸額度的淨支付金額 | ( | ) | ||||||
| 其他 | ( | ) | ( | ) | ||||
| 籌集資金的淨現金流量 | ( | ) | ||||||
| 現金淨變動 | ( | ) | ||||||
| 年初現金餘額 | ||||||||
| 期末現金餘額 | $ | $ | ||||||
| 補充現金流信息披露： | ||||||||
| 支付的利息現金 | $ | |||||||
| 非現金投資和融資現金流信息: | ||||||||
| 發行普通股以購買SemiCab Inc | $ | $ | ||||||
| 依資本租約購買設備 | $ | $ | ||||||
| 使用權資產以換取租賃負債 | $ | $ | ||||||
見 簡明合併財務報表注
| 6 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
注意 1 - 業務性質
Algorhythm Holdings, Inc.（原名爲The Singing Machine Company, Inc.）（以下簡稱「公司」）是一家通過我們的SemiCab控股子公司運營的人工智能軟件物流業務的控股公司，以及一家設計並通過我們的Singing Machine子公司將卡拉OK產品全球分銷給零售商和電商合作伙伴的家用卡拉OK消費產品公司。
我們的經營範圍包括我們的全資子公司，SMC物流有限公司，加利福尼亞州法人（「SMCL」），SMC-Music有限公司，佛羅里達州法人（「SMCM」），SMC（HK）有限公司，香港公司（「SMH」），MICS酒店控股有限公司，特拉華州公司（「MICS Hospitality」），MICS酒店管理有限責任公司，特拉華州有限責任公司（「MICS 酒店管理」），MICS Nomad有限責任公司，特拉華州有限責任公司（「MICS NY」）和SemiCab控股有限責任公司，內華達州有限責任公司（「SemiCab」）。
唱歌 機器主要從事消費卡拉OK音頻設備、配件和音樂錄音的開發、營銷和銷售。 我們是一家全球貨幣卡拉OK和音樂娛樂公司，專注於爲成人和兒童設計和生產優質的卡拉OK和音樂消費產品。
SemiCab 是一個基於雲的協作運輸平台，旨在實現所需的可擴展性，以預測和優化企業級的整車運輸。 爲了協調製造商、零售商、分銷商和他們的承運人之間的協作，SemiCab 使用來自基於API的貨物招標的實時數據，並與TMS和ELD合作伙伴的預構建集成。 爲了構建完全裝載的往返行程，SemiCab使用人工智能/機器學習技術和愛文思控股的預測優化模型。
附註2-近期發展
名稱 和標的變更
自2024年9月5日起，我們的公司章程已經被修訂，以更改公司名稱從「The Singing Machine Company, Inc.」更改爲「Algorhythm Holdings, Inc.」 另外，自2024年9月8日起，公司的逐筆明細已從「MICS」更改爲「RIME」.
在2023財年發生了變化。
在2023年，我們的董事會批准將財政年度結束日期從3月31日更改爲12月31日。 我們在此10-Q表格季度報告中提供的截至2024年9月30日的經營業績、現金流和所有影響股東權益的交易結果，爲截至2024年9月30日的三個月和九個月期間以及2024年和2023年結束的期間。
ATM發行。
在2024年6月26日，公司與Ascendiant 資本市場有限責任公司（「代理商」）簽署了一份按市場發行銷售協議（「銷售協議」），根據該協議，公司可以不時通過代理商（「ATm交易」）提供和出售大約$
| 7 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
2024年9月30日後至2024年11月18日（提交文件前最後交易日），公司出售了 在ATm發行下出售了普通股股份，並收到了約$的淨收益
資產 購買
2024年6月11日，公司及其全資子公司SemiCab Holdings，LLC，一家內華達有限責任公司（「SemiCab LLC」和公司合稱爲「買方」），SemiCab，Inc.，一家特拉華州公司（「SemiCab」或「賣方」）與Ajesh Kapoor和Vivek Sehgal簽訂了資產購買協議（「資產購買協議」），根據該協議，賣方同意向公司出售並轉讓，公司同意從賣方購買和承擔與賣方業務相關的幾乎所有資產和特定負債。 除資產購買協議中規定的某些例外情況外，雙方約定買方不會承擔賣方的債務。SemiCab是一家人工智能、基於雲的協作運輸平台，旨在實現所需的可擴展性，以預測和優化半拖車載貨效率。
2024年7月3日，各方完成了資產購買交易，公司向賣方發行了（i） 公司普通股（ii）SemiCab LLC二十厘的成員權益。
根據資產收購協議，公司與賣方簽署了一份選擇權協議（「選擇權協議」），授予買方收購SMCb解決方案私人有限公司（「SMCB」）所有已發行和流通的資本證券的權利，而SMCB是賣方的全資子公司，作爲對價， 公司普通股的股份。選擇權協議在未行使的情況下到期。
酒吧租約。
2023年8月23日，MICS NY與OAC 111 Flatiron，LLC和OAC Adelphi，LLC（「房主」）簽訂了租賃協議（「租賃協議」），其中MICS NY同意租賃位於紐約市，紐約州的111 West 24[TO BE TRANSLATED]。
2024年6月30日結束的六個月中，公司放棄了繼續使用租賃空間的計劃，並行使了租賃協議的提前終止條款，但未被房東接受。由於放棄租賃，所有與租賃相關的資產都已減值。資產包括安防-半導體、租金按金和使用權資產，約爲$
2024年7月26日，OAC 111 Flatiron, LLC和OAC Adelphi, LLC（「房東」）在紐約州最高法院對MICS Nomad LLC（公司的子公司，「MICS NY」）和公司（「被告」）提起民事訴訟，指控違反租約，尋求包括未支付租金、未來未支付租金以及與租約相關的其他費用在內的貨幣賠償。投訴稱，被告在多個重要方面違反了租約。
在2024年9月25日，公司簽署了和解協議，協議要求在公司支付$後5個業務日內完全解除和撤回投訴。
由於和解，在截至2024年9月30日的三個月內，公司註銷了租賃協議中剩餘的運營租賃負債，並確認了提前終止運營租賃的收益，金額約爲$
| 8 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
定向增發
2024年10月22日，公司與投資者簽訂了證券購買協議（「SPA」），根據該協議，我們以定向增發（「定向增發」）方式銷售了總額爲$的擔保票據。
牛津信貸設施。
在2024年3月28日，公司與密歇根州的銀行公司Oxford Commercial Finance（以下簡稱「Oxford」）簽訂了一份貸款協議（「貸款協議」）及相關的可循環信用票據（「票據」）。
股份回購
在2024年11月1日，公司與Regalia Ventures LLC（以下簡稱「賣方」）簽訂了一份股票回購協議（「回購協議」），根據該協議，公司同意從賣方回購一定數量的發行和流通中的普通股，每股面值爲$ 每股股價$的公司發行和流通中的普通股（以下簡稱「股票」）。根據回購協議的條款，公司同意從賣方回購，而賣方同意出售、轉讓股票，價格爲每股$與： （1）回購協議簽訂日期前最後一個交易日的普通股收盤價; 或（2）回購協議簽訂日期前10個連續交易日的普通股的最高成交量加權平均價（VWAP）每股的價格（「購買價格」），公司應向賣方發行一張主要金額等於購買價格的本票，形式基本上與《回購協議》附件A中附加的形式相同（以下簡稱「票據」），及其中的條款和條件。 分享企業的所有發佈和流通中的普通股，每股面值$。根據回購協議的條款，公司已同意向賣方回購，賣方已同意出售、轉讓公司所持有的所有股票的所有權、所有權和利益，每股價格爲：（1）普通股的收盤價前一個交易日即回購協議簽訂日期; 或（2）普通股的成交量加權平均價格(VWAP)在回購協議日期前10(10)連續交易日的定價期內每股價值最高的價格(『購買價格』), 公司將向賣方發行一張主要金額等於購買價格的本票，實質上爲附加至回購協議上形式爲附件A的票據（『票據』），並受其中的條款和條件約束。
待回購的普通股份最初是根據某股票購買協議於2023年11月21日發行給賣方的，該協議日期爲2023年11月20日。
截至本文件提交之日，股份回購尚未完成。
注意 3 — 流動性、持續經營和管理計劃
根據2024年8月30日提交的8-K表格，2024年8月26日，公司收到了納斯達克證券交易所（「NASDAQ」）的通知，指示其報告在2024年6月30日結束的季度報告中，股東權益未達到NASDAQ上市規則5550(b)(1)要求的$250萬美元的最低股東權益，也未達到繼續上市所需的上市證券市值或持續經營的淨利潤的備選方案。根據股東權益規則，公司提交了一份計劃以恢復符合股東權益規則。
2024年11月13日，公司提交了一份8-k表格，稱其相信已恢復符合股權規則。如本文所披露，公司報告的股東權益約爲$
納斯達克已建議公司繼續監視公司對股東權益要求的持續遵守，如果在下一期定期報告時公司不能證明遵守，公司可能會被除牌。
截至2024年9月30日，公司現金約爲$
這份簡潔的合併財務報表並未包含假設公司能夠繼續作爲經營實體所做的任何調整。因此，這份簡潔的合併財務報表是在這樣一種基礎上編制的：認爲公司將繼續作爲經營實體，並在業務的正常流程中實現資產和滿足負債和義務。
管理層打算通過未來的債務或股權融資來爲業務提供資金，但是否以及何時發生此類融資仍不確定。
在進行本評估時，管理層對公司當前情況進行了全面分析，包括：其財務狀況，現金流量和現金使用預測，以及義務和債務。雖然管理層最近成功進行過資本籌集，但用於判斷公司作爲經營實體的能力的分析不包括管理層預計未來12個月內公司直接控制之外的現金來源。
| 9 |
AlgorHythm 控股公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
注意 4 - 重要會計政策摘要
表述基礎
截至2024年9月30日和2023年，附表中列示的未經審計的基本報表已根據美國通行的會計準則（「US GAAP」）和證券交易委員會第10-Q表格和規則S-X第8條的要求編制，適用於中期財務信息。因此，它們不包括所有對於完成合並財務報表所需的US GAAP要求的信息和披露。
管理層認爲，這些簡明合併基本報表包含爲公允呈現簡明合併財務狀況和簡明合併經營成果所需的所有調整（包括正常的經常性應計項目）。截至所呈現期間的簡明合併經營成果不一定代表預計的全年結果。截至2024年9月30日的簡明合併資產負債表及截至2024年和2023年9月30日的三個月和九個月的簡明基本報表信息未經審計，而截至2023年12月31日的簡明合併資產負債表是基於截至該日期的經審計合併資產負債表得出的。簡明合併基本報表及其附註應與公司在Form 10-Kt年度報告中包含的合併基本報表及其附註一起閱讀，報告的過渡期截止至2023年12月31日。我們在Form 10-Kt年度報告中披露的重大會計政策未發生變化，報告的過渡期截止至2023年12月31日。
合併原則
公司評估與相關方的業務關係，以識別潛在的變量利益實體（「VIEs」） 根據會計標準編纂（「ASC」）810，合併。公司將合併任何其擁有控制金融利益的VIE，並被視爲主要受益人。控制金融利益具有以下兩個特徵：（1）有權指揮VIE的活動，這些活動對其經濟表現產生最顯著的影響；以及（2）有義務吸收VIE的損失，這些損失可能對VIE具有重大意義，或者有權從VIE獲得對VIE可能具有重大意義的利益。如果同時滿足這兩個特徵，則公司被視爲主要受益人，因此將該VIE併入其綜合基本報表。
根據ASC 810的規定，如果公司在一個VIE中持有變量利益但不是該實體的主要受益人，則應披露其確定公司是否爲VIE主要受益人的方法，例如，做出的重大判斷和假設。所需的其他信息包括關於認爲重要的參與類型的信息，以及在確定報告實體是否爲主要受益人時考慮的參與類型的信息。
此外，如果公司在合同上沒有要求的情況下向VIE提供或打算提供財務或其他支持（明示或暗示），公司應披露支持的類型和金額，以及提供支持的主要原因。關於公司與VIE的涉入，應包括關於VIE的性質、目的、規模和活動的定性和定量信息，包括VIE的融資方式。
企業合併
公司根據收購業務的預估公允價值，將購買價格分配給所收購的有形和無形資產以及負債。購買價格超過淨資產公允價值的部分將記錄爲商譽。購買價格分配過程要求管理層在收購日期就對無形資產進行重大估計和假設。在某些情況下，支付的交易對價分配可能根據測定的公允價值最終確定，在收購日期起計的計量期間內，該期間最長可達一年。與業務組合相關的直接交易成本按發生時計入費用。公司從收購日起可能將已收購業務的經營業績納入其合併業績中。
商譽
公司根據金融會計標準委員會（「FASB」）發佈的會計標準更新（「ASU」）350評估其商譽的減值， ——其他資產和商譽當收購的購買價格超過所識別的有形和無形資產的公允價值時，商譽被記錄。
公司會在每年12月31日或更頻繁地進行測試，以評估商譽的賬面價值是否減值，如果有跡象表明商譽的賬面價值超過其公允價值。
無形資產
公司在資產購買協議中獲得了可攤銷的無形資產，包括客戶關係、商標和專有技術。這些無形資產按直線法按其預期壽命進行攤銷。
公司每當發生事件或業務環境變化表明資產的賬面價值可能無法恢復時，就會對無形資產進行減值審查。公司在決定何時進行減值審查時考慮的因素包括業務相對於預期的顯著不佳表現、顯著的負面行業或經濟趨勢，以及資產使用的顯著變化或計劃變更。如果進行減值審查以評估一項長期資產的可恢復性，公司將預計的未折現現金流的預測與該長期資產的賬面價值進行比較。當預計的未折現未來現金流低於資產的賬面價值時，將確認減值損失。減值損失將基於受損資產的賬面價值超出其公允價值的部分，此公允價值是基於折現現金流確定的。
| 10 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
公允價值衡量
根據ASC 820，《公允價值衡量和披露》規定，公允價值定義爲退出價格，即在測量日期作爲市場參與者之間進行有序交易時將收到的出售資產或支付轉讓責任的金額。
該指導原則還建立了一個用於測量公允價值的輸入層次結構，最大程度地使用可觀察輸入，並最小化使用不可觀察輸入，要求在可用時使用最可觀察的輸入。可觀察輸入包括市場參與者在評估資產或負債時使用的輸入，並基於獨立於公司的來源獲得的市場數據開發。不可觀察輸入是反映公司對市場參與者在評估資產或負債時使用的因素的假設的輸入。該指導原則建立了三個可以用於測量公允價值的輸入級別：
| ● | 級別 1：在活躍市場上對於相同資產或負債的報價市場價格。 |
| ● | 水平 2：除了可以直接或間接觀察到的級別1之外，還有類似資產或負債的已公佈價格；市場上不活躍的已公佈價格； 或模型推導的估值。公司估值中使用的所有重要輸入都是可觀察的，或者可以主要地從可觀察市場數據中推導出來， 或可以從可觀察市場數據協助以實質性地完整的資產或負債期間。級別2的輸入還包括 已調整爲特定於安全性約束的已公佈價格，這些價格與內部開發的模型的輸出進行比較，例如貼現現金流模型。 |
| ● | 級別 3：缺乏市場活動的不可觀察輸入，且對資產或負債的公允價值具有重要意義。 |
財務工具的賬面金額按成本計量，包括現金、應收賬款、應收賬款-關聯方、交易應付款項、預付款項及應付票據、應付票據-關聯方，由於此類工具的短期到期性質，其公允值近似。
金融工具在估值層次中的分類是基於對公允值測量具有重要性的最低輸入級別。
R最近 會計公告
在2023年11月，FASb發佈了ASU 2023-07， 分部報告（主題 280）：報告服務部門（主題 280）變更披露方式，通過升級對意義重大的分部費用的披露來改進分部報告披露要求。該準則適用於 2023 年 12 月 15 日之後的財年和 2024 年 12 月 15 日之後的財年間隔期。該準則必須適用於財務報表中呈現的所有期間的追溯。該公司目前正在評估該標準對合並財務報表的影響。 ，需要披露由首席經營決策者定期審查幷包括在每個報告的板塊利潤或損失中的重要分部費用。該標準還要求披露包括在不另行披露的板塊利潤或損失中的其他板塊項目構成。根據ASU 2023-07，所有披露要求對於具有單一可報告板塊的公共實體也是必需的。該ASU自2024年12月31日結束的公司年度10-k表的生效，並允許提前採用。公司目前正在評估採用該標準對我們的合併財務報表和相關披露可能造成的影響。
| 11 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
2023-09號ASU的修訂增強了與所得稅相關的主要信息，特別是有效稅率的調和和所得稅信息。該指南要求披露特定類別的有效稅率調和，並提供重大和適當的調和項目信息。此外，修訂的指南要求根據5%或超過總所得稅（扣除收到的退款）的標準對所得稅支付（扣除收到的退款）進行分離，也要求在所得稅支付中分離每個特定司法管轄區。此修訂指南於2024年12月15日後開始實施。指南可根據前瞻性或回溯性進行應用。目前，公司正在評估這種修訂指南對彙總財務報表的附註可能產生的影響。所得稅（主題740）：改進所得稅披露。該標準要求上市的業務實體在每年披露稅率調節表的特定類別，併爲滿足數量門限的調節項目提供其他信息（如果這些調節項目的影響相當於或大於將稅前收入（或損失）與適用的法定所得稅率相乘所得金額的5%）。它還要求所有實體每年披露按聯邦、州和外國稅種分解的所支付的所得稅（扣除退款），以及按所支付的所得稅（扣除退款）在個別司法管轄區分解的金額，當所支付的所得稅（扣除退款）相當於或大於所支付的總所得稅（扣除退款）的5%時。最後，該標準取消了要求所有實體披露未識別稅務負債餘額在未來12個月內合理可能變動範圍的性質和估計，或聲明無法估算範圍的要求。該標準對公司自2026年1月1日開始的年度適用。可以提前採納該標準。該標準應以前瞻性基礎應用。允許追溯適用。公司目前正在評估該標準可能對其財務報表產生的影響。. ASU 2023-09旨在通過要求企業披露特定的稅率調解、按聯邦和個人稅收轄區分離的所得稅金額以及在業務正常流程中實現資產和滿足負債和義務等詳細信息，增強所得稅披露的實用性。ASU 2023-09於2025年1月1日起對公司生效，可予以提前採用。目前，公司正在評估採用此標準對我們的合併財務報表和相關披露的影響。
注意 5 – 資產收購
在 2024年6月11日，公司及其全資子公司SemiCab, LLC、SemiCab, Inc.、Ajesh Kapoor和Vivek Sehgal簽署了 資產購買協議，賣方同意將其幾乎所有的資產及與賣方業務相關的某些特定負債出售並轉讓給公司，公司同意從賣方購買和承擔這些資產和負債。
公司決定收購SemiCab作爲戰略計劃的一部分， 以多元化其業務，減少對零售和消費電子-半導體的依賴，並戰略性地專注於增長。此次收購 符合公司向控股公司結構轉型的戰略決策。
2024年7月3日，各方完成了資產購買協議，公司向賣方發行了(i)。 公司普通股價值約的股份 $
根據資產收購協議，公司與賣方簽署了一份選擇權協議（「選擇權協議」），授予買方收購SMCb解決方案私人有限公司（「SMCB」）所有已發行和流通的資本證券的權利，而SMCB是賣方的全資子公司，作爲對價， 公司普通股股票。截至此次備案日期，期權協議已過期未行使。
根據資產收購協議，自2024年7月3日起，SemiCab有限責任公司與Ajesh Kapoor和Vivek Sehgal簽訂了僱傭協議（稱爲「協議」）。 Kapoor的協議跨越三年，年基本工資爲$
| 12 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
2024年7月3日（「收購日期」），公司以大約$收購了SemiCab, Inc.的幾乎所有資產並承擔了某些負債。
使用減免特許權使用費的方法對商標名稱和開發的科技無形資產進行了評估。減免特許權使用費的方法是收益方法下的一種，其中公司歸屬於無形資產的收益估計是基於如果公司不擁有該資產，它所需支付的使用資產的特許權使用費率。特許權使用費支付額是通過將特許權使用費率應用於與無形資產相關的預期營業收入來估算的。
公司使用多期超額收益法確定客戶關係的估計公允價值，利用折現現金流方法。分析中包含了關於新業務發展增長率的假設，得出的結論是
上述無形資產的估值需要使用被分類爲公允價值層次3級的不可觀察輸入。
由此收購產生的商譽可抵稅。
下表展示了基於其公允價值轉移給所獲得資產和承擔負債的對價分配：
| 股權代價 | $ | |||
| 非控制權益公允價值 | ||||
| 總股本考慮 | ||||
| 債務解除 | ||||
| 總代價 | $ | |||
| 已獲取的可辨認淨資產： | ||||
| 現金及現金等價物 | $ | |||
| 應收賬款 | ||||
| 預付費用及其他流動資產 | ||||
| 物業和設備，淨值 | ||||
| 其他非流動經營資產，淨額 | ||||
| 客戶關係（ | ||||
| 交易名稱（ | ||||
| 開發的科技（ | ||||
| 應付賬款和應計費用 | ( | ) | ||
| 應付貸款 商家現金預付款（MCA） | ( | ) | ||
| 應付票據 | ( | ) | ||
| 應付票據 相關方 | ( | ) | ||
| 已收購淨資產 | ( | ) | ||
| 預計商譽 | $ |
副本信息。
以下未經審計的增補財務信息展示了資產購買協議的影響，假設該協議已於2023年1月1日完成。增補調整源自各公司歷史報告的交易。這些增補結果不包括預期的合併效果或其他預計的收購收益。2024年和2023年截止到9月30日的九個月增補結果反映了公司與SemiCab業務在該期間的合併表現。未經審計的增補信息基於可用數據和公司認爲在這種情況下合理的某些假設。然而，實際結果可能與所使用的假設有重大差異。此選定的未經審計的增補合併財務信息僅供說明用途，不打算代表如果收購日期發生在2023年1月1日，實際合併經營結果會是什麼樣子，也不試圖預測未來的合併經營結果。
| 13 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
| 截至九個月 | ||||||||
| 2024年9月30日 | 2023年9月30日 | |||||||
| 淨營業收入 | $ | |||||||
| 持續經營業務的營業虧損 | ( | ) | ( | ) | ||||
| 淨虧損 | ( | ) | ( | ) | ||||
2023年9月30日結束的前瞻性財務數據包括營業費用淨增加$
注意 6-隨後事件融資
牛津信貸設施。
2024年3月28日，公司與安聯商業信貸（「牛津」）簽訂了貸款和安防-半導體協議（「信用協議」），作爲出借人。信用協議建立了一個擔保資產支持型循環信貸授信額度，最高爲$
根據信貸協議，貸款的利率爲華爾街日報基準利率加%，但以不低於%的利率計算。信貸協議包括某些契約，其中包括但不限於債務、資產留置權、資本支出、新實體的組建以及財務契約方面的限制。
信貸協議是爲期年的協議，到期日爲2026年11月28日，如果未在紀念日前60天公司通知Oxford其意願償還信貸設施並終止信貸協議，則自動續簽一年。 11月28日
如果公司在貸款合同的週年紀念日之前終止貸款協議並償還貸款，則該公司需要支付2％的退款費用。如公司未能在借款協議的兩週年紀念日前60天以書面方式通知貸方，表明借款人有意償還此信貸設施並在該紀念日全額償還全部信貸設施的債務，則退款費用將在貸款協議的兩週年紀念日自動續期一年。迄今爲止，未對貸款設施進行過任何提款。
於2024年10月17日，公司自願終止了信貸協議。根據信貸協議的條款，公司有義務支付$
Fifth Third Bank資產支持的循環信貸設施
公司於2022年10月14日與Fifth Third Financial Corporation（「貸款協議」）簽訂貸款和擔保協議，作爲借款人，替代了公司與Crestmark和IHC的信貸設施，該設施於2022年10月13日被終止。信貸協議建立了一個擔保資產支持的循環信貸設施，其中包括最高6400萬美元的循環信貸設施。信貸設施於[TO BE TRANSLATED]終止。信貸設施的可用額度每月由借款人的應收賬款和有資格庫存的百分比構成。公司在借款協議下的債務受到借款方每個借款方的全部財產的不斷的安全利益的保證，但受信貸設施中定義的某些排除性抵押財產的限制。
與信貸協議的關閉相關的成本約爲[TO BE TRANSLATED]，正在貸款的期間內分期攤銷。在2023年6月30日結束的三個月和六個月內，公司分別因信貸協議中的延遲融資費用攤銷而產生了大約[TO BE TRANSLATED]的費用。
| 14 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
信貸設施下的融資採用基準利率貸款，利率爲以下兩者中較大的那個：(a) 新加坡招商銀行利率（Prime Rate）加0.50％；(b) 擔保過夜融資利率（「SOFR」）30天期利率加3％，但無論哪種情況，都不得低於0.050％。
截至2023年9月30日止三個月和九個月，公司發生了約爲$的利息費用。
2023年5月19日，公司簽署了豁免和第一修正協議，該協議提供之前違約的豁免，並引入了新的契約。
2023年8月30日，公司簽署了豁免和第二個修正協議（「循環貸款修正協議」），其中規定了（i）是否所有在循環貸款修正協議生效日被確認的現有違約的豁免和（ii）「借款基礎」的定義的修改，將最高金額從[TO BE TRANSLATED]。
2023年11月17日，公司自願終止了信貸協議，因爲該公司無法滿足從2023年9月30日開始生效的債務覆蓋財務契約。終止日期時，信貸協議上沒有未償還的餘額。
商戶 現金預付款 - Agile Capital Funding, LLC
根據對SemiCab的收購，公司承擔了一項與Agile Capital Funding, LLC（"Agile"）相關的商戶現金預付款（「MCA融資」）。在2024年3月22日，SemiCab與Agile簽訂了一份MCA融資協議。最初借款金額爲$
商戶 現金預付款應付 - Cedar Advance, LLC
根據對SemiCab的收購，公司承擔了一筆MCA融資，可由Cedar Advance，LLC（「Cedar」）支付。 2024年5月8日，SemiCab與Cedar簽訂了一項MCA融資。最初借款額爲$
貸款 應付 半卡車投資者
SemiCab
維持了一筆來自一位SemiCab投資者的貸款，金額爲$
注7 - 股東赤字應付貸款 - 關聯方
SemiCab
保留了幾筆來自Ajesh Kapoor和Vivek Sehgal（SemiCab的現任員工和創始人）最初由SemiCab Holdings LLC發行的傑出關聯貸款。這些票據是無抵押的。應付的應計利息大約爲$
| 15 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
每筆貸款的具體條件如下表中總結：
| 發行 | 到期 | 利息 | ||||||||||||
| 持有者 | 日期 | 日期 | 狀態 | 比率 | 負責人 | |||||||||
| Ajesh Kapoor | 當前 | % | $ | |||||||||||
| Ajesh Kapoor | 當前 | % | ||||||||||||
| Vivek Seghal | 違約 | % | ||||||||||||
| Ajesh Kapoor | 違約 | % | ||||||||||||
| Ajesh Kapoor | 違約 | % | ||||||||||||
| 2024年9月30日到期的應付金額 | ||||||||||||||
| 減：應付給關聯方的應付票據的流動部分 | ||||||||||||||
| 應付款項（關聯方），減去流動部分 | $ | |||||||||||||
注意 8 - 承諾和 contingencies
和解協議 - Efficient Capital Labs, Inc.
2023年5月18日，SemiCab與Efficient Capital Labs, Inc.（「ECL」）簽訂了一份分期業務貸款協議（「IBLA」），本金餘額爲$
支付:
Semicab應支付給ECL美元指數
(a)
在2024年5月20日或之前，Semicab應支付ECL美元（「初始付款」）;
(b)
在2024年6月3日之前，Semicab應支付ECL $
(c)
在接下來的十 (10) 個月的第一個 業務日或之前，從2024年7月1日開始，Semicab 應該向ECL支付 $
截至2024年9月30日，結算款項應付金額爲$
藍天遠景公司訴訟
根據與SemiCab簽訂的資產購買協議，公司承擔了一項針對SemiCab的判決，該判決涉及由於合同違約而導致的損失，用於IT訂閱服務。2020年3月28日，SemiCab與Blue Yonder，Inc.（「Blue Yonder」）簽訂了一份IT訂閱服務的服務合同和協議。協議的原始期限爲三年，每年價格爲$
| 16 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
導數 行動
在 2023年12月21日，Ault Lending, LLC，Ault Alliance, Inc.（「Ault」）的全資子公司，作爲公司 最大的股東之一，向特拉華州衡平法院提起了對公司的派生股東訴訟，訴訟對象是公司及其董事和其他 股東（The Stingray Group, Inc.和Regalia Ventures）（「被告」），指控其在批准最近的超過市場價的 定向增發股權交易時違反了受託責任。投訴稱，公司及其董事在評估2023年11月進行的定向增發 交易時，採用了不充分的程序，並故意進入交易以稀釋Ault在公司的持股比例。公司已提交對該投訴的 駁回動議。根據公司對索賠背後事實的評估、訴訟的不確定性和該案的初步階段， 公司無法合理估計此行動可能導致的潛在損失或損失區間。
公司涉及因其他事項而引發的訴訟，屬於正常的業務範圍。公司面臨索賠、訴訟和其他程序的風險，這可能導致罰款、民事處罰或其他不利後果。公司在認爲損失發生的可能性很高且金額可以合理估計時，會記錄一項負債。如果公司判斷某項損失很可能發生，並且損失或損失區間可以估計，公司會披露合理可能發生的損失。公司評估其法律事務中的進展，這些進展可能會影響之前已經計提的負債金額，與此相關的合理可能損失也會被披露，並在適當時進行調整。需要進行重大判斷來判斷這些事項是否存在損失的可能性以及相關損失的估計金額。
2022年1月18日，以色列特拉維夫地區法院（以下簡稱法院）對我們及以色列子公司「教授薩拉·費伯」（Prof. Sarah Ferber）、Vered Caplan和Efrat Asa Kunik（以下簡稱被告）進行了訴訟。原告是擁有特哈肖麥德中心（Sheba）的以色列國家和特哈肖麥德醫學研究、基礎設施及服務有限公司（合稱原告）。原告尋求法院裁定，要求被告按照7%的銷售額和24%的所有收入向原告支付版稅，以代表與Sheba、由Prof. Ferber開展或監督的任何產品、服務或流程相關的任何和所有-know-how和技術，包括關於細胞治療的領域中基於現場平台的各種服務和產品以及與被告的細胞和基因治療CDMO業務有關的所有服務和產品。此外，原告還要求被告提供財務報表並向原告支付NIS的款項。由於2012年2月2日以色列子公司與特哈肖麥德醫學研究、基礎設施和服務有限公司之間的許可協議的版稅條款，原告將向原告支付1百萬美元。原告指控該公司和以色列子公司在細胞治療領域使用了Sheba的-know-how和技術，以及由Prof. Ferber在Sheba受僱期間在細胞治療領域中開發或監督的-know-how和技術，包括基於現場平台的各種服務和產品及與細胞萬能藥物工廠CDMO的業務相關的所有服務和產品，並根據許可協議的條款有權獲得某些版稅。被告已提交其回應此訴訟的答辯。公司認爲本訴訟中的指控沒有實質依據，並打算積極捍衛自己的權利。由於不存在存在重大損失的可能，因此在財務報表中未作出任何準備。經營租賃
在提交此文件時，公司在佛羅里達和香港的辦公室有經營租賃協議。
公司於2017年10月1日簽訂了經營租賃協議，租賃位於佛羅里達州勞德代爾堡的公司總部，佔地面積約爲
公司於2023年8月23日簽訂了經營租賃協議，租賃了約
截至2024年9月30日和2023年12月31日與租賃相關的補充 資產負債表信息如下：
| 資產: | 2024年9月30日 | 2023年12月31日 | ||||||
| 經營租賃-使用權資產 | $ | $ | ||||||
| 負債 | ||||||||
| 當前 | ||||||||
| 經營租賃的流動部分 | $ | $ | ||||||
| 經營租賃負債，淨值超過流動資產 | $ | $ | ||||||
經營租賃相關的補充營運信息如下:
| 截至2024年9月30日的三個月 | 截至2023年9月30日的三個月 | 截至2024年9月30日的九個月 | 截至2023年9月30日的九個月 | |||||||||||||
| 運營租賃費用作爲一般和管理費用的組成部分 | $ | $ | $ | $ | ||||||||||||
| 與經營租賃相關的補充現金流信息如下： | ||||||||||||||||
| 爲計量租賃負債所含金額支付的現金： | ||||||||||||||||
| 爲經營租賃支付的運營現金流 | $ | $ | $ | $ | ||||||||||||
| 租賃期限和折扣率 | ||||||||||||||||
| 加權平均剩餘租賃期限（年） | ||||||||||||||||
| 加權平均折扣率 | % | % | ||||||||||||||
| 17 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
到2024年9月30日爲止，所有租賃的最低未來付款如下：
| 按期限到期的付款 | 金額 | |||
| 2024年 | $ | |||
| 2025 | ||||
| 總未來最低支付額 | ||||
| 減：利息 | ||||
| 總營業租賃負債 | $ | |||
注8-其他重大交易普通股發行
股權激勵計劃
2022年4月12日，董事會批准了《The Singing Machine Company, Inc. 2022 Equity Incentive Plan》（以下簡稱「2022計劃」）。 2022 計劃爲發行權益激勵獎勵（如期權、股票增值權、股票獎勵、限制性股票、股票單位、績效獎勵和其他股票或現金激勵獎勵共同構成的「獎勵」）提供了規定。2022計劃下可向公司的員工、主管、董事、顧問、代理人、顧問和獨立承包商授予獎勵。
截至2022年12月31日和2023年3月31日，共有未行使權證 2022計劃下在截至2024年9月30日的三個月和九個月期間頒發的股權基礎補償獎勵，加權平均授予日期公允價值爲$每股的價格爲$。 2022計劃下在截至2023年9月30日的三個月和九個月期間頒發的股權基礎補償獎勵。總共有 和 截至2024年9月30日的三個月和九個月期間，共有股份被取消。總共有 截至2023年9月30日，被沒收的股份在三個月和九個月內。截止2024年9月30日，有 在2022年計劃下可供發行的股份。
2022年計劃下的股權報酬約爲$ 和 $ 截至2024年9月30日的三個和九個月內，作爲一般管理費用的組成部分支出 附表中的損益綜合表。截至2024年9月30日，未認可的費用約爲$ 剩餘的期權目前按時間分配激勵，大約加權平均 直到這些期權完全到期爲止。
截至2024年9月30日，已歸屬的期權爲 內在價值。
其他 股權補償
截至2024年9月30日結束的三個月和九個月，公司發行
注意 11 - 認股證
截至2024年9月30日和2023年12月31日，已發行和未償還的普通warrants爲
截至2024年9月30日，公司的warrants按到期日期的分類如下：
| 數量 普通認股權證 | 行權價格 | 到期日 | ||||||
| $ | ||||||||
| $ | ||||||||
| 18 |
ALGORHYTHm控股有限公司及其子公司
附註-簡明合併財務報表註釋
2024年和2023年9月30日
(未經審計)
| For the three months ended September 30, 2024 | For the three months ended September 30, 2023 | For the nine months ended September 30, 2024 | For the nine months ended September 30, 2023 | |||||||||||||
| Net income (loss) available to common stockholders | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||
| Weighted-average common shares outstanding | ||||||||||||||||
| Basic and diluted income (loss) per share | $ | $ | $ | ) | $ | ) | ||||||||||
Basic 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 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 three and nine months ended September 30, 2024 and 2023, options to purchase and shares of common stock, respectively and options to purchase common stock warrants for both September 30, 2024 and 2023 were excluded in the calculation of diluted net loss per share as the result would have been anti-dilutive.
NOTE 13 - INCOME TAXES
For
the three months ended September 30, 2024 and 2023 the Company did t recognize income tax provision as the Company is not forecasting
any taxable income for the current year and had a loss before income tax benefit in the previous year. The Company’s income tax
provision for the nine months ended September 30, 2023, was approximately $
The Company’s income tax expense differs from the expected tax benefit/expense based on statutory rates primarily due to full valuation allowance for all of its subsidiaries for the three and nine months ended September 30, 2024 and 2023.
NOTE 14 – REVENUE DISAGGREGATION
The 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:
Revenue by product line is as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| Product Line | September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||
| Classic Karaoke Machines | $ | $ | $ | $ | ||||||||||||
| Licensed Products | ||||||||||||||||
| Kids Youth Electronics | ||||||||||||||||
| Microphones and Accessories | ||||||||||||||||
| Music Subscriptions | ||||||||||||||||
| Logistics Services | ||||||||||||||||
| Total Net Sales | $ | $ | $ | $ | ||||||||||||
| 19 |
ALGORHYTHM HOLDINGS, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024 and 2023
(Unaudited)
Sales by geographic region for the periods presented are as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Australia | ||||||||||||||||
| Europe | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The
Company selectively participates in a retailer’s co-op promotion incentives by providing marketing fund allowances to its customers.
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. For the three months ended September 30, 2024 and 2023, co-op promotion incentives were approximately $
The
Company estimates variable consideration under its return allowance programs for goods returned from the customer whereby a revenue return
reserve is recorded based on historic return amounts, specific events as identified and management estimates. The Company’s reserve
for sales returns as of September 30, 2024 and December 31, 2023, was approximately $
A return program for defective goods is negotiated with each of the Company’s wholesale customers on a year-to-year basis. Customers are allowed to return defective goods within a specified period of time after shipment (between six and nine months). The Company does make occasional exceptions to this return policy and accordingly records a sales return reserve based on historic return amounts, specific exceptions as identified and management estimates.
The 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 condensed consolidated balance sheets.
NOTE 15 - CONCENTRATIONS OF CREDIT RISK AND REVENUE
The
Company derives a majority of its revenues from retailers of products in the United States. 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 September 30, 2024,
Revenues
from customers representing greater than 10% of total net sales derived from our top three customers as a percentage of net sales were
| 20 |
ALGORHYTHM HOLDINGS, INC. and SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024 and 2023
(Unaudited)
NOTE 16 – RELATED PARTY TRANSACTIONS
Due To/From Related Parties
Stingray
Stingray
Group, Inc. (“Stingray”) is an existing shareholder with board representation. The Company has a music subscription sharing
agreement with Stingray. For the three months ended September 30, 2024, and 2023, the amounts earned from the subscription agreement
were approximately $
SMCB
The Company determined that SMCB is a VIE as the Company provides financial support to SMCB. While not contractually obligated, SMCB currently relies on our reimbursement of certain costs under a Services Agreement (“MSA”) whereby SMCB agree to provide IT software development services to support SemiCab’s US operations. 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. As a result of this relationship SMCB has been determined to be a VIE.
Pursuant to the asset acquisition agreement of SemiCab, the Company entered into an option agreement granting the right to acquire all of the issued and outstanding capital securities of SMCB, however the option agreement expired on August 31, 2024 unexercised.
The Company further determined that it is not the primary beneficiary of SMCB as 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 the accompanying condensed consolidated financials presented for this period.
As
of September 30, 2024, the Company has advanced approximately $
NOTE 17 – SUBSEQUENT EVENTS
Securities Purchase Agreement
On
October 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), 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 (each a “Note” and collectively, the “Notes”), and (ii) a number of shares
of common stock of the Company, par value $ equal to (i) multiplied by (ii) such purchaser’s subscription amount
divided by (iii) $
The
Company agreed to certain registration rights with respect to the Shares, as described in the SPA. The Company also granted the purchasers
a right to participate up to an amount of
Univest
Securities LLC served as the placement agent in the Offering and received
The
Offering closed on October 24, 2024. At the closing, the Company issued to the purchasers an aggregate of shares of its common
stock and Notes in the aggregate principal amount of $
At
the closing, the Company issued a Note to each purchaser equal to such purchaser’s subscription amount divided by. The Notes
were issued with an original issue discount of
The Notes also provide for redemption upon a change of control, as such term is defined under the Notes and mandatory redemption upon the receipt of net proceeds from any offering of equity or debt by the Company. The Company also has the right to prepay the Notes.
The Notes are secured by a security interest in the assets and property of the Company and its subsidiaries and guaranteed by the Company’s subsidiaries, pursuant to the terms of a Guarantee Agreement entered into among the purchasers and the Company and each of its subsidiaries.
Stock Repurchase Agreement
On November 1, 2024, the Company entered into Stock Repurchase Agreement (the “Repurchase Agreement”) with Regalia Ventures LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company agreed to repurchase from the Seller an aggregate of issued and outstanding shares of common stock, par value $ per share, of the Company (the “Shares”). The shares of common stock to be repurchased were originally issued to the Seller on November 21, 2023, pursuant to a certain stock purchase agreement, dated November 20, 2023.
As consideration for the transaction contemplated by the Repurchase Agreement (the “Stock Repurchase”), when the transaction closes, the Company has agreed to repurchase from the Seller, and the Seller has agreed to sell, assign and transfer to the Company, all of the Seller’s right, title and interest in and to the Shares, at a price per Share equal to the higher of: (1) the closing price of the common stock on the last trading day immediately preceding the date of the Repurchase Agreement; or (2) the highest volume weighted average price (VWAP) of the common stock during a pricing period of ten (10) consecutive trading days prior to the date of the Repurchase Agreement per share (the “Purchase Price”), and the Company shall issue to the Seller a promissory note in the principal amount equal to the Purchase Price.
As of the date of this filing, the repurchase of the shares has not yet closed.
| 21 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” “would,” “should,” “could,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Transition Report on Form 10-KT for the nine months period ended December 31, 2023, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”) that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.
You should read the following management’s discussion and analysis of financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Transition Report on Form 10-KT, filed with the SEC on April 15, 2024.
In this Quarterly Report, unless the context requires otherwise, references to the “Company,” “Algorhythm,” “we,” “our company” and “us” refer to Algorhythm Holdings, Inc., a Delaware corporation, as well as our 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”), MICS Nomad, LLC, a Delaware limited liability company (“MICS NY”) and SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab”).
The objective of this Management’s Discussion and Analysis of Financial Condition and Results of Operation is to allow investors to view our company from management’s perspective, considering items that would have a material impact on future operations.
Overview
Algorhythm Holdings, Inc. (f/k/a The Singing machine Company, Inc.) (the “Company”) is a holding company for an AI enabled software logistics business operated through our SemiCab Holding subsidiary and a home karaoke consumer products company that designs and distributes karaoke products globally to retailers and ecommerce partners through our Singing Machine subsidiary.
Our operations include our 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”), MICS Hospitality Holdings, Inc., a Delaware corporation (“MICS Hospitality”), MICS Hospitality Management, LLC, a Delaware limited liability company (“MICS Hospitality Management”), MICS Nomad, LLC, a Delaware limited liability company (“MICS NY”) and SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab”).
| 22 |
Singing Machine is primarily engaged in the development, marketing, and sale of consumer karaoke audio equipment, accessories, and musical recordings. We are a global karaoke and music entertainment company that specializes in the design and production of quality karaoke and music enabled consumer products for adults and children.
SemiCab is a cloud-based collaborative transportation platform built to achieve the scalability required to predict and optimize full-truckload transportation at enterprise-scale. To orchestrate collaboration across manufacturers, retailers, distributors, and their carriers, SemiCab uses real-time data from API-based load tendering and pre-built integrations with TMS and ELD partners. To build fully loaded round trips, SemiCab uses AI/ML techniques and advanced predictive optimization models.
Recent Developments
Name and Symbol Change
Effective September 5, 2024, our Certificate of Incorporation was amended to effect a change in the name of the Company from “The Singing Machine Company, Inc.” to “Algorhythm Holdings, Inc.” In addition, effective September 8, 2024, the Company’s ticker symbol was changed from “MICS” to “RIME.”
Change in Fiscal Year
During 2023, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. Our results of operations, cash flows, and all transactions impacting shareholders’ equity presented in this Quarterly Report on Form 10-Q as of September 30, 2024 are for the three and nine month periods ended September 30, 2024 and 2023.
ATM Offering
On June 26, 2024, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital markets, LLC, as sales agent (the “Agent”), pursuant to which the Company could offer and sell, from time to time, through the Agent (the “ATM Offering”), up to approximately $1,100,000 in shares of the Company’s common stock. On July 8, 2024, the Company entered into the First Amendment to the Sales Agreement (the “Amendment”) to increase the number of shares to be sold in the ATM Offering to $2,020,000. On August 9, 2024, the Company entered into the Second Amendment to the Sales Agreement (the “Amendment”) to increase the number of shares to be sold in the ATM Offering to $3,100,000. Pursuant to the agreement, the Agent was paid $30,000 in fees to cover legal and administrative expenses and will receive an amount equal to 3% of the gross proceeds from each sale of the Company’s share of common stock. For the three and nine months ended September 30, 2024, the Company sold 1,673,077 shares of common stock under the ATM offering and received net proceeds of approximately $1,489,000 after payment of legal and accounting fees, brokerage commissions, and administrative fees to the agent of approximately $189,000.
Subsequent to September 30, 2024 and through November 18, 2024 (the last trading day prior to filing), the Company sold 2,162,423 shares of common stock under the ATM offering, and received net proceeds of approximately $1,372,000 after payment of brokerage commissions and administrative fees to the agent of approximately $42,000.
Asset Purchase
On June 11, 2024, the Company and its wholly owned subsidiary SemiCab Holdings, LLC, a Nevada limited liability company (“SemiCab LLC” and collectively with the Company, the “Buyer”), SemiCab, Inc., a Delaware corporation (“SemiCab” or the “Seller”), Ajesh Kapoor and Vivek Sehgal entered into an asset purchase agreement (the “Asset Purchase Agreement”) pursuant to which the Seller agreed to sell and assign to the Company, and the Company agreed to purchase and assume from the Seller, substantially all the assets, and certain specified liabilities relating to the business of the Seller. Subject to certain exceptions set forth in the Asset Purchase Agreement, the parties agreed that the Buyer will not assume the liabilities of the Seller. SemiCab is an artificial intelligence, cloud-based collaborative transportation platform built to achieve the scalability required to predict and optimize semi-tractor trailer load efficiency.
On July 3, 2024, the parties closed on the asset purchase whereby the Company issued to the Seller (i) 641,806 shares of the Company’s common stock (ii) a twenty percent (20%) membership interest in SemiCab LLC.
| 23 |
Pursuant to the asset acquisition agreement, the Company and Seller entered into an option agreement (the “Option Agreement”), granting the Buyer the right to acquire all of the issued and outstanding capital securities of SMCB Solutions Private Limited (“SMCB”), a wholly owned subsidiary of the Seller, in consideration for 320,903 shares of common stock of the Company. The Option Agreement has not been exercised through the date of this filing.
Hospitality Lease
On 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 24th Street, New York, New York (the “Premises”).
During the six months ended June 30, 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 three months ended June 30, 2024.
On July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC (the “Landlord”), filed a civil action in the Supreme Court of the State of New York against MICS Nomad LLC, a subsidiary of the Company (“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 alleges the Defendants breached the lease in various material respects.
On September 25, 2024, the Company entered into a Settlement Agreement for a full release and dismissal of the complaint within 5 business days of the Company’s payment of $250,000. Pursuant to the Settlement Agreement, the Company made the first payment of $150,000 was made on September 25, 2024 and a final payment of $100,000 was due and paid on October 25, 2024. On October 29, 2024 the Landlord filed a discontinuance with prejudice.
As a result of the settlement, during the three months ended September 30, 2024, the Company wrote off the remaining operating lease liability on the Lease Agreement and recognized a gain on early termination of the operating lease of approximately $3,874,000. For the nine months ended September 30, 2024 the Company recognized a loss on early termination of the operating lease of $4,000 which includes the $250,000 termination settlement expense. The net loss on early termination of the Lease Agreement was recorded as a component of operating expenses in the accompanying condensed consolidated statements of operations.
Private Placement
On October 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with investors pursuant to which we sold, in a private placement (the “Private Placement”), secured notes with an aggregate principal amount of $2,352,941 (the “Notes”), for cash proceeds of $2,000,000, net of original issue discount of $352,941. As consideration for entering into the SPA, we issued a total of 2,299,998 shares of common stock of the Company to the investors on October 24, 2024 (See Note 17).
Oxford Credit Facility
On March 28, 2024, the Company and Oxford Commercial Finance, a Michigan banking corporation, (referred to as “Oxford”) entered into a Loan Agreement (the “Loan Agreement”) and related Revolving Credit Note (the “Note”) for a $2,000,000 revolving line of credit (the “Oxford Line of Credit”). On October 17, 2024, the Company terminated the Loan Agreement and the Note. As of the date of termination, the Company had no outstanding amounts owed to Oxford and paid a termination fee of $40,000.
| 24 |
Amended Bylaws
On October 18, 2024, the Company amended its Amended By-laws (the “By-law Amendment”), for the purpose of reducing the quorum required to hold meetings of the stockholders of the Company (the “Quorum Requirement”). The By-law Amendment reduced the Quorum Requirement from a majority to thirty-three and one-third percent (33 1/3%) of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting. The By-law Amendment was approved by the Board of Directors of the Company on October 18, 2024.
Share Repurchase
On November 1, 2024, the Company entered into a Stock Repurchase Agreement (the “Repurchase Agreement”) with Regalia Ventures LLC, a Delaware limited liability company (the “Seller”), pursuant to which the Company agreed to repurchase from the Seller an aggregate of 1,098,901 issued and outstanding shares of common stock, par value $0.01 per share, of the Company (the “Shares”). Pursuant to the terms of the Repurchase Agreement, the Company has agreed to repurchase from the Seller, and the Seller has agreed to sell, assign and transfer to the Company, all of the Seller’s right, title and interest in and to the Shares, at a price per Share equal to the higher of: (1) the closing price of the common stock on the last trading day immediately preceding the date of the Repurchase Agreement; or (2) the highest volume weighted average price (VWAP) of the common stock during a pricing period of ten (10) consecutive trading days prior to the date of the Repurchase Agreement per share (the “Purchase Price”), and the Company shall issue to the Seller a promissory note in the principal amount equal to the Purchase Price, substantially in the form attached to the Repurchase Agreement as Exhibit A (the “Note”), and subject to terms and conditions therein.
The shares of common stock to be repurchased were originally issued to the Seller on November 21, 2023, pursuant to a certain stock purchase agreement, dated November 20, 2023.
As of the date of this filing, the repurchase of the shares has not yet closed.
Results of Operations
The following table sets forth, for the periods indicated, certain items related to our consolidated statements of operations as a percentage of net sales as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | |||||||||||||
| Net Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Cost of Goods Sold | 77.6 | % | 76.6 | % | 79.3 | % | 75.6 | % | ||||||||
| Operating Expenses | 10.5 | % | 22.8 | % | 67.1 | % | 44.8 | % | ||||||||
| Income (Loss) from Operations | 11.8 | % | 0.6 | % | -46.4 | % | -20.4 | % | ||||||||
| Other (Expenses) Income, Net | -2.7 | % | -0.1 | % | -2.1 | % | 2.9 | % | ||||||||
| Income (Loss) Before Income Tax Provision | 9.1 | % | 0.5 | % | -48.5 | % | -17.5 | % | ||||||||
| Income Tax Provision | 0.0 | % | 0.0 | % | 0.0 | % | -6.8 | % | ||||||||
| Net Income (Loss) | 9.1 | % | 0.5 | % | -48.5 | % | -24.3 | % | ||||||||
Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
Net Sales
Net sales for the three months ended September 30, 2024, decreased to approximately $10,622,000 from approximately $15,931,000 representing a decrease of approximately $5,309,000 as compared to the three months ended September 30, 2023. The decrease was primarily due to lower overall sell-through results during the prior year holiday season, mostly with our largest customer, Walmart, which in turn reduced their forecast for the upcoming holiday season resulting in decreased stock purchases.
Gross Profit
Gross profit for the three months ended September 30, 2024 decreased to approximately $2,375,000 from approximately $3,734,000 representing a decrease of approximately $1,359,000 as compared to the three months ended September 30, 2023. The decrease in gross profit was primarily due to the decrease in net sales as described above.
| 25 |
Operating Expenses
During the three months ended September 30, 2024, total operating expenses decreased to approximately $1,118,000, compared to approximately $3,628,000 during the three months ended September 30, 2023. This represents a decrease in total operating expenses of approximately $2,510,000 from the three months ended September 30, 2023. The Company wrote off the remaining operating lease liability on the hospitality Lease Agreement due to a termination Settlement Agreement and recognized a gain on early termination of the operating lease of approximately $3,874,000 as the related right of use asset had already been written off as impaired in the previous quarter. Selling expenses decreased by approximately $516,000 of variable and discretionary selling expenses commensurate with the decrease in net sales as described above. These decreases in operating expenses were offset by increases in stock-based consulting expenses of approximately $426,000 and increased third-party logistics costs of approximately $213,000 associated with the closing of the Company’s logistics warehouse in the prior year. In addition, there was an increase in operating expenses of approximately $816,000 related to the asset acquisition agreement of SemiCab.
Other Expenses (Income)
Other expenses consisted of interest expense of approximately $283,000 for the three months ended September 30, 2024, as compared to interest expense of approximately $53,000 for the three months ended September 30, 2023. The increase in interest expense of approximately $230,000 was primarily due to interest incurred on debt from the recently acquired asset purchase of SemiCab. There was a gain on the disposal of warehouse equipment of approximately $44,000 associated with the closing of the logistics facility in California during the three months ended September 30, 2023.
Income Taxes
For the three months ended September 30, 2024 and 2023 the Company did not recognize any income tax provision. The Company is not recognizing any tax provision for the three months ended September 30, 2024 as the Company is not forecasting any taxable income for the current year and had a loss before income tax benefit in the previous year. The Company’s income tax expense differs for the expected tax benefit based on statutory rates primarily due history of losses and forecasts that suggest the Company will not be able to utilize any deferred tax assets in the future.
Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
Net Sales
Net sales for the nine months ended September 30, 2024, decreased to approximately $15,488,000 from approximately $21,939,000 representing a decrease of approximately $6,451,000 as compared to the nine months ended September 30, 2023. The decrease was primarily due to lower overall sell-through results during the prior year holiday season, mostly with our largest customer, Walmart, which in turn reduced their forecast for the upcoming holiday season resulting in decreased stock purchases.
Gross Profit
Gross profit for the nine months ended September 30, 2024 decreased to approximately $3,201,000 from approximately $5,357,000 representing a decrease of approximately $2,156,000 as compared to the nine months ended September 30, 2023. The decrease in gross profit was primarily due to the decrease in net sales as described above. Gross margins for the nine months ended September 30, 2024 were 20.7%, as compared to 24.4% for the nine months ended September 30, 2023. The primary reason for the decrease in gross profit margin was due to a product mix of excess inventory that was sold at margins significantly lower than current active products.
| 26 |
Operating Expenses
During the nine months ended September 30, 2024, total operating expenses increased to approximately $10,386,000 compared to approximately $9,829,000 during the nine months ended September 30, 2023. This represents an increase in total operating expenses of approximately $557,000 for the nine months ended September 30, 2023. The increase in total operating expenses was primarily due to an increase in stock-based consulting expenses of approximately $426,000 and an increase in operating expenses of approximately $816,000 related to the asset acquisition agreement of SemiCab. These increases were offset by a decrease in variable and discretionary selling expenses of approximately $596,000 commensurate with the decrease in net sales as described above.
Other (Expenses) Income, net
Other expenses, net increased to approximately $328,000 for the nine months ended September 30, 2024 as compared to other income, net of approximately $626,000.
There was interest expense of approximately $328,000 for the nine months ended September 30, 2024 as compared to interest expense of approximately $122,000. The increase in interest expense of approximately $206,000 was primarily due to interest incurred on debt from the recently acquired asset purchase of SemiCab. During the nine months ended September 30, 2023, there was a refund of approximately $704,000 from the Employee Retention Credit program and a gain on the disposal of warehouse equipment of approximately $44,000 associated with the closing of the logistics facility in California.
Income Taxes
For the nine months ended September 30, 2024, the Company did not recognize any income tax provision as the Company is not forecasting any taxable income for the current year. The Company’s income tax provision for the nine months ended September 30, 2023, was approximately $1,502,000 as the Company recognized a full valuation allowance on all of its deferred tax assets based on the recent history of losses and forecasts that suggested the Company would not be able to utilize the deferred tax assets in the future. The Company’s income tax expense differs for the expected tax benefit/expense based on statutory rates primarily due to full valuation allowance for all of its subsidiaries for the nine months ended September 30, 2023.
Liquidity and Capital Resources
The Company incurred a net loss of approximately $7,247,000 for the nine-month period ended September 30, 2024, and has a history of recurring losses.
On September 30, 2024, we had cash on hand of approximately $621,000 as compared to approximately $6,703,000 on December 31, 2023. The decrease in cash on hand of approximately $6,082,000 from December 31, 2023, was primarily due to approximately $7,069,000 used in operations. We advanced approximately $776,000 to SMCB for prepaid services under a service agreement (See Note 5). There was a decrease in refunds due to customers of approximately $1,968,000 which included payment of approximately $768,000 to one major customer for refunds due for overstock returned by the customer in the prior year. There was a seasonal increase in reserves for sales returns of approximately $1,180,000. These uses of cash were offset by proceeds of approximately $1,489,000 for the sale of its common stock and a decrease in trade and related party accounts receivable of approximately $3,158,000. As of September 30, 2024, we had deficit working capital of approximately $2,082,000.
On September 30, 2023, we had cash on hand of approximately $3,213,000 as compared to $2,795,000 as of December 31, 2022. The increase in cash on hand of approximately $418,000 was primarily due to approximately $760,000 provided by operating activities primarily due to peak seasonal increases of accounts payable of approximately $10,442,000 primarily due to factory vendors offset by seasonal increases in accounts receivable of approximately $3,982,000, inventories or approximately $3,424,000 accrued expenses related to seasonal accruals for estimated returned goods and co-op incentive program expenses, approximately $1,132,000. Net cash used investing activities for the purchase of molds and tooling was approximately $163,000. Net cash used in financing activities was approximately $234,000. While the Company received proceeds from the exercise of common stock warrants and issuance of common stock (net of offering costs) of approximately $1,640,000, this increase in financing activities was offset by repayment of revolving credit lines of credit and other debt of approximately $1,874,000 during the nine months ended September 30, 2023.
| 27 |
As previously reported on Form 8-K filed on August 30, 2024, on August 26, 2024, the Company received a notice from The Nasdaq Stock Market LLC (“NASDAQ”) indicating that its stockholders’ equity as reported in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 did not meet the minimum of $2,500,000 in stockholders’ equity required by NASDAQ Listing Rule 5550(b)(1) (the “Equity Rule”) for continued listing, or the alternatives of market value of listed securities or net income from continuing operations. Pursuant to the Equity Rule, the Company submitted a plan to regain compliance with the Equity Rule.
On November 13, 2024, the Company filed a Form 8-K stating that it believed it regained compliance with the Equity Rule. As disclosed herein, the Company reported stockholders’ equity of approximately $2.7 million.
NASDAQ has advised the Company that it will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic report the Company does not evidence compliance, that it may be subject to delisting.
Based on cash flow projections from operating and financing activities and the existing balance of cash, management is of the opinion that the Company has insufficient funds to sustain operations for at least one year after the date of this report, and it may not be able to meet its payment obligations from operations and related commitments, if the Company is not able to obtain outside financing to allow the Company to continue as a going concern. Based on these factors, the Company has substantial doubt that it will continue as a going concern for the twelve months following the issuance date of the financial statements included elsewhere in this report.
The Company’s plan to alleviate the going concern issue is to increase revenue while controlling operating costs and expenses and obtaining funds from outside sources of financing to generate positive financing cash flows. While management is optimistic about its ability to raise funds to fund operations for at least one year after the date of this report, there can be no assurance that any such measures will be successful.
The Company’s ability to raise additional funds will depend, in part, on the success of our product development activities, and other events or conditions that may affect the share value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control. There can be no assurances that sufficient funds will be available to us when required or on acceptable terms, if at all. Accordingly, management has concluded that these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
Critical Accounting Estimates
Our interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgement increases such judgements become even more subjective. While management believes that its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in our Transition Report for the period ended December 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for small reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer, with the assistance of other members of our management, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
| 28 |
Changes in Internal Controls over Financial Reporting
During our transition period ended December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective due to the material weaknesses described below.
| 1. | We lack sufficient resources in our accounting department restricting our ability to review and approve certain material journal entries which increases the likelihood that a material misstatement of interim or annual financial statements might not be prevented. Management evaluated our current process of review and approval of certain material journal entries and concluded this deficiency represented a material weakness. |
| 2. | We lack sufficient resources in our accounting department, which restricts our ability to review certain material reconciliations related to financial reporting in a timely manner. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. Management evaluated the impact of our failure to have proper segregation between the preparation, review and approval of account reconciliations and concluded that this control deficiency represented a material weakness. |
| 3. | Due to resource restrictions, we have not established a three-way match of documents or other controls precise enough to detect a material misstatement in revenue. Management evaluated our current process of determining the occurrence of revenue and concluded this deficiency represented a material weakness. |
Planned Remediation
We continue to work on improving and simplifying our internal processes and implement enhanced controls to address the material weaknesses in our internal control over financial reporting discussed above and to remedy the ineffectiveness of our disclosure controls and procedures. We are addressing our accounting resource requirements to help remediate the segregation of duties and plan to implement a concise “three-way” document matching procedure. These material weaknesses will not be considered as remediated until the applicable remediated controls are operating for a sufficient period and management has concluded, through testing, that these controls are operating effectively.
Despite the material weaknesses identified above, we believe that the consolidated financial statements included in the period covered by this report on Form 10-Q fairly present, in all material aspects, our financial conditions, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.
During the fiscal quarter ended September 30, 2024, there were no additional changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 26, 2024, OAC 111 Flatiron, LLC and OAC Adelphi, LLC, filed a civil action in the Supreme Court of the State of New York against MICS Nomad LLC, a subsidiary of the Company (“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 alleges the Defendants breached the lease in various material respects.
On September 25, 2024, the Company entered into a Settlement Agreement for a full release and dismissal of the complaint within 5 business days of the Company’s payment of $250,000. Pursuant to the Settlement Agreement, the Company made the first payment of $150,000 was made on September 25, 2024 and a final payment of $100,000 was due and paid on October 25, 2024. On October 29, 2024 the Landlord filed a discontinuance with prejudice.
| 29 |
Blue Yonder, Inc. Lawsuit
Pursuant to the asset purchase agreement with SemiCab, the Company assumed a judgement against SemiCab regarding damages resulting from contract breach for IT subscription-based services. On March 28, 2020, SemiCab 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. On June 21, 2023, Blue Yonder filed a lawsuit claiming damages in the amount of $275,000 with the Maricopa County Superior Court in Arizona (“Lawsuit”). 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. If this 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, 2025. 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 condensed consolidated balance sheets.
Derivative Action
On December 21, 2023, Ault Lending, LLC, a wholly owned subsidiary of Ault Alliance, Inc. (“Ault”), one of the Company’s largest shareholders, filed a derivative shareholder action in Delaware Chancery Court against the Company, its Directors, and other Company shareholders (The Stingray Group, Inc. and Regalia Ventures) (“the Defendants”) for alleged breach of fiduciary duty in approving a recent above-market private placement equity transaction. The complaint alleges the Company, and its directors followed an inadequate process in evaluating the private placement transaction which occurred back in November 2023 and entered into the transaction with an intent to dilute Ault’s ownership stake in the Company. 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.
There were no other material changes during the quarter ended September 30, 2024, to our disclosure in Part I, Item 3, “Legal Proceedings” of our Form 10-KT for the period ended December 31, 2023. There are no other relevant matters to disclose under this Item for this period. See Note 8 to our consolidated financial statements entitled “Commitments and Contingencies” which is incorporated in this item by reference.
ITEM 1A. RISK FACTORS
Not required for small reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangement
During
the three months ended September 30, 2024, no director or officer of the Company
| 30 |
ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | Furnished herewith. |
| 31 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ALGORHYTHM HOLDINGS, INC. | ||
| Date: November 19, 2024 | By: | /s/ Gary Atkinson |
| Gary Atkinson | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| /s/ Richard Perez | ||
| Richard Perez | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
| 32 |