PART I – FINANCIAL INFORMATION Item 1. Financial Statements The company reported a net loss of $9.29 million for the three months ended March 31, 2025, a significant increase from the $2.37 million loss in the same period of 2024, primarily driven by a $6.47 million non-cash charge related to the change in fair value of warrant liabilities. Total assets decreased from $18.3 million to $10.5 million, and the company shifted from a shareholders' deficit of $10.5 million to a shareholders' equity of $3.3 million, mainly due to the reclassification of warrant liabilities to equity. The financial statements raise substantial doubt about the company's ability to continue as a going concern Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $10.46 million, a significant decrease from $18.30 million at December 31, 2024. This was primarily due to a reduction in cash from $7.55 million to $3.30 million and a decrease in accounts receivable. Total liabilities fell sharply from $28.82 million to $7.12 million, mainly because a $16.60 million warrant liability was reclassified to equity. Consequently, the company moved from a total shareholders' deficit of $10.52 million to a total shareholders' equity of $3.34 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $3,296,000 | $7,550,000 | | Total Current Assets | $9,011,000 | $16,763,000 | | Total Assets | $10,461,000 | $18,302,000 | | Liabilities & Equity | | | | Total Current Liabilities | $6,735,000 | $28,438,000 | | Warrant liability | $0 | $16,603,000 | | Total Liabilities | $7,120,000 | $28,823,000 | | Total Shareholders' Equity (Deficit) | $3,341,000 | ($10,521,000) | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported a net loss of $9.29 million, compared to a net loss of $2.37 million for the same period in 2024. The increased loss was primarily driven by a $6.47 million non-cash charge for the change in fair value of warrant liability. Net sales decreased to $1.99 million from $2.43 million year-over-year, while operating expenses increased, widening the loss from operations to $2.81 million from $2.29 million Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2124 | | :--- | :--- | :--- | | Net Sales | $1,993,000 | $2,426,000 | | Gross Profit | $500,000 | $502,000 | | Loss from Operations | ($2,810,000) | ($2,287,000) | | Change in fair value of warrant liability | ($6,468,000) | $0 | | Net Loss | ($9,294,000) | ($2,367,000) | | Net Loss Available to Common Stockholders | ($9,191,000) | ($2,367,000) | | Basic and diluted loss per share | ($4.66) | ($73.76) | Condensed Consolidated Statements of Cash Flows For the first three months of 2025, net cash used in operating activities was $3.11 million, an increase from $2.56 million in the prior year period. The company used $0.67 million in investing activities, primarily for advances to its VIE, SMCB. Net cash used in financing activities was $0.47 million. Overall, the cash balance decreased by $4.25 million, ending the period at $3.30 million Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,108,000) | ($2,557,000) | | Net cash used in investing activities | ($673,000) | $0 | | Net cash used in financing activities | ($473,000) | ($21,000) | | Net change in cash | ($4,254,000) | ($2,578,000) | | Cash at end of period | $3,296,000 | $4,125,000 | Notes to Condensed Consolidated Financial Statements The notes detail the company's structure as a holding company for SemiCab (AI logistics) and Singing Machine (karaoke products). A key disclosure is the management's conclusion that there is substantial doubt about the company's ability to continue as a going concern due to recurring losses and insufficient cash. The notes also cover significant events, including a reverse stock split, the reclassification of a large warrant liability to equity which resulted in a $6.47 million loss, segment performance showing SemiCab is not yet profitable, and a post-quarter-end acquisition of SMCB to expand the AI logistics business into India - The company operates as a holding company with two primary business units: SemiCab, an AI-enabled software logistics business, and Singing Machine, a home karaoke consumer products business16 - There is substantial doubt about the Company's ability to continue as a going concern due to a cash balance of $3,296,000 as of March 31, 2025, which is insufficient to fund planned operations for at least one year, alongside a history of recurring operating losses19 - A derivative lawsuit filed by Ault Lending, LLC against the company and its directors was dismissed without prejudice on April 30, 202554 - On May 2, 2025, after the quarter end, the company acquired 99.99% of SMCB, an Indian logistics company, for $1.75 million to expand its AI logistics and distribution into India109 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's dual business structure, focusing on investing in the early-stage AI logistics unit, SemiCab, while optimizing the established Singing Machine karaoke business. Q1 2025 net sales decreased to $2.0 million from $2.4 million year-over-year due to lost retail shelf space. The net loss widened significantly to $9.2 million from $2.4 million, primarily due to a one-time, non-cash charge of $6.5 million related to warrant revaluation. The company expects total net sales to increase over the next 12 months, driven by SemiCab's growth, and net loss to decrease substantially as the non-cash charge will not recur. However, the company's cash position is low, and it acknowledges the need for additional capital to fund operations and expansion, reinforcing the going concern risk - The company's strategy involves investing heavily in its early-stage AI logistics business, SemiCab, for growth, while focusing on operational optimization and cost reduction for its mature Singing Machine business124125127 - The significant increase in net loss for Q1 2025 was mainly due to a one-time, non-cash charge of $6,468,000 for the change in fair value of warrants issued in a December 2024 public offering. This liability was reclassified to equity, and no further charges are expected130 - The company's cash balance was $3,296,000 as of March 31, 2025. Management states that existing capital sources may not be adequate to fund operations and expansion over the next 12 months, and there is no assurance that additional financing will be available142147148 Comparison of the Three-Month Periods Ended March 31, 2025 and 2024 Net sales for Q1 2025 decreased by $433,000 to $1.99 million, primarily due to the loss of retail shelf space for Singing Machine products. Cost of goods sold decreased proportionally. Operating expenses rose by $521,000, driven by a $387,000 increase in G&A expenses for the development of the SemiCab business and a $134,000 increase in selling expenses. Other expenses surged by $6.46 million, almost entirely from the non-cash charge related to the change in fair value of warrant liabilities Financial Performance Comparison (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,993,000 | $2,426,000 | ($433,000) | | Cost of Goods Sold | $1,493,000 | $1,924,000 | ($431,000) | | Selling Expenses | $764,000 | $630,000 | $134,000 | | General & Admin Expenses | $2,546,000 | $2,159,000 | $387,000 | | Other Expenses | $6,468,000 | $28,000 | $6,456,000 | Liquidity And Capital Resources As of March 31, 2025, the company had a cash balance of $3.3 million. Net cash used in operations increased to $3.1 million in Q1 2025 from $2.6 million in Q1 2024. The company used $673,000 in investing activities for advances to SMCB and $473,000 in financing activities for note repayments. Management states that current capital is insufficient for the next 12 months and that additional financing, which is not guaranteed, will be necessary to fund operations and potential acquisitions. The company regained compliance with Nasdaq's minimum bid price rule but remains under a one-year monitoring period - The company's cash balance was $3,296,000 as of March 31, 2025, having been funded primarily through operations, equity sales, and debt142 - Net cash used in operating activities increased by $551,000 year-over-year to $3,108,000 for the three months ended March 31, 2025143 - On March 25, 2025, the company regained compliance with Nasdaq's minimum bid price requirement but will be subject to a mandatory one-year panel monitor151 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies - Disclosure is not required as the company is a smaller reporting company155 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025. This is due to material weaknesses in internal control over financial reporting identified at year-end 2024, including insufficient accounting resources leading to a lack of review for material journal entries, improper segregation of duties, and inadequate controls to prevent misstatement in revenue. The company intends to remediate these weaknesses by reviewing accounting staff, potentially hiring more personnel, and implementing more comprehensive written policies - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are not effective157 - Material weaknesses identified include: insufficient resources for reviewing material journal entries, lack of proper segregation of duties, and inadequate controls (e.g., three-way match) to detect material misstatements in revenue159161 - Remediation plans include reviewing accounting department staff and experience, potentially hiring additional personnel, and implementing more comprehensive written policies and procedures162 PART II – OTHER INFORMATION Item 1. Legal Proceedings A derivative shareholder action filed on December 21, 2023, by Ault Lending, LLC against the company, its board, and other parties, alleging breach of fiduciary duty, was dismissed without prejudice on April 30, 2025, at the plaintiff's request. There were no other material changes to legal proceedings from the last annual report - A derivative shareholder action filed by Ault Lending, LLC in December 2023 was dismissed without prejudice on April 30, 2025, after Ault Lending filed a motion for dismissal166 Item 1A. Risk Factors This section is not required for smaller reporting companies - Disclosure is not required as the company is a smaller reporting company168 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On February 13, 2025, the company issued a non-qualified stock option and a restricted stock award, each for 23,818 shares, to Alex Andre as part of his employment agreement as the new Chief Financial Officer and General Counsel. These securities were issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act - On February 13, 2025, the company granted a stock option and a restricted stock award, each for 23,818 shares, to its new CFO and General Counsel, Alex Andre, as part of his employment agreement169 Item 3. Defaults Upon Senior Securities None reported - None170 Item 5. Other Information During the first quarter of 2025, none of the company's officers or directors adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No officers or directors adopted or terminated a Rule 10b5-1 trading arrangement during the three-month period ended March 31, 2025173 Item 6. Exhibits This section lists the exhibits filed with the report, including the Equity Purchase Agreement for SMCB, a related Promissory Note, an Amended LLC Agreement for SemiCab Holdings, and various officer certifications and XBRL data files
The Singing Machine pany(MICS) - 2025 Q4 - Annual Report