Business Context and Reporting Period
Company: Algorhythm Holdings, Inc. (Ticker: RIME)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2026
Business Overview: The Company is an AI technology firm focused on SemiCab, an AI-enabled software logistics and distribution platform. On August 1, 2025, the Company sold its Singing Machine business, which is now reported as discontinued operations. The Company currently operates as a single segment.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 |
Six Months Ended June 30, 2026 |
Six Months Ended June 30, 2025 |
|---|---|---|---|
| Net Sales | $3,005,000 | $5,405,000 | $1,275,000 |
| Cost of Sales | $3,598,000 | $6,675,000 | $1,621,000 |
| Gross Loss | $(593,000) | $(1,270,000) | $(346,000) |
| Operating Expenses | $2,108,000 | $5,775,000 | $1,924,000 |
| Net Loss (Continuing Ops) | $(4,149,000) | $(9,529,000) | $(8,781,000) |
| Net Loss Available to Common Shareholders | $(3,829,000) | $(8,935,000) | $(9,776,000) |
| Cash and Restricted Cash | $7,955,000 (as of June 30, 2026) | ||
| Total Debt (Promissory Notes) | $6,413,000 (Current) + $2,300,000 (Related Party) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased significantly ($4.1M increase for the six-month period) primarily due to the inclusion of SMCB, an Indian logistics subsidiary acquired in May 2025.
- Margin Deterioration: The Company reported a gross loss of $1.27M for the six months ended June 30, 2026, compared to $346k in the prior year period. Cost of sales rose disproportionately to revenue due to freight and servicing costs associated with the SMCB acquisition.
- Operating Expenses: General and administrative expenses increased by $3.77M year-over-year for the six-month period, driven by growth initiatives and stock-based compensation ($1.12M recognized).
- Debt Extinguishment: The Company recorded a $400,000 loss on debt extinguishment in Q2 2026 after exchanging a portion of a pre-paid purchase facility for Series A Preferred Stock.
- Discontinued Operations: The Singing Machine business was sold in August 2025; prior year results include discontinued operations which are excluded from current period continuing operations.
Guidance, Outlook, Risks, and Contingencies
- Going Concern: Management has expressed substantial doubt about the Company's ability to continue as a going concern for at least one year. Cash on hand ($7.96M) is deemed insufficient to fund planned operations without additional financing.
- Financing Strategy: The Company plans to raise capital through equity sales or debt issuance. No specific arrangements are currently in place. Recent financing included "Pre-Paid Purchase" facilities with Streeterville Capital, LLC.
- Nasdaq Compliance: The Company received notice in June 2026 of non-compliance with the minimum bid price requirement ($1.00/share). It has a 180-day compliance period (until December 14, 2026) to regain compliance, potentially via a reverse stock split.
- Legal Settlements: A $500,000 settlement with Blue Yonder regarding a prior judgment was paid in July 2026 (subsequent event). A derivative lawsuit filed by Ault Lending was dismissed without prejudice in April 2025.
- Debt Defaults: The Company triggered events of default on certain related-party loans and a promissory note to SemiCab, Inc. Forbearance agreements were entered into in May and June 2026 to waive immediate enforcement.
- Internal Controls: The Company disclosed material weaknesses in internal controls over financial reporting, citing insufficient accounting resources and lack of segregation of duties.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $7.96M cash balance against the reported burn rate and upcoming debt maturities.
- Debt Covenants: Review the terms of the Streeterville Pre-Paid Purchase facilities and related-party notes for default triggers and interest rates (some notes carry 9-18% interest).
- Nasdaq Status: Monitor the stock price to ensure compliance with the $1.00 minimum bid price requirement by December 2026 to avoid delisting.
- Revenue Concentration: Note that 70% of revenue for the six months ended June 30, 2026, came from the four largest customers, all located in India.
- Equity Dilution: Assess the impact of recent and potential future equity issuances, including the conversion of pre-paid purchases and the issuance of Series A Preferred Stock.