Business Context and Reporting Period
Company: Algorhythm Holdings, Inc. (Ticker: RIME)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: The Company is an AI technology firm focused on its SemiCab logistics and distribution platform. On August 1, 2025, the Company sold its former Singing Machine karaoke business, which is now reported as discontinued operations. The Company operates as a single segment (SemiCab) following the divestiture.
Key Financial Metrics
| Metric | 2025 (Year Ended Dec 31) | 2024 (Year Ended Dec 31) |
|---|---|---|
| Net Sales (Continuing Ops) | $4,391,000 | $297,000 |
| Cost of Sales | $5,706,000 | $491,000 |
| Gross Loss | $(1,315,000) | $(194,000) |
| Net Loss (Continuing Ops) | $(15,210,000) | $(18,884,000) |
| Net Loss (Total) | $(16,572,000) | $(24,367,000) |
| Net Loss Available to Common Shareholders | $(15,871,000) | $(23,257,000) |
| Cash Used in Operating Activities | $(7,309,000) | $(3,985,000) |
| Total Assets | $12,724,000 | $18,302,000 |
| Shareholders' Deficit | $(1,860,000) | $(10,521,000) |
Note: The filing text does not provide a clear value for total debt outstanding as of December 31, 2025, though it details specific promissory notes and prepaid purchase obligations in the notes to financial statements.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased by approximately 1,379% to $4.39 million, driven primarily by the acquisition of SMCB (India operations) in May 2025.
- Cost Structure: Cost of sales increased to $5.71 million, resulting in a gross loss of $1.32 million, compared to a gross loss of $194,000 in 2024.
- Non-Cash Charges: The 2024 net loss included a $3.59 million goodwill impairment charge and an $8.89 million loss on warrant issuance. These non-cash items were absent or significantly reduced in 2025, contributing to a lower net loss despite higher operating costs.
- Discontinued Operations: The Singing Machine business was sold in August 2025. Results for this segment are now classified as discontinued operations, showing a net loss of $1.36 million for 2025.
- Stock Split: A 1-for-200 reverse stock split was effected on February 10, 2025. All historical share data has been adjusted.
Guidance, Outlook, Risks, and Unusual Items
Outlook and Guidance
Management expects net sales to increase substantially over the next 12 months as the customer base in India grows and operations expand into the U.S. and Europe. However, operating expenses and net losses are also expected to increase as the Company funds the growth of the SemiCab business.
Going Concern
The independent auditor (M&K CPAs, PLLC) has issued an explanatory paragraph stating there is substantial doubt about the Company's ability to continue as a going concern. This is due to recurring operating losses, an accumulated deficit of approximately $65 million, and cash resources that are insufficient to fund operations for the next 12 months without additional financing.
Material Risks and Contingencies
- Financing Needs: The Company must raise additional capital to sustain operations. Failure to do so could force a discontinuation of operations.
- Streeterville Transaction: The Company entered into a complex financing arrangement with Streeterville Capital involving "Pre-Paid Purchases." As of the filing date, significant principal amounts remain outstanding. These instruments carry high interest rates (9% to 18% upon default) and dilution risks if converted to equity.
- Internal Controls: The Company identified material weaknesses in internal controls over financial reporting, including insufficient accounting resources, lack of segregation of duties, and inadequate revenue controls.
- Nasdaq Compliance: The Company received notice in November 2025 that it failed to meet the $2.5 million stockholders' equity requirement for continued Nasdaq listing. It has been granted an extension until May 27, 2026, to regain compliance.
- Litigation: Blue Yonder, Inc. obtained a judgment on the pleadings against the Company for approximately $509,000 related to assumed liabilities from the SemiCab acquisition. The outcome remains uncertain.
Investor Verification Checklist
- Going Concern Status: Verify the Company's ability to secure additional financing before the current cash reserves are depleted.
- Nasdaq Listing: Monitor the Company's progress in regaining compliance with the $2.5 million stockholders' equity requirement by May 27, 2026.
- Debt Obligations: Review the terms of the Streeterville Pre-Paid Purchases, specifically the conversion mechanics, interest rates, and potential for immediate repayment upon default.
- Internal Controls: Assess the remediation plan for the identified material weaknesses in financial reporting.
- Revenue Concentration: Note that 58% of accounts receivable are due from three customers in India, creating significant concentration risk.