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Related Party Transactions
 3 Months Ended
Mar. 31, 2025
Related Party Transactions [Abstract]  
Related Party Transactions

Note 16 – Related Party Transactions

 

Stingray Group Subscription Payments

 

The Company has a music subscription sharing agreement with Stingray Group. For the three months ended March 31, 2025 and 2024, the Company received music subscription revenue of $264,000 and $240,000, respectively, from Stingray Group. As of March 31, 2025 and December 31, 2024, the Company had $357,000 and $212,000, respectively, due from Stingray Group for music subscription reimbursement.

 

 

Algorhythm Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

March 31, 2025 and 2024 (Unaudited)

 

SMCB

 

VIE Analysis

 

The Company determined that SMCB, which is a subsidiary of SemiCab, Inc., is a VIE as the Company provides financial support to SMCB. While not contractually obligated, SMCB currently relies on the Company’s reimbursement of certain costs under an intercompany services agreement (“MSA”) whereby SMCB agrees to provide IT software development services to SemiCab, Inc. In exchange, under the MSA, the Company grants intellectual property rights to SMCB to use the software platform in India. Compensation for services is invoiced and paid on a monthly or quarterly basis as agreed by both parties, with rates subject to periodic review and revision. The agreement is for a term of two years ending on April 1, 2025 and automatically renews for additional 12-month periods unless prior notice is given by the terminating party. The agreement automatically renewed for an additional 12-month period on April 1, 2025. As a result of this relationship and the financial support provided by the Company to SMCB under the loan agreement described below to fund SMCB’s operations, SMCB has been determined to be a VIE.

 

The Company further determined that it is not the primary beneficiary of SMCB because the Company does not have the power to direct or control SMCB’s significant activities related to its business. Accordingly, the Company has not consolidated SMCB’s results of operations and financial position in its consolidated financial statements.

 

Pursuant to the terms of the asset purchase agreement that the Company entered into on June 11, 2024, the Company entered into an option agreement that granted SemiCab Holdings the right to acquire all of the issued and outstanding equity securities of SMCB for 1,605 shares of the Company’s common stock. The Company did not exercise this right and the option agreement expired on August 31, 2024.

 

Loan Agreement

 

The Company is a party to a loan agreement with SMCB dated March 22, 2024. Under the loan agreement, the Company agreed to loan up to $2,500,000 to SMCB. The loans are anticipated to be made in tranches. Disbursements of any tranches are fully at the discretion of the Company. Each tranche has a repayment period of five years. The loans can be repaid at any time prior to the five-year maturity date without penalty. Interest on the loans accrues at a rate of six percent per year and is payable quarterly.

 

At December 31, 2024, a total of $1,140,000 was outstanding under the loan agreement. During the three months ended March 31, 2025, the Company made advances to SMCB in the amount of $672,000. During the three months ended March 31, 2025, SMCB charged $172,000 for services to the Company that were performed under the MSA, which charges offset amounts due under the loan with SMCB. As a result, as of March 31, 2025, a total of $1,640,000 of loans were outstanding under the loan agreement, and a total of $860,000 remained available for future borrowings under the loan agreement as of March 31, 2025. As of March 31, 2025, SMCB had not made any interest payments due under the loan agreement. As a result, the loans were in default as of March 31, 2025.

 

 

Algorhythm Holdings, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

March 31, 2025 and 2024 (Unaudited)