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Derivative Liability | 6 Months Ended | 12 Months Ended
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Jun. 30, 2025 | Dec. 31, 2024
Derivative Liability | Note 12 – Derivative Liability During the six months ended June 30, 2025, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis. These fair value measurements were estimated using a Monte Carlo simulation model, with the key inputs described below. Each of these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including the probability and expected date of stockholder approval. ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 The key inputs for the Series A warrant liabilities were as follows: Schedule of Derivative Warrant Liabilities
Warrant Liability – Series A Warrants |  | January 17, 2025 |  |  | December 31, 2024 |
Stock price on valuation date |  | $ | 8.38 |  |  | $ | 18.00 |
Exercise price |  | $ | 8.38 |  |  | $ | 34.00 |
Number of warrants |  |  | 1,133,652 |  |  |  | 279,412 |
Remaining term (years) |  |  | 4.88 |  |  |  | 4.93 |
Annual equity volatility |  |  | 126.0 | % |  |  | 113.0 | %
Annual volume volatility |  |  | 377.0 | % |  |  | 379.0 | %
Risk-free interest rate |  |  | 4.32 | % |  |  | 4.29 | %
Expected stockholder approval date |  |  | January 13, 2025 |  |  |  | January 14, 2025 |
Expected stockholder approval probability |  |  | 100 | % |  |  | 50 | %
The Series B warrant liabilities were remeasured on each exercise date based on the closing price of the Company’s common stock on the date the warrants were exercised. On January 13, 2025, the Company’s shareholders approved the issuance of the Series A and Series B warrants. This approval triggered the adjustment to the exercise price described above. In connection with this approval, the holders of the Series B warrants exercised their warrants in full under the alternative cashless exercise provision, resulting in the issuance of 1,910,975 shares of common stock and no additional proceeds received by the Company. The Series A warrants became exercisable for 1,133,652 shares of common stock at an exercise price of $8.38 per share after the shareholder approval adjustment was finalized on March 17, 2025. In addition, the Company reassessed the classification of the Series A warrants after the shareholder approval adjustment was finalized, concluding that the Series A warrants now met the requirements for equity classification under ASC 480 and ASC 815. The Company adjusted the Series A warrants to fair value upon reclassification and reclassified that value to additional paid-in capital during the six months ended June 30, 2025. The following table provides a roll-forward of the fair value of the derivative liabilities described above during the six months ended June 30, 2025: Schedule of Fair Value of the Derivative Liabilities
|  | Series A Warrants |  |  | Series B Warrants |  |  | Total Warrant Liabilities |
Balance at December 31, 2024 |  | $ | 5,456,000 |  |  | $ | 11,147,000 |  |  | $ | 16,603,000 |
Balance |  | $ | 5,456,000 |  |  | $ | 11,147,000 |  |  | $ | 16,603,000 |
Exercises |  |  | — |  |  |  | (15,214,000 | ) |  |  | (15,214,000 | )
Loss on change in fair value |  |  | 2,401,000 |  |  |  | 4,067,000 |  |  |  | 6,468,000 |
Reclassification to equity |  |  | (7,857,000 | ) |  |  | — |  |  |  | (7,857,000 | )
Balance at June 30, 2025 |  | $ | — |  |  | $ | — |  |  | $ | — |
Balance |  | $ | — |  |  | $ | — |  |  | $ | — |
ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 The following table provides a roll-forward of the number of shares of common stock underlying warrants issued during the six months ended June 30, 2025: Schedule of Shares of Common Stock Underlying Warrants
|  | Series A Warrants |  |  | Series B Warrants |  |  | Other Warrants |  |  | Total |
Balance at December 31, 2024 |  |  | 279,412 |  |  |  | 279,412 |  |  |  | 4,511 |  |  |  | 563,335 |
Balance |  |  | 279,412 |  |  |  | 279,412 |  |  |  | 4,511 |  |  |  | 563,335 |
Exercises |  |  | — |  |  |  | (279,412 | ) |  |  | — |  |  |  | (279,412 | )
Balance at June 30, 2025 |  |  | 279,412 |  |  |  | — |  |  |  | 4,511 |  |  |  | 283,923 |
Balance |  |  | 279,412 |  |  |  | — |  |  |  | 4,511 |  |  |  | 283,923 |
The Company did not issue any warrants during the three and six months ended June 30, 2024 and did not have any warrants outstanding as of June 30, 2024. |
Previously Reported [Member] |  |
Derivative Liability |  | Note 13 – Derivative Liability During the year ended December 31, 2024, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis. These fair value measurements were estimated using a Monte Carlo simulation model, with the key inputs described below. Each of these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including the probability and expected date of stockholder approval. The key inputs for each of these warrant liabilities were as follows: Schedule of Derivative Warrant Liabilities
Warrant Liability – Series A Warrants |  | Issuance Date |  |  | December 31, 2024 |
Stock price on valuation date |  | $ | 18.00 |  |  | $ | 18.00 |
Exercise price |  | $ | 34.00 |  |  | $ | 34.00 |
Number of warrants |  |  | 279,412 |  |  |  | 279,412 |
Remaining term (years) |  |  | 5.00 |  |  |  | 4.93 |
Annual equity volatility |  |  | 113.0 | % |  |  | 114.0 | %
Annual volume volatility |  |  | 377.0 | % |  |  | 379.0 | %
Risk-free interest rate |  |  | 3.95 | % |  |  | 4.29 | %
Expected stockholder approval date |  |  | January 14, 2025 |  |  |  | January 14, 2025 |
Expected stockholder approval probability |  |  | 50 | % |  |  | 50 | %
ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023
Warrant Liability – Series B Warrants |  | Issuance Date |  |  | December 31, 2024 |
Stock price on valuation date |  | $ | 18.00 |  |  | $ | 18.00 |
Exercise price |  | $ | 68.00 |  |  | $ | 68.00 |
Number of warrants |  |  | 279,412 |  |  |  | 279,412 |
Remaining term (years) |  |  | 2.50 |  |  |  | 2.43 |
Annual equity volatility |  |  | 126.0 | % |  |  | 120.0 | %
Annual volume volatility |  |  | 409.0 | % |  |  | 416.0 | %
Risk-free interest rate |  |  | 4.00 | % |  |  | 4.17 | %
Expected stockholder approval date |  |  | January 14, 2025 |  |  |  | January 14, 2025 |
Expected stockholder approval probability |  |  | 50 | % |  |  | 50 | %
The following table details the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of December 31, 2024: Schedule of fair value on a recurring basis
December 31, 2024 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Warrant liabilities |  | $ | — |  |  | $ | — |  |  | $ | 16,603,000 |
Total liabilities |  | $ | — |  |  | $ | — |  |  | $ | 16,603,000 |
The following table provides a roll-forward of the fair value of the derivative liabilities described above: Schedule of fair value of the Derivative Liabilities
|  | Series A Warrants |  |  | Series B Warrants |  |  | Total Warrant Liabilities |
Balance at December 31, 2023 |  | $ | — |  |  | $ | — |  |  | $ | — |
Issuances |  |  | 5,901,000 |  |  |  | 11,036,000 |  |  |  | 16,937,000 |
Exercises |  |  | — |  |  |  | — |  |  |  | — |
Loss (gain) on change in fair value |  |  | (445,000 | ) |  |  | 111,000 |  |  |  | (334,000 | )
Balance at December 31, 2024 |  | $ | 5,456,000 |  |  | $ | 11,147,000 |  |  | $ | 16,603,000 |
ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 The following table provides a roll-forward of the number of shares of common stock underlying warrants issued during the year ended December 31, 2024 and the nine months ended December 31, 2023: Schedule of Shares of Common Stock Underlying Warrants
|  | Pre-Funded Warrants |  |  | Series A Warrants |  |  | Series B Warrants |  |  | Other Warrants |  |  | Total |
Balance at March 31, 2023 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,511 |  |  |  | 4,511 |
Issuances |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Exercises |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance at December 31, 2023 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,511 |  |  |  | 4,511 |
Issuances |  |  | 258,412 |  |  |  | 279,412 |  |  |  | 279,412 |  |  |  | — |  |  |  | 817,236 |
Exercises |  |  | (258,412 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (258,412 | )
Balance at December 31, 2024 |  |  | — |  |  |  | 279,412 |  |  |  | 279,412 |  |  |  | 4,511 |  |  |  | 563,335 |
The Company did not issue any warrants during the nine month transition period ended December 31, 2023 and did not have any warrants outstanding as of December 31, 2023.

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- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 820 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/820/tableOfContent Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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