Algorhythm Holdings, Inc. (NASDAQ:RIME), a company specializing in phonograph records and prerecorded audio tapes and disks, announced on Monday that it has entered into a Securities Purchase Agreement (SPA) and secured approximately $2 million in funding. The Fort Lauderdale-based company, formerly known as Singing Machine Co Inc, disclosed the financial arrangement in a recent SEC filing.
The agreement, dated October 22, 2024, outlines the sale of Original Issue Discount Senior Secured Notes and shares of common stock. The notes carry a principal amount calculated by dividing the subscription amount by 0.85 and were issued with a 15% original issue discount. The notes do not accrue interest unless an Event of Default occurs, with interest then set at 14% per annum. They are due 90 days from the issuance date of October 24, 2024.
As part of the offering, Algorhythm Holdings issued 2,300,000 shares of common stock, expanding its issued and outstanding shares to approximately 14.2 million. The company has stated that the net proceeds will be used for working capital and other general corporate purposes.
The SPA also grants the purchasers registration rights for the shares and an option to participate in up to 20% of any future equity or equivalent cash issuances by the company for the next 90 days. Univest Securities LLC acted as the placement agent for the offering and received a 7% commission and reimbursement for legal fees.
In other recent news, Algorhythm Holdings, previously known as The Singing Machine Company, announced significant changes. The company has entered into a partnership with Apollo Tyres, India's largest tire manufacturer, through its subsidiary SemiCab India. The agreement will see SemiCab India optimize freight logistics for Apollo Tyres using its AI-powered platform. This partnership aims to improve delivery accuracy, reduce service costs, and contribute to sustainability efforts by reducing the carbon footprint of the industry.
Additionally, Algorhythm Holdings is facing potential delisting from The Nasdaq Capital Market due to failure to meet the exchange's minimum bid price and stockholders' equity requirements. The company is currently exploring options to regain compliance and avoid delisting.
Amid these developments, Algorhythm Holdings has also announced a strategic shift towards the automotive and connected TV sectors. This move follows the recent acquisition of SemiCab and the integration of karaoke microphones into Tesla (NASDAQ:TSLA)'s North American models. Despite a decrease in net sales and gross profit, the company expressed optimism about its transformation into a more technology-driven, asset-light, and higher-margin entity. Plans to reduce product offerings and focus on WiFi-enabled models by 2025 were also revealed. These are the recent developments for Algorhythm Holdings.
InvestingPro Insights
The recent $2 million funding secured by Algorhythm Holdings, Inc. (NASDAQ:RIME) comes at a critical time for the company, as revealed by InvestingPro data and tips. With a market capitalization of just $4.19 million, this funding represents a significant capital injection relative to the company's size.
InvestingPro data shows that RIME's revenue for the last twelve months as of Q2 2024 stood at $29.05 million, with a concerning revenue growth decline of -45.07% over the same period. This context underscores the importance of the new funding for working capital and general corporate purposes.
Two relevant InvestingPro Tips highlight the company's financial challenges:
1. RIME is quickly burning through cash, which explains the urgent need for this new funding.
2. The company has not been profitable over the last twelve months, reflected in its negative P/E ratio of -0.47.
These insights align with the company's decision to secure additional funding and suggest that the $2 million could be crucial for Algorhythm Holdings' near-term operations and potential turnaround efforts.
Investors considering RIME might find value in exploring the additional 10 InvestingPro Tips available, which could provide a more comprehensive view of the company's financial health and market position.
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