Algorhythm Holdings, Inc. 8-K

What Happened

• Algorhythm Holdings, Inc. (Nasdaq: RIME) filed an 8-K on Feb 27, 2026 disclosing an amended and restated employment agreement with CEO Gary Atkinson dated Feb 23, 2026. The agreement replaces his April 22, 2022 contract and runs for three years with automatic one-year renewals unless either party gives 90 days’ notice.
• As part of the agreement the company granted Mr. Atkinson a stock option to purchase 740,597 shares of common stock at an exercise price of $1.84 per share (the Feb 23, 2026 Nasdaq closing price). The option vests in equal quarterly installments over four years beginning Feb 23, 2026.

Key Details

• Base salary: $360,000 per year; Annual Bonus: up to 50% of base (up to $180,000), with 50% of any bonus tied to continued employment and 50% tied to performance goals.
• Stock option: 740,597 shares, $1.84 exercise price, vesting quarterly over 4 years; company will seek to register the underlying shares for sale (or amend Form S-8) within one year if not already registered.
• Severance: if terminated by the company without Cause, the company doesn’t renew, or CEO leaves for Good Reason, lump-sum severance equals 2x(Base Salary + Annual Bonus at max) — approximately $1,080,000 (2 × $540,000). If termination occurs within 12 months after a Change in Control, severance equals Base Salary + Annual Bonus (approx. $540,000); outstanding equity awards will vest in certain termination/Change in Control scenarios.
• Other: Change-of-control bonus (if a Change of Control occurs during employment) equals Base Salary + Annual Bonus for that year; severance payments conditioned on CEO signing a release; the agreement contains restrictive covenants and non-compete provisions.

Why It Matters

• This filing updates investors on executive compensation and potential dilution. The granted option for 740,597 shares could dilute existing shareholders if exercised, and accelerated vesting on termination or a change of control can increase near-term dilution.
• The agreement creates potential cash or equity obligations (severance and change‑of‑control payouts) and clarifies retention incentives for the CEO, which investors should consider when evaluating governance and potential future dilution or cash needs.