Algorhythm Holdings, Inc. 8-K

What Happened

• Algorhythm Holdings, Inc. (RIME) filed an 8‑K on July 2, 2026 disclosing that on June 29, 2026 it entered an Exchange Agreement with Streeterville Capital, LLC to partition $3,500,000 from Secured Pre‑Paid Purchase #4 and exchange that Partitioned Amount for 3,500 newly created Series A Preferred Stock shares. Secured Pre‑Paid Purchase #4 had an original principal of $10,355,000; after the partition and cancellation the outstanding balance of that instrument is $7,202,371.69. The Company filed a Certificate of Designation for the Series A Preferred Stock with the Delaware Secretary of State on June 29, 2026. The exchange was made under a broader Securities Purchase Agreement (Aug 21, 2025) providing for up to $20,000,000 in pre‑paid purchases.

Key Details

• Exchange date and parties: June 29, 2026 — Algorhythm Holdings and Streeterville Capital, LLC.
• Partitioned amount exchanged: $3,500,000 → 3,500 shares of Series A Preferred Stock.
• Series A terms: 15,000 shares designated; stated value $1,150 per share; preferred return 9% per annum, compounds daily, payable quarterly in cash or additional Series A shares (Company election).
• Rights and restrictions: Series A is non‑convertible, has no general voting rights, ranks senior to common stock for dividends and liquidation, may be redeemed by the board at 110% of the applicable liquidation amount; on an event of default the stated value increases to 15% (may be applied up to three times).
• Effect on secured pre‑paid purchase: Secured Pre‑Paid Purchase #4 outstanding balance reduced to $7,202,371.69.

Why It Matters

• This transaction replaces $3.5M of a secured prepaid financing obligation with a preferred equity instrument that carries a high stated value and an accrued cash/PIK preferred return (9% annual, compounding). That creates a priority claim over common stock for dividends and liquidation and could lead to cash payouts or additional preferred issuance if the Company elects PIK. The Certificate of Designation also imposes covenants that may limit certain corporate actions. Investors should note the change in the company’s capital structure and the new contractual obligations to the preferred holder, while recognizing the Series A is non‑convertible and generally non‑voting.