Material Agreement, Private Placement (Form 8-K)

Item 1.01 Entry Into a Material Definitive Agreement.

As previously disclosed, on February 17, 2026, Algorhythm Holdings, Inc. (the "Company") entered into Secured Pre-Paid Purchase #4 in the principal amount of $10,355,000 ("Secured Pre-Paid Purchase #4") with Streeterville Capital, LLC, a Utah limited liability company ("Streeterville"), under that certain securities purchase agreement (the "Securities Purchase Agreement"), dated August 21, 2025, between the Company and Streeterville. Under the Securities Purchase Agreement, the Company agreed to issue and sell shares of its common stock to Streeterville in one or more pre-paid purchases (each, a "Pre-Paid Purchase" and collectively, the "Pre-Paid Purchases") for an aggregate purchase price of up to $20,000,000.

On June 29, 2026, the Company entered into an exchange agreement (the "Exchange Agreement") with Streeterville. Pursuant to the Exchange Agreement, the Company and Streeterville agreed to partition a new Pre-Paid Purchase (the "Partitioned Pre-Paid Purchase") in the original principal amount of $3,500,000 (the "Partitioned Amount") from Secured Pre-Paid Purchase #4 and reduce the outstanding balance of Secured Pre-Paid Purchase #4 by an amount equal to the Partitioned Amount. The parties then exchanged the resulting Partitioned Pre-Paid Purchase for 3,500 shares (the "Exchange Shares") of the Company's newly created Series A Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"). The parties agreed that, immediately following cancellation of the Partitioned Amount, the outstanding balance of Secured Pre-Paid Purchase #4 was $7,202,371.69.

On June 29, 2026, in connection with the issuance of the Exchange Shares, the Company filed the Certificate of Designation of Preferences and Rights of Series A Preferred Stock (the "Certificate of Designation") with the Secretary of State of the State of Delaware. The Certificate of Designation designates 15,000 shares of the Company's preferred stock, par value $1.00 per share, as Series A Preferred Stock and provides that each share of Series A Preferred Stock has a stated value of $1,150 (the "Stated Value"). Each share of Series A Preferred Stock accrues a preferred return on the Stated Value at a rate of 9% per annum (the "Preferred Return") which compounds daily and is payable quarterly in cash or additional shares of Series A Preferred Stock at the Company's election. Upon the occurrence of an event of default under the Certificate of Designation, the Stated Value will automatically increase to 15%, which increase may be applied up to three times for three separate events of default.

The Series A Preferred Stock is non-convertible and has no voting rights except in certain limited circumstances. It is not entitled to participate in dividends, distributions or payments to holders of the Company's common stock and may be redeemed by the Company, at the sole discretion of its board of directors, for a cash redemption price equal to 110% of the applicable liquidation amount. The Series A Preferred Stock ranks senior to all shares of the Company's capital stock, including the Company's common stock, with respect to dividends, distributions and payments upon liquidation, dissolution and winding up. The Certificate of Designation also contains covenants restricting certain issuances of securities, changes to authorized shares, asset pledges, asset dispositions, reverse stock splits and fundamental transactions.

The foregoing descriptions of the Exchange Agreement and Certificate of Designation do not purport to be complete and are qualified in their entirety by reference to the full text of the Exchange Agreement and Certificate of Designation, copies of which are filed as Exhibits 10.1 and 3.1, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.

Item 3.02 Unregistered Sales of Equity Securities.

The information contained in Item 1.01 above is incorporated by reference herein. The Exchange Shares were issued in exchange for the Partitioned Pre-Paid Purchase pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended. The Company did not receive any cash proceeds from the issuance of the Exchange Shares and did not receive any consideration for entering into the Exchange Agreement other than cancellation of the Partitioned Amount. The Exchange Shares have not been registered under the Securities Act or any state securities laws and may not be offered or sold absent registration with the Securities and Exchange Commission or an applicable exemption from registration requirements.