Business Context and Reporting Period
Company: Algorhythm Holdings, Inc. (Ticker: RIME)
Filing Type: Form 8-K (Current Report)
Date of Report: February 17, 2026
Event: Entry into a Material Definitive Agreement and Unregistered Sales of Equity Securities.
Key Financial Metrics and Transaction Details
This filing details a specific financing transaction rather than periodic financial performance metrics (revenue, profit, or cash flow from operations are not reported in this document).
- Transaction Type: Secured Pre-Paid Purchase #4 (Private Placement).
- Principal Amount: $10,355,000.
- Original Issue Discount (OID): $855,000.
- Net Proceeds Received: $9,500,000.
- Interest Rate: 9% per annum.
- Maturity Date: Three years from issuance.
- Collateral: Secured by cash held in a Deposit Account Control Agreement (DACA) and intellectual property.
- Placement Agent Fees: 8% of gross proceeds (paid on funds not in DACA; deferred 8% fee on funds held in DACA until release).
Material Changes and Structure
The Company executed the fourth tranche under a Securities Purchase Agreement dated August 21, 2025, with Streeterville Capital, LLC. Key structural elements include:
- Collateral Requirement: $3,500,000 of the net proceeds were immediately placed into a restricted DACA Account held by a wholly-owned subsidiary (RIME Holdings, LLC). This amount represents the lesser of $3.5 million or 90% of the outstanding balance.
- Usage of Funds: The Company may use funds in the DACA Account to repay the principal only if the balance does not drop below the Minimum Balance Amount. Excess funds may be withdrawn absent a default.
- Guaranty: RIME Holdings, LLC executed a guaranty for the obligations under this purchase.
Outlook, Risks, and Contingencies
Management Commentary: The filing confirms the completion of the transaction as a private placement exempt from registration under Section 4(a)(2) of the Securities Act. No forward-looking guidance or general outlook is provided in this specific report.
Risks and Contingencies:
- Liquidity Constraints: A significant portion of the proceeds ($3.5 million) is restricted in a collateral account, limiting immediate availability for general corporate purposes.
- Default Risk: Access to excess funds in the DACA Account is contingent on no event of default occurring.
- Cost of Capital: The transaction carries a 9% interest rate plus an original issue discount, representing a high cost of capital.
Investor Verification Checklist
- Verify the total aggregate purchase price cap ($20,000,000) under the August 2025 Securities Purchase Agreement to determine remaining capacity for future tranches.
- Confirm the current status of the restricted $3,500,000 in the DACA Account and any subsequent withdrawals or repayments.
- Review the full text of the Security Agreement and IP Security Agreement (Exhibits 10.1 and 10.2) for specific default triggers and covenants.
- Assess the impact of the 9% interest rate and OID on the Company's future interest expense and net income.
- Check subsequent filings for the release of the deferred 8% placement agent fee on the restricted funds.