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Exhibit 3.1

 

CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF

SERIES A PREFERRED STOCK

 

of

 

Algorhythm Holdings, Inc.,

a Delaware corporation

 

Pursuant to Section 151 of the Delaware General Corporation Law

 

The undersigned, Gary Atkinson, hereby certifies that:

1.He is the Chief Executive Officer of Algorhythm Holdings, Inc., a Delaware corporation (“Corporation”).
  
2.A resolution was adopted and approved by the Board of Directors of the Corporation at a meeting duly held on June 26, 2026 authorizing and approving the Certificate of Designation of Preferences and Rights of Series A Preferred Stock (this “Certificate”) of the Corporation set forth below.
  
3.No shares of Series A Preferred Stock have been issued as of the date hereof.

 

IN WITNESS WHEREOF, the undersigned does hereby execute this Certificate and does hereby acknowledge that this instrument constitutes his act and deed and that the facts stated herein are true.

 

Algorhythm Holdings, Inc.

 

By: /s/ Gary Atkinson  
Name: Gary Atkinson  
Title: Chief Executive Officer  
Dated: June 29, 2026  

 

 

 

 

CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF

SERIES A PREFERRED STOCK

 

of

 

Algorhythm Holdings, Inc.,

a Delaware corporation

 

The Chief Executive Officer of Algorhythm Holdings, Inc. (“Corporation”), a corporation organized and existing under the laws of the State of Delaware, does hereby certify that, pursuant to the authority contained in the Corporation’s Certificate of Incorporation (“Certificate”) and pursuant to Section 151 of the Delaware General Corporation Law, and in accordance with the provisions of the resolution creating a series of the class of the Corporation’s authorized preferred stock designated as the Series A Preferred Stock as follows:

 

FIRST: The Certificate authorizes the issuance by the Corporation of 800,000,000 shares of common stock, par value of $0.01 per share the “Common Stock”), and 1,000,000 shares of preferred stock, par value of $1.00 per share (“Preferred Stock”), and further, authorizes the Board of Directors (“Board”) of the Corporation, by resolution or resolutions, at any time and from time to time, to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series into one or more series and to designate the rights, preferences and limitations of each series.

 

SECOND: At a duly held meeting of the Board on June 26, 2026, the Board designated fifteen thousand (15,000) shares of the Preferred Stock as Series A Preferred Stock pursuant to a resolution providing that a series of preferred stock of the Corporation be and hereby is created and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such Series A Preferred Stock, and the qualifications, limitations and restrictions thereof, are as follows:

 

SERIES A PREFERRED STOCK

 

Section 1. Definitions. Capitalized terms used but not otherwise defined herein shall have meanings set forth in Section 12 below.

 

Section 2. Powers and Rights of Series A Preferred Stock. There is hereby designated a class of Preferred Stock of the Corporation as Series A Preferred Stock, par value $1.00 per share (the “Series A Stock”). The number of shares, powers, terms, conditions, designations, preferences and privileges, relative, participating, optional and other special rights, and qualifications, limitations and restrictions of the Series A Stock shall be as set forth in this Certificate of Designation of Preferences and Rights of Series A Preferred Stock (this “Certificate of Designation”). For purposes hereof, a holder of a share or shares of Series A Stock, with respect to their rights as related to the Series A Stock, shall be referred to as a “Series A Holder.”

 

 

 

 

Section 3. Number and Stated Value. The number of authorized shares of the Series A Stock is fifteen thousand (15,000) shares. Each share of Series A Stock shall have a stated value of $1,150.00 (the “Stated Value”).

 

Section 4. Ranking. Except to the extent that the holders of at least a majority of the outstanding Series A Stock (the “Required Holders”) expressly consent to the creation of Parity Stock (as defined below), all shares of capital stock of the Corporation shall be junior in rank to all Series A Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (such junior stock is referred to herein collectively as “Junior Stock”). The rights of all such shares of capital stock of the Corporation shall be qualified by the rights, powers, preferences and privileges of the Series A Stock. Without limiting any other provision of this Certificate of Designation, without the prior express written consent of the Required Holders, voting separately as a single class, the Corporation shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior rank to the Series A Stock in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “Senior Preferred Stock”), or (ii) of pari passu rank to the Series A Stock in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “Parity Stock”). In the event of the merger or consolidation of the Corporation with or into another corporation wherein the Corporation is the surviving entity, the shares of Series A Stock shall maintain their relative rights, powers, designations, privileges and preferences provided for herein and no such merger or consolidation shall provide for a result inconsistent therewith, subject to the other terms and conditions herein.

 

Section 5. Preferred Return.

 

(a)Each share of Series A Stock shall accrue a rate of return on the Stated Value at the rate of nine percent (9%) per annum, to be determined pro rata for any fractional year periods (the “Preferred Return”). The Preferred Return shall accrue on each share of Series A Stock from its Issuance Date and shall be payable or otherwise settled as set forth herein. Following the occurrence of an Event of Default (as defined below), the Preferred Return will increase to 15% per annum.
   
(b)The Preferred Return shall compound daily and be payable on a quarterly basis, within five (5) Trading Days following the end of each calendar quarter, either in cash or via the issuance to the applicable Series A Holder of an additional number of shares of Series A Stock equal to (i) the Preferred Return then accrued and unpaid, divided by (ii) $1,150.00, with the election as to payment in cash or via the issuance of additional shares of Series A Stock to be determined in the discretion of the Corporation.
   
(c)In the event that the Corporation elects to pay any Preferred Return via the issuance of shares of Series A Stock, no fractional shares of Series A Stock shall be issued, and the Corporation shall pay in cash the Preferred Return that would otherwise be payable via the issuance of a fractional share of Series A Stock.
 

 

 

Section 6. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, each share of Series A Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share of Series A Stock equal to the Stated Value at such time plus any accrued and unpaid Preferred Return (as applicable, the “Series A Preferred Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the Series A Preferred Liquidation Amount, the Series A Holders with respect to their shares of Series A Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Following the payment of the Series A Preferred Liquidation Amount, if there are any remaining assets of the Corporation available for distribution to its shareholders, the Series A Stock shall not participate in such distributions.

 

Section 7. Corporation Optional Redemption.

 

(a)Subject to the terms and conditions herein, the Corporation may elect, in the sole discretion of the Board, to redeem all or any portion of the Series A Stock then issued and outstanding from all of the Series A Holders (a “Corporation Optional Redemption”) by paying to the applicable Series A Holders an amount in cash equal to the Series A Preferred Liquidation Amount then applicable to such shares of Series A Stock being redeemed in the Corporation Optional Redemption multiplied by 110% (the “Redemption Price”). For the avoidance of doubt, any redemptions made in connection with a Fundamental Transaction will be paid at the Redemption Price.
   
(b)The Corporation shall provide written notice of any Corporation Optional Redemption to the Series A Holders within ten (10) Trading Days following the determination of the Board to consummate the applicable Corporation Optional Redemption, and thereafter such Corporation Optional Redemption shall be completed on the third (3rd) Trading Day following the delivery of such notice, and at such time the Corporation shall deliver to the Series A Holders the Redemption Price in valid funds. Each Series A Holder agrees to execute and deliver to the Corporation such instruments and documents, and to take such actions, as reasonably required to consummate the Corporation Optional Redemption.

Section 8. Dividends and Distributions. The Series A Stock shall not participate in any dividends, distributions or payments to the holders of the Common Stock.

 

Section 9. Vote; Amendment.

 

(a)Other than as set forth in Section 9(b), the Series A Stock shall not have any voting rights and shall not vote on any matter submitted to the holders of the Common Stock, or any class thereof, for a vote.
 

 

 

(b)The Corporation may not, and shall not, amend or repeal this Certificate of Designation without the prior written consent of Series A Holders holding a majority of the Series A Stock then issued and outstanding, in which vote each share of Series A Stock then issued and outstanding shall have one vote, voting separately as a single class, in person or by proxy, either in writing without a meeting or at an annual or a special meeting of such Series A Holders, and any such act or transaction entered into without such vote or consent shall be null and void ab initio, and of no force or effect.

Section 10. Covenants. Until such time as no shares of Series A Stock remain outstanding, the Corporation and any subsidiary (to the extent applicable) will at all times comply with the following covenants:

 

(a)The Corporation will timely file on the applicable deadline (inclusive of any timely filed extensions) all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the Exchange Act, and will take all reasonable action under its control to ensure that adequate current public information with respect to the Corporation, as required in accordance with Rule 144 of the Securities Act, is publicly available, and will not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.
   
(b)The Common Stock will be listed or quoted for trading on any of NYSE, NYSE American or Nasdaq.
   
(c)After the initial issuance of Series A Stock, the Corporation will not issue any new shares of Series A Stock to anyone other than the initial holder of Series A Stock.
   
(d)The Corporation will not increase or decrease the authorized shares of Common Stock or Preferred Stock.
   
(e)The Corporation will not make any Restricted Issuance.
   
(f)The Corporation shall not enter into or extend any agreement or otherwise agree to any covenant, condition, or obligation that locks up, restricts in any way or otherwise prohibits the Corporation (i) from entering into a variable rate transaction with any Series A Holder or any Affiliate of any Series A Holder, or (ii) from issuing Common Stock, Preferred Stock, warrants, convertible notes, other debt securities, or any other of the Corporation’s securities to any Series A Holder or any Affiliate of any Series A Holder.
   
(g)The Corporation will not pledge or grant a security interest in any of its assets.
   
(h)The Corporation will not, and will not enter into any agreement or commitment to, dispose of any assets or operations outside the ordinary course of business that are material to the Corporation’s operations.
   
(i)Except in connection with satisfaction of a Nasdaq deficiency notice, the Corporation will not, and will not enter into any agreement or commitment to, undertake or complete any reverse split of any class of Common Stock or Preferred Stock.
   
(j)The Corporation will not consummate a Fundamental Transaction or enter into an agreement to consummate a Fundamental Transaction without the consent of the Required Holders.
 

 

 

Section 11. Covenant Default.

 

(a)Event of Default. The Required Holders may elect to declare an “Event of Default” if any of the following conditions or events shall occur and be continuing:

 

(i)The Corporation fails to fully comply with any covenant, obligation or agreement of the Corporation in this Certificate of Designation (other than payment or issuance defaults which are addressed in subparagraph (ii) below) or a breach of any covenant owed to any Series A Holder in any other agreement between the Corporation and such Series A Holder, and such failure is not cured within five (5) Trading Days of the occurrence of such event;
   
(ii)The Corporation fails to pay any amount due and payable to the Series A Holders pursuant to and as required by this Certificate of Designation, or fails to issue any additional shares of Series A Stock to the Series A Holders pursuant to and as required by this Certificate of Designation, and such failure, if known to the Series A Holders and reasonably possible of cure, is not cured within five (5) Trading Days of the occurrence of such event; or
   
(iii)The Corporation shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator; (2) make a general assignment for the benefit of the Corporation’s creditors; or (3) commence a voluntary case under the U.S. Bankruptcy Code as now and hereafter in effect, or any successor statute.

 

(b)Consequences of Events of Default. Upon the occurrence of an Event of Default the Stated Value will automatically increase by fifteen percent (15%) (the “Default Effect”). The Default Effect may be applied up to three (3) times for three (3) separate Events of Default. If an Event of Default has occurred (i) the Series A Holders shall have the right to pursue any remedies that the Required Holders may have under applicable law and/or in equity; and (ii) the Series A Holders shall have the right to seek and receive injunctive relief from a court or an arbitrator prohibiting the Corporation from issuing any of its Common Stock or Preferred Stock to any party unless all the shares of Series A Stock owned by the Series A Holders are redeemed in full simultaneously with such issuance.
   
(c)Expenses. In the event that any Series A Holder incurs expenses in the enforcement of its rights hereunder, including but not limited to reasonable attorneys’ fees, then the Corporation shall immediately reimburse such Series A Holder the reasonable costs thereof.

 

 

 

 

Section 12. No Redemption at the Option of Series A Holder. Notwithstanding anything in this Certificate of Designation to the contrary, the Series A Stock shall not be redeemable at the option of any Series A Holder, and no Series A Holder shall have any right, under any circumstance or upon the occurrence of any event (including any Event of Default or any Fundamental Transaction), to require, demand or compel the Corporation to redeem, repurchase or otherwise acquire any shares of Series A Stock, or to otherwise require the Corporation to transfer cash or other assets in respect of the Series A Stock. Every redemption of the Series A Stock shall be effected solely at the option and in the sole discretion of the Corporation.

 

Section 13. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms, as used herein, have the following meanings:

 

(a)“Affiliate” means, with respect to a specified Person, any other Person that directly or indirectly Controls, is Controlled by or is under common Control with, the specified Person.
   
(b)“Control” means (i) the possession, directly or indirectly, of the power to vote 10% or more of the securities or other equity interests of a Person having ordinary voting power, (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, by contractor otherwise, or (iii) being a director, officer, executor, trustee or fiduciary (or their equivalents) of a Person or a Person that controls such Person.
   
(c)“Equity Securities” means Common Stock of the Corporation, Preferred Stock of the Corporation, and any option, warrant, or right to subscribe for, acquire or purchase Common Stock or Preferred Stock.
   
(d)“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
   
(e)“Exempt Issuance” means: (i) the issuance of shares of Common Stock or securities exercisable or convertible into shares of Common Stock to employees, officers, directors, consultants or advisors of the Company pursuant to any equity compensation plan of the Company, (ii) the issuance of shares of Common Stock upon the conversion, exercise or vesting of any securities of the Company outstanding on the date of this Agreement or issued in the future under Section 12(e)(i), (iii) the issuance of any securities issued pursuant to transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144 of the Securities Act) and carry no registration rights that require or permit the filing of any registration statement in connection therewith (other than a registration , or (iv) the issuance of any securities in a capital-raising transaction in an aggregate amount not to exceed $5,000,000.

 

 

 

 

(f)“Fundamental Transaction” means: that (i) (A) the Corporation or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not the Corporation or any of its subsidiaries is the surviving corporation) any other person or entity, (B) the Corporation or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, (C) the Corporation or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than fifty (50%) of the outstanding shares of voting stock of the Corporation (not including any shares of voting stock of the Corporation held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), (D) the Corporation or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than fifty percent (50%) of the outstanding shares of voting stock of the Corporation (not including any shares of voting stock of the Corporation held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), (E) the Corporation or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock or Preferred Stock, other than an increase in the number of authorized shares of the Common Stock or Preferred Stock, (F) the Corporation transfers any material asset to any subsidiary, affiliate, person or entity under common ownership or control with the Corporation (other than in the ordinary course of business), or (G) the Corporation pays or makes any monetary or non-monetary dividend or distribution to its stockholders (other than in the ordinary course of business); or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than fifty (50%) of the aggregate ordinary voting power represented by issued and outstanding voting stock of the Corporation. For the avoidance of doubt, “Fundamental Transaction” will not be deemed to include a reincorporation by the Corporation into another State.
   
(g)“Issuance Date” means the date that the applicable shares of Series A Stock are issued to a Series A Holder.
   
(h)“Liabilities” means liabilities, obligations or responsibilities of any nature whatsoever, whether direct or indirect, matured or un-matured, fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured, absolute, contingent or otherwise, including any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost or expense.
   
(i)“Nasdaq” means the Nasdaq Stock Market.
   
(j)“Person” means a natural person, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof.

 

 

 

 

(k)“Restricted Issuance” means: (i) the issuance, incurrence or guaranty of any debt obligations other than Liabilities or trade payables incurred in the ordinary course of business, (ii) the issuance of (a) any Equity Securities; or (b) any securities that are convertible into or exchangeable for Equity Securities, other than in each of the foregoing clauses (i) and (ii): (x) for any such issuances or sales to a Series A Holder as contemplated in this Certificate of Designation or otherwise to a Series A Holder or any of its Affiliates, or (y) for any Exempt Issuances.
   
(l)“SEC” means the United States Securities and Exchange Commission.
   
(m)“Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
   
(n)“Trading Day” means any day on which Nasdaq is open for trading.

 

Section 14. Miscellaneous.

 

(a)Legend. Any certificates representing the Series A Stock shall bear a restrictive legend in substantially the following form (and a stop transfer order may be placed against transfer of such stock certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH HEREIN.

 

(b)Uncertificated Shares Lost or Mutilated Series A Stock Certificate. The Series A Stock shall be issued to each Series A Holder in uncertificated (book entry) form by the stock transfer agent of the Corporation unless a Series A Holder requests such Series A Stock be issued to such Series A Holder in certificated form. If any certificate for the Series A Stock held by the Series A Holder thereof shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the share of Series A Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Corporation.

 

 

 

 

(c)Interpretation. If the Corporation or any Series A Holder shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
   
(d)Waiver. Any waiver by the Corporation or the Series A Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation. The failure of the Corporation or the Series A Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver must be in writing.
   
(e)Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.