Algorhythm Holdings, Inc.

PROPOSAL 2

REVERSE STOCK SPLIT

We are asking stockholders to approve a proposed amendment to our certificate of incorporation to implement, at the discretion of the Board at any time prior to the one-year anniversary of the Annual Meeting, a reverse stock split of the outstanding shares of common stock in a range of not less than one-for-two (1-for-2) shares and not more than one-for-ten (1-for-10) shares, with the exact ratio to be determined by the Board at its discretion without further approval or authorization of our stockholders (the “Reverse Stock Split”). The Board may effect only one reverse stock split as a result of this authorization.

We will effect a reverse stock split ONLY to the extent that it is necessary to maintain compliance with the continued listing requirements of The Nasdaq Capital Market.

AS OF THE DATE OF THIS PROXY, WE HAVENOT RECEIVED A DEFICIENCY NOTICE REGARDING THE BID PRICE RULE FROM THE LISTING QUALIFICATIONS STAFF OF NASDAQ.

Nasdaq Listing Rule 5550(a)(2) requires listed companies to maintain a minimum bid price (the “Minimum Bid Price”) of at least $1.00 per share (the “Bid Price Rule”). Failure to meet the continued listing requirement related to the Bid Price Rule is determined to exist only if the deficiency continues for a period of 30 consecutive business days. Accordingly, even if the closing bid price of our stock is below the Minimum Bid Price on a particular trading day, we will not be deemed to have violated the continued listing requirement for the Bid Price Rule unless the closing bid price for our stock remains below $1.00 for 30 consecutive business days. For example, if our stock price has a closing bid price below $1.00 for four consecutive business days and then on the fifth consecutive business day it has a closing bid price at or above $1.00, we would continue to be in compliance with the Bid Price Rule and the 30 consecutive business day period would start over again with “day 1” only if the closing bid price for our stock is below $1.00 on a subsequent trading day.

Effecting the Reverse Stock Split would reduce the number of outstanding shares of common stock should, absent other factors, increase the price of our common stock by an inversely proportionate amount. The primary purpose for the proposed Reverse Stock Split, should the Board choose to effect it, is to increase the per share market price of our common stock to meet the Bid Price Rule for continued listing on The Nasdaq Capital Market in the event a situation arises in which we believe we may in the future violate the Bid Price Rule. The decision to implement the Reverse Stock Split will be at the Board’s discretion. The Reverse Stock Split will only be implemented if necessary to regain or maintain compliance with the Bid Price Rule..

The Board has unanimously approved and declared advisable the Reverse Stock Split and recommended that our stockholders approve an amendment to our certificate of incorporation to effect this proposal. The text of the proposed form of Certificate of Amendment to our Certificate of Incorporation, which we refer to as the “Certificate of Amendment”, is attached hereto as Appendix A.

We are proposing that our Board have the discretion to select the Reverse Stock Split ratio from within a range of not less than one-for-two (1-for-2) shares and not more than one-for-ten (1-for-10) shares rather than proposing that stockholders approve a specific ratio at this time in order to give our Board the flexibility to implement the Reverse Stock Split at a ratio that reflects the Board’s then-current assessment of the factors described below under “Criteria to be Used for Determining the Reverse Stock Split Ratio to Implement.” We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split is not intended as, and will not effectuate, a “going private transaction” covered by Rule 13e-3 promulgated under the Securities Exchange Act. The Reverse Stock Split is not intended to, and will not, modify the rights of existing stockholders in any material respect.

The actual timing for implementation of the Reverse Stock Split, if one is implemented, will be determined by the Board based upon its evaluation as to when such action would be most advantageous to us and our stockholders but must be implemented at any time prior to the one-year anniversary of the Annual Meeting.

If the Board decides to implement a Reverse Stock Split, we will file the Certificate of Amendment with the Secretary of State of the State of Delaware. The Certificate of Amendment will contain the Reverse Stock Split ratio determined by the Board. The Reverse Stock Split will become effective at 12:01 a.m., Eastern Time, on the business day following the date of filing of the Certificate of Amendment with the office of the Secretary of State of the State of Delaware, or such later time and/or date as is set forth in the Certificate of Amendment. Except for adjustments that may result from the treatment of fractional shares as described below, each of our stockholders will hold the same percentage of our outstanding common stock immediately following the Reverse Stock Split as such stockholder holds immediately prior to the Reverse Stock Split.

Board Discretion to Effect the Reverse Stock Split

If the Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split will only be effected upon a determination by the Board that filing the Certificate of Amendment to effect the Reverse Stock Split is in the best interests of us and our stockholders. The determination by the Board will be based upon a variety of factors, including those discussed under “Criteria to be Used for Determining the Reverse Stock Split Ratio to Implement” below. We expect that the biggest factor that the Board will evaluate when determining whether or not to file the Certificate of Amendment will be whether we will be able to maintain a closing bid price of at least $1.00 per share of our common stock on The Nasdaq Capital Market for 30 consecutive business days without effecting the Reverse Stock Split.

Reasons for the Reverse Stock Split

On August 26, 2024, we received a written notice from Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), which requires listed companies to maintain a minimum bid price of $1.00 per share. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we were granted a period of 180 calendar days, or until February 24, 2025, to regain compliance with the minimum bid price requirement.

On December 30, 2024, we received notice from the Nasdaq indicating that the bid price for our common stock had closed below $0.10 per share for the 13-consecutive trading day period ended December 27, 2024 and, accordingly, we would be subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) and its securities would be subject to delisting from Nasdaq unless we timely request a hearing before the Nasdaq hearings panel. On February 10, 2025, we implemented a 200-for-1 reverse stock split. On that day, the closing price of our common stock was $2.98 per share and the closing bid of our common stock remained above $1.00 for the next 10 consecutive business days.

On March 25, 2025, we received a letter from the Nasdaq stating that we had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2). We will be subject to a mandatory panel monitor for a period of one year from March 25, 2025. If, within that one-year monitoring period, the Nasdaq finds that we are again out of compliance with the minimum bid price requirement, notwithstanding Nasdaq Listing Rule 5810(c)(2), then the Nasdaq will issue a delist determination letter and we will have an opportunity to request a new hearing with the initial Nasdaq hearing panel or a newly convened hearing panel if the initial panel is unavailable.

Reducing the number of outstanding shares of our common stock should, absent other factors, generally increase the per share market price of our common stock by an inversely proportionate amount. Although the intent of the Reverse Stock Split is to increase the price of our common stock, there can be no assurance that the Reverse Stock Split will increase the closing bid price of our common stock sufficiently for us to regain and maintain compliance with the Bid Price Rule.

We also believe that the Reverse Stock Split will make our common stock more attractive to a broader range of investors. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Additionally, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, a low average price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price was higher. We believe that the Reverse Stock Split will make our common stock a more attractive and cost effective investment for many investors, which in turn would enhance the liquidity of the holders of our common stock.

Reducing the number of outstanding shares of our common stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, market conditions and the market perception of our business, may adversely affect the market price of our common stock. There can be no assurance that the Reverse Stock Split, if completed, will result in the market price of our common stock increasing or that, if it does increase, we will be able to meet or maintain a bid price that complies with the Bid Price Rule. The market price of our common stock may instead decrease due to the above factors. Additionally, we cannot assure you that the market price per share of our common stock after the Reverse Stock Split will increase in reverse proportion to the reduction in the number of shares of our common stock outstanding after the Reverse Stock Split. The total market capitalization of our common stock after the Reverse Stock Split may be lower than the total market capitalization of our common stock before the Reverse Stock Split.

In evaluating whether to seek stockholder approval for the Reverse Stock Split, the Board took into consideration negative factors associated with reverse stock splits. These factors include: (i) the negative perception of reverse stock splits that investors, analysts and other stock market participants may hold; (ii) the fact that the stock prices of some companies that have effected reverse stock splits have subsequently declined, sometimes significantly, following their reverse stock splits; (iii) the possible adverse effect on liquidity that a reduced number of outstanding shares could cause; and (iv) the costs associated with implementing a reverse stock split.

Even if our stockholders approve the Reverse Stock Split, the Board reserves the right to not effect the Reverse Stock Split if in the Board’s opinion it would not be in the best interests of us or our stockholders to effect the Reverse Stock Split.

Criteria to be Used for Determining the Reverse Stock Split Ratio to Implement

In determining which Reverse Stock Split ratio to implement, if any, following receipt of stockholder approval of Proposal 2, our Board may consider, among other things, various factors, such as:

Potential Effects of the Proposed Amendment

If our stockholders approve the Reverse Stock Split and the Board effects it, the number of shares of common stock issued and outstanding will be reduced, depending upon the ratio determined by the Board. The Reverse Stock Split will affect all holders of our common stock uniformly and will not affect any stockholder’s percentage ownership interest in us, except to the extent the stockholder is otherwise entitled to receive a fractional share. Holders of common stock that are entitled to receive a fractional share because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive that additional fraction of a share of common stock necessary to round up that fraction of a share to the next whole share. See “Fractional Shares” below.

The Reverse Stock Split will not change the terms of the common stock or affect any stockholder’s proportionate voting power (subject to the effect of receiving fractional shares). Additionally, the Reverse Stock Split will have no effect on the number of shares of common stock that we are authorized to issue. After the Reverse Stock Split, the shares of common stock will remain fully paid and non-assessable, will have the same voting rights and rights to dividends and distributions, and will be identical in all other respects to the common stock now has.

After the effective time of the Reverse Stock Split, we will continue to be subject to the periodic reporting and other requirements of the Exchange Act.

Registered “Book-Entry” Holders of Common Stock

Some of our registered holders of common stock hold some or all of their shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the common stock. They are, however, provided with statements reflecting the number of shares registered in their accounts.

Stockholders who hold shares electronically in book-entry form with the transfer agent will not need to take action to receive evidence of their shares of post-Reverse Stock Split common stock.

Holders of Certificated Shares of Common Stock

Stockholders holding shares of our common stock in certificated form prior to the implementation of the Reverse Stock Split (the “Old Certificates”) will be entitled to receive a new stock certificate evidencing the shares of common stock such stockholder owns on a post reverse stock split basis. Unless a stockholder specifically requests a new paper certificate or holds restricted shares, upon the stockholder’s surrender of all of the stockholder’s Old Certificates to the transfer agent (together with any required documentation), the transfer agent will register the appropriate number of shares of post-Reverse Stock Split common stock electronically in book-entry form and provide the stockholder with a statement reflecting the number of shares registered in the stockholder’s account. No stockholder will be required to pay a transfer or other fee to exchange his, her or its Old Certificates. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of shares of post-Reverse Stock Split common stock to which these stockholders are entitled. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for the appropriate number of shares of post-Reverse Stock Split common stock. If an Old Certificate has a restrictive legend on its reverse side, a new certificate will be issued with the same restrictive legend on its reverse side.

STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.

Fractional Shares

We will not issue fractional shares in connection with the Reverse Stock Split. Instead, shareholders of record who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive that additional fraction of a share of common stock necessary to round up to the next whole share. Cash will not be paid for fractional shares.

Effect of the Reverse Stock Split on Outstanding Stock Options, Warrants and Convertible Securities

Based upon the Reverse Stock Split ratio, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options, warrants and convertible securities. This will result in approximately the same aggregate price being required to be paid under the options, warrants and convertible securities upon exercise or conversion, and approximately the same value of shares of common stock being delivered upon such exercise or conversion, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The number of shares reserved for issuance pursuant to these securities will be reduced proportionately based upon the Reverse Stock Split ratio.

Accounting Matters

The proposed amendment to our certificate of incorporation will not affect the par value of our common stock. As a result, at the effective time of the Reverse Stock Split, the stated capital on our balance sheet attributable to the common stock will be reduced in the same proportion as the Reverse Stock Split ratio, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per share net income or loss for prior periods will be restated to conform to the post-Reverse Stock Split presentation.

No Dissenters’ or Appraisal Rights

Under the Delaware General Corporation Law, our stockholders are not entitled to any dissenters’ or appraisal rights with respect to the Reverse Stock Split, and we will not independently provide stockholders with any such rights.

Certain Federal Income Tax Consequences of the Reverse Stock Split

The following summary describes, as of the date of this proxy statement, certain U.S. federal income tax consequences of the Reverse Stock Split to holders of our common stock. This summary addresses the tax consequences only to a U.S. holder, which is a beneficial owner of our common stock that is either:

This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations, administrative rulings and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of the Reverse Stock Split. This summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also does not address the tax consequences to: (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar, partnerships or other pass-through entities, traders in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging transaction,” “conversion transaction” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our common stock as “capital assets” (generally, property held for investment). This summary does not address backup withholding and information reporting. This summary does not address U.S. holders who beneficially own common stock through a “foreign financial institution” (as defined in Code Section 1471(d)(4)) or certain other non-U.S. entities specified in Code Section 1472. This summary does not address tax considerations arising under any state, local or foreign laws, or under federal estate or gift tax laws.

If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.

Each holder should consult his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the Reverse Stock Split, as well as the consequences arising under the laws of any other taxing jurisdiction, including any foreign, state, or local income tax consequences.

General Tax Treatment of the Reverse Stock Split

The Reverse Stock Split is intended to qualify as a “reorganization” under Section 368 of the Code that should constitute a “recapitalization” for U.S. federal income tax purposes. Assuming the Reverse Stock Split qualifies as a reorganization, a U.S. holder generally will not recognize gain or loss upon the exchange of our ordinary shares for a lesser number of ordinary shares, based upon the Reverse Stock Split ratio. A U.S. holder’s aggregate tax basis in the lesser number of ordinary shares received in the Reverse Stock Split will be the same such U.S. holder’s aggregate tax basis in the shares of our common stock that such U.S. holder owned immediately prior to the Reverse Stock Split. The holding period for the ordinary shares received in the Reverse Stock Split will include the period during which a U.S. holder held the shares of our common stock that were surrendered in the Reverse Stock Split. The United States Treasury regulations provide detailed rules for allocating the tax basis and holding period of the shares of our common stock surrendered to the shares of our common stock received pursuant to the Reverse Stock Split. U.S. holders of shares of our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

THE FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT AND DOES NOT CONSTITUTE A TAX OPINION. EACH HOLDER OF OUR SHARES OF COMMONS STOCK SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO IT AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.

Procedure for Implementing the Amendment

The Reverse Stock Split will become effective upon the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware or such later time as specified in the filing. The form of the Certificate of Amendment is attached hereto as Appendix A. The exact timing of the filing of the Certificate of Amendment, if any, will be determined by the Board based on its evaluation as to when such action will be the most advantageous to us and our stockholders.

Interests of Officers and Directors in this Proposal

Our officers and directors do not have any substantial interest, direct or indirect, in this proposal.

Votes Required

Approval of Proposal 2 requires the affirmative vote by holders of a majority of votes cast at the Annual Meeting. Abstentions and broker non-votes will have no effect on Proposal 2. Proposal 2 is a matter on which brokers are expected to have discretionary voting authority. We do not, therefore, expect any broker non-votes with respect to this proposal. If, however, your shares are represented at the Annual Meeting and your broker fails to vote your shares on Proposal 2, it will have no effect on Proposal 2.

OUR Board unanimously recommends That YOU vote “FOR” Proposal 2.