Business Context and Reporting Period
This Form 8-K was filed by Archimedes Tech SPAC Partners Co. in connection with its agreement to combine with SoundHound, Inc. The Merger Agreement was executed on November 15, 2021, and the report was dated November 16, 2021. SoundHound would become a wholly owned subsidiary of Archimedes, with Archimedes expected to continue as the public company.
Transaction and Key Financial Terms
- Total merger consideration is approximately $2.0 billion, subject to the treatment of in-the-money options and warrants on a net exercise basis.
- Archimedes entered into PIPE subscription agreements for 11.1 million shares at $10.00 per share, providing aggregate gross proceeds of $111.0 million.
- PIPE proceeds are intended to fund the transaction and satisfy minimum cash requirements. The PIPE shares will not have redemption rights and will initially be unregistered.
- Closing requires Archimedes to have at least $5,000,001 of net tangible assets immediately before or upon closing.
- The filing does not provide SoundHound revenue, profit, cash flow, margins, debt, cash balance, or liquidity figures for a comparable reporting period.
Material Changes and Transaction Structure
- SoundHound preferred stock will convert into SoundHound Class A common stock, which will then convert into Archimedes Class A common stock at the defined conversion ratio.
- SoundHound options, warrants, restricted stock, and RSUs will generally be assumed or converted with adjustments based on the conversion ratio.
- SoundHound’s founders proposed creating a super-voting Class B common stock. This proposal required approval by a special committee and ratification by SoundHound stockholders excluding the founders and their affiliates. The filing does not establish that the proposal was approved.
- Archimedes agreed to adopt an omnibus incentive plan with an initial reserve equal to 10% of fully diluted shares at closing and a 5% annual evergreen increase, subject to stockholder approval. An employee stock purchase plan is also contemplated.
- Certain SoundHound stockholders agreed to vote in favor of the transaction and accepted a lock-up period extending until six months after closing, subject to customary exceptions.
- Archimedes agreed to enter into amended registration rights arrangements, including a resale shelf registration statement generally to be filed no later than 60 days after closing.
Guidance, Outlook, Risks, and Contingencies
- The filing does not provide formal financial guidance. It references projections and expectations regarding market opportunity, future revenue growth, annual bookings, and revenue from subscriptions, advertising, products, and services, but these are forward-looking statements rather than reported results.
- Closing is subject to regulatory approvals, expiration of the Hart-Scott-Rodino waiting period, effectiveness of a Form S-4 registration statement, Nasdaq listing approval, approval by both companies’ stockholders, satisfaction of minimum cash requirements, and other customary conditions.
- The transaction may be terminated if it is not completed by the outside date, generally six months after the Merger Agreement, with a possible one-month extension if the Form S-4 has not become effective by the specified deadline.
- SoundHound-specific risks include intense competition, dependence on key personnel and commercial relationships, intellectual-property protection, execution of its business plan, revenue forecasting, and the ability to generate sufficient revenue from its various offerings.
- Additional risks include shareholder redemptions, inability to complete the PIPE financing, failure to maintain Nasdaq listing, transaction costs, litigation, regulatory changes, COVID-19 effects, and failure to realize anticipated merger benefits.
- Archimedes’ closing conditions include a requirement that transaction fees and expenses not exceed $10.3 million and that certain private warrants be amended to qualify for equity treatment under applicable accounting and securities rules.
Important Facts for Investors to Verify
- Review the definitive Merger Agreement, Form S-4, proxy statement/prospectus, and subsequent filings for the final conversion ratio, capitalization, dilution, and closing conditions.
- Verify the amount of public-shareholder redemptions and the resulting cash available at closing.
- Confirm whether the $111.0 million PIPE financing closed and whether all minimum cash requirements were satisfied.
- Determine whether the proposed founder-controlled Class B super-voting structure was approved and implemented.
- Assess SoundHound’s historical and projected revenue, profitability, cash burn, debt, liquidity, customer concentration, and business metrics, which are not provided in this 8-K text.
- Confirm whether the merger was completed by the applicable outside date and review any amendments, termination notices, litigation, or regulatory developments.