SOUNDHOUND AI, INC. current report, 16 August 2022

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SoundHound AI, Inc. — Form 8-K Summary

Filing date: August 16, 2022; signed August 17, 2022. The filing reports entry into a material definitive financing agreement. It does not provide quarterly or annual operating results.

Business Context and Transaction

SoundHound AI entered into a Common Stock Purchase Agreement and related registration rights agreement with CF Principal Investments LLC (CFPI). SoundHound may elect to sell CFPI up to the lesser of 25,000,000 shares of Class A common stock and the applicable Exchange Cap, subject to contractual conditions and limitations.

  • Sales cannot begin until specified conditions are satisfied, including the filing and SEC effectiveness of a resale registration statement.
  • Following commencement, SoundHound may direct sales at its discretion for a period ending on the first day of the month following the 36-month period after commencement.
  • The purchase price will equal 97% of the volume-weighted average price on the applicable purchase date.
  • SoundHound will control the timing and amount of sales, which will depend on market conditions and the trading price of its stock.
  • SoundHound will issue CFPI 250,000 commitment shares in consideration for CFPI’s irrevocable purchase commitment. CFPI is entitled to $1.0 million in proceeds from the sale of those shares, subject to the agreement.

Financial Metrics and Liquidity

The filing does not provide revenue, profit or loss, cash flow, margins, debt, cash balances, liquidity ratios, or other operating financial metrics. The transaction provides a potential source of equity financing, but the filing does not state the amount or timing of proceeds expected from future stock sales.

Material Changes and Dilution

  • The agreement creates a potential issuance of up to 25,000,000 shares, subject to the Exchange Cap and other limitations.
  • The 250,000 commitment shares are issued as consideration to CFPI and may create immediate dilution to existing stockholders.
  • Future sales may result in additional dilution and could place pressure on the market price of Class A common stock.
  • No actual sales to CFPI or proceeds from such sales are reported in this filing.

Outlook, Conditions, and Risks

  • Funding is discretionary rather than guaranteed to occur on a specified schedule; SoundHound may decide whether and when to sell shares.
  • Commencement is contingent on satisfaction of contractual conditions, including an effective resale registration statement.
  • SoundHound may terminate the purchase agreement without cost or penalty after commencement with three trading days’ notice.
  • CFPI may terminate upon specified events, including a material adverse effect, a fundamental transaction, material breach of the registration rights agreement, or suspension of Nasdaq trading.
  • Termination does not eliminate the registration rights provisions.
  • The filing contains no management guidance or forecast for revenue, profitability, cash flow, or future operating performance.

Investor Verification Items

  1. Confirm whether the resale registration statement was filed and declared effective and whether the financing reached commencement.
  2. Verify the number and price of shares actually sold to CFPI and the resulting cash proceeds.
  3. Assess dilution from the 250,000 commitment shares and any subsequent issuances.
  4. Review the Exchange Cap, purchase limits, termination provisions, and other conditions in Exhibits 10.1 and 10.2.
  5. Use subsequent filings to determine the financing’s impact on cash resources, capitalization, and share price.