Item 1.01 Entry into
a Material Definitive Agreement.
$750,000 Secured
Bridge Note Financing
As
previously disclosed, on November 14, 2022, Auddia Inc. (the “Company”, “we” and “us”) entered into
a Secured Bridge Note (“Prior Note”) financing with one accredited investor who is a significant existing stockholder of the
Company. The Company received $2,000,000 of gross proceeds in connection with that financing.
On
April 17, 2023, we entered into an additional Secured Bridge Note (“New Note”) financing with the same accredited investor.
The Company received $750,000 of gross proceeds in connection with the New Note financing.
The
principal amount of the New Note is $825,000. The New Note has a 10% interest rate and matures on July 31, 2023. The New Note is
secured by a lien on substantially all of the Company’s assets.
At
maturity, the investor has the option to convert any original issue discount and accrued but unpaid interest on the New Note into shares
of the Company’s common stock. The fixed conversion price is $0.61 per share.
In
connection with the New Note financing, the Company issued issue to the investor 650,000 common stock warrants with a five year term and
a fixed $0.61 per share exercise price. 325,000 of such warrants are exercisable immediately. The other 325,000 of such warrants would
only become exercisable if the maturity date of the New Note is extended in accordance with the terms of the New Note.
If
the New Note remains outstanding as of July 31, 2023, the Company has the option to extend the maturity date of the New Note to November
30, 2023. Upon such extension, the interest rate on the New Note will be increased to 20% rather than 10%, and the 325,000 portion of
the warrants shall become exercisable.
Amendments to Prior
Secured Bridge Note Financing
In
connection with the New Note financing, the parties agreed to make certain amendments to the Prior Note financing.
The
parties agreed to cancel the 300,000 common stock warrants issued November 14, 2022 in connection with the Prior Note financing.
In
addition, the Company issued to the investor common stock warrants for 600,000 common shares, with an exercise price of $0.61 per common
share and a five year term. 300,000 of such warrants are exercisable immediately. The other 300,000 of such warrants would only become
exercisable if the maturity date of the Prior Note is extended in accordance with the terms of the Prior Note.
The
investor will not be able to receive shares upon conversion or exercise, unless prior stockholder approval is obtained, if the number
of shares to be issued to the investor, when aggregated with all other shares of common stock then owned by the investor beneficially
or deemed beneficially owned by the Holder, would (i) result in the Holder owning more than the Beneficial Ownership Limitation (as defined
below), as determined in accordance with Section 13 of the Securities Exchange Act of 1934 or (ii) otherwise constitute a Change of Control
within the meaning of Nasdaq Rule 5635(b). The “Beneficial Ownership Limitation” shall be 19.99% of the number of shares of
the common stock outstanding immediately prior to the proposed issuance of shares of common stock.
******
The foregoing description of the New Note and related warrants is qualified
in its entirety by reference to the full text of those agreements, copies of which are filed as Exhibits 10.1, 10.2 and 10.3 to this Current
Report on Form 8-K and incorporated herein by reference.
