Item 1.01 Entry into a Material Definitive
Agreement.
As of February 3, 2023 (the
“Effective Date”), LiveOne, Inc. (the “Company”) entered into an exchange agreement (collectively, the “Exchange
Agreements”) with (i) Harvest Small Cap Partners Master, Ltd. (“HSCPM”) in regard to that certain 8.5% Senior Secured
Convertible Note in the aggregate amount of $10,503,965 issued by the Company on September 15, 2020, as amended on June 3, 2021 and July
6, 2022, to HSCPM (the “HSCPM Note”), (ii) Harvest Small Cap Partners, L.P. (“HSCP”) in regard to that certain
8.5% Senior Secured Convertible Note in the aggregate amount of $4,496,035 issued by the Company on September 15, 2020, as amended on
June 3, 2021 and July 6, 2022, to HSCP (the “HSCP Note”); and (iii) Trinad Capital Master Fund Ltd., a fund controlled by
Mr. Ellin, the Company’s Chief Executive Officer, Chairman, director and principal stockholder (“Trinad Capital” and
collectively with HSCPM and HSCP, the “Holders”) in regard to all promissory notes in the aggregate principal and interest
amount of $6,177,218 issued by the Company to Trinad Capital (the “Trinad Notes” and collectively with the HSCPM Note and
the HSCP Note, the “Notes”). Pursuant to the Exchange Agreements, the Holders exchanged the Notes, and with respect to Trinad
Capital, together with interest, due and payable thereon, and relinquished any and all rights thereunder, for 21,177 shares of the Company’s
newly designated and issued Series A Perpetual Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred
Stock”), with a stated value of $1,000 per share (the “Stated Value”), having the terms as set forth in the Company’s
Certificate of Designation of Preferences, Rights and Limitations of Series A Perpetual Convertible Preferred Stock (the “Certificate
of Designation”) filed by the Company on February 2, 2023 with the Secretary of State of the State of Delaware.
The Series A Preferred Stock
is convertible at any time at a Holder’s option into shares of the Company’s common stock, $0.001 par value per share,
at a price of $2.10 per share of common stock, bears a dividend of 12% per annum, is perpetual and has no maturity date. At the option
of the Company, the dividend may be paid in-kind for the first 12 months after the Effective Date, and thereafter, the Holders shall have
the option to select whether subsequent dividend payments shall be paid in kind or in cash; provided, that as long as any Series A Preferred
Stock is held by HSCPM and/or HSCP (the “Harvest Funds”), Trinad Capital shall receive the dividend solely in kind. The Series
A Preferred Stock shall have no voting rights, except as set forth in the Certificate of Designation or as otherwise required by law.
The Company may, at its option
(the “Optional Redemption Right”), on or before the Mandatory Redemption Date (as defined herein), purchase up to $5,000,000
in aggregate of the then outstanding shares of Series A Preferred Stock held by the Harvest Funds at a cash redemption price per share
of Series A Preferred Stock equal to the Stated Value (the “Redemption Price”). The Company shall be required on or before
the 18-month anniversary of the Effective Date (the “Mandatory Redemption Date”), and in any event if prior to the Mandatory
Redemption Date the Company consummates any financing transaction in which the Company, directly or indirectly, raises, in aggregate,
gross proceeds of more than $20,000,000 of new capital, to purchase $5,000,000 in aggregate of the then outstanding shares of Series A
Preferred Stock held by the Harvest Funds (the “Mandatory Redemption Amount”) at the Redemption Price (the “Mandatory
Redemption”). If the Optional Redemption Right is exercised up to the full $5,000,000 amount, the Mandatory Redemption requirement
shall be terminated; provided, that if the Optional Redemption Right is exercised in any amount less than $5,000,000, the Mandatory Redemption
Amount shall be reduced by the amount that the Optional Redemption Right has been elected and exercised. Without the prior express consent
of the majority of the votes entitled to be cast by the holders of Series A Preferred Stock outstanding at the time of such vote (the
“Majority Holders”), the Company shall not authorize or issue any additional or other shares of its capital stock that are
(i) of senior rank to the Series A Preferred Stock or (ii) of pari passu rank to the Series A Preferred Stock, in each case in respect
of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.
Pursuant to the Exchange
Agreements, the Company agreed that at any time that any of the shares of Series A Preferred Stock issued to the Harvest Funs are outstanding,
(i) to directly or through its 100% owned subsidiaries (as applicable), to own on a fully diluted basis at least 66% of the total equity
and voting rights of any and all classes of securities of each of the Company’s Courtside Group, Inc. (dba PodcastOne) (“PodcastOne”),
Slacker, Inc., PPV One, Inc., and LiveXLive Events, LLC subsidiaries, (ii) not to issue shares of its common stock or convertible equity
securities at a price less than $2.10 per share (subject to certain exceptions), provided, that such consent shall not be required in
connection with any merger, acquisition or other business combinations of the Company and/or any of its subsidiaries with any unaffiliated
third party, (iii) not to raise more than an aggregate of $20,000,000 of capital in one or more offerings, including without limitation,
one or more equity or debt offerings or a combination thereof, on an accumulated basis commencing after the Effective Date (the “Qualified
Offering”); provided, that such consent shall not be required for any equity financing of the Company at a price of $2.25 per share
or above, and (iv) if after the Effective Date the Company distributes any of its assets or any shares of its common stock or Common Stock
Equivalents (as defined in the Exchange agreements) of any of its subsidiaries pro rata to the record holders of any class of shares of
its common stock, the Company shall distribute to the Holders its pro rata portion of any such distribution (calculated on an as-converted
basis with respect to the then outstanding Series A Preferred Stock) concurrently with the distribution to the then record holders of
any class of its common stock (including an applicable distribution of shares of PodcastOne’s common stock to the Harvest Funds
in connection with the Company’s recently announced spin-out and special dividend of PodcastOne’s common stock to the Company’s
stockholders of record), in each case without the Majority Holders’ prior written consent. Any breach of the aforementioned covenants
or the terms of the Ellin Letter (as defined below) shall constitute a material breach, which if uncured, shall result in the issuance
of an aggregate of 56,473 shares of the Company’s restricted common stock (the “Default Shares”) to the Holders for
each five trading days (or pro rata thereof) after the date of the breach; provided, that if such breach is cured within the applicable
cure period, no Default Shares shall be issued.
In consideration for entry
into the Exchange Agreements and the Holders’ willingness to forego certain rights to common stock of the Company previously agreed
by the parties, the Company issued to the Harvest Funds an aggregate of 600,000 shares of its common stock (the “Harvest Shares”)
and to Trinad Capital 200,000 shares of its common stock. Additionally, the Company issued 25,000 shares of its common stock to the Harvest
Funds as consideration for them previously agreeing to extend interest payment dates on the HSCPM Note and the HSCP Note (the “Extension
Shares”). In connection with and as a condition to the entry of the Exchange Agreements, pursuant to a letter agreement among the
Company, the Harvest Funds and Mr. Ellin (the “Ellin Letter”), unless otherwise agreed to by the Harvest Funds, Mr. Ellin
agreed to (i) to serve as the Company’s Chief Executive Officer and (ii) extend the period during which he cannot dispose of any
equity or convertible securities of the Company owned by him or any entity of which he is the beneficial owner and not to cease to be
the beneficial owner of any other equity or convertible securities of the Company of which Mr. Ellin is the beneficial owner (subject
to certain exceptions), in each case until the time that the Harvest Funds no longer own any shares of the Series A Preferred Stock. The
Harvest Shares and the Series A Preferred Stock were issued, and the shares of common stock underlying the shares of Series A Preferred
Stock, to the extent applicable, will be issued, to the Holders as restricted securities in a private placement transaction exempt from
the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).
The Company further agreed,
on or prior to the date that is 45 days after the consummation of any Qualified Offering and in any event no later than July 15, 2023,
to prepare and file with the U.S. Securities and Exchange Commission (the SEC”) a Registration Statement on Form S-3 (or such other
form as applicable) covering the resale under the Securities Act of all the shares of the Company’s common stock underlying the
Series A Preferred Stock (including any dividends paid in kind) issued to the Harvest Funds and the Harvest Shares and the Extension Shares.
The Company shall use its commercially reasonable best efforts to cause such registration statement to be declared effective promptly
thereafter on or before 60 days after the filing of such registration statement (or if the SEC issues any comments with respect to such
registration statement, on or before 120 days after the filing of such registration statement).
The foregoing summary of
the terms of the Certificate of Designation and the Exchange Agreements is incomplete and subject to, and qualified in their entirety
by, the actual terms of the Certificate of Designation and the Exchange Agreements, which are attached hereto as Exhibits 4.1, 10.1,
10.2 and 10.3, respectively, and are hereby incorporated by reference.
The information described under Item 5.02 below
is incorporated by reference in this Item 1.01.