soun-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________to________

Commission File No. 001-40193


SOUNDHOUND AI, INC.
(Exact name of registrant as specified in its charter)


Delaware						86-1286799
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


5400 Betsy Ross Drive, Santa Clara, CA 95054
(Address of principal executive offices) (Zip Code)


(408) 441-3200
(Registrant’s telephone number, including area code)


N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common stock, par value $0.0001 per share

SOUN

The Nasdaq Stock Market LLC

Redeemable Warrants

SOUNW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


o	Large accelerated filer	o	Accelerated filer
x	Non-accelerated filer	x	Smaller reporting company
		x	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x

As of May 9, 2023, there were 177,215,906 shares of the Company’s Class A common stock, $0.0001 par value per share, issued and outstanding, and 39,735,408 shares of the Company’s Class B common stock, $0.0001 par value per share, issued and outstanding.

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SOUNDHOUND AI, INC.

QUARTERLY REPORT ON FORM 10-Q

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PART I. FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements	1

	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	1

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	2

	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2023 and 2022 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION		41

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	42

SIGNATURES		43

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “report”) of SoundHound AI, Inc. (“we,” “us,” “our,” “SoundHound,” or the “Company”) contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that significant known and unknown risks, uncertainties and other important factors (including those over which we may have no control and others listed in this report and in the “Risk Factors” section of our annual report on Form 10-K, which was filed with the Securities and Exchange Commission on March 28, 2023 (the "Form 10-K")) may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

•execution of our business strategy, including launching new product offerings and expanding information and technology capabilities, particularly following our recent restructuring efforts;

•our market opportunity and our ability to acquire new customers and retain existing customers;

•the timing and impact of our growth initiatives on our future financial performance;

•our ability to protect intellectual property and trade secrets;

•the ability to obtain additional capital, including equity or debt financing, on terms that are acceptable to us, if at all, particularly in light of inflationary pressures and resulting increases in the cost of borrowing;

•changes in applicable laws or regulations and extensive and evolving government regulations that impact our operations and business;

•the ability to attract or maintain a qualified workforce, particularly following our recent restructuring efforts;

•level of product service failures that could lead our customers to use competitors’ services;

•investigations, claims, disputes, enforcement actions, litigation and/or other regulatory or legal proceedings, including with respect to our AI technology;

•the effects of the COVID-19 pandemic or any similar public health developments on our business;

•risks relating to uncertainty of our estimates of market opportunity and forecasts of market growth;

•the ability to maintain the listing of our Class A Common Stock on the Nasdaq Global Market;

•the possibility that we may be adversely affected by other economic, business, and/or competitive factors; and

•other risks and uncertainties described under the section titled “Risk Factors” of our Form 10-K.

These forward-looking statements involve numerous and significant risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” section contain in this report and in the “Business,” “Risk Factors” and other sections of the Form 10-K. You should thoroughly read this report and the documents that we refer to with the understanding that our actual future results may be materially different from, and worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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The forward-looking statements made in this report relate only to events or information as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.

iii

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	March 31, 2023		December 31, 2022
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	46,331	$	9,245

Accounts receivable, net	2,660		3,414
Prepaid expenses	1,651		2,514
Contract assets	1,546		1,671
Other current assets	1,069		859
Total current assets	53,257		17,703
Restricted cash equivalents, non-current	230		230
Right-of-use assets	7,393		8,119
Property and equipment, net	2,754		3,447
Deferred tax asset	55		55
Contract assets, non-current	7,040		7,041
Other non-current assets	2,074		1,656
Total assets	$	72,803	$	38,251

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	2,542	$	2,798
Accrued liabilities	12,306		7,462
Operating lease liabilities	3,157		3,282
Finance lease liabilities	147		160
Income tax liability	1,213		1,314
Deferred revenue	5,319		5,812
Notes payable	16,828		16,668
Total current liabilities	41,512		37,496

Operating lease liabilities, net of current portion	5,045		5,715
Finance lease liabilities, net of current portion	102		128
Deferred revenue, net of current portion	5,433		7,543
Notes payable, net of current portion	14,035		18,299
Other non-current liabilities	4,294		4,295
Total liabilities	70,421		73,476
Commitments and contingencies (Note 6)

Stockholders’ equity (deficit):
Series A Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; 835,011 and 0 shares issued and outstanding, aggregate liquidation preference of $25,050 and $0 as of March 31, 2023 and December 31, 2022, respectively	24,942		—
Class A Common Stock, $0.0001 par value; 455,000,000 shares authorized; 174,714,741 and 160,297,664 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	18		16
Class B Common Stock, $0.0001 par value; 44,000,000 shares authorized; 39,735,408 shares issued and outstanding as of March 31, 2023 and December 31, 2022	4		4
Additional paid-in capital	505,889		466,857
Accumulated deficit	(528,471)		(502,102)
Total stockholders’ equity (deficit)	2,382		(35,225)
Total liabilities and stockholders’ equity (deficit)	$	72,803	$	38,251

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Revenues	$	6,707	$	4,290
Operating expenses:
Cost of revenues	1,976		1,773
Sales and marketing	4,875		2,581
Research and development	14,184		16,650
General and administrative	7,125		4,003
Restructuring	3,585		—
Total operating expenses	31,745		25,007
Loss from operations	(25,038)		(20,717)

Other expense, net:
Interest expense	(1,096)		(2,977)
Other income (expense), net	94		(1,057)
Total other expense, net	(1,002)		(4,034)
Loss before provision for income taxes	(26,040)		(24,751)
Provision for income taxes	329		352
Net loss	(26,369)		(25,103)

Net loss per share:
Basic and diluted	$	(0.13)	$	(0.36)

Weighted-average common shares outstanding:
Basic and diluted	205,082,328		69,604,188

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share data)

(Unaudited)


Three Months Ended March 31, 2023
	Series A Preferred Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balances as of December 31, 2022	—	$	—	160,297,664	$	16	39,735,408	$	4	$	466,857	$	(502,102)	$	(35,225)
Issuance of Class A common shares upon exercise of stock options	—	—		1,209,302	—		—	—		2,425		—		2,425
Issuance of Class A common shares upon vesting of restricted stock units	—	—		2,259,223	—		—	—		—		—		—
Issuance of Class A common shares under the ELOC program				10,948,552	2					28,358				28,360
Issuance of Series A Preferred Stock	835,011	24,942		—										24,942
Stock-based compensation	—	—		—	—		—	—		8,249		—		8,249
Net loss	—	—		—	—		—	—		—		(26,369)		(26,369)
Balances as of March 31, 2023	835,011	$	24,942	174,714,741	$	18	39,735,408	$	4	$	505,889	$	(528,471)	$	2,382

SEC Form 10-Q filed by SoundHound AI Inc