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Item 1A. Risk Factors

2025-03-11 compared with 2024-03-01 · 116 added, 131 removed, 624 unchanged (28% of the section changed)

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You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Annual Report, including our financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the following risks could have a material adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives.

As a result, the trading price of our securities could decline and you could lose all or part of your investment.

As a result, the trading price of our securities could decline and you could lose all or part of your

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our securities.

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• Our operating results could be materially and adversely affected if it loses any of its largest customers due to concentration risk;

• The loss of one or more key members of our management team or personnel, or our failure to attract, integrate and retain additional personnel in the future, could harm our business and negatively affect our ability to successfully grow our business;

• The market in which we operate is highly competitive and rapidly changing and we may be unable to compete successfully;

• Adverse conditions in the Voice AI market or the global economy more generally could have adverse effects on our results of operations;

• Our operating results could be materially and adversely affected if we lose any of our largest customers, many of which are OEMs;

• We depend on skilled employees and the loss of one or more key members of our management team or personnel, or our failure to attract, integrate and retain additional personnel in the future, could harm our business and negatively affect our ability to successfully grow our business;

• Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit our growth;

• Cybersecurity and data privacy incidents or breaches may damage client relations and adversely affect our operations;

• Our business is subject to a variety of domestic and international laws, rules, policies and other obligations, including data protection and anticorruption;

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• If we are unable to maintain and enhance our brand or reputation as an industry leader, our operating results may be adversely affected;

• Our acquisition of Synq3, Inc.

and any potential future acquisitions or strategic transactions may subject us to various risks that could adversely affect our business and for which we may not achieve the anticipated benefit of such a transaction;

• We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet its periodic reporting obligations and the trading price of our stock could be negatively affected.

• Our acquisition of SYNQ3, Amelia and any potential future acquisitions or strategic transactions may not be accretive and may subject us to various risks that could adversely affect our business and for which we may not achieve the anticipated benefit of such a transaction;

financial statements or cause us to fail to meet its periodic reporting obligations and the trading price of our stock could be negatively affected.

Risks Related to our Intellectual Property and Technology

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• Our stock price and trading volume may fluctuate significantly;

• Our management has limited experience in operating a public company.

• The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate;

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Our Class B Common Stock has multiple votes per share and this ownership will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions requiring stockholder approval, and that may adversely affect the trading price of our Class A Common stock;

• We are considered a “controlled company” within the meaning of Nasdaq listing standards and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements.

You will not have the same protections afforded to shareholders of companies that are subject to such requirements;

Risks Related to U.S.

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Risks Related to SoundHound’s Business and Financial Condition

Our use and provision of AI-powered solutions could lead to operational or reputational damage, competitive harm, legal and regulatory risk and additional costs.

Use and provision of AI, including generative AI, is a core part of our business.

The use of generative AI, a relatively new and emerging technology in the early stages of commercial use, exposes us to additional risks, such as damage to our reputation, competitive position and business, legal and regulatory risks and additional costs.

For example, generative AI has been known to produce false or “hallucinatory” inferences or output, and certain generative AI uses machine learning and predictive analytics, which can create inaccurate, incomplete or misleading output, unintended biases and other discriminatory or unexpected results, errors or inadequacies, any of which may not be easily detectable.

Accordingly, while AI-powered applications may help provide more tailored or personalized user experiences, if the content, analyses or recommendations that AI-powered solutions assist in producing on our products and services are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed, our reputation, competitive position and business may be materially and adversely affected.

Additionally, if any of our employees, contractors, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information, including inadvertent disclosure of our confidential information into publicly available third-party training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business.

Our ability to mitigate risks associated with disclosure of our confidential information, including in connection with AI-powered software, will depend on our implementation, maintenance, monitoring and enforcement of appropriate technical and administrative safeguards, policies and procedures governing the use of AI in our business.

Additionally, any content created by us using generative AI tools may not be subject to copyright protection which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content.

In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, the outcome of any one of which may, amongst other things, require us to limit the ways in which we use AI in our business and may affect our ability to develop our AI-powered platform innovations and features.

For example, the output produced by generative AI tools may include information subject to certain rights of publicity or privacy laws or constitute an unauthorized derivative work of the copyrighted material used in training the underlying AI model, any of which could also create a risk of liability for us, or adversely affect our business or operations.

In addition, the use of AI has resulted in, and may in the future result in, cybersecurity breaches or incidents that implicate the personal data of users of AI-powered applications.

To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the generative AI tools used in our business, or if we experience cybersecurity breaches or incidents in connection with our use of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, publicity, contractual or other rights.

Further, our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.

As the utilization of AI becomes more prevalent, we anticipate that it will continue to present new or unanticipated ethical, reputational, technical, operational, legal, competitive and regulatory issues, among others.

We expect that such utilization of AI will require additional resources, including the incurrence of additional costs, to develop and maintain our platform offerings, services and features to minimize potentially harmful or unintended consequences, to comply with applicable and emerging laws and regulations, to maintain or extend our competitive position and to address any ethical, reputational, technical, operational, legal, competitive or regulatory issues which may arise as a result of any of the foregoing.

As a result, the challenges presented with our use of AI could adversely affect our business, financial condition and results of operations.

Regulatory and legislative developments related to the use of AI could adversely affect our use and provision of AI-powered solutions in our products, services and business.

As the regulatory framework for machine learning technology, generative AI and automated decision making evolves, our business, financial condition and results of operations may be adversely affected.

The regulatory framework for AI and similar technologies, and automated decision making, is changing rapidly.

It is possible that new laws and regulations will be adopted in the United States and in non-U.S.

jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect our use and provision of AI-powered solutions in our products, services and business.

We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions.

In addition, because these technologies are themselves highly complex and rapidly developing, it is not possible to predict all of the legal or regulatory risks that may arise relating to our use of such technologies.

Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.

For example, in Europe, the European Parliament formally enacted the European Union’s Artificial Intelligence Act (the “AI Act”).

The AI Act establishes, among other things, a risk-based governance framework for regulating AI systems operating in the European Union.

This framework seeks to categorize AI systems, based on the risks associated with such AI systems’ intended purposes, as creating unacceptable or high risks, with all other AI systems being considered low risk.

While the AI Act has only recently been enacted, there is a risk that our current or future AI-powered software or applications may obligate us to comply with the applicable requirements of the AI Act, which may impose additional costs on us, increase our risk of liability or adversely affect our business.

For example, the AI Act would prohibit certain uses of AI systems and place numerous obligations on providers and deployers of permitted AI systems, with heightened requirements based on AI systems that are considered high risk.

If enacted in this form or a similar form, this regulatory framework is expected to have a material impact on the way AI is regulated in the European Union and beyond, and, together with developing regulatory guidance and judicial decisions in this area, may affect our use of AI and our ability to provide and to improve our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us and could adversely affect our business, financial condition and results of operations.

The market in which SoundHound operates is highly competitive and rapidly changing and SoundHound may be unable to compete successfully.

There are a number of companies that develop or may develop products that compete in the Voice AI market.

The market for SoundHound’s products and technologies is characterized by intense competition, evolving industry and

regulatory standards, emerging business and distribution models, disruptive software technology developments, short product and service life cycles, price sensitivity on the part of customers, and frequent new product introductions, including alternatives to certain of SoundHound’s products from other vendors which may be offered at significantly lower costs or free of charge.

The market for SoundHound’s products and technologies is characterized by intense competition, evolving industry and regulatory standards, emerging business and distribution models, disruptive software technology developments, short product and service life cycles, price sensitivity on the part of customers, and frequent new product introductions, including alternatives to certain of SoundHound’s products from other vendors which may be offered at significantly lower costs or free of charge.

Current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to increase the ability of their technologies to address the needs of SoundHound’s current and prospective customers.

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SoundHound’s business depends on, and is directly affected by, the global Voice AI market, as well as the global economy more generally, including global economic trends affecting the automotive, internet of things (“IoT”), mobile application, call center, semiconductor device maker and restaurant and hospitality industries.

For example, SoundHound’s largest customers are currently in the automotive industry, and automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets.

For example, SoundHound’s largest customers are currently in the automotive industry, and automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, tariffs, consumer confidence, fuel costs, fuel availability, environmental impact, union strikes, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets.

Such factors may also negatively impact consumer demand for products, including automobiles, that incorporate or use SoundHound products or technologies.

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SoundHound’s strategy to increase cloud connected and embedded products and technologies and expand the number of foreign languages SoundHound understands may adversely affect its near-term revenue growth and results of operations.

SoundHound has been and is continuing to develop new cloud-connected and embedded products and technologies and expand the number of foreign languages that its products and technologies understand.

SoundHound has been and is continuing to develop new cloud-connected and embedded products and technologies.

The design and development of new cloud-connected and embedded products and technologies and the addition of new languages will involve significant expense.

SoundHound’s research and development costs have greatly increased in recent years and, together with certain expenses associated with delivering SoundHound’s connected services, are projected to continue to escalate in the near

SoundHound’s research and development costs have greatly increased in

recent years and, together with certain expenses associated with delivering SoundHound’s connected services, are projected to continue to escalate in the near future.

SoundHound may encounter difficulties with designing, developing, and releasing new cloud-connected and embedded components, as well as integrating these components with SoundHound’s existing technologies.

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Alternatively, there is a risk that one or more of SoundHound’s major customers could be unable to pay its invoices as they become due or that a customer will simply refuse to make such payments given its financial difficulties.

If a major customer becomes subject to bankruptcy or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, or if a major customer otherwise successfully procures protection against SoundHound legally enforcing its

obligations, it is likely that SoundHound will be forced to record a substantial loss.

If a major customer becomes subject to bankruptcy or similar

proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, or if a major customer otherwise successfully procures protection against SoundHound legally enforcing its obligations, it is likely that SoundHound will be forced to record a substantial loss.

In addition, certain of SoundHound’s customers that are tier 1 suppliers to the automotive industry exclusively sell to certain OEMs, including some of SoundHound’s other customers.

A bankruptcy of, or other significant disruption to, any of these OEMs could intensify any adverse impact on our business and results of operations.

During the years ended December 31, 2023, two customers accounted for 62% of SoundHound's total revenues.

During the years ended December 31, 2022 and 2021, three customers accounted for the following approximate percentages of SoundHound’s total revenues during the respective applicable period:

During the year ended December 31, 2024, one customer accounted for 14% of SoundHound's total revenues.

During the years ended December 31, 2023 and 2022, two and three customers accounted for the following approximate percentages of SoundHound’s total revenues during the respective applicable period:

Accounts receivable balances due from one customer totaled 23% of the Company’s consolidated accounts receivable balance at December 31, 2024.

Accounts receivable balances due from three customers collectively totaled 87% of the Company’s consolidated accounts receivable balance at December 31, 2023.

Accounts receivable balances due from two customers collectively totaled 75% of the Company’s consolidated accounts receivable balance at December 31, 2022.

The unbilled receivables balances from three customers collectively totaled 86% of the Company’s consolidated unbilled receivables balance at December 31, 2023.

The unbilled receivables balances from two customers collectively totaled 74% of the Company’s consolidated unbilled receivables balance at December 31, 2024.

The unbilled receivables balances from three customers collectively totaled 86% of the Company’s consolidated unbilled receivables balance at December 31, 2023.

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Our business depends on the overall demand for technology and on the economic performance of our current and prospective customers.

In general, worldwide economic conditions may remain unstable, including inflation, and these conditions would make it difficult for our customers, prospective customers and us to forecast and plan future business activities accurately, and they could cause our customers or prospective customers to reevaluate their decision to purchase our features.

In general, worldwide economic conditions may remain unstable, including inflation, in particular in connection with the implementation of tariffs in the U.S.

and abroad, and these conditions would make it difficult for our customers, prospective customers and us to forecast and plan future business activities accurately, and they could cause our customers or prospective customers to reevaluate their decision to purchase our features.

Weak global economic conditions, changes in consumer behavior or a reduction in technology spending even if economic conditions stabilize, could adversely impact our business and results of operations in a number of ways, including longer sales cycles, lower demand or prices for our platform, fewer subscriptions and lower or no growth.

For example, increased inflation in recent months, the residual effects of the collapse of Silicon Valley Bank and other financial institutions in March 2023, and related instability in the global financial markets, may cause difficulties for our customers, resulting in reduced spending by them on our business.

SoundHound’s operating results may fluctuate significantly from period to period, and this may cause its stock price to decline.

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• reduction in the prices of SoundHound’s products in response to competition, market conditions or contractual obligations;

• increased costs to raise cash in the market place, including increased borrowing costs as a result of inflation;

• increased costs to raise cash in the market place, including increased borrowing costs as a result of inflation and tariffs;

• accounts receivable that are not collectible;

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Complying with the GDPR and other requirements may cause SoundHound to incur substantial costs and may require it to change our business practices.

Additionally,

China has recently implemented new regulation pertaining to cybersecurity and the protection of personal information, including the Data Security Law which took effect in September 2001 and the Personal Information Protection Law which took effect in November 2021.

Additionally, China has recently implemented new regulation pertaining to cybersecurity and the protection of personal information, including the Data Security Law which took effect in September 2001 and the Personal Information Protection Law which took effect in November 2021.

Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation or changes in enforcement.

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Even if SoundHound’s practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm its reputation and brand and adversely affect its business, financial condition and results of operations.

Moreover, the legal uncertainty created by certain of these laws, including the Data Security Law, and recent government actions could materially adversely affect its ability, on favorable terms, to raise capital, including engaging in follow-on offerings of its securities in the U.S.

market once SoundHound is a public.

Compliance with data security and personal information protection laws, may result in additional expenses to SoundHound and subject it to negative publicity, which could harm SoundHound’s reputation among users and negatively affect the trading price of its shares in the future.

Compliance with data security and personal information protection laws, may result in additional expenses to

SoundHound and subject it to negative publicity, which could harm SoundHound’s reputation among users and negatively affect the trading price of its shares in the future.

Furthermore, SoundHound’s data transfer policies may be subject to additional compliance requirement and regulatory burdens, and SoundHound may be required to make further adjustments to its business practices to comply with the interpretation and implementation of such laws, which may increase our compliance costs and adversely affect our operating results.

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• less effective protection of intellectual property than in the United States.

SoundHound’s business in China is subject to aggressive competition and is sensitive to economic, market and political conditions.

SoundHound operates in the highly competitive Voice AI market in China and face competition from both international and smaller domestic manufacturers.

SoundHound currently generates less than $0.1 million annually in revenue from its operations in China, though SoundHound expects to expand its business in China going forward.

SoundHound anticipates that additional competitors, both international and domestic, may seek to enter the Chinese market resulting in increased competition.

Increased competition may result in price reductions, reduced margins and SoundHound’s inability to gain or hold market share.

There have been periods of increased market volatility and moderation in the levels of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously experienced, including in the Chinese automotive production industry, which affects SoundHound because SoundHound’s largest customers are currently OEMs.

In addition, political tensions between China and the United States may negatively impact SoundHound’s ability to conduct business in China.

If SoundHound is unable to grow or maintain its position in the Chinese market, the pace of growth slows or vehicle sales in China decrease, SoundHound’s business, results of operations and financial condition could be materially adversely effected.

Government regulations and business considerations may also require SoundHound to conduct business in China through joint ventures with Chinese companies.

SoundHound’s participation in joint ventures would limit its control over Chinese operations and may expose SoundHound’s proprietary technologies to misappropriation by joint venture partners.

The above risks, if realized, could have a material adverse effect on SoundHound’s results of operations.

If the Chinese government deems that the contractual arrangements in relation to SoundHound’s variable interest entity do not comply with Chinese governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, SoundHound could be subject to penalties or be forced to relinquish SoundHound’s interests in those operations.

SoundHound currently generates less than $0.1 million annually in revenue from its operations in China, though SoundHound expects to expand its business in China going forward.

Foreign ownership of certain types of internet businesses, such as internet information services, is subject to restrictions under applicable Chinese laws, rules and regulations.

For example, foreign investors are generally not permitted to own more than 50% of the equity interests in a value-added telecommunication service provider.

Any such foreign investor must also have experience and a good track record in providing value-added telecommunications services overseas.

Accordingly, under current and applicable Chinese laws, it is possible that SoundHound will lose the license that currently permits its operations of its Chinese subsidiary.

It is uncertain whether any new Chinese laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide.

If SoundHound or its variable interest entity are found to be in violation of any existing or future Chinese laws, rules or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant Chinese regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including revoking the operating licenses of its Chinese subsidiary or variable interest entity, requiring SoundHound to discontinue or restrict its operations, restricting its right to collect revenue, blocking one or more of its websites, requiring SoundHound to restructure its operations or taking other regulatory or enforcement actions against SoundHound.

The imposition of any of these measures could result in a material adverse effect on SoundHound’s ability to conduct all or any portion of its business operations through its Chinese subsidiary.

In addition, it is unclear what impact Chinese government actions would have on SoundHound and on its ability to consolidate the financial results of its variable interest entity in its consolidated financial statements, if the Chinese government authorities were to find SoundHound’s legal structure and contractual arrangements to be in violation of Chinese laws, rules and regulations.

If the imposition of any of these government actions causes SoundHound to lose its right to direct the activities of its variable

interest entity or otherwise separate from it and if SoundHound is not able to restructure its ownership structure and operations in a satisfactory manner, SoundHound would no longer be able to consolidate the financial results of its variable interest entity in its consolidated financial statements.

Any of these events could have a material adverse effect on SoundHound’s business, financial condition and results of operations through its Chinese subsidiary.

Interruptions or delays in SoundHound’s services or services from data center hosting facilities or public clouds could impair the delivery of its services and harm its business.

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• rapid changes in government, economic and political policies and conditions;

• political or civil unrest or instability, terrorism or epidemics or pandemics (including any risks related to or resulting from COVID-19) and other similar outbreaks or events.

• political or civil unrest or instability, terrorism or epidemics or pandemics and other similar outbreaks or events.

SoundHound’s failure to effectively manage the risks and uncertainties associated with its existing and planned global operations could limit the future growth of its business and adversely affect its operating results.

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SoundHound’s international expansion may not be successful and may not produce the return on investment it expects.

SoundHound’s international subsidiaries employ workers primarily in Canada, Germany, Japan, China, France and Korea.

Operating in international markets requires significant resources and management attention and subjects it to intellectual property, regulatory, economic and political risks that are different from those in the United States.

SoundHound increases its international sales efforts it will face risks in doing business internationally that could harm its business, including:

SoundHound’s international subsidiaries employ workers primarily in Canada, Germany, France and India.

Operating in international markets requires significant resources and management attention and subjects it to intellectual property,

regulatory, economic and political risks that are different from those in the United States.

As SoundHound increases its international sales efforts it will face risks in doing business internationally that could harm its business, including:

• the need to establish and protect SoundHound’s brand in international markets;

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SoundHound’s brand, reputation and ability to attract, retain and serve its customers are dependent in part upon the reliable performance of its products and technologies.

If SoundHound is unable to maintain and enhance its brand or reputation as an industry leader, its operating results may be adversely affected.

SoundHound’s brand, reputation and ability to attract, retain and serve its customers are dependent in part upon the reliable performance of, and the ability of its existing customers and new customers to access and use, its solutions, including real-time analytics and intelligence.

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Any disruptions or other performance problems with its products could harm SoundHound’s reputation and business and may damage its customers’ businesses.

Interruptions in its service delivery might reduce SoundHound’s revenue, cause SoundHound to issue credits to customers, subject us to potential liability and cause customers not to renew their subscription purchases of its products.

If SoundHound is unable to maintain and enhance its brand or reputation as an industry leader, its operating results may be adversely affected.

SoundHound believes that maintaining and enhancing its reputation as the leader in Voice AI market is critical to its relationship with its customers and its customers’ end-users and its ability to maintain customers and continue to attract new customers.

The successful promotion of its brand will depend on multiple factors, including its marketing efforts, its ability to continue to deliver a superior customer experience and develop high-quality features for its products and its ability to successfully differentiate its products from those of its competitors.

Its brand promotion activities may not be successful or yield increased revenue.

The promotion of its brand requires SoundHound to make substantial expenditures, and it anticipates that the expenditures will increase as its market becomes more competitive, as it expands into new geographies and vertical markets and as more sales are generated through its reseller partners.

To the extent that these activities yield increased revenue, this revenue may not offset the increased expenses it incurs.

If SoundHound does not successfully maintain and enhance its brand and reputation, its operating results may be adversely affected.

We may engage in future acquisitions or strategic transactions which may require us to seek additional financing or financial commitments, increase our expenses and/or present significant distractions to our management.

In January 2024, we completed our acquisition of Synq3, Inc.

and we are continuing to actively evaluate opportunities to grow and enhance our business and technologies.

In the event we engage in an acquisition or strategic transaction, including by making an investment in another company, we may need to acquire additional financing.

In January 2024, we completed our acquisition of SYNQ3 and in August 2024, we completed our acquisition of Amelia and we continue to actively evaluate opportunities to grow and enhance our business and technologies.

In the event we engage in an acquisition or other strategic transaction, including by making an investment in another company, we may need to acquire additional financing.

Obtaining financing through the issuance or sale of additional equity and/or debt securities, if possible, may not be at favorable terms and may result in additional dilution to our current stockholders.

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• increased amortization expenses;

• difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

• difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel which may result in reorganizations and reductions in force;

• impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;

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Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.

If intangible assets and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.

If intangible assets and goodwill that we recorded in connection with our acquisitions, including our SYNQ3 and Amelia acquisitions, become impaired, we may have to take significant charges against earnings, which would have a negative impact on our financial condition and results of operations.

We record goodwill and intangible assets at fair value upon the acquisition of a business.

Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired.

Under generally accepted accounting principles in the United States, we must assess, at least annually and potentially more frequently, whether the value of indefinite-lived intangible assets and goodwill have been impaired.

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• underperformance of any acquired technology, product, or business relative to our expectations and the price we paid;

• negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges;

• negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges and contingent acquisition liabilities related to earnout payments or otherwise;

• the potential loss of key employees, customers, and strategic partners of acquired companies;

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In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and marketing, research and development, finance, legal, and information technologies.

There can be no assurance that any of the acquisitions we may make will be successful or will be, or will remain, profitable.

There can be no assurance that any of the acquisitions we may make will be successful or will be, or will remain, profitable or accretive.

Our failure to successfully address the foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all.

The integration of our acquisitions may result in significant accounting charges that adversely affect the announced results of our company.

The integration of our acquisitions, and in particular, our acquisition of SYNQ3 and Amelia, may result in significant accounting charges that adversely affect the financial results of our company.

The financial results of our company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our acquisitions.

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The price of our common stock could decline to the extent our financial results are materially affected by the foregoing charges or if the foregoing charges are larger than anticipated.

Our recent acquisitions may result in unexpected consequences to our business and results of operations.

Our acquisitions may result in unexpected consequences to our business and results of operations.

Although we believe that our recently acquired businesses will generally be subject to risks similar to those to which we are subject to in our existing operations, we may not have discovered all risks applicable to these businesses during the due diligence process.

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Failure to realize the benefits expected from our recent acquisitions could adversely affect the value of our common stock.

The success of our recent acquisition will depend, in part, on our ability to:

• integrate Synq3’s customer base and capitalize on our cross-selling opportunities;

• realize cost savings from reduced back-office and infrastructure expenses, elimination of duplicative company and management structure costs;

The success of our recent acquisitions will depend, in part, on our ability to:

• integrate SYNQ3’s and Amelia's customer bases and capitalize on our cross-selling opportunities;

• realize cost savings from reduced back-office and infrastructure expenses, eliminate duplicative company and management structure costs;

• operate our combined businesses efficiently, achieve the strategic operating objectives for our business and realize significant cost savings and synergies;

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• capitalize on the embedded and/or underexploited expansion opportunities offered by our acquisitions that we can expand upon.

However, to realize the anticipated benefits of our acquisition we must successfully integrate their business in a manner that permits those benefits and cost savings to be realized.

Although we expect significant benefits to result from this acquisition, there can be no assurance that we will be able to successfully realize these benefits.

business or inconsistencies in standards, controls, procedures, practices, and policies that could adversely impact our operations.

However, to realize the anticipated benefits of our acquisitions we must successfully integrate their businesses in a manner that permits those benefits and cost savings to be realized.

Although we expect benefits to result from these acquisitions, there can be no assurance that we will be able to successfully realize these benefits.

The challenges involved in this integration will be complex and time consuming and may require a disproportionate amount of resources and management attention and could result in the loss of valuable employees, the disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures, practices, and policies that could adversely impact our operations.

If we do not successfully manage these and related issues and challenges, we may not achieve the anticipated benefits of these acquisitions and our revenue, expenses, operating results, financial condition and stock price could be materially adversely affected.

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SoundHound may require additional capital to continue its planned business operations but may not be able to obtain such capital when desired on favorable terms, if at all, or without dilution to its stockholders.

SoundHound will require additional capital to continue its planned business operations.

Even though the total unrestricted cash and cash equivalents on hand as of December 31, 2024 was $198.2 million, SoundHound may require additional capital to continue its planned business operations.

SoundHound anticipates that current cash, cash equivalents, cash provided by operating activities and funds available through SoundHound’s at-the-market offering program (ATM program), will not be sufficient to meet its future capital needs.

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Additionally, if any of SoundHound’s key management team members or other employees were to leave, SoundHound could face substantial difficulty in hiring qualified successors, particularly with consideration to our recent reduction in force related to our restructuring plan and could experience a loss in productivity while any successor obtains the necessary training and experience.

Although SoundHound has arrangements with some of its executive officers designed to promote

retention, its employment relationships are generally at-will and SoundHound has had key employees leave in the past.

Although SoundHound has arrangements with some of its executive officers designed to promote retention, its employment relationships are generally at-will and SoundHound has had key employees leave in the past.

SoundHound cannot assure you that one or more key employees will not leave in the future.

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The Company has identified material weaknesses in its internal control over financial reporting and may identify additional material weaknesses in the future, which may result in material misstatements of the Company’s consolidated financial statements or cause the Company to fail to meet its periodic reporting obligations and the trading price of our stock could be negatively affected.

Since becoming a public company, our Company has been classified as a non-accelerated filer, emerging growth company and smaller reporting company.

On June 30, 2023 (the annual measurement date for SEC filing status), our public float was in excess of $700 million, and accordingly we have become a large accelerated filer for the year ended December 31, 2023 and are now subject to the requirements of 404(b) of Sarbanes-Oxley Act of 2002 (“SOX”) for the year ended December 31, 2023.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting.

Pursuant to SEC rules and regulations, our management is required to report on the effectiveness of our internal control over financial reporting.

The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Annually, we perform activities that include reviewing, documenting and testing our internal control over financial reporting.

If we fail to maintain the adequacy of our internal control over financial reporting, we will not be able to conclude on an ongoing basis that we have effective internal control over financial reporting.

Failure to achieve and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.

This could result in significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.

We identified material weaknesses in internal control over financial reporting as of December 31, 2024.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The Company did not maintain an effective control environment as it lacked sufficient oversight of activities related to its internal control over financial reporting due to a lack of appropriate level of experience and training commensurate with its financial reporting requirements.

Further, due to rapid business growth, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting, which resulted in the Company not designing and maintaining effective controls related to substantially all accounts and disclosures.

Further, due to rapid business growth, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement to financial reporting, which resulted in the Company, including the SYNQ3 and Amelia entities which were acquired during 2024, not designing and maintaining effective controls related to substantially all accounts and disclosures.

These material weaknesses contributed to the following additional material weaknesses as of December 31, 2024:

• The Company did not design and maintain effective controls to verify appropriate accounting for complex financing transactions.

• The Company did not design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the accounting for complex financing transactions and acquisitions.

• The Company did not design and maintain effective controls to verify appropriate segregation of duties, including assessment of incompatible duties, identification of instances where incompatible duties were assigned to an individual, and addressing conflicts on a timely basis.

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and (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored.

The material weaknesses related to the control environment, risk assessment and complex financing transactions resulted in the revision of the consolidated financial statements as of and for the periods ended September 30, 2022, December 31, 2022, March 31, 2023 and June 30, 2023.

The material weaknesses related to the control environment, risk assessment and the accounting for certain non-routine, unusual or complex transactions resulted in the revision of the consolidated financial statements as of and for the periods ended September 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, immaterial errors related to SYNQ3 and Amelia acquisitions during the year ended December 31, 2024 and immaterial errors in various accounts during the interim and annual periods during 2023 and 2024.

The material weaknesses related to segregation of duties and IT general controls did not result in a misstatement to our annual or interim consolidated financial statements.

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Effective internal control over financial reporting is necessary to provide reliable financial reports and to assist in the effective prevention or detection of material misstatements due to error or fraud.

Any inability to provide reliable financial reports or prevent or detect material misstatements due to error or fraud could harm our business.

Any inability to provide reliable financial

reports or prevent or detect material misstatements due to error or fraud could harm our business.

We regularly review and update our internal control over financial reporting, disclosure controls and procedures, and corporate governance policies.

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Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

financial statements will not be prevented or detected on a timely basis.

Accordingly, a material weakness increases the risk that the financial information we report contains material misstatements.

While we are in the process of addressing our material weaknesses as disclosed herein, elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.

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Natural disasters, health epidemics, or other catastrophic events may cause damage or disruption to our operations, commerce and the global economy, and have a negative effect on our business and operations.

Our business operations are subject to interruption by natural disasters, flooding, fire, power shortages, health epidemics, terrorism, political unrest, telecommunications failure, vandalism, cyber-attacks, geopolitical instability, war, the effects of climate change (such as drought, wildfires, hurricanes, and increased storm severity) and other events beyond our control.

A significant natural disaster, such as an earthquake, wildfire, flood, hurricane or significant power outage or other similar events, such as infectious disease outbreaks or pandemic events, could have an adverse effect on our business and operating results, by impacting, among other things, the demand for our services, our ability to achieve or maintain profitability and our ability to raise additional capital in the future.

Our corporate headquarters are located in the San Francisco Bay Area of California, a region known for seismic and wildfire activities.

Customer data could be lost, significant recovery time could be required to resume operations and our financial condition and operating results could be adversely affected in the event of a major natural disaster or catastrophic event.

Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to deliver our services to our customers, could decrease demand for our services, and could cause us to incur substantial expense.

Our insurance may not be sufficient to cover losses or additional expenses that we may sustain.

Our corporate headquarters are located near major seismic faults in California.

In addition, the impacts of climate change on the global economy and our industry are rapidly evolving.

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SoundHound’s ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in its ability to be competitive.

There is a risk that we will not be able to achieve the technological advances that may be necessary for us to be competitive or that

certain of its products will become obsolete.

There is a risk that we will not be able to achieve the technological advances that may be necessary for us to be competitive or that certain of its products will become obsolete.

SoundHound is also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly.

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• our ability to retain and recruit qualified personnel, particularly in light of our recent restructuring;

• our quarterly or annual earnings, or those of other companies in our industry;

• our quarterly or annual earnings or losses, or those of other companies in our industry;

• announcements by us or our competitors of significant acquisitions or dispositions;

• changes in accounting standards, policies, guidance, interpretations or principles;

• purchases or sales of our Class A Common Stock by large or influential investors or stockholders;

• the failure of securities analysts to cover, or positively cover, our Class A Common Stock;

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• general economic conditions and other external factors.

Low trading volume for SoundHound’s Class A Common Stock, which may occur if an active trading market does not develop, among other reasons, would amplify the effect of the above factors on stock price volatility.

In addition, over the last few years, the stock market more broadly has experienced price and volume fluctuations, including due to factors relating to the outbreak of COVID-19, inflationary pressures, and the wars in Ukraine and in Gaza, and this volatility has sometimes been unrelated to the operating performance of particular companies.

Low trading volume for SoundHound’s Class A Common Stock would amplify the effect of the above factors on stock price volatility.

In addition, over the last few years, the stock market more broadly has experienced price and volume fluctuations, including due to factors relating to the outbreak of COVID-19, inflationary pressures, the wars in Ukraine and in Gaza and the imposition and/or threat of tariffs, and this volatility has sometimes been unrelated to the operating performance of particular companies.

As a result, there is a potential for rapid and substantial decreases in the price of our Class A Common Stock, including decreases unrelated to our operating performance or prospects.

This market and share price volatility relating to these outside effects, as well as

general economic, market or political conditions, has and could further reduce the market price of our Class A Common Stock in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.

This market and share price volatility relating to these outside effects, as well as general economic, market or political conditions, has and could further reduce the market price of our Class A Common Stock in spite of our operating performance and could also increase our cost of capital, which could prevent us from accessing debt and equity capital on terms acceptable to us or at all.

Additionally, a proportion of our Class A Common Stock may be traded by short sellers which may put pressure on the supply and demand for our Class A Common Stock, creating further price volatility.

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We do not intend to and there can be no assurance that we will pay any dividend in the future.

SoundHound’s management has limited experience in operating a public company.

The requirements of being a public company may strain SoundHound’s resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than SoundHound anticipates.

As a public company, and particularly since we are no longer an “emerging growth company” or a “smaller reporting company,” we will continue to incur significant legal, accounting and other expenses that SoundHound did not incur as a private company.

As a public company and a large accelerated filer, we will continue to incur significant legal, accounting and other expenses that SoundHound did not incur as a private company.

SoundHound is subject to the reporting requirements of the Exchange Act, and is required to comply with the applicable requirements of the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.

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Moreover, these rules and regulations have increased, and will continue to increase, SoundHound’s historical legal and financial compliance costs and will make some activities more time-consuming and costly.

For example, SoundHound expects to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.

SoundHound has hired and will continue to need to hire additional accounting and financial staff, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which has and will increase its operating expenses.

For example, SoundHound has incurred and expects to continue to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.

SoundHound has hired and will continue to need to hire additional accounting and financial staff, including as a result of our acquisitions in 2024, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which has and will increase its operating expenses.

Moreover, SoundHound could incur additional compensation costs in the event that it decides to pay cash compensation closer to that of other publicly listed companies, which would increase its general and administrative expenses and could materially and adversely affect its profitability.

SoundHound will evaluate these rules and regulations, and cannot predict or estimate the amount of additional costs SoundHound may incur or the timing of such costs.

SoundHound’s executive officers have limited experience in the management of a publicly traded company.

Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of the post-combination company.

SoundHound may not have

adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies.

SoundHound may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies.

SoundHound’s management will need to continually assess its staffing and training procedures to improve its internal control over financial reporting.

For example, SoundHound did not timely file its Form 10-Q for the quarter ended March 31, 2021 and had to file an extension for its Form 10-Q for the quarter ended September 30, 2023 and unless the matters discussed in this risk factor and elsewhere in this Annual Report are mitigated, the risk exists that SoundHound may not be able to file timely in the future.

For example, SoundHound did not timely file its Form 10-Q for the quarter ended March 31, 2021 and had to file extensions for its Form 10-Q for the quarter ended September 30, 2023 and 2023 Form 10-K.

Unless the matters discussed in this risk factor and elsewhere in this Annual Report are mitigated, the risk exists that SoundHound may not be able to file timely in the future.

Further, the development, implementation, documentation and assessment of appropriate processes, in addition to the need to remediate any potential deficiencies, will require substantial time and attention from management.

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The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

SoundHound may be subject to securities litigation, which is expensive and could divert management attention.

The per share price of our Class A Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including class action litigation.

Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations.

Any adverse determination in litigation could also subject SoundHound to significant liabilities.

Risks Applicable to a Dual Class Common Stock Structure

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SoundHound has a dual class common stock structure and the holders of SoundHound Class B Common Stock have ten votes per share.

SoundHound Founders own shares of Class B Common Stock representing approximately 63% of the voting power of the outstanding capital stock of SoundHound.

SoundHound Founders own shares of Class B Common Stock representing approximately 48% of the voting power of the outstanding capital stock of SoundHound as of December 31, 2024.

In addition, because of the ten-to-one voting ratio between our Class B and Class A Common Stock, holders of our Class B Common Stock could continue to control a majority of the combined voting power of our Common Stock and therefore control all matters submitted to our stockholders for approval until such time, if any, as a sufficient number of shares of our Class B Common Stock are converted into shares of our Class A Common Stock in accordance with the terms of the Second Amended & Restated Certificate of Incorporation of the Company (the "Amended Charter").

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Shares of Class B Common Stock are convertible into shares of Class A Common Stock and will automatically convert into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited excepts set forth in the Amended Charter.

The conversion of Class B Common Stock to Class A Common Stock will have the effect, over time, of increasing the relative voting power of those holders of Class B Common Stock who retain their shares in the long term.

The conversion of Class B Common Stock to Class A

Common Stock will have the effect, over time, of increasing the relative voting power of those holders of Class B Common Stock who retain their shares in the long term.

As a result, it is possible that one or more of the persons or entities holding our Class B Common Stock could gain significant voting control as other holders of Class B Common Stock sell or otherwise convert their shares into Class A Common Stock.

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As a result, the market price of our Class A Common stock could be adversely affected.

We are considered a “controlled company” within the meaning of Nasdaq listing standards and, as a result, qualify for, and may rely on, exemptions from certain corporate governance requirements.

You will not have the same protections afforded to shareholders of companies that are subject to such requirements.

SoundHound qualifies as a “controlled company” within the meaning of the corporate governance standards of Nasdaq.

Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our board of directors consist of independent directors, (ii) we have a compensation committee that is composed entirely of independent directors and (iii) director nominees be selected or recommended to the board by independent directors.

We are currently in compliance with all of these corporate governance requirements.

However, SoundHound may in the future rely on the corporate governance exemptions as we adopted the dual class common stock structure reflected in our Amended and Restated Charter and qualify as a controlled company.

To the extent we will rely on any of these exemption, holders of our Class A Common Stock will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq and we cannot predict the impact this may have on the price of our Class A Common Stock.

Delaware law and provisions in our charter documents could make a merger, tender offer, or proxy contest difficult, thereby depressing the trading price of our common stock.

change of control of SoundHound or changes in SoundHound that our management or stockholders may deem advantageous.

The Amended Charter, Amended & Restated Bylaws of the Company (the "Amended Bylaws"), and Delaware law contain provisions that could depress the trading price of our common stock by acting to discourage, delay, or prevent a change of control of SoundHound or changes in SoundHound that our management or stockholders may deem advantageous.

Among other things, the Amended Charter and Amended Bylaws include the following provisions:

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As a Delaware corporation, we are also subject to provisions of Delaware law.

Pursuant to the Amended Charter, we have opted out of Section 203 of the DGCL, which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock, from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, our board of directors approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our common stock, or (iii) following board approval, such business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder at an annual or special meeting of stockholders.

Pursuant to the Amended Charter, we have opted out of Section 203 of the DGCL, which prevents interested stockholders, such as certain

stockholders holding more than 15% of our outstanding common stock, from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, our board of directors approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our common stock, or (iii) following board approval, such business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder at an annual or special meeting of stockholders.

However, our Amended Charter includes provisions similar to the provisions contained in Section 203 of the DGCL, which are designed to limit SoundHound’s ability to enter into certain business combination transactions within a three (3) year period following the adoption of the Amended Charter.

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On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), was signed into law making significant changes to the Internal Revenue Code of 1986, as amended (the “Code”).

In particular, sweeping changes were made to the

In particular, sweeping changes were made to the U.S.

taxation of foreign operations.

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The federal and state net operating loss carryforwards will start to expire in 2025 and 2028, respectively, with the exception of $403.3 million federal net operating loss carryforwards and $11.0 million state net operating loss carryforwards, which can be carried forward indefinitely.

It is possible that SoundHound will not generate taxable income in time to use these net operating loss carryforwards before their expiration or at all.

It is possible that

SoundHound will not generate taxable income in time to use these net operating loss carryforwards before their expiration or at all.

Under legislative changes made in December 2017, U.S.

federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such net operating losses is limited.

It is uncertain if and to what extent various states will conform to the newly enacted federal tax law.

In addition, the federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the Code, respectively, and similar provisions of state law.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors