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Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-01 · 821 added, 536 removed, 1033 unchanged (57% of the section changed)

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of SoundHound AI, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders' equity (deficit) and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of SoundHound AI, Inc.

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders' equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to the Company not designing and maintaining (i) an effective control environment due to insufficient oversight of activities related to internal control over financial reporting due to lack of an appropriate level of experience and training commensurate with the Company’s financial reporting requirements, (ii) effective controls 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, (iii) effective controls to verify appropriate accounting for complex financing transactions, (iv) effective controls to verify appropriate segregation of duties, including assessment of incompatible duties and addressing conflicts on a timely basis, and (v) effective controls over certain information technology general controls over information systems that are relevant to the preparation of the Company’s financial statements, including not maintaining user access controls, program change management controls, and computer operations controls.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to the Company not designing and maintaining (i) an effective control environment due to insufficient oversight of activities related to internal control over financial reporting due to lack of an appropriate level of experience and training commensurate with the Company’s financial reporting requirements, (ii) effective controls 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, (iii) effective controls to identify and appropriately account for certain non-routine, unusual or complex transactions, including accounting for complex financing transactions and acquisitions, (iv) effective controls to verify appropriate segregation of duties, including assessment of incompatible duties and addressing conflicts on a timely basis, and (v) effective controls over certain information technology general controls over information systems that are relevant to the preparation of the Company’s financial statements, including not maintaining user access controls, program change management controls, and computer operations controls.

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

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The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control

based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinions.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition

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Contracts are accounted for by management when the parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is probable.

Revenues are generally recognized upon the transfer of control of promised products or services provided to customers, reflecting the amount of consideration the Company expects for those products or services.

Management applies significant judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition.

Management applies significant judgment in identifying and evaluating terms and conditions in contracts which impact revenue recognition.

The Company’s consolidated revenues for the year ended December 31, 2024 were $84.7 million.

The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are (i) the significant judgment by management in identifying and evaluating any terms and conditions in contracts with customers which may impact revenue recognition and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to revenue recognition.

The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are (i) the significant judgment by management in identifying and evaluating terms and conditions in contracts with customers which impact revenue recognition and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to revenue recognition.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, material weaknesses were identified related to this matter.

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(ii) obtaining an understanding of management’s process for identifying and evaluating terms and conditions in contracts, including evaluating management’s determination of the impact of those terms and conditions on revenue recognition;

(iii) testing, on a sample basis, (a) the completeness and accuracy of management’s identification and evaluation of terms and conditions by examining contracts and (b) revenue transactions by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of delivery, and subsequent cash receipts;

(iii) testing, on a sample

basis, (a) the completeness and accuracy of management’s identification and evaluation of terms and conditions by examining contracts and (b) revenue transactions by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of delivery, and subsequent cash receipts;

(iv) testing, on a sample basis, the timing of recognition of revenue transactions;

and (v) testing, on a sample basis, the determination of the standalone selling price of performance obligations and testing the completeness and accuracy of the underlying data used by management in determining standalone selling price of performance obligations.

Acquisition of Amelia Holdings, Inc.

– Valuation of Developed Technology and Customer Relationships

As described in Notes 2 and 3 to the consolidated financial statements, on August 6, 2024, the Company completed the acquisition of Amelia Holdings, Inc.

(Amelia) for total consideration of $98.6 million.

Of the acquired intangible assets, $98.9 million of developed technology and $68.6 million of customer relationships were recorded.

Fair value of the acquired intangible assets was determined using an income approach, specifically the multi-period excess earnings method or the with-and-without method, depending on the nature of the respective asset.

The significant judgments and assumptions used in valuing the developed technology include revenue growth rates, prospective financial information for cost of sales, research and development expenses and other operating expenses, the discount rate, the technological obsolescence rate, and contributory asset charges.

For customer relationships, the significant judgments and assumptions include the discount rate, revenue growth rates, and prospective financial information for cost of sales and fixed and variable operating expenses.

The principal considerations for our determination that performing procedures relating to the valuation of the developed technology and customer relationships acquired in the acquisition of Amelia are (i) the significant judgment by management when developing the fair value estimate of the developed technology and customer relationships acquired;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, prospective financial information for cost of sales, research and development expenses and other operating expenses, the discount rate, the technological obsolescence rate, and contributory asset charges for developed technology, and the discount rate, revenue growth rates, and prospective financial information for cost of sales and fixed and variable operating expenses for customer relationships;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, material weaknesses were identified related to this matter.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others (i) evaluating and determining the nature and extent of audit procedures performed and evidence obtained that are responsive to the material weaknesses identified;

(ii) reading the purchase agreement;

(iii) testing management’s process for developing the fair value estimate of the developed technology and customer relationships acquired;

(iv) evaluating the appropriateness of the multi-period excess earnings and with-and-without methods used by management;

(v) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings and with-and-without methods;

and (vi) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, prospective financial information for cost of sales, research and development expenses and other operating expenses, the discount rate, the technological obsolescence rate, and contributory asset charges for developed technology, and the discount rate, revenue growth rates, and prospective financial information for cost of sales and fixed and variable operating expenses for customer relationships.

Evaluating management’s assumptions related to revenue growth rates, prospective financial information for cost of sales, fixed and variable operating expenses, research and development expenses and other operating expenses involved considering (i) the current and past performance of the Amelia business;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings and with-and-without methods;

and (ii) evaluating the reasonableness of the discount rate, the technological obsolescence rate, and contributory asset charges assumptions for developed technology and the discount rate assumption for customer relationships.

/s/ PricewaterhouseCoopers LLP

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Stockholders of SoundHound AI, Inc.

Santa Clara, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of SoundHound AI, Inc.

(the "Company") as of December 31, 2022, and the related consolidated statements of operations and comprehensive loss, consolidated statements of redeemable convertible preferred stock and stockholders' deficit, and consolidated statements of cash flows for each of the two years in the period ended December 31, 2022 , and the related notes (collectively, referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ deficit, and of cash flows of SoundHound AI, Inc.

(the "Company") for the year ended December 31, 2022, including the related notes (collectively, referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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In 2023, we became the predecessor auditor.

March 28, 2023, except for the effects of the tables reflecting the impact of the revisions as of and for the year ended December 31, 2022 discussed in Note 20 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company's 2023 annual Report (Form 10-K), as to which the date is March 1, 2024.

March 28, 2023, except for the effects of the tables reflecting the impact of the revisions as of and for the year ended December 31, 2022 discussed in Note 22 to the consolidated financial statements appearing under Item 8 of the Company’s 2023 Annual Report on Form 10-K, as to which the date is March 1, 2024, and except for the effects of segment reporting discussed in Note 21 to the consolidated financial statements appearing under Item 8 of the Company’s 2024 Annual Report on Form 10-K, as to which the date is March 11, 2025.

SOUNDHOUND AI, INC.

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Accounts receivable, net of allowances of $ 726 and $ 203 as of December 31, 2024 and 2023, respectively

Prepaid expenses 924 2,514

Contract assets and unbilled revenue, net 26,645 11,780

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Property and equipment, net 1,239 1,515

Goodwill 101,704 —

Intangible assets, net 174,943 —

Deferred tax asset 4 11

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Deferred revenue 23,876 4,310

Notes payable — 16,668

Other current liabilities 7,319 —

Total current liabilities 67,742 24,223

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Deferred revenue, net of current portion 6,862 4,910

Notes payable, net of current portion 84,312 18,299

Long-term debt — 84,312

Contingent acquisition liabilities 286,898 —

Income tax liability, net of current portion 3,075 2,453

Other non-current liabilities 4,320 3,967

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Accumulated other comprehensive income $ 205 199

Total stockholders’ equity (deficit) 28,168 ( 36,565 )

Total liabilities and stockholders’ equity (deficit) $ 151,122 $ 37,986

Total stockholders’ equity 182,653 28,168

Total liabilities and stockholders’ equity $ 553,953 $ 151,122

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

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General and administrative 53,270 28,285 30,443

Change in fair value of contingent acquisition liabilities 222,670 — —

Amortization of intangible assets 7,116 — —

Restructuring — 4,557 —

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Other expense, net:

Loss on early extinguishment of debt ( 15,629 ) ( 837 ) —

Interest expense ( 12,168 ) ( 16,733 ) ( 6,893 )

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Total other expense, net ( 18,575 ) ( 16,415 ) ( 8,152 )

Loss before provision for income taxes ( 85,023 ) ( 113,824 ) ( 79,084 )

Provision for income taxes 3,914 2,889 456

Loss before provision (benefit) for income taxes ( 359,928 ) ( 85,023 ) ( 113,824 )

Provision (benefit) for income taxes ( 9,247 ) 3,914 2,889

Net loss ( 350,681 ) ( 88,937 ) ( 116,713 )

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Balances as of December 31, 2021 106,949,326 $ 279,503 68,258,556 $ 1 — $ — — $ — — $ — $ 43,491 $ — $ ( 386,729 ) $ ( 343,237 )

Retroactive application of Business Combination 87,171,583 — 53,849,015 — — — — — — — — — — —

Adjusted Balances, beginning of period 106,303,970 $ 273,687 65,667,776 $ 1 — $ — — $ — — $ — $ 30,836 $ ( 1 ) $ ( 307,189 ) $ ( 276,353 )

Issuance of common stock upon exercise of stock options — — 2,582,535 — — — — — — — 2,840 — — 2,840

Issuance of common stock warrants — — — — — — — — — — 3,843 — — 3,843

Other comprehensive gain, net of tax — — — — — — — — — — — 1 — 1

Net exercise of outstanding warrants — — 673,416 — — — — — — — — — — —

Conversion of convertible note — — 2,046,827 — — — — — — — 20,239 — — 20,239

Effect of reverse recapitalization, net of costs (Note 3) ( 106,949,326 ) ( 279,503 ) ( 73,561,334 ) ( 1 ) — — 140,114,060 14 40,396,600 4 279,486 — — 279,503

PIPE financing — — — — — — 11,300,000 1 — — 86,584 — — 86,585

Issuance of Class A common shares pursuant to the Business Combination — — — — — — 4,693,050 1 — — 4,105 — — 4,106

Issuance of Class A common shares upon conversion of Class B common shares — — — — — — 661,192 — ( 661,192 ) — — — — —

Issuance of Class A common shares upon exercise of stock options — — — — — — 1,013,171 — — — 1,320 — — 1,320

Issuance of Class A common shares upon vesting of restricted stock units — — — — — — 2,516,191 — — — — — — —

Stock-based compensation — — — — — — — — — — 28,792 — — 28,792

Issuance of redeemable convertible Series C preferred stock upon net exercise of Series C Warrants 645,356 5,816 — — — — — — — — — — — —

Net loss — — — — — — — — — — — — ( 116,713 ) ( 116,713 )

Balances as of December 31, 2022 — — — — — — 160,297,664 16 39,735,408 4 466,857 — ( 503,442 ) ( 36,565 )

Issuance of common stock under the ELOC program — — — — — — 25,000,000 4 — — 73,762 — — 73,766

SOUNDHOUND AI, INC.

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Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Issuance of common stock upon exercise of stock options — — 2,582,535 — — 0 — — — — 2,840 — — 2,840

Net exercise of outstanding warrants — — 673,416 — — 0 — — — — — — — —

Conversion of convertible note — — 2,046,827 — — 0 — — — — 20,239 — — 20,239

Effect of reverse recapitalization, net of costs (Note 3) ( 106,949,326 ) ( 279,503 ) ( 73,561,334 ) ( 1 ) — 0 140,114,060 14 40,396,600 4 279,486 — — 279,503

PIPE financing — — — — — 0 11,300,000 1 — — 86,584 — — 86,585

Issuance of Class A common shares pursuant to the Business Combination — — — — — 0 4,693,050 1 — — 4,105 — — 4,106

ELOC program fee settled in common stock — — — — — — 250,000 — — 915 — — 915

Issuance of common stock under the Sales Agreement, net of issuance costs — — — — — — 5,805,995 1 — — 12,411 — — 12,412

Issuance of Series A Preferred Stock — — — — 835,011 24,942 — — — — — — — 24,942

Issuance of Class A common shares upon conversion of Class B common shares — — — — — — 2,250,000 — ( 2,250,000 ) — — — — —

Issuance of Class A common shares upon conversion of Series A Preferred Stock — — — — ( 360,006 ) ( 10,755 ) 11,597,654 1 — — 10,754 — — —

Issuance of Class A common shares upon exercise of stock options — — — — — — 3,585,829 — — — 8,506 — — 8,506

Issuance of Class A common shares upon vesting of restricted stock units — — — — — — 7,678,184 — — — — — — —

Issuance of common stock warrants — — — — — — — — — — 4,136 — — 4,136

Issuances of ESPP — — — — — — 478,023 — — — 863 — — 863

Stock-based compensation — — — — — — — — — — 27,931 — — 27,931

Net loss — — — — — — — — — — — — ( 88,937 ) ( 88,937 )

Other comprehensive income — — — — — — — — — — — 199 199

Balances as of December 31, 2023 0 0 0 0 475,005 $ 14,187 216,943,349 22 37,485,408 4 606,135 199 ( 592,379 ) $ 28,168

SOUNDHOUND AI, INC.

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Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Issuance of Class A common shares upon vesting of restricted stock units — — — — — 0 2,516,191 — — — — — — —

Stock-based compensation — — — — — 0 — — — — 28,792 — — 28,792

Net loss — — — — — 0 — — — — — — ( 116,713 ) ( 116,713 )

Balances as of December 31, 2022 — — — — 0 $ — 160,297,664 16 39,735,408 4 466,857 — ( 503,442 ) $ ( 36,565 )

Issuance of common stock under the ELOC program — — — — — — 25,000,000 4 — — 73,762 — — 73,766

ELOC program fee settled in common stock — — — — — — 250,000 — — 915 — — 915

Issuance of common stock under the Sales Agreement — — — — — — 5,805,995 1 — — 12,411 — — 12,412

Issuance of Series A Preferred Stock — — — — 835,011 24,942 — — — — — — — 24,942

Issuance of Class A common shares upon conversion of Class B common shares — — — — — — 2,250,000 — ( 2,250,000 ) — — — — —

Issuance of Class A common shares upon conversion of Series A Preferred Stock ( 360,006 ) ( 10,755 ) 11,597,654 1 — — 10,754 — — —

Issuance of Class A common stock under the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreement, net of issuance costs — — — — — — 85,826,406 9 — — 396,685 — — 396,694

Issuance of Class A common stock upon acquisition of SYNQ3 — — — — — — 5,794,187 1 — 9,875 — — 9,876

Issuance of restricted shares of Class A common stock, subject to repurchase in connection with acquisition of SYNQ3 — — — — — — 2,033,156 — — — — — — —

Issuance of Class A common stock for equity incentive awards — — — — 17,750,154 — — — 29,685 — — 29,685

Issuance of Class A common stock upon conversion of Class B common shares — — — — — — 4,950,000 1 ( 4,950,000 ) ( 1 ) — — — —

Issuance of Class A common stock upon conversion of Series A Preferred Stock — — — — ( 475,005 ) ( 14,187 ) 16,624,215 1 — — 14,186 — — —

Issuance of Class A common stock in connection with the exercise of warrants — — — — — — 2,272,023 — — — 23 — — 23

Issuance of Class A common stock upon acquisition of Amelia — — — — — — 5,959,050 1 — — 23,919 — — 23,920

SOUNDHOUND AI, INC.

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Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount

Issuance of Class A common shares upon exercise of stock options — — — — — — 3,585,829 — — — 8,506 — — 8,506

Issuance of Class A common shares upon vesting of restricted stock units — — — — — — 7,678,184 — — — — — — —

Issuance of common stock warrants — — — — — — — — — — 4,136 — — 4,136

Issuances of ESPP — — — — — — 478,023 — — — 863 — — 863

Issuance of Class A common stock to settle obligations under Amelia Debt — — — — — — 2,943,917 — — — 11,817 — — 11,817

Stock-based compensation — — — — — — — — — — 33,145 — — 33,145

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Change in fair value of derivative and warrant liability — — 606

Amortization of debt issuance costs 5,400 2,287 4,746

Amortization of debt issuance cost 1,621 5,400 2,287

Non-cash lease amortization 2,613 3,346 3,189

Loss on debt extinguishment 837 — —

Loss on early extinguishment of debt 15,629 837 —

Foreign currency gain/loss from remeasurement ( 24 ) 143 —

Change in fair value of contingent acquisition liabilities 222,670 — —

Deferred income taxes ( 12,183 ) 30 2,127

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Accrued liabilities 1,846 4,266 116

Other current liabilities ( 642 ) — —

Operating lease liabilities ( 3,214 ) ( 3,657 ) ( 3,912 )

Deferred revenue ( 6,186 ) ( 4,135 ) ( 7,646 )

Other liabilities 2,131 2,946 ( 1,034 )

Other non-current liabilities ( 415 ) 2,131 2,946

Net cash used in operating activities ( 108,878 ) ( 68,265 ) ( 94,019 )

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Purchases of property and equipment ( 640 ) ( 392 ) ( 1,329 )

Payment related to acquisitions, net of cash acquired ( 11,732 ) — —

Net cash used in investing activities ( 12,372 ) ( 392 ) ( 1,329 )

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Proceeds from the issuance of Series A Preferred Stock, net of issuance costs — 24,942 —

Proceeds from sales of common stock under the ELOC program, net of issuance cost 71,615 — —

Proceeds from sales of common stock under the Sales Agreement 12,412 — —

Proceeds from issuance of debt, net of issuance costs 85,087 — 44,738

Proceeds from sales of Class A common stock under the ELOC program, net of issuance costs — 71,615 —

Proceeds from sales of Class A common stock under the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreement 407,270 12,412 —

Proceeds from exercise of stock options and employee stock purchase plan 29,685 — —

Proceeds from warrants exercised 23 — —

Payment of financing costs associated with the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreement ( 10,357 ) — —

Proceeds from the issuance of debt, net of issuance costs — 85,087 —

Proceeds from the issuance of common stock — 9,369 4,160

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Payments on notes payable ( 215,373 ) ( 35,029 ) ( 11,545 )

Payment to settle contingent holdback liabilities from SYNQ3 and other acquisitions ( 217 ) — —

Payments on finance leases ( 125 ) ( 159 ) ( 1,303 )

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Cash, cash equivalents, and restricted cash equivalents, end of year $ 198,916 $ 109,035 $ 9,475

SOUNDHOUND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — Continued

For the Year Ended December 31, 2024 and 2023

(In thousands)

2024 2023 2022

Reconciliation to amounts on the consolidated balance sheets:

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$ 198,916 $ 109,035 $ 9,475

SOUNDHOUND, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS — Continued

For the Year Ended December 31, 2023 and 2022

(In thousands)

2024 2023 2022

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Noncash investing and financing activities:

Conversion of convertible preferred stock to common stock $ 10,755 $ — $ —

Conversion of Series A Preferred Stock to Class A common stock $ 14,187 $ 10,755 $ —

Debt discount through issuance of common stock warrants $ — $ 4,136 $ —

Issuance of common stock to settle commitment shares related to the ELOC program $ 915

Issuance of Class A Common Stock to settle commitment shares related to the ELOC program $ — $ 915 $ —

Issuance of Class A Common Stock to settle obligations under Amelia Debt $ 11,817 $ — $ —

Issuance of Class A Common Stock to settle contingent holdback consideration of SYNQ3 acquisition $ 189 $ — $ —

Conversion of redeemable convertible preferred stock to common stock pursuant to Business Combination $ — $ — $ 279,503

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Operating lease liabilities arising from obtaining right-of-use assets $ 1,559 $ — $ 650

Operating lease liabilities and right-of-use assets through adoption of ASC 842 $ — $ — $ 11,428

Issues of series C redeemable convertible preferred stock for exercise of warrants $ — $ — $ 5,816

Property and equipment acquired under finance leases or debt $ — $ — $ 584

Deferred offering costs reclassified to additional paid-in capital $ 220 $ — $ —

Fair value of Class A common stock and deferred equity consideration issued to acquire SYNQ3 and Amelia $ 33,606 $ — $ —

Fair value of contingent earnout consideration to acquire SYNQ3 and Amelia $ 67,945 $ — $ —

Fair value of contingent holdback consideration to acquire SYNQ3 $ 570 $ — $ —

Fair value of deferred cash consideration under other acquisition $ 195 $ — $ —

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

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Houndify is an open-access platform that allows developers to leverage SoundHound's Voice AI technology.

We have developed a range of proprietary technologies on our voice AI platform, including Speech-to-Meaning, Deep Meaning Understanding, Collective AI, Dynamic Interaction and SoundHound Chat AI.

The Company has developed a range of proprietary technologies on our voice AI platform, including Speech-to-Meaning, Deep Meaning Understanding, Collective AI, Dynamic Interaction and SoundHound Chat AI.

The SoundHound music app allows customers to identify and play songs by singing or humming into the smartphone’s microphone, or by identifying the sound playing in the background from external sources.

We also provide edge, cloud and hybrid connectivity solutions that allow brands to optimize their voice-enabled products and devices with options ranging from fully-embedded to exclusively cloud-connected.

SoundHound also provides edge, cloud and hybrid (Edge+Cloud) connectivity solutions that allow brands to optimize their voice-enabled products and devices with options ranging from fully-embedded to exclusively cloud-connected.

On April 26, 2022 (the “Closing Date”), pursuant to a merger agreement dated as of November 15, 2021 by and among Archimedes Tech SPAC Partners Co.

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As such, the shares and corresponding capital amounts and loss per share related to Legacy SoundHound Preferred Stock and Legacy SoundHound Common Stock prior to the Business Combination have been retroactively restated as shares reflecting the conversion ratio established in the Business Combination.

On January 3, 2024, the Company completed the acquisition of Synq3, Inc.

("SYNQ3") in a cash and stock transaction.

On June 14, 2024, the Company completed an immaterial acquisition in a cash transaction.

On August 6, 2024, the Company completed the acquisition of Amelia Holdings, Inc.

("Amelia") in a cash and stock transaction.

Refer to Note 3 for additional information.

Going Concern

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Total unrestricted cash and cash equivalents on hand as of December 31, 2024 was $ 198.2 million.

Although the Company has incurred recurring losses each year since its inception, the Company expects it will be able to fund its operations for at least the next twelve months.

Although the Company has incurred recurring losses each year since its inception, the Company expects it will be able to fund its operations for at least the next twelve months from the date these consolidated financial statements are issued.

The Company may seek funding through additional debt or equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing its operations.

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The Company's consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

Other Risk and Uncertainties

Inflation has risen significantly worldwide and the United States has recently experienced historically high levels of inflation.

This inflation and government efforts to combat inflation, such as recent and future significant increases to benchmark interest rates and other related monetary policies, have and could continue to increase market volatility and have an adverse effect on the domestic and international financial markets and general economic conditions.

Additionally, U.S.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine and the Israel-Hamas war.

Although our business has not been materially impacted by the Russia-Ukraine conflict or the Israel-Hamas war, it is impossible to predict the extent to which our operations, or those of our customers’ suppliers and manufacturers, will be impacted in the short and long-term, or the ways in which the conflict may impact our business.

The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict but could be substantial.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

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Principles of Consolidation

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and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE.

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Foreign Currency

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dollars at current exchange rates at the balance sheet date for monetary assets and liabilities and at historical exchange rates for non-monetary assets and liabilities.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized net losses/(gains) related to foreign currency transactions and remeasurements of $ 0.5 million, $ 0.7 million and $ 0.5 million, respectively, in the consolidated statements of operations as other expense, net.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized net losses related to foreign currency transactions and remeasurements of $ 0.7 million, $ 0.5 million and $ 0.7 million, respectively, in the consolidated statements of operations as other expense, net.

Reclassification

Certain accounts in the prior year consolidated financial statements were reclassified to conform with the current year presentation.

The reclassification had an immaterial impact on our consolidated balance sheets, consolidated statements of operations and comprehensive loss and consolidated statements of cash flows in the prior year period.

Use of Estimates

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GAAP requires management to make estimates and judgments that affect the amounts reported and disclosures in the consolidated financial statements and accompanying notes.

Such estimates include revenue recognition, allowance for doubtful accounts, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense.

Such estimates include revenue recognition, allowance for credit losses, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, the accounting for business combinations and allocating purchase price, valuation and estimating the useful life of identifiable intangible assets, probability of achievement of revenue estimates related to contingent earnout consideration and performance-based equity awards, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense.

In connection with the measurement period for the acquisition of SYNQ3 and Amelia, management revised certain significant estimates during the years ended December 31, 2024, which include, but are not limited to, the recognition and measurement of assumed contingent liabilities and deferred and contingent holdback consideration.

The Company bases its estimates on historical experience, the current economic environment, and on assumptions it believes are reasonable under the circumstances.

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Changes in the relevant information may materially affect the estimates of expected credit losses.

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Property and Equipment, Net

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Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the respective assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The estimated useful lives of the Company’s property and equipment are as follows:

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Impairment of Long-Lived Assets

The Company evaluates property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The Company evaluates property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of a specific asset or asset group may not be recoverable.

An impairment loss is recognized when the total of estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

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We amortize our ROU assets as operating lease expense generally on a straight-line basis over the lease term and classify both the lease amortization and imputed interest as operating expenses.

The Company has lease agreements with lease and nonlease components.

The Company elected to not separate lease and nonlease components for its asset class of equipment.

Segment Information

The Company has determined that the Chief Executive Officer is its chief operating decision maker.

The Company’s Chief Executive Officer reviews discrete financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Accordingly, the Company has determined that it operates as a single reportable segment.

The Company has lease agreements with lease and non-lease components.

The Company elected to not separate lease and non-lease components for its asset class of equipment.

Cash and Cash Equivalents

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Changes in fair value for cash equivalents classified as available for sale securities are recorded to other comprehensive loss.

As of December 31, 2023, available-for-sale securities consisted of U.S.

As of December 31, 2024, and 2023, available-for-sale securities consisted of U.S.

treasury bills and government bonds with original maturities of three months or less.

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Restricted Cash

The Company’s restricted cash were established according to the requirements under the Credit Agreement (as defined in Note 9) and leases for the Company’s corporate headquarters, data center and sales office and are subject to certain

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restrictions.

Restricted cash is classified as current or non-current on the consolidated balance sheets based on the expected duration of the restriction.

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The Company regularly monitors its credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss.

As of December 31, 2024, accounts receivable balances due from Customer F accounted for 23 % of the Company’s consolidated accounts receivable balance.

As of December 31, 2023, accounts receivable balances due from Customer A, C and E accounted for 40 %, 32 % and 15 % of the Company’s consolidated accounts receivable balance, respectively.

As of December 31, 2022, accounts receivable balances due from Customer A and C accounted for 49 % and 26 % of the Company’s consolidated accounts receivable balance, respectively.

As of December 31, 2023, unbilled receivables from Customer A, B, and C accounted for 59 %, 16 % and 11 % of the Company’s consolidated unbilled receivables balance, respectively.

As of December 31, 2024, unbilled receivables from Customer A and C accounted for 50 % and 24 % of the Company’s consolidated unbilled receivables balance, respectively.

As of December 31, 2023, unbilled receivables from Customer A, B, and C accounted for 59 %, 16 % and 11 % of the Company’s consolidated unbilled receivables balance, respectively.

For the year ended December 31, 2023, Customer A and B accounted for 49 % and 13 % of the revenue, respectively.

For the year ended December 31, 2024, Customer A accounted for 14 % of revenue.

For the year ended December 31, 2023, Customer A and B accounted for 49 % and 13 % of revenue, respectively.

For the year ended December 31, 2022, Customer A, C and D accounted for 42 %, 13 %, and 12 % of revenue, respectively.

For the year ended December 31, 2021, Customer C, D and F accounted for 12 %, 18 % and 31 % of revenue, respectively.

Common Stock Offerings

The Company enters into certain agreements to sell common stock with counterparties through the Equity Line of Credit ("ELOC") and the Sales Agreement (as defined in Note 13) to further support its growth strategy through initiatives such as accretive acquisitions and internal investments, to bolster working capital, and/or for general corporate purposes.

The Company has entered into certain agreements to sell common stock with counterparties including through the Equity Line of Credit ("ELOC") program and “at-the-market” offering programs pursuant to the Sales Agreement, Equity Distribution Agreement and Execute Equity Distribution Agreements (each as described in Note 14) to further support its growth strategy through initiatives such as accretive acquisitions and internal investments, to bolster working capital, and/or for general corporate purposes.

The Company evaluates its common stock purchase agreements to determine whether they should be accounted for as derivatives with changes in fair value as other income (expense), net in the period in which they occur.

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The Company classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable.

There has been no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2023.

The Company has recorded $ 0.2 million interest expense and penalties related to unrecognized tax benefits through December 31, 2024.

Stock-Based Compensation

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Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities.

Business Combinations and Contingent Consideration

Business combinations are accounted for using the acquisition method.

The Company allocates the fair value of the purchase price of an acquisition to the assets acquired and liabilities assumed, based on their estimated fair values as of the date of acquisition.

The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.

Fair value of the acquired intangible assets was determined using an income approach, specifically the multi-period excess earnings method, relief-from-royalty method, or the with-and-without method, depending on the nature of the respective assets.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but the estimates and assumptions are inherently uncertain and subject to

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The significant judgments and assumptions used in valuing the developed technology include revenue growth rates, prospective financial information for cost of sales, research and development expenses and, other operating expenses, the discount rate, the technological obsolescence rate, and contributory asset charges.

For customer relationships, the significant judgments and assumptions include revenue growth rates, customer attrition rate, prospective financial information for cost of sales and fixed and variable operating expenses and the discount rate.

These estimates are inherently uncertain and, therefore, actual results may differ from the estimates made.

As a result, during the measurement period of up to one year from the acquisition date, the Company may make adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the measurement period's conclusion or final determination of the fair value of the purchase price of an acquisition, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations in the period they are identified.

Acquisition-related expenses are recognized separately from the business combination and expensed as incurred.

Certain business combinations include contingent consideration arrangements, which are generally based on achievement of future financial performance or future events.

If it is determined the contingent consideration arrangement is not compensatory, the Company estimates fair value of contingent consideration payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability in the consolidated balance sheet.

The Company reviews and assesses the estimated fair value of contingent consideration each reporting period, and the updated fair value could differ materially from the initial estimates.

Adjustments to estimated fair value related to changes in fair value are reported as change in fair value of contingent acquisition liabilities in our consolidated statements of operations.

Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired.

Goodwill is not amortized but tested annually for impairment or when indicators of impairment are present.

The test for goodwill impairment involves a qualitative assessment of impairment indicators.

If indicators are present, a quantitative test of impairment is performed.

Goodwill impairment, if any, is determined by comparing the reporting unit’s fair value to its carrying value.

An impairment loss is recognized in an amount equal to the excess of the reporting unit’s carrying value over its fair value, up to the amount of goodwill allocated to the reporting unit.

The Company's policy is to review goodwill for impairment annually on October 1st unless a triggering event requires an analysis sooner.

There was no goodwill impairment in any of the periods presented.

Intangible Assets with Definite Lives

The Company's intangible assets consist principally of developed technology, customer relationships, tradename, and conversation data.

The Company assesses the appropriate method of amortization of the intangible assets that reflects the pattern in which the economic benefits of the intangible assets are consumed.

The Company determined that a straight-line method of amortization was appropriate for its intangible assets.

The remaining useful lives of long-lived assets are re-assessed periodically at the asset group level for any events and circumstances that may change the future cash flows expected to be generated from the long-lived asset or asset group.

Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate the carrying value of a specific asset or asset group may not be recoverable.

We assess the recoverability of intangible assets with definite lives at the asset group level.

Asset groups are determined based upon the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

For the purpose of the recoverability test, we compare the total undiscounted future cash flows from the use and disposition of the assets with its net carrying amount.

When the carrying value of the asset group exceeds the undiscounted future cash flows, the asset group is deemed to be impaired.

The amount of the impairment loss represents the excess of the asset or asset group’s carrying value over its estimated fair value, which is generally determined based upon the present value of estimated future pre-tax cash flows that a market participant would expect from use and disposition of the long-lived asset or asset group.

There were no intangible asset impairments in any of the periods presented.

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Recent Accounting Pronouncements — Adopted

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Where it is determined that a new accounting pronouncement will result in a change to the Company's financial reporting, the Company takes the appropriate steps to ensure that such changes are properly reflected in the consolidated financial statements or notes thereto.

In June 2016, the FASB issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”).

This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity

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debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments.

This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates.

The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (“Topic 326”), Targeted Transition Relief, which amends the transition guidance for ASU 2016-13.

The ASU provides entities with the option to irrevocably elect the fair value option in Subtopic 825-10 on an instrument-by-instrument basis.

ASU 2019-10 and ASU 2016-13 are effective for years beginning after December 15, 2022, with early adoption permitted.

The Company adopted the standard on January 1, 2023.

ASU 2016-13 did not result in any material impact on the Company's consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures," ("ASU 2023-07") which expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses.

This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

Early adoption is permitted.

The Company adopted the standard during the year ended December 31, 2024.

See Note 21 to our consolidated financial statements included within this report for more information on the increased disclosure for the Company's single reportable segment.

Recent Accounting Pronouncements — Not Yet Adopted

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-07, Segment Reporting, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The updated standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

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The Company is currently evaluating the impact that the updated standard will have on the financial statement disclosures.

BUSINESS COMBINATION

BUSINESS COMBINATIONS

As discussed in Note 1, on April 26, 2022, the Business Combination was consummated.

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The value of the shares is calculated as of two (2) business days prior to the date of the Special Meeting, which was $ 10.00 per share, or $ 127.7 million in the aggregate.

As a result of the Business Combination, among other things (1) all outstanding shares of Legacy SoundHound Common Stock as of immediately prior to the Closing (including Legacy SoundHound Common Stock resulting from the Legacy SoundHound Preferred Stock Conversion), were exchanged at an conversion ratio of 5.5562 (the “Conversion Ratio”) for an aggregate of 140,114,060 shares of Class A Common Stock and 40,396,600 Class B

(2) each outstanding warrant to purchase shares of Legacy SoundHound Common Stock automatically converted into a warrant to purchase, subject to substantially the same terms and conditions as were applicable under these warrants prior to the Effective Time, shares of Class A Common Stock, proportionately adjusted for the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective

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Common Stock;

Time divided by the Conversion Ratio and were net exercised upon the Closing;

(3) each outstanding option to purchase shares of Legacy SoundHound Common Stock converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under these options prior to the Effective Time, shares of Class A Common Stock equal to the number of shares subject to such option prior to the Effective Time multiplied by the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Conversion Ratio;

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The amount recorded to additional paid-in-capital was comprised of $ 86.6 million net proceeds from the PIPE investment and $ 4.1 million after net redemptions of ATSP shareholders.

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The number of shares of common stock issued immediately following the consummation of the Business Combination was as follows:

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Total shares of common stock immediately after Business Combination 196,503,710

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SYNQ3 Acquisition

On January 3, 2024 (the "SYNQ3 Acquisition Date"), the Company acquired all of the issued and outstanding equity of SYNQ3, a provider of voice AI and other technology solutions to the restaurant industry, for total purchase consideration of $ 15.8 million (the “SYNQ3 Acquisition”).

The Company’s acquisition of SYNQ3 is expected to expand its AI customer service solutions and create a Voice AI provider for restaurants.

The acquisition is expected to significantly extend the Company's market reach and accelerate the deployment of generative AI capabilities to the industry.

The total purchase consideration includes $ 3.9 million in cash paid and 5,755,910 in shares of the Company’s Class A Common Stock.

The Company has also withheld purchase consideration of $ 0.5 million in cash and 1,179,514 shares of the Company’s Class A Common Stock, subject to customary net working capital adjustments, to partially secure the indemnification obligations of SYNQ3's former stockholders under the merger agreement and agreed to pay up to $ 0.8 million in cash and 1,434,936 in shares of the Company’s Class A Common Stock to certain former stockholders of SYNQ3 based upon the achievement of specified future milestones.

On the SYNQ3 Acquisition Date, the Company also issued 2,033,156 restricted shares of the Company’s Class A Common Stock subject to time and performance-based vesting conditions.

The fair value of the purchase consideration was $ 15.8 million.

The $ 0.5 million in cash and 1,179,514 shares of the Company's Class A Common Stock is being withheld for a period of 15 months (the "Holdback Amount").

The Company determined that there are two components to the Holdback Amount related to deferred consideration and contingent consideration, each comprised of cash and shares.

The deferred cash holdback consideration of $ 0.1 million and the deferred share holdback consideration of 361,145 shares of the Company's Class A Common Stock (collectively the "Deferred Consideration") were not recognized as of the SYNQ3 Acquisition Date as such amounts were offset by the indemnification obligations of SYNQ3's former stockholders.

The contingent cash and share holdback consideration to be issued is variable ("Contingent Holdback Consideration").

Final amounts to be issued will be reduced based upon future actions and settlements with third parties to resolve assumed contingent sales tax liabilities and certain other assumed contingent liabilities of SYNQ3 in connection with the SYNQ3 Acquisition.

The Company accounted for the Contingent Holdback Consideration as a liability on the consolidated balance sheet.

As of the SYNQ3 Acquisition Date, the Contingent Holdback Consideration was estimated to be $ 0.6 million in aggregate and to be settled in $ 0.1 million cash and the remainder in shares of the Company’s Class A Common Stock.

During the year ended December 31, 2024, the Company issued 38,277 shares of the Company’s Class A Common Stock and paid an immaterial amount in cash from the Contingent Holdback Consideration to SYNQ3's former stockholders as a result of the net working capital adjustments settled during the year.

The Contingent Holdback Consideration will be subsequently remeasured at each reporting date with changes in fair value recognized as a component of operating expense on the Company’s consolidated statement of operations and comprehensive loss.

See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of shares associated with the holdback.

Contingent SYNQ3 Earnout Consideration

The Company also agreed to pay in aggregate up to $ 0.8 million in cash and 1,434,936 in shares of Class A Common Stock to certain stockholders of SYNQ3 based on tiered annual revenue targets for each fiscal year 2024, 2025 and 2026 (the “Contingent SYNQ3 Earnout Consideration”).

The Company accounted for the Contingent SYNQ3 Earnout Consideration as a liability within contingent acquisition liabilities on the Company's consolidated balance sheets and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in the Company’s consolidated statement of operations and comprehensive loss.

As of the SYNQ3 Acquisition Date, the Contingent SYNQ3 Earnout Consideration was estimated to be $ 1.7 million in aggregate and to be settled in $ 0.2 million cash and the remainder in shares of the Company’s Class A Common Stock.

See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of Contingent SYNQ3 Earnout Consideration.

As of December 31, 2024, the 2024 revenue target was

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not met but the Company assessed the 2025 and 2026 revenue target were probable of being met, and no earnout consideration was issued during the year ended December 31, 2024.

Restricted stock awards

The 2,033,156 restricted shares of the Company's Class A Common Stock issued at the SYNQ3 Acquisition Date to certain continuing employees of SYNQ3 subject to time and performance-based vesting conditions was determined to be a separate transaction from the SYNQ3 Acquisition and therefore is excluded from purchase consideration.

See Note 15 to our consolidated financial statements included within this report for more information on stock-based awards issued in connection with the SYNQ3 Acquisition.

Purchase price allocation

The purchase price allocation was performed as of January 3, 2024 and allocated to the assets acquired and liabilities assumed based on their respective fair values, as follows (in thousands):

January 3, 2024

Cash paid $ 3,910

Equity consideration 9,687

Contingent earnout consideration 1,676

Contingent holdback consideration 570

Purchase price 15,843

Assets acquired:

Accounts receivable 1,500

Prepaid expenses 72

Intangible assets 12,705

Total identified assets acquired 14,498

Liabilities assumed:

Accounts payable 440

Accrued liabilities 3,427

Other non-current liabilities 750

Deferred tax liability 38

Total liabilities assumed 4,655

Fair value of identifiable net assets acquired $ 9,843

Goodwill acquired on acquisition $ 6,000

Goodwill recognized includes synergies expected to be achieved from the operations of the combined company and intangible assets that do not qualify for separate recognition.

Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems.

The transaction is considered a non-taxable business combination, and goodwill is not deductible for tax purposes.

During the year ended December 31, 2024, the Company recorded measurement period adjustments to decrease the deferred revenue by $ 0.1 million as the revenue recognition criteria had been met at the acquisition date, to increase

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the accrued liabilities by $ 1.8 million resulting from a pre-acquisition legal settlement, and to decrease the deferred tax liability assumed by $ 0.2 million.

Refer to Note 8 to these consolidated financial statements for more information on the legal proceedings.

These measurement period adjustments resulted in a decrease of $ 0.1 million in deferred cash consideration, $ 0.6 million in deferred equity consideration, and $ 0.4 million in contingent holdback consideration in accordance with the merger agreement.

As a result of the adjusted acquisition-date fair value of assets acquired and liabilities assumed, the Company recorded an increase of $ 0.2 million to the goodwill recognized.

The measurement period adjustments were recorded in the consolidated financial statements as of and for the year ended December 31, 2024 and were made to reflect facts and circumstances that existed as of the SYNQ3 Acquisition Date.

The purchase price allocation has been finalized as of December 31, 2024.

The following table summarizes the fair values of the identifiable intangible assets acquired (in thousands):

Intangible Assets:

January 3, 2024

Developed technology 3.0 $ 5,210

Customer relationships 4.0 4,800

Tradename 2.0 1,410

Conversation data 2.5 1,285

The Company incurred $ 2.1 million in acquisition related expenses, of which $ 1.0 million was incurred during the year ended December 31, 2024 and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.

Amelia Acquisition

On August 6, 2024 (the “Amelia Acquisition Date”), the Company acquired all of the issued and outstanding equity of Amelia Holdings, Inc.

(the “Amelia Acquisition”), a privately-held conversational AI software company involved in the development and delivery of AI and automation solutions and related services to improve customer experience and optimize business outcomes.

The Company’s acquisition of Amelia is expected to strengthen SoundHound’s position in voice and conversational AI and allow the Company to enter new industries such as healthcare, insurance, financial services, energy and retail, expanding its market reach.

The total preliminary purchase consideration includes 3,809,520 shares of the Company's Class A Common Stock issued to the selling shareholders.

The Company also issued and deposited 2,149,530 shares of Class A Common Stock otherwise owed to the selling shareholders into an escrow account in order to partially secure the indemnification obligations of the selling shareholders to the Company under the purchase agreement (the “Escrow Consideration”).

The fair value of equity issued as part of the consideration paid was determined on the basis of the closing market price of the Company’s shares on the Amelia Acquisition Date, which also incorporated a discount for lack of marketability rates caused by the trading restrictions due to the fact that the shares were not registered at issuance for a six-month holding period.

The Company also paid $ 8.4 million of cash for seller transaction expenses in connection with the closing of the Amelia Acquisition.

The Company agreed to issue up to 16,822,429 shares to the

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selling shareholders based on achievement of certain revenue targets in fiscal years 2025 and 2026 (the "Amelia Contingent Earnout Consideration).

The fair value of the preliminary purchase consideration was $ 98.6 million.

In connection with the Amelia Acquisition, the Company assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $ 121.5 million (“Amelia Debt”).

See Note 10 to our consolidated financial statements included within this report for more information on the Amelia Debt.

Escrow Consideration

The Company accounted for the Escrow Consideration as equity-classified shares issued as part of the consideration transferred.

The Company recorded an indemnification asset of $ 1.4 million under other non-current assets related to assumed sales tax and litigation contingent liabilities that existed prior to the Amelia Acquisition Date and are covered by the Company’s indemnification rights provided by the sellers.

Upon the settlement of any valid indemnification claims against the selling shareholders, the escrow agent will return a number of shares to the Company equal to the dollar value of the indemnified loss divided by the reference price of $ 5.35 as stipulated in the purchase agreement.

The Company concluded that this variability in settlement value is a derivative that is required to be remeasured to fair value due to changes in stock price.

This derivative did not have a material impact to the financial statements for the year ended December 31, 2024.

Upon the expiration of the escrow period, any remaining shares within the escrow account will be released to the selling shareholders.

Contingent Amelia Earnout Consideration

The Company also agreed to pay up to 16,822,429 in shares of Class A Common Stock to the selling shareholders based on achievement of certain annual revenue targets in fiscal years 2025 and 2026.

The Company accounted for the Contingent Amelia Earnout Consideration as a liability within contingent acquisition liabilities on the Company's consolidated balance sheets and will subsequently remeasure the liability at each reporting date with changes in fair value recognized as a component of operating expense in the Company’s consolidated statement of operations and comprehensive loss.

As of the Amelia Acquisition Date, the Contingent Amelia Earnout Consideration had an estimated fair value of $ 66.3 million.

For the year ended December 31, 2024, the Company recognized a $ 211.9 million loss related to the Contingent Amelia Earnout Consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.

See Note 12 to our consolidated financial statements included within this report for more information on the fair value measurement of Contingent Amelia Earnout Consideration.

As of December 31, 2024, the Company assessed the 2025 and 2026 revenue target were probable of being met.

Preliminary purchase price allocation

The preliminary purchase price allocation was performed as of August 6, 2024 and allocated to the assets acquired and liabilities assumed based on their respective fair values, as follows (in thousands):

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

August 6, 2024

Cash paid $ 8,420

Equity consideration 15,291

Equity consideration in escrow 8,628

Contingent earnout consideration 66,269

Purchase price 98,608

Assets acquired:

Cash and cash equivalents 1,128

Accounts receivable 8,075

Other current assets 1,822

Contract asset - current 4,090

Property and equipment 348

Right-of-use assets 227

Other assets 1,741

Intangible assets 174,500

Total identified assets acquired 191,931

Liabilities assumed:

Accounts payable 11,112

Accrued liabilities 11,048

Income tax liabilities 582

Short-term debt 70,000

Operating lease liability, current 211

Financing lease liability, current 37

Other current liabilities 3,885

Deferred revenue 23,408

Deferred revenue, non-current 4,295

Long-term debt 51,511

Deferred tax liabilities 11,820

Operating lease liability, non-current 16

Other liabilities, non-current 34

Income tax liability, net of current portion 1,068

Total liabilities assumed 189,027

Fair value of identifiable net assets accquired $ 2,904

Goodwill acquired on acquisition $ 95,704

Goodwill recognized includes synergies expected to be achieved from the operations of the combined company and intangible assets that do not qualify for separate recognition.

Expected synergies include both increased revenue opportunities and the cost savings from the planned integration of platform infrastructure, facilities, personnel, and systems.

The transaction is considered a non-taxable business combination, and goodwill is not deductible for tax purposes.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the year ended December 31, 2024, the Company recorded measurement period adjustments to increase the cash consideration by $ 12.8 thousand, to decrease the accounts receivable by $ 0.2 million, increase the accrued liabilities by $ 0.9 million due to additional payroll taxes identified, to decrease the non-current income tax liabilities by $ 1.8 million due to the change of pre-acquisition tax exposures subsequent to the acquisition.

As a result of the adjusted acquisition-date fair value of cash consideration, assets acquired and liabilities assumed, the Company recorded a decrease of $ 0.7 million to the goodwill recognized.

In addition to the measurement period adjustments, the Company also recorded adjustments to correct certain errors in the preliminary purchase price allocation that existed as of the acquisition date during the year ended December 31, 2024, which decreased the contingent earnout consideration by $ 5.3 million, decreased the accounts payable by $ 3.7 million, decreased the accrued liabilities by $ 1.2 million, increased deferred revenue by $ 0.3 million and increased the deferred tax liabilities by $ 0.7 million.

As a result of the adjusted acquisition-date fair value of contingent earnout consideration recognized and liabilities assumed, the Company recorded a decrease of $ 9.3 million to the goodwill recognized.

The identified error related to the contingent earnout consideration had an immaterial impact to the change in fair value from the acquisition date through September 30, 2024, which would have been recorded in change in fair value of contingent acquisition liabilities in the consolidated statements of operations and comprehensive loss.

The preliminary purchase price allocation has not been finalized as of December 31, 2024 primarily due to the final assessment of the fair values of the intangible assets, contingent tax liability assumed, and fair value of the contingent earnout consideration.

The fair value estimates of assets acquired and liabilities assumed is pending the completion of various items, including obtaining further information regarding the identification and valuation of all assets acquired and liabilities assumed.

Any adjustments to the estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date.

The Company expects to finalize the purchase price allocation within 12 months from the Amelia Acquisition Date.

The following table summari zes the preliminary fair values of the identifiable intangible assets acquired (in thousands) :

Useful life Preliminary fair value

Intangible Assets:

(in years) at acquisition

Developed technology 7.0 $ 98,900

Customer relationships 7.0 68,600

Trade names 5.0 7,000

The Company incurred $ 5.8 million in acquisition related expenses, all of which was incurred during the year ended December 31, 2024 and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.

Unaudited pro forma financial information

The financial results of SYNQ3 and Amelia are included in these consolidated financial statements from the date of the acquisition.

SYNQ3 contributed revenue of $ 12.0 million and net loss of $ 7.5 million to the Company for the year ended December 31, 2024.

Amelia contributed revenue of $ 42.0 million and net loss of $ 8.5 million to the Company for the year ended December 31, 2024.

The following table includes unaudited pro forma financial information that presents combined results of the Company as if the business combinations were completed on January 1, 2023, the beginning of the comparable prior annual reporting period.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2024 December 31, 2023

Revenue $ 143,498 $ 153,586

Net loss attributable to SoundHound AI, Inc.

$ ( 374,469 ) $ ( 158,339 )

The unaudited pro forma financial information includes the combined historical operating results of the Company, SYNQ3 and Amelia prior to the acquisitions, with adjustments to give effect for the acquisitions and related events.

Pro forma adjustments have been made to reflect the incremental intangible asset amortization to be incurred based on the fair values and useful lives of each identifiable intangible asset, incremental stock-based compensation related to inducement equity awards, incremental transaction costs related to the acquisitions, adjustments to interest expense related to previously outstanding debt held by the acquired entities, elimination of amortization expense related to previously recognized goodwill held by SYNQ3, and the related tax effects of pro forma adjustments for the period.

Given the paydown of Amelia Debt occurred in December 2024, which was shortly after the Amelia Acquisition Date, the interest expenses from Amelia Debt were excluded from the unaudited pro forma financial information.

These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

The unaudited pro forma results are based on the preliminary purchase price allocation and will be updated to reflect the final amounts as the allocation is finalized during the measurement period.

The Company did not have any material nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.

Other Acquisition

On June 14, 2024, the Company completed an immaterial acquisition for total preliminary purchase consideration of $ 1.0 million.

As part of the acquisition, the Company acquired net assets of $ 2.2 million, including intangible assets of $ 2.6 million, and recognized a preliminary gain on bargain purchase of $ 1.2 million within other income (expense) , net in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2024, resulting from a favorable fair value of identifiable net assets acquired at the date of acquisition as compared with the Company’s purchase price.

The Company was able to negotiate a bargain purchase price as a result of the recurring losses and pre-filing bankruptcy status of the selling entity.

The preliminary purchase price allocation has not been finalized as of December 31, 2024 primarily due to the final assessment of the fair values of the intangible assets.

The Company expects to finalize the purchase price allocation within 12 months from the acquisition date.

The following table s ummarizes the preliminary fair values of the identifiable intangible assets acquired (in thousands) :

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Useful life Fair value

Intangible Assets:

(in years) at acquisition

Developed technology 3.0 $ 1,530

Customer relationships 3.0 960

Tradename 3.0 60

The Company incurred $ 0.1 million in acquisition related expenses during the year ended December 31, 2024, and recorded as general and administration expenses in its consolidated statements of operations and comprehensive loss.

The financial results of the acquired entity are included in these consolidated financial statements from the date of the acquisition, and are immaterial.

The Company has not separately presented unaudited pro forma results of operations reflecting the acquisition or revenue and operating losses of the acquired entity for the period from acquisition date to December 31, 2024 as the impacts were not material to the consolidated financial statements.

REVENUE RECOGNITION

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The Company’s arrangements with customers may contain multiple obligations.

Individual services are accounted for separately if they are distinct — that is, if a service is separately identifiable from other items in the contract and a customer can benefit from it in its own or with other resources that are readily available to the customer.

Individual services are accounted for separately if they are distinct — that is, if a customer can benefit from it on its own or with other resources that are readily available to the customer and if the service is separately identifiable from other items in the contract.

The Company derives its revenue primarily from the following performance obligations:

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Hosted Services

Hosted services, along with non-distinct customization, integration, maintenance and support professional services, allow customers to access the Houndify platform over the contract period without taking possession of the software.

The contract terms of hosted services range from one year to twenty years.

Hosted services, along with non-distinct customization, integration, maintenance and support professional services, allow customers to access the Houndify and Amelia Software Platform over the contract period without taking possession of the software.

The Company has determined that the hosted services arrangements are a single performance obligation comprised of a series of distinct services, since each day of providing access to hosted services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided.

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The Company recognizes revenue as each distinct service period is performed.

Hosted services generally include up-front services to develop and/or customize the Houndify application to each customer’s specification.

Hosted services may include up-front services to develop and/or customize the applications to each customer’s specification.

Judgement is required to determine whether these professional services are distinct from the hosted services.

In making this determination, factors such as the degree of integration, the customers’ ability to start using the software prior to customization, and the availability of these services from other independent vendors are considered.

In instances where the Company concluded that the up-front services are not distinct performance obligations, revenues for these activities are recognized over the period which the hosted services are provided and is included within hosted services revenue.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All revenues derived as a result of the SYNQ3 Acquisition, and substantial revenues derived as a result of the Amelia Acquisition are categorized as hosted service revenue.

Professional Services

Revenues from distinct professional services, such as non-integrated development services, are either recognized over time based upon the progress towards completion of the project, or at a point in time at project completion.

Revenues from distinct professional services, such as non-integrated development services and other professional services, are either recognized over time based upon the progress towards completion of the project, or at a point in time at project completion.

The Company assesses distinct professional services to determine whether the transfer of control is over-time or at a point in time.

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If none of the criteria are met, revenues are determined to be recognized at a point in time.

For distinct professional services determined to be recognized over-time, measuring the stage of completion of a project requires significant judgement and estimates and is based on input and output measures.

During the year ended December 31, 2024, $ 9.4 million of professional service revenue was recognized over time, with the remaining $ 0.1 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer.

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Monetization revenues are primarily derived from advertising payments associated with ad impressions placed on the SoundHound music identification application.

The Company derives an immaterial amount of revenue from sales commissions earned from song purchases facilitated by the SoundHound app and App store fees paid for ads-free downloads of the SoundHound music identification app.

The amount of revenue is based on actual monetization generated or usage, which represent a variable consideration with constrained estimates.

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Based on these factors, the Company reports revenue on a net basis.

The Company licenses voice solutions that are embedded in customer's products.

The Company licenses voice and Amelia's software solutions that are embedded in customer's products or services.

Licensing revenues are a distinct performance obligation that is recognized when control is transferred to the customer, which is at a point in time for non-customized solutions.

For licenses with non-distinct customized solutions, revenues are recognized over time based on the progress towards completion of the customized solution.

Revenues generated from licensing are based on royalty models with a combination of minimum guarantees and per unit pricing.

Royalty periods are generally subsequent to when control of the license passes to the customer.

The Company records licensing revenue as a usage-based royalty from customers’ usage of intellectual property in the same period in which the underlying sale occurs.

For royalty arrangements that include fixed considerations related to a minimum guarantee from a customer, the fixed consideration allocated to the license is recognized when the control of the license passes to the customer.

The Company provides assurance-type warranty services and to date, post-contract support has been an immaterial performance obligation within the context of the contract.

Revenues generated from licensing are on royalty arrangements with a per unit pricing or on fixed considerations.

The Company records licensing revenue relating to usage-based royalty arrangements in the same period in which the underlying usage occurs.

Licensing revenue on fixed considerations including fixed fee and a minimum guarantee from royalty arrangements are recognized when the Company grants the customer the right to use and benefit from the license at the start of the licensing period.

Licenses may include post-contract support, which is a distinct performance obligation and revenue from post- contract support is recognized ratably over the licensing period.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

When a contract has multiple performance obligations, the transaction price is allocated to each performance obligation based on its relative estimated standalone selling price (“SSP”).

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SSP is determined by maximizing observable inputs from pricing of standalone sales, when possible.

Since prices vary from customer to customer based on customer relationship, volume

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

discount and contract type, in instances where the SSP is not directly observable, the Company estimates SSP by considering the following factors:

Since prices vary from customer to customer based on customer relationship, volume discount and contract type, in instances where the SSP is not directly observable, the Company estimates SSP by considering the following factors:

• Costs of developing and supplying each performance obligation;

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If the facts and circumstances underlying the factors considered change or should future facts and circumstances lead the Company to consider additional factors, the Company’s best estimate of SSP may also change.

The Company's long-term contracts do not have significant financing components, as there is generally payment and performance in each year of the contract.

When such observable data is not available because there is a limited number of transactions or prices are highly variable, the Company will estimate the standalone selling price using the residual approach.

The Company's long-term contracts generally do not have significant financing components, as there is normally payment and performance in each year of the contract.

The Company has elected the practical expedient to not adjust promised amounts of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

If there is a period of one year or longer between the transfer of promised services and payment, it is generally for reasons other than financing, thus, the Company does not adjust the transaction price for financing components.

In the limited cases where a significant financing component is present, the Company adjusts the promised consideration for the effects of a significant financing component and to recognize revenue to approximate an amount that reflects the cash selling price that a customer would have paid for the promised goods or services.

For the years ended December 31, 2024, 2023 and 2022, revenue under each performance obligation was as follows (in thousands):

1 unchanged sentence

2024 2023 2022

Licensing $ 18,600 $ 8,322 $ —

Hosted services $ 57,246 $ 18,364 $ 17,743

Licensing 17,577 18,600 8,322

Professional services 9,488 8,275 4,220

6 unchanged sentences

2024 2023 2022

Korea $ 22,962 $ 14,530 $ 2,460

United States $ 46,751 $ 6,769 $ 3,344

Germany 5,950 4,134 7,526

Korea 12,289 22,962 14,530

France 8,756 4,090 4,023

Japan 3,908 3,707 3,866

Germany 196 5,950 4,134

Other 12,793 2,395 1,232

2 unchanged sentences

The end customer location may be different than the customer's billing location.

F or the years ended December 31, 2023, 2022 and 2021, the disaggregated revenue by recognition pattern was as follows (in thousands):

The ‘Other’ category is composed of geographic regions with sales less than 10% of the consolidated revenue.

For the years ended December 31, 2024, 2023 and 2022, the disaggregated revenue by recognition pattern was as follows (in thousands):

Year Ended December 31,

7 unchanged sentences

Revenues from Product Royalties are based on volume, usage, or life of the products, which are driven by number of devices, users, or unit of time.

Service Subscription revenues are generated through Houndified Services, which include customer services, food ordering, content, appointments, and voice commerce.

Subscription revenues are derived from monthly fees based on usage-based revenue, revenue per query or revenue per user.

Both Houndified Products and Houndified Services may include professional services that develop and customize the Houndify platform to fit customers’ specific needs.

Service Subscription revenues are generated through Houndified Services and Amelia services, which include customer services, food ordering, content, appointments and voice commerce, autonomous business workflows, and IT systems analysis.

Subscription revenues are derived from monthly fees based on fixed fees, usage-based revenue, revenue per query or revenue per user.

Houndified Products, Houndified Services, and Amelia services may include professional services that develop and customize the Houndify platform and Amelia Software Platform to fit customers’ specific needs, and any post-contract support for on-premise solutions.

Revenues from Monetization are generated from the SoundHound music identification app and are primarily attributable to user ad impression revenue.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 31, 2024, 2023 and 2022, the disaggregated revenue by service type was as follows (in thousands):

1 unchanged sentence

2024 2023 2022

Product royalties $ 43,299 $ 28,447 $ 18,356

Service subscriptions $ 56,347 $ 1,940 $ 1,838

Product royalties 27,964 43,299 28,447

Monetization 382 634 844

Total $ 84,693 $ 45,873 $ 31,129

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract Balances

1 unchanged sentence

The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset or deferred revenue.

As of December 31, 2021, accounts receivable, net of allowances, were $ 2.1 million, contract assets were $ 54 thousand and deferred revenue was $ 21.0 million.

During the year ended December 31, 2022, $ 7.6 million of licensing revenue was recognized from the Company's Houndify Edge solution, which was delivered to a customer during the second half of 2022, related to minimum guarantee units to be utilized over the life of the contract and resulted in a corresponding increase in the contract assets balance.

During the year ended December 31, 2023, the Company and the same customer modified the minimum guarantee units in an existing contract in the ordinary course of business.

The Company accounted for a contract modification prospectively resulting in an increase to net revenue in the amount of $ 10.4 million during the year ended December 31, 2023, with corresponding increases in contract asset balances.

Additionally, during the year ended December 31, 2023, the Company recognized $ 3.6 million of licensing revenue related to right-to-use licenses for a new contract in 2023, where delivery occurred and total consideration was fixed.

As of January 1, 2023, accounts receivable, net of allowances, was $ 3.4 million, contract assets, net of allowances, were $ 8.7 million and deferred revenue was $ 13.4 million.

The contract asset and unbilled accounts receivable, net as of December 31, 2024 and December 31, 2023 consists of the following (in thousands):

Balance Sheet Presentation December 31,

2024 December 31,

Unbilled account receivables - current Contract assets and unbilled receivables, net of allowance for credit losses $ 13,441 $ 5,138

Contract assets - current Contract assets and unbilled receivables, net of allowance for credit losses 13,204 6,642

Unbilled account receivables - non-current Contract assets and unbilled receivables, non-current, net of allowance for credit losses 922 —

Contract assets - non-current Contract assets and unbilled receivables, non-current, net of allowance for credit losses 11,957 16,492

The Company has not recorded any asset impairment charges related to contract assets during the periods presented in the consolidated financial statements.

The balance of contract assets for the years ended December 31, 2023 and 2022 includes $ 5.1 million and $ 3.5 million, respectively, of unbilled receivables which represents amounts for which the Company has an unconditional right to bill the customer.

Revenues recognized included in the balances of the deferred revenue at the beginning of the reporting period for the years ended December 31, 2024, 2023 and 2022 were $ 5.1 million, $ 7.9 million and $ 6.4 million, respectively.

4 unchanged sentences

The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to scope, changes in timing of delivery of products and services, or contract modifications.

Research and Development

The Company’s research and development costs are expensed as incurred.

These costs include salaries and other personnel related expenses, contractor fees, facility costs, supplies, and depreciation of equipment associated with the design and development of new software products prior to the establishment of technological feasibility.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

GOODWILL AND INTANGIBLE ASSETS

The change in the carrying value of goodwill including the effect of measurement period adjustments for the year ended December 31, 2024, was as follows (in thousands):

Balance as of December 31, 2023 $ —

Acquisition of SYNQ3 6,000

Acquisition of Amelia $ 95,704

Balance as of December 31, 2024 $ 101,704

The Company has applied the acquisition method of accounting in accordance with ASC 805 and recognized assets acquired and liabilities assumed of SYNQ3 and Amelia at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill.

As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments to the amount of goodwill may be necessary.

Refer to Note 3 for further information on the measurement period adjustments of SYNQ3 and Amelia Acquisitions.

Intangible Assets

The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):

December 31, 2024

Gross Carrying Value Accumulated Amortization Net Carrying Value

Developed technology 3.0 - 7.0

$ 105,640 $ 7,696 $ 97,944

Customer relationships 3.0 - 7.0

74,360 5,322 69,038

Tradename 2.0 - 5.0

8,470 1,280 7,190

Conversation data 2.5 1,285 514 771

Total $ 189,755 $ 14,812 $ 174,943

Amortization expense of intangible assets was $ 14.8 million for the year ended December 31, 2024.

This expense was recorded as $ 7.7 million within cost of revenues for the year ended December 31, 2024.

There was no amortization expense during the year ended December 31, 2023.

Future amortization expense of intangible assets held as of December 31, 2024, is as follows (in thousands):

Year ending December 31,

2025 $ 30,334

Thereafter $ 38,155

Total $ 174,943

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

PROPERTY AND EQUIPMENT, NET

16 unchanged sentences

Accrued lender fees — 2,603

Accrued ELOC liability — 1,075

Accrued interest — 236

Accrued litigation liabilities 1,750 —

Other accrued liabilities 551 528

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In August 2021, the Company entered into an exclusive agreement with a cloud service provider to host its voice artificial intelligence platform pursuant to which the Company committed to pay a minimum of $ 98.0 million in cloud costs over a seven-year period subject to variable increases based on usage.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Aggregate non-cancelable future minimum payments were as follows as of December 31, 2024 (in thousands):

Total $ 78,000

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Legal Proceedings

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The Company accrues contingent liabilities when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

In the opinion of management, there are no pending claims for which the outcome is expected to result in a material adverse effect on the financial position, results of operations or cash flows of the Company.

Prior to the SYNQ3 Acquisition, SYNQ3 filed a litigation against its landlord, TEBO in the United States District Court of Colorado, and TEBO counterclaimed in May 2022.

On June 2, 2022, the District Court entered a judgment that was in favor of SYNQ3.

TEBO filed the notice of appeal in July, 2023.

On June 27, 2024, the Colorado Court of Appeals reversed the judgment and remanded the case to the District Court to enter judgment in favor of TEBO on both SYNQ3’s claim and TEBO’s counterclaim and to conduct further proceedings as are necessary to determine the damages, attorney fees and costs, if any, to be awarded to TEBO.

On January 15, 2025, the Company entered a Settlement Agreement with TEBO.

The Settlement Agreement requires SYNQ3 to pay $ 1.8 million to TEBO in January 2025 to resolve all matters related to the litigation and dispute.

Therefore, the Company recorded a liability of $ 1.8 million under accrued liabilities as of December 31, 2024.

Other Matters

The Company has not historically collected U.S.

state or local sales and use tax, or other similar taxes, in any jurisdiction.

On June 21, 2018, the U.S.

Supreme Court decided, in South Dakota v.

Wayfair, Inc.

, that state and local jurisdiction may, in certain circumstances, enforce sales and use tax collection obligations on remote vendors that have no physical presence in such jurisdiction.

A number of states have already begun, or have positioned themselves to begin, requiring sales and use tax collection from remote vendors.

The details and effective dates of these collection requirements vary from state to state.

The Company continues to analyze potential sales tax exposure using a state-by-state assessment.

In accordance with ASC 450, Contingencies, the Company estimated and recorded a liability of $ 3.1 million and $ 0.2 million as of December 31, 2024 and 2023.

Warrants Related to Convertible Notes and Note Payable

In connection with the issuance of the Company’s 2021 note payable (“SVB March 2021 Note”) and 2021 convertible note (“SCI June 2021 Note”), the Company issued detachable warrants to purchase 708,808 and 354,404 shares of Legacy SoundHound common stock, respectively, with an exercise price of $ 3.67 per share to the lenders, which were immediately exercisable.

On the Closing Date, all outstanding warrants issued in connection to the SVB March 2021 Note and the SCI June 2021 Note were fully net exercised by their respective lenders, leading to a net issuance of 673,416 shares of Class A Common Stock.

In connection with the Credit Agreement (as defined in Note 9), on the Term Loan Closing Date the Company issued a warrant to purchase up to 3,301,536 shares of the Company's Class A common stock to the Agent (the "Term Loan Warrant").

The Term Loan Warrant has a per share exercise price of $ 2.59 and may be exercised, including on a cashless basis, by the holder at any time prior to the 10-year anniversary of the issue date.

The Term Loan Warrant will be automatically cashless exercised immediately prior to a change in control of the Company.

On the Term Loan Closing Date, the Company allocated the gross proceeds and issuance costs between the Term Loan and the Term Loan Warrant based on their relative fair values, resulting in the initial recognition of the Term Loan Warrant at $ 4.1 million as additional paid-in-capital on the consolidated balance sheets.

As of December 31, 2023, there were 3,301,536 warrants issued and outstanding in connection with the Credit Agreement.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Term Loan Warrants

In connection with the Credit Agreement (as defined in Note 10), the Company issued warrants to purchase up to 3,301,536 shares of the Company's Class A Common Stock to the lenders (the "Term Loan Warrants").

The Term Loan Warrants have a per share exercise price of $ 2.59 and may be exercised, including on a cashless basis, by the holder at any time prior to the 10-year anniversary of the issue date.

The Term Loan Warrants will be automatically cashless exercised immediately prior to a change in control of the Company.

The Term Loan Warrants are indexed to the Company's stock and were classified as an equity instrument.

On the Term Loan Closing Date, this resulted in the Company allocating the gross proceeds and issuance costs between the Term Loan and the Term Loan Warrants based on their relative fair values, resulting in the initial recognition of the Term Loan Warrant at $ 4.1 million as additional paid-in-capital on the consolidated balance sheets.

In March 2024, the Company issued 2,269,982 shares of the Company's Class A Common Stock resulting from the cashless exercise in full of the Term Loan Warrants that were outstanding.

As of December 31, 2024, all of the Term Loan Warrants had been exercised and no Term Loan Warrants are outstanding.

Warrants Related to the Business Combination

Public Warrants

Prior to the Business Combination, ATSP issued public warrants (“Public Warrants”).

On April 26, 2022 (the "Closing"), pursuant to a merger agreement dated as of November 15, 2021 by and among Archimedes Tech SPAC Partners Co.

(“ATSP”), ATSPC Merger Sub, Inc.

and SoundHound, Inc.

(“Legacy SoundHound”), the parties consummated the merger of ATSPC Merger Sub, Inc.

with and into Legacy SoundHound, with Legacy SoundHound continuing as the surviving corporation, as well as the other transactions contemplated by the Merger Agreement (the merger and such other transactions collectively referred to the “ATSP Merger”).

Prior to the ATSP Merger, ATSP issued public warrants (“Public Warrants”).

Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $ 11.50 per share.

No fractional shares were issued upon exercise of the Public Warrants.

The Company may redeem the outstanding warrants, for $ 0.01 per warrant, upon not less than 30 days’ prior written notice of redemption, if the reported last sale price of the common stock equals or exceeds $ 18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 -trading day period commencing after the warrants become exercisable and ending on the third trading day before the Company sends the notice of redemption to the warrant holders.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

warrant holders.

Upon issuance of a redemption notice by the Company, the warrant holders may, at any time after the redemption notice, exercise the Public Warrants for cash, or on a cashless basis.

Subsequent to the closing of the Business Combination, the Company’s Public Warrants continue to be classified as equity instruments, as they are indexed to the Company’s stock.

Subsequent to the closing of the ATSP Merger, the Company’s Public Warrants continue to be classified as equity instruments, as they are indexed to the Company’s stock.

Private Warrants

Prior to the Business Combination, ATSP issued private warrants (“Private Warrants”).

Prior to the ATSP Merger, ATSP issued private warrants (“Private Warrants”).

The Private Warrants were initially issued in the same form as the Public Warrants with the exception that the Private Warrants:

2 unchanged sentences

The Private Warrants were initially classified as derivative liability instruments as they met the definition of a derivative and were not considered indexed in the Company's own stock as the settlement value could be dependent on who held the Private Warrants at the time of exercise.

Upon the Closing of the Business Combination, the Company modified its Private Warrants to be identical to its Public Warrants (collectively, "SPAC Warrants").

Upon the Closing of the ATSP Merger, the Company modified its Private Warrants to be identical to its Public Warrants.

Therefore, the Private Warrants met requirements for classification as equity instruments, as they are indexed to the Company’s stock.

As of December 31, 2023, there were 3,665,996 SPAC Warrants issued and outstanding.

In December 2024, the Company issued 2,041 shares of the Company's Class A Common Stock resulting from the exercise of Public Warrants and Private Warrants that were outstanding and raised $ 23.5 thousand in cash proceeds.

As of December 31, 2024, there were 3,663,955 Public Warrants and Private Warrants issued and outstanding.

There was no exercise during the years ended December 31, 2023 and December 31, 2022.

SNAP June 2020 Note

2 unchanged sentences

The Company recognized total interest expense of $ 0.7 million associated with the SNAP June 2020 Note for the year ended December 31, 2022, out of which $ 0.4 million relates to amortization of the debt discount.

The Company recognized total interest expense of $ 2.0 million associated with the SNAP June 2020 Note for the year ended December 31, 2021, out of which $ 1.3 million relates to amortization of the debt discount.

The debt discount related to the SNAP June 2020 Note is amortized over the life of the instrument, beginning at note issuance and ending on April 26, 2022, the date on which the note was converted.

The Company was amortizing the discounts on an effective interest basis over the period from issuance through the Early Maturity Date.

The effective interest rate was 14.3 % for the years ended December 31, 2022 and 2021.

The effective interest rate was 14.3 % for the year ended December 31, 2022.

As a result of the Business Combination, on the Closing Date, the SNAP June 2020 Note conversion feature was triggered.

As a result, on the Closing Date, all outstanding principal of $ 15.0 million and accrued interest of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 1.4 million were converted into 2,046,827 shares of Class A Common Stock.

As a result, on the Closing Date, all outstanding principal of $ 15.0 million and accrued interest of $ 1.4 million were converted into 2,046,827 shares of Class A Common Stock.

In addition, the remaining debt discount of $ 0.2 million and related derivative liability with fair value of $ 4.1 million as of the Closing Date were extinguished.

4 unchanged sentences

Payments were interest-only for the first twelve months and are now principal and interest through maturity.

The Company recorded interest expense in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021 of $ 0.6 million, $ 2.8 million and $ 2.1 million respectively.

The total amount of debt discount at issuance was $ 3.5 million.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 16 thousand, $ 1.0 million and $ 2.4 million related to the amortization of the debt discount in interest expense, respectively.

The Company was amortizing the discounts on an effective interest basis over the period from issuance through the Early Maturity Date.

The effective interest rate was 13.4 %, 14.9 % and 20.9 % for the year ended December 31, 2023, 2022 and 2021.

Concurrently with the Company's entry into the Credit Agreement, the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SVB March 2021 Note.

In connection with the SVB March 2021 Note prepayment, the Company paid a total of $ 18.5 million on April 14, 2023, which consisted of (i) the remaining principal amount outstanding of $ 18.1 million, (ii) a prepayment premium of $ 0.3 million, (iii) accrued and unpaid interest of $ 0.1 million and (iv) a nominal amount for transaction expenses.

The Company recorded a loss on debt extinguishment of $ 0.4 million related to the early repayment in interest expense in the consolidated statements of operations and comprehensive loss.

There was no interest expense recorded during the year ended December 31, 2024.

During the years ended December 31, 2023 and December 31, 2022, the Company

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recorded $ 16.0 thousand and $ 1.0 million related to the amortization of the debt discount in interest expense, respectively.

Concurrently with the Company's entry into the Credit Agreement (as defined below), the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SVB March 2021 Note.

SCI June 2021 Note

4 unchanged sentences

During the year ended December 31, 2023, the interest rate was 13.75 %.

Payments were interest-only for the first twelve months and are now principal and interest through maturity.

The Company incurred and paid $ 0.5 million, $ 1.5 million and $ 0.3 million in interest expense in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2023, 2022 and 2021 respectively.

During the years ended December 31, 2023, 2022 and 2021, the Company recorded $ 31 thousand, $ 0.8 million and $ 1.0 million related to the amortization of the debt discounts in interest expense, respectively.

The Company was amortizing the discounts on an effective interest basis over the period from issuance through the Early Maturity Date.

The effective interest rate was 18.6 %, 17.3 % and 26.1 % for the year ended December 31, 2023, 2022 and 2021.

Concurrently with the Company’s entry into the Credit Agreement, the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SCI June 2021 Note.

In connection with the SCI June 2021 Note prepayment on April 14, 2023, the Company paid a total of approximately $ 11.7 million, which consisted of (i) the remaining principal amount outstanding of approximately $ 11.5 million, (ii) a prepayment premium of approximately $ 0.2 million and (iii) a nominal amount for transaction expenses.

The Company recorded a loss on debt extinguishment of $ 0.4 million related to the early repayment in interest expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

On April 14, 2023 (the “Term Loan Closing Date”), the Company entered into a Senior Secured Term Loan Credit Agreement (the “Credit Agreement”) with ACP Post Oak Credit II LLC, as administrative agent and collateral agent for the Lenders (the “Agent”), and the lenders from time to time party thereto (the “Lenders”).

The Credit Agreement provides for a term loan facility in an aggregate principal amount of up to $ 100.0 million (the “Term Loan”), the entirety of which was funded on the Term Loan Closing Date.

The Credit Agreement also permits the Company to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

request additional commitments of up to $ 25.0 million in the aggregate, with funding of such commitments in the sole discretion of the Lenders, under certain circumstances and under the same terms as the Term Loan.

On the Term Loan Closing Date, the Company also entered into that certain Guarantee and Collateral Agreement, dated as of April 14, 2023, by and among the Company, the other grantors named therein and the Agent (the “Guarantee and Collateral Agreement”).

In addition, the Company is obligated to pay incremental lender fees, beginning on the Closing Date, equal to initially 3.5 % of the principal amount of the Term Loans, decreasing to 2.5 % after the 18-month anniversary, semi-annually (the “Lender Fees”) to provide a collateral protection insurance policy on behalf of the Lenders.

The Lender Fees are effectively additional fees payable to the Lenders as the Lenders are the sole beneficiary of the insurance policy and is therefore being recognized as interest expense over the term of the Term Loan based on the effective interest method.

Payments were interest-only for the first twelve months and principal and interest through maturity.

There was no interest expense recorded during the year ended December 31, 2024.

During the years ended December 31, 2023 and December 31, 2022, the Company recorded $ 31 thousand and $ 0.8 million related to the amortization of the debt discounts in interest expense, respectively.

Concurrently with the Company’s entry into the Credit Agreement (as defined below), the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SCI June 2021 Note.

In connection with the SCI June 2021 Note p repayment on April 14, 2023 , the Company paid a total of approximately $ 11.7 million , which consisted of (i) the remaining principal amount outstanding of approximately $ 11.5 million , (ii) a prepayment premium of approximately $ 0.2 million and (iii) a nominal amount for transaction expenses resulting in a loss on debt extinguishment of $ 0.4 million.

On April 14, 2023 (the “Term Loan Closing Date”), the Company entered into a Senior Secured Term Loan Credit Agreement (the “Credit Agreement”).

The Credit Agreement provides for a term loan facility in an aggregate principal amount of up to $ 100.0 million (the “Term Loan”).

The Credit Agreement also permits the Company to request additional commitments of up to $ 25.0 million in the aggregate, with funding of such commitments in the sole discretion of the lenders, under certain circumstances, which will be subject to the same terms as the Term Loan if funded.

On the Term Loan closing date, the Company also entered into Guarantee and Collateral Agreement.

In addition, the Company is obligated to pay incremental lender fees (the "Lender Fees"), beginning on the Term Loan closing date, initially at the rate of 3.50 % of the principal amount of the Term Loans for the first 18 months paid semi-annually to provide a collateral protection insurance policy on behalf of the lenders.

Such rate for the Lender Fees will decrease to 2.50 % after the 18-month anniversary of the Term Loan Closing Date.

As the lenders are the sole beneficiary of the insurance policy, the Lender Fees are deemed to be additional fees payable to the Lenders and is therefore being recognized as interest expense over the term of the Term Loan based on effective interest method.

The Company used the proceeds from the Term Loan to (i) repay outstanding amounts equal to approximately $ 30.0 million under the Company’s existing loan facilities, (ii) fund an escrow account on the Term Loan Closing Date in the name of the Agent for an amount equal to the first four interest payments, (iii) pay certain fees and expenses incurred in connection with entering into the Credit Agreement, and (iv) fund the Lender Fees, together with related taxes, with the remaining proceeds to be used to fund growth investments and for general corporate purposes as permitted under the Credit Agreement.

The outstanding principal balance of the Term Loan bears interest at the applicable margin plus, at the Company’s election, either (i) the Term SOFR rate published by CME Group Benchmark Administration Limited for a one-month interest period plus 0.15 % or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (a) the Prime Rate (as defined in the Credit Agreement), (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50 % and (c) the Term SOFR rate plus 1.00 %.

The applicable margin under the Credit Agreement is 8.50 % per annum with respect to SOFR loans, and 7.50 % per annum with respect to ABR loans.

As of December 31, 2023 , the contractual interest rate was approximately 14.0 %.

The Company was amortizing the discounts on an effective interest basis over the period from issuance through the Early Maturity Date.

The effective interest rate was 25.18 % for the year ended December 31, 2023.

The Company incurred and paid $ 9.9 million in stated interest in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

During the year ended December 31, 2023, the Company recorded $ 5.4 million in interest expense related to the debt discount.

The remaining period over which the discount will be amortized is 3.33 years as of December 31, 2023.

Subject to certain exceptions as set forth in the Credit Agreement, interest on the Term Loan is payable quarterly in arrears on the last business day of each fiscal quarter.

The Term Loan is set to mature on April 14, 2027 (the “Maturity Date”).

The Credit Agreement provides for no scheduled principal payments prior to the Maturity Date.

The Term Loan is secured by substantially all of the assets of the Company and its subsidiaries and is guaranteed by the Company’s subsidiaries other than Excluded Subsidiaries.

As set forth in more detail in the Credit Agreement, the Company is required to make mandatory prepayments on the Term Loan in the event of certain specified events, including in the event of certain capital raises by the Company and its subsidiaries.

The Company may also elect to prepay amounts at any time.

If the Term Loan is prepaid for any reason prior to the second anniversary of the Closing Date, in additional to principal and accrued interest, the Company will have to pay an amount equal to the discounted future interest payments from the date of redemption through the second anniversary of the Closing Date, calculated on the basis of the interest rate in effect on the redemption date and discounted based on the applicable rate for US treasury securities of equal tenor plus 50 basis points.

Additionally, the Company will have to pay the excess of 14 % of the Term Loans over the amount of the Lender Fees paid through the Redemption Date.

The Credit Agreement also contains customary representations and warranties for a facility of this nature and affirmative and negative covenants.

In particular, the Credit Agreement requires the Company to have liquidity at least equal to the Interest Escrow Required Amount (as defined in the Credit Agreement) as of the last day of each fiscal quarter.

The Interest Escrow Required Amount as described in Note 2 is included in restricted cash equivalents, non-current, on the consolidated balance sheet as of December 31, 2023.

In addition, the Credit Agreement limits the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback

The outstanding principal balance of the Term Loan bears interest at the applicable margin plus, at the Company’s election, either (i) the Term SOFR published by CME Group Benchmark Administration Limited for a one-month interest period plus 0.15 % or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (a) the Prime Rate (as defined in the Credit Agreement), (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50 % and (c) the Term SOFR plus 1.00 %.

The applicable margin under the Credit Agreement is 8.50 % per annum

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

transactions, among other restrictions.

As of December 31, 2023, the Company was in compliance with all covenants prescribed in the Credit Agreement.

The Credit Agreement includes customary events of default, including, but not limited to, nonpayment of principal or interest, breaches of representations and warranties, failure to perform or observe covenants, cross-defaults with certain other indebtedness, final judgments or orders, certain change of control events, and certain bankruptcy-related events or proceedings.

Upon the occurrence of an event of default (subject to notice and grace periods), obligations under the Credit Agreement could be accelerated.

The aggregate long-term debt maturities were as follows as of December 31, 2023 (in thousands):

Total 100,000

unamortized discount ( 15,688 )

Long-term portion of debt $ 84,312

with respect to SOFR loans, and 7.50 % per annum with respect to ABR loans.

As of June 30, 2024, the contractual interest rate was approximately 14.0 %.

The Company was amortizing th e discounts on an effective interest basis over the period from issuance through April 14, 2027 (the “Maturity Date”).

The effective interest rate was 25.18 % for the quarter ended June 30, 2024.

The Company incurred $ 6.0 million in stated interest in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024, and paid $ 3.5 million for the period.

During the year ended December 31, 2024, the Company recorded $ 1.5 million in interest expense related to the debt discount.

On June 7, 2024, the Company entered into a letter agreement (the “Payoff Letter”) to prepay in full all indebtedness and other amounts outstanding and owing under the Credit Agreement.

In connection with the Term Loan prepayment, the Company paid a total of $ 105.6 million on June 7, 2024, which consisted of (i) the remaining principal amount outstanding of $ 100.0 million, (ii) a prepayment premium of $ 5.0 million, (iii) transaction expenses of $ 0.6 million, resulting in a loss on debt extinguishment of $ 15.6 million.

Accordingly, the accrued and unpaid interest of $ 2.6 million was waived under the Payoff Letter.

In connection with the Amelia Acquisition, the Company assumed the amended senior secured term loan facility from Amelia in an aggregate principal amount of $ 121.5 million, which was issued pursuant to the existing Credit Agreement (the “Amelia Debt Credit Agreement”) of Amelia with Monroe Capital Management Advisors, LLC (“Monroe”), as administrative and collateral agent for certain affiliated funds of Monroe, as lenders.

In accordance with the terms of the debt assumed, on August 7, 2024, the Company paid $ 70.0 million in cash to pay down a portion of the outstanding principal balance and issued 2,943,917 shares of Class A common stock to settle certain fees associated with the Amelia Debt.

The remaining outstanding balance of $ 39.7 million has a maturity date of June 30, 2026 (the “Maturity Date”) and provides, at the Company’s election, for payment of a portion of interest in cash or in kind ("PIK"), in which case interest will be capitalized and added to the outstanding principal amount, with principal and accrued interest due at the Maturity Date.

The Amelia Debt may be prepaid at any time and must be prepaid, along with the applicable prepayment premium and exit fee, upon the occurrence of certain future events.

The Amelia Debt will accrue interest at an annual rate equal to the sum of (a) Adjusted Term SOFR and (b)(i) an applicable margin of 9.00 % for the portion of interest paid in cash, and (ii) an additional 1.00 % for the portion of interest paid in kind.

Upon an event of default, the interest rate will automatically increase by an additional 2.00 % per annum, and may result in the declaration that all outstanding principal and interest under the Amelia Debt be immediately due and payable in whole or in part.

During the year ended December 31, 2024, the Company recorded and paid $ 2.0 million in interest expense, of which $ 0.1 million was paid to settle the PIK that was capitalized and added to the outstanding principal amount.

On December 3, 2024 , the Company entered into a letter agreement (the “Amelia Debt Payoff Letter”) to prepay in full all indebtedness and other amounts outstanding and owing under the Amelia Debt Credit Agreement.

In connection with the Amelia Debt prepayment, the Company paid a total of $ 39.8 million on December 4, 2024, which consisted of the remaining principal amount outstanding of $ 39.8 million and transaction expenses of $ 42 thousand, resulting in a loss on debt extinguishment of $ 42 thousand.

The following table summarizes the Company’s debt balances as of December 31, 2024 and December 31, 2023 (in thousands):

December 31, 2023 December 31, 2022

2024 December 31, 2023

Term Loan $ — $ 100,000

SVB March 2021 Note — 22,050

SCI June 2021 Note — 12,979

Total debt $ 100,000 $ 35,029

Current portion of debt — ( 16,668 )

Unamortized discount and debt issuance costs — ( 15,688 )

2 unchanged sentences

In January 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins, improve cash flows and accelerate the Company’s path to profitability.

The Restructuring Plan included a reduction of the Company’s then-current workforce by approximately 40 % or 180 positions globally.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restructuring Plan included a reduction of the Company’s then-current workforce by approximately 40 % or 180 positions globally.

Costs associated with the Restructuring Plan consist of employee severance payments, employee benefits and share-based compensation.

2 unchanged sentences

The Restructuring Plan was substantially complete as of December 31, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FAIR VALUE MEASUREMENT

6 unchanged sentences

Total assets $ 169,837 $ — $ —

There were no financial instrument assets measured or disclosed at fair value on a recurring basis as of December 31, 2022.

Other current liabilities

Contingent holdback consideration

$ — $ — $ 4,076

Contingent acquisition liabilities

Contingent earnout consideration

$ — $ — $ 286,898

Total liabilities $ — $ — $ 290,974

December 31, 2023

Level 1 Level 2 Level 3

Cash equivalents:

Treasury bills $ 35,961 $ — $ —

Money market funds 54,542 $ — $ —

Total assets $ 90,503 $ — $ —

Equity Line of Credit

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity Line of Credit

7 unchanged sentences

The Company determined that the ELOC was not indexed to the Company’s own common stock and, therefore, should be accounted for in accordance with ASC 815:

Derivatives .

Accordingly, the Company recorded a derivative liability with an initial fair value of $ 1.1 million based on the upfront commitment fee and the reimbursement amount to the investor as consideration for its irrevocable commitment to purchase up to 25,000,000 shares of the Company's common stock.

3 unchanged sentences

The fair value of the liability then is remeasured as of the settlement date equal to the difference between the volume weighted average price at a 3 % discount compared to the fair value of the common stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Series C Warrants (April 2013 and November 2013)

In December 2021, the Series C Warrants were fully exercised.

Immediately prior to their exercise, the Company revalued the warrants to their intrinsic value, resulting in a change in fair value of $ 3.8 million.

This change in fair value was recorded as a component of other expense, net, in the accompanying consolidated statements of operations and comprehensive loss.

The warrants were recorded as Series C Preferred Stock at their fair value of $ 5.8 million upon net share settlement.

Derivative Liability (SNAP June 2020 Note)

10 unchanged sentences

The significant unobservable inputs used in the fair value measurement of the derivative liability are the remaining expected term, the discount rate, and the probability of financing for each scenario.

Significant increases (decreases) in the term would result in significantly lower (higher) fair value measurements.

Significant increases (decreases) in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the term would result in significantly lower (higher) fair value measurements.

Significant increases (decreases) in the discount rate would result in significantly lower (higher) fair value measurements.

2 unchanged sentences

As the Closing of the Business Combination triggered the Conversion Feature contained within the SNAP June 2020 Note, therefore converting the note’s principal to equity, the embedded derivative associated with the note was extinguished.

The Company recorded the remeasurement of derivative liabilities in other expense, net on the consolidated statements of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

operations and comprehensive loss.

The Company recorded the remeasurement of derivative liabilities in other expense, net on the consolidated statements of operations and comprehensive loss.

The fair value of the embedded derivative was recorded as additional paid-in capital upon extinguishment on the consolidated balance sheet.

The following table summarizes the fair value remeasurement of the embedded derivative for the years ended December 31, 2022 and 2021 (in thousands):

The following table summarizes the fair value remeasurement of the embedded derivative for the year ended December 31, 2022 (in thousands):

Year Ended December 31,

4 unchanged sentences

Change in fair value $ 606 $ —

Exercise of warrants $ — $ ( 5,816 )

Balance as of December 31, 2021 $ 3,488 $ —

Change in fair value $ 606 $ —

Extinguishment of embedded derivative upon conversion of convertible note $ ( 4,094 ) $ —

12 unchanged sentences

Expected term (in years) 5

As of December 31, 2023, no warrants related to the Term Loan had been exercised.

All of the Term Loan Warrants had been exercised during the year ended December 31, 2024.

No Term Loan Warrants had been exercised during the year ended December 31, 2023.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent Acquisition Liabilities

Contingent Holdback Consideration

The reconciliation of the Company's Contingent Holdback Consideration measured at fair value, including the effect of measurement period adjustments, on a recurring basis using unobservable inputs (Level 3) is as follows:

Balance as of December 31, 2023 $ —

Acquisition of SYNQ3 981

Change in the fair value of liability 3,712

Measurement period adjustments ( 411 )

Settlement ( 206 )

Balance as of December 31, 2024 $ 4,076

The fair value of the cash portion of the Contingent Holdback Consideration was estimated based upon the holdback period of 15 months, and discounted using the risk-free interest rate based on the U.S.

Treasury zero-coupon yield curve on the valuation date for a maturity similar to the 15 -month holdback period.

The fair value of the equity portion of the Contingent Holdback Consideration was estimated based upon the value of the Company’s Class A Common Stock price.

The fair value of the Contingent Holdback Consideration was initially measured on January 3, 2024, the date on which the Company completed the acquisition of SYNQ3.

For the year ended December 31, 2024, the Company recognized a loss of $ 3.7 million related to the Contingent Holdback Consideration.

The fair value of the Contingent Holdback Consideration has been estimated as of the Closing Date and December 31, 2024, under the following assumptions:

January 3, 2024 December 31, 2024

Risk-free interest rate

Holdback period

1.25 years 0.25 years

Contingent Earnout Consideration

The reconciliation of the Company's contingent earnout consideration measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

Balance as of December 31, 2023 $ —

Acquisition of SYNQ3 1,676

Acquisition of Amelia 66,269

Change in the fair value of liability* 218,953

Balance as of December 31, 2024 $ 286,898

*The Company's year-end stock price increase resulted in an increase in its fair value of contingent acquisition liabilities where future Contingent Earnout Consideration is marked-to-market on a quarterly basis, significantly impacting net loss and net loss per share during the year ended December 31, 2024.

The fluctuation is non-operating and non-cash in nature.

For the year ended December 31, 2024, the Company recognized a loss of $ 219.0 million related to the contingent earnout consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company utilizes a Monte Carlo simulation to value the contingent earnout consideration.

The Company selected this model as it believes it is reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the contingent earnout consideration.

Such assumptions include, among other inputs, expected stock price volatility, risk-free rates, and change in control assumptions.

The Company estimates the expected volatility of its common stock based on historical volatility of a peer group, considering the remaining term of the contingent earnout consideration.

The risk-free interest rate is based on the U.S.

Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the contingent earnout consideration.

The expected life of the contingent earnout consideration is assumed to be equivalent to their remaining contractual term.

The dividend rate is based on the historical rate, which the Company anticipates to remain at zero .

The fair value of the Contingent SYNQ3 Earnout Consideration acquired from SYNQ3 Acquisition has been estimated as of the Closing Date and December 31, 2024, with the following assumptions for the unobservable inputs:

January 3, 2024 December 31, 2024

Discount rate

12.6 % 12.9 %

Expected stock price volatility

115.3 % 130.0 %

Risk-free interest rate

Expected dividend yield

Expected life

0.5 - 2.5 years

0.50 - 1.50 years

The fair value of the Contingent Amelia Earnout Consideration acquired from Amelia Acquisition has been estimated as of the Closing Date and December 31, 2024, with the following assumptions for the unobservable inputs:

August 6, 2024 December 31, 2024

Metric specific discount rate 8.0 % 9.5 %

Earnout payment discount rate 3.8 % 4.2 %

Expected stock price volatility 73.0 % 68.0 %

Expected metric volatility 11.0 % 12.0 %

Risk-free interest rate for target revenue 4.0 % 4.2 %

Risk-free interest rate for stock price 3.8 % 4.2 %

Expected dividend yield — % — %

Expected life 1.4 - 2.4 years

1.0 - 2.0 years

There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the years ended December 31, 2024 and 2023.

PREFERRED STOCK

2 unchanged sentences

Legacy SoundHound Preferred Stock was contingently redeemable upon a deemed liquidation event which the Company determined was not solely within its control as the Company determined that a deemed liquidation event can only occur with the approval of the board of directors and the preferred shareholders maintained control of the board of directors as of December 31, 2021 and through April 26, 2022, the effective date of the Business Combination, and thus has classified shares of Legacy SoundHound Preferred Stock as temporary equity.

Since the occurrence of a deemed liquidation event was not probable, the carrying values of the shares of legacy SoundHound Preferred Stock were not being accreted to their redemption values.

Since the occurrence of a deemed liquidation event was not

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

probable, the carrying values of the shares of legacy SoundHound Preferred Stock were not being accreted to their redemption values.

A summary of the Legacy SoundHound Preferred Stock authorized, issued and outstanding as of the date of the Business Combination is as follows:

16 unchanged sentences

Any new series of preferred stock may be designated, fixed and determined as provided by the Board without approval of the holders of common stock or preferred stock and the preferred stock holders may be granted such rights, powers (including voting powers) and preferences as determined by the Board in its sole discretion, including the right to elect one or more directors.

Series A Convertible Preferred Stock

On January 20, 2023, the Company entered into the Purchase Agreements with the Investors, pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock for issuance price of $ 30.00 per share, raising an aggregate of approximately $ 25.0 million in cash proceeds.

On January 20, 2023, the Company filed a Certificate of Designations of Preferences, Rights and Limitations of the Series A Preferred Stock with the Secretary of State of the State of Delaware (the "Certificate of Designations"),

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

designating shares of Series A Preferred Stock.

The shares of Series A Preferred Stock were issued and sold in a private placement exempt from the registration requirements of the Securities Act.

The Company does not intend to register the shares of Series A Preferred Stock or the underlying common stock for resale under the Securities Act.

The holders of Series A Preferred Stock are entitled to cumulative dividends payable for such share at the rate of 14 % per annum, compounding semi-annually to Liquidation Preference on January 1 and July 1 of each year.

The Company may also elect to pay any dividend in cash in lieu of accretion to Liquidation Preference if permitted under the agreements and instruments governing its outstanding indebtedness at such time.

After payment of the cumulative dividend, including by way of accretion to the Liquidation Preference, any additional dividends declared or paid shall be distributed among the holders of Preferred Stock and common stock then outstanding pro rata based on the number of shares of common stock then held by each holder (assuming conversion of all such Preferred Stock into common stock at the then-effective conversion price.

Series A Preferred Stock

Between January 18, 2023 and January 20, 2023, the Company entered into Preferred Stock Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”), pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock for issuance price of $ 30.00 per share, raising an aggregate of approximately $ 25.0 million in cash proceeds.

As of December 31, 2024, all the Series A Preferred Stock have been converted to Class A Common Stock.

Liquidation Preference

The Liquidation Preference per share of Preferred Stock was initially equal to $ 30.00 , the original issue price per share.

On July 1, 2023, the Company's Series A Preferred Stock holders received dividends paid-in-kind as an increase in the Liquidation Preference, thereby increasing the Liquidation Preference per share to approximately $ 31.90 .

Additionally, as of December 31, 2023 , the Series A Preferred Stock had accrued additional dividends since the last dividend payment date which has the effect of increasing the Liquidation Preference to approximately $ 34.16 .

On January 1, 2024, the Company's Series A Preferred Stock holders received their latest dividends paid-in-kind as an increase in Liquidation Preference, thereby increasing the Liquidation Preference per share to approximately $ 34.13 .

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Series A Preferred Stock is not mandatorily redeemable.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or in the event of any Deemed Liquidation Event (as defined below), the holders of the Series A Preferred Stock will be entitled to receive, prior and in preference to any distribution of the proceeds of the transaction or any of the assets of the Company to holders of the common stock, an amount per share equal to the greater of (i) two and a half time ( 2.5 x) the Liquidation Preference (including any accrued and unpaid dividends since the last dividend payment date) or (ii) the amount as would have been payable had the Series A Preferred Stock been converted into common stock.

A Deemed Liquidation Event includes (i) a merger or acquisition of the Company in which 50% or less of the voting securities of the surviving entity are no longer held by the shareholders of the Company immediately prior to such transaction or (ii) a sale, lease, transfer, exclusive license, or other disposal of all or substantially all of the Company’s assets.

If the Company is not liquidated within 90 days of a Deemed Liquidation Event, the holders of the Series A Preferred Stock will have the option to require the redemption of the Preferred Stock to the extent the Company has sufficient available proceeds to do so.

The Company determined that a Deemed Liquidation Event can only occur with the approval of the board of directors, and therefore the exercise of this contingent redemption feature is within the control of the Company and the Investors are not in control of the Company.

Therefore, the Series A Preferred Stock is not classified as redeemable equity within the Company’s consolidated balance sheet and consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit).

Each share of Series A Preferred Stock is convertible, at the option of the holder, into such number of shares of Class A Common Stock equal to the Liquidation Preference per share at the time of conversion divided by $ 1.00 (the “Conversion Price”).

In addition, each share of Series A Preferred Stock will automatically convert into shares of Class A Common Stock at the Conversion Price on or after January 20, 2024 if and when the daily volume-weighted average closing price per share of Class A Common Stock is at least 2.5 times the Conversion Price for each of any 90 trading days during any 120 consecutive trading day period, which 120 -trading day period may commence (but may not end) prior to January 20, 2024.

During the year ended December 31, 2023, some Investors optionally converted 360,006 shares of Series A Preferred Stock into 11,597,656 shares of Class A Common Stock.

During the year ended December 31, 2024, the condition of automatic conversion was met and all the remaining Series A Preferred Stock were automatically converted.

During the year ended December 31, 2024, 475,005 shares of preferred stock were converted into 16,624,215 shares of Class A Common Stock.

The conversion was pursuant to the original terms of the agreement and therefore the carrying value of Series A Preferred Stock was converted into Class A Common Stock with no gain or loss upon conversion.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the year ended December 31, 2023, some Investors optionally converted 353,338 shares of preferred stock into 11,375,090 shares of Class A Common Stock.

Voting Rights

8 unchanged sentences

Holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval.

Each share of Class B Common Stock shall automatically convert into one fully paid and nonassessable share of Class A Common Stock.

Shares of Class B Common Stock will be convertible into shares of Class A Common Stock and will be 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.

Each share of Class B Common Stock shall convert into one fully paid and nonassessable share of Class A Common Stock upon mandatory or optional conversion.

Shares of Class B Common Stock will be automatically converted into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited exceptions 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.

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.

As a result, it is possible that one or more of the persons or entities

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

During the years ended December 31, 2024 and December 31, 2023, certain holders of Class B Common Stock optionally converted 4,950,000.00 and 2,250,000.00 shares, respectively, of Class B Common Stock into the same number of shares of Class A Common Stock.

Equity Line of Credit ("ELOC")

On August 16, 2022, the Company entered into a common stock purchase agreement (“Common Stock Purchase Agreement”) and related registration rights agreement (the “CFPI Registration Rights Agreement”) with CF Principal Investments LLC (the “Counterparty”).

Pursuant to the Common Stock Purchase Agreement, the Company had the right, but not the obligation, to direct the Counterparty to purchase up to 25,000,000 shares of Class A Common Stock, subject to certain limitations and conditions as described below (the "ELOC Program") at a purchase price equal to 97 % of the volume weighted average stock price for a given purchase date.

Pursuant to the Common Stock Purchase Agreement, the Company had the right, but not the obligation, to direct the Counterparty to purchase up to 25,000,000 shares of Class A Common Stock, subject to certain limitations and conditions (the "ELOC Program") at a purchase price equal to 97 % of the volume weighted average stock price for a given purchase date.

In connection with the execution of the Common Stock Purchase Agreement and the side letter on February 14, 2023, the Company issued 250,000 shares of Common Stock (the “Initial Commitment Shares”) and additional cash commitment fee of $ 0.3 million.

The Company controlled the timing and amount of any sales to the Counterparty, which depended on a variety of factors including, among other things, market conditions, the trading price of the Company’s common stock, and determinations by the Company as to appropriate sources of funding for its business and operations.

However, the Counterparty’s obligation to purchase shares is subject to certain conditions, including the daily trading volume of the Company’s stock.

In all instances, the Company may not sell shares of its common stock under the Purchase Agreement if it would result in the Counterparty and its affiliate beneficially owning more than 4.99 % of its outstanding voting power or shares of common stock at any one point in time, or the aggregation number of shares of

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

common stock would not exceed 39,365,804 shares of common stock representing 19.99 % of the voting power or number of shares of common stock.

The Company evaluated the Common Stock Purchase Agreement with the Counterparty and determined that it was not indexed to the Company’s own common stock and, therefore, should be accounted for as a derivative instrument at fair value with changes in fair value as other income (expense), net in the period in which they occur.

Accordingly, the Company recorded a derivative liability with an initial fair value of $ 1.1 million based on the upfront commitment fee in the form of proceeds from future issuance of commitment shares to the Counterparty plus certain fees and expenses as specified in the Purchase Agreement.

Subsequent changes in the fair value of the derivative liability were dependent upon, among other things, changes in the closing share price of the Company’s common stock, the quantity and purchase price of shares purchased by the Counterparty during the reporting period and the cost of raising other forms of capital.

The Company recorded changes in the fair value of the derivative liability associated with the ELOC of $ 1.9 million and $ 1.1 million respectively, for the years ended December 31, 2023 and 2022 as other income (expense), net on its consolidated statements of operations and comprehensive loss.

The Company recorded Common Stock Purchase Agreement as a derivative liability with an initial fair value of $ 1.1 million based on the upfront commitment fee in the form of proceeds from future issuance of commitment shares to the Counterparty plus certain fees and expenses as specified in the Purchase Agreement.

The Company recorded losses on changes in the fair value of the derivative liability associated with the ELOC Program of $ 1.9 million and $ 1.1 million respectively, for the years ended December 31, 2023 and 2022 as other income (expense), net on its consolidated statements of operations and comprehensive loss.

The Company incurred third-party costs of $ 0.2 million related to the execution of the Common Stock Purchase Agreement which were recorded as general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

Refer to Note 2 for information on the fair value of the derivative liability.

During the year ended, the Company sold the entirety of the 25,000,000 shares under the ELOC Program for aggregate proceeds of approximately $ 71.7 million, with the volume weighted average stock price of shares purchased by the Counterparty ranging from $ 1.75 to $ 4.26 per share.

During the year ended December 31, 2023, the Company sold the entirety of the 25,000,000 shares for aggregate proceeds of approximately $ 71.7 million, with the volume weighted average stock price of shares purchased by the Counterparty ranging from $ 1.75 to $ 4.26 per share.

Sales Agreement

2 unchanged sentences

Davidson & Co.

(each a “Sales Agent” and collectively, the “Sales Agents”), pursuant to which the Company may offer and sell up to $ 150.0 million of shares of our Class A common stock from time to time through or to the Sales Agents acting as agent or principal.

Sales of our Class A common stock, if any, under the Sales Agreement will be made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.

We will pay the Sales Agents commission for their services in acting as agent in the sale of our Class A common stock.

The Sales Agents are entitled to aggregate compensation at a fixed commission rate of 2.5 % of the gross sales price per share sold under the Sales Agreement.

We have also agreed to reimburse the Sales Agents for certain specified expenses, including the reasonable and documented fees and disbursements of its legal counsel in an amount not to exceed $ 75 thousand in the aggregate in connection with the execution of the Sales Agreement.

(each a “Sales Agent” and collectively, the “Sales Agents”), pursuant to which the Company was able to offer and sell up to $ 150.0 million of shares of our Class A Common Stock from time to time through or to the Sales Agents acting as agent or principal.

Sales of our Class A Common Stock under the Sales Agreement were made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.

The Sales Agents were entitled to aggregate compensation at a fixed commission rate of 2.5 % of the gross sales price per share sold under the Sales Agreement.

We agreed to reimburse the Sales Agents for certain specified expenses, including the reasonable and documented fees and disbursements of its legal counsel in an amount of $ 75 thousand in the aggregate in connection with the execution of the Sales Agreement.

During the year ended December 31, 2024, the Company sold 37,907,219 shares of our Class A common stock under the Sales Agreement, at a weighted-average price of $ 3.62 per share and raised $ 137.3 million of gross proceeds, which resulted in complete utilization of the Sales Agreement.

After deducting approximately $ 3.4 million of commissions and offering costs incurred by the Company, the net proceeds from sales of Class A common stock was $ 133.8 million.

During the year ended December 31, 2023, the Company sold 5,805,995 shares of our common stock under the Sales Agreement, at a weighted-average price of $ 2.19 per share and raised $ 12.7 million of gross proceeds.

The commissions and offering costs borne by the Company during the year were approximately $ 0.3 million.

As of December 31, 2023, the Company has a remaining capacity to sell up to an additional $ 137.3 million of the Company's common stock under the Sales Agreement.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity Distribution Agreement

On April 9, 2024, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Citigroup Global Markets Inc., Barclays Capital Inc., Wedbush Securities Inc., Northland Securities, Inc.

and Ladenburg Thalmann & Co.

(the “Managers”) with respect to an at-the-market equity program under which the Company was able to offer and sell up to $ 150.0 million of shares of its Class A Common Stock from time to time through the Managers.

Sales of Class A Common Stock under the Equity Distribution Agreement will be made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.

The Managers were entitled to commission at a fixed rate of 2.5 % of the gross sales price per share for their services in acting as agent in the sale of the Company's Class A Common Stock.

During the year ended December 31, 2024, the Company sold a total of 31,694,198 shares of our Class A common stock under the Equity Distribution Agreement, at a weighted-average price of $ 4.73 per share and raised $ 150.0 million of gross proceeds.

After deducting approximately $ 3.7 million of commissions and offering costs incurred by the Company, the net proceeds from sales of Class A common stock was $ 146.2 million during the year ended December 31, 2024.

As of December 31, 2024, the Company had no remaining capacity to sell the Company's Class A common stock under the Equity Distribution Agreement.

Execute Equity Distribution Agreement

On November 12, 2024, the Company entered into an Execute Equity Distribution Agreement (the “Execute Equity Distribution Agreement”) with Barclays Capital Inc., Piper Sandler & Co., D.A.

Davidson & Co., H.C.

Wainwright & Co., LLC, and Joseph Gunnar & Co., LLC, (each, an “Agent,” and, collectively, the “Agents”) with respect to an at-the-market equity program under which the Company was able to offer and sell up to $ 120.0 million of shares of its Class A Common Stock from time to time through the Agents.

Sales of Class A Common Stock under the Execute Equity Distribution Agreement were made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.

The Agents were entitled to commission at a fixed rate of 2.5 % of the gross sales price per share for their services in acting as agent in the sale of the Company's Class A Common Stock.

During the year ended December 31, 2024, the Company sold a total of 16,224,989 shares of our Class A common stock under the Execute Equity Distribution Agreement, at a weighted-average price of $ 7.40 per share and raised $ 120.0 million of gross proceeds .

After deducting approximately $ 3.0 million of commissions and offering costs incurred by the Company , th e net proceeds from sales of Class A common stock was $ 117.0 million during the year ended December 31, 2024.

As of December 31, 2024, the Company had no remaining capacity to sell the Company's Class A common stock under the Execute Equity Distribution Agreement.

STOCK INCENTIVE PLANS

2016 Equity Incentive Plan

In April 2016, we adopted the 2016 Equity Incentive Plan (the “2016 Plan”) as a successor and continuation of the 2006 Plan.

Under the 2016 Plan, the Company was permitted to grant awards of stock options and RSUs, as well as stock appreciation rights and other stock awards.

During the year ended December 31, 2021, the Company amended the 2016 Plan to increase the number of shares of common stock reserved for issuance by 6,667,478 to an aggregate of 48,347,329 .

As of the Closing Date of the Business Combination, the Company no longer has shares available for issuance under the 2016 Plan.

The 2016 Plan provides for incentive stock options to be granted to employees at an exercise price not less than 100 % of the fair value at the grant date as determined by the Board of Directors, unless the optionee is a 10 % stockholder, in

Under the 2016 Plan, the Company was permitted to grant awards of stock options and Restricted Stock Units ("RSUs"), as well as stock appreciation rights and other stock awards.

The Company no longer has shares available for issuance under the 2016 Plan.

2022 Incentive Award Plan

The Company adopted the 2022 Incentive Award Plan (the “2022 Incentive Plan”), effective April 26, 2022.

The Company reserved 19,650,371 shares of Class A Common Stock for the issuance of awards under the 2022 Incentive Plan (“the Initial Limit”).

The Initial Limit represents 10 % of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to increase each year over a ten-year period.

As of December 31, 2024, the Company had 417,633 shares remaining for issuance under the 2022 Incentive Plan.

2022 Employee Stock Purchase Plan

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

which case the option price will not be less than 110 % of such fair market value.

Options granted generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant, and generally vest over a four-year period, with a 25 % cliff vesting after one year and then ratably on a monthly basis for the remaining three years.

RSUs granted generally vest over a four-year period, with 25 % cliff vesting after one year and then ratably on a quarterly basis for the remaining three years.

On April 26, 2022, the stockholders of the Company approved the SoundHound AI, Inc.

2022 Incentive Award Plan (the “2022 Incentive Plan”) (collectively, with the 2006 Plan and the 2016 Plan, the “Plans”), which became effective upon the Closing.

The Company initially reserved 19,650,371 shares of Class A Common Stock for the issuance of awards under the 2022 Incentive Plan (“Initial Limit”).

The Incentive Award Plan provides for the grant of stock options, which may be ISOs or non-statutory stock options (“NSOs”), stock appreciation rights (“SARs”), restricted shares, restricted stock units and other stock or cash-based awards that the Incentive Award Plan Administrator determines are consistent with the purpose of the Incentive Award Plan and the interests of the Combined Company, or collectively, awards.

As of December 31, 2023, the Company had 2,361,806 awards remaining for issuance under the 2022 Incentive Plan.

On April 26, 2022, the stockholders of the Company approved the SoundHound AI, Inc.

2022 Employee Stock Purchase Plan (the “ESPP”), which became effective upon the Closing.

An aggregate of 3,930,074 shares of the Company’s Class A Common Stock has been reserved for issuance or transfer pursuant to rights granted under the ESPP (“Aggregate Number”).

The Company adopted the 2022 Employee Stock Purchase Plan (the "ESPP") effective April 26, 2022, An aggregate of 3,930,074 shares of the Company’s Class A Common Stock has been reserved for issuance or transfer pursuant to rights granted under the ESPP (“Aggregate Number”).

The Aggregate Number represents 2 % of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to increase each year over a ten-year period.

5 unchanged sentences

The first offering period under the ESPP began on November 1, 2022.

As of December 31, 2023, we had issued 478,023 shares pursuant to the ESPP.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Option Activity

As of December 31, 2024, 936,368 shares of Class A Common Stock were issued under the ESPP.

2024 Employment Inducement Incentive Award Plan

The Company adopted 2024 Employment Inducement Incentive Award Plan (the “2024 Inducement Plan”, collectively, with the 2016 Plan and the 2022 Incentive Plan, the “Plans” ) effective August 6, 2024.

The Company reserved 6,000,000 shares of Class A Common Stock for the issuance of awards under the 2024 Inducement Plan.

As of December 31, 2024 , 0 shares were issued under the 2024 Inducement Plan.

Stock Options Activity

O ptions granted generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant, and generally vest over a four-year period, with a 25 % cliff vesting after one year and then ratably on a monthly basis for the remaining three years .

Stock option activity under the Plans was as follows for the years ended December 31, 2024, 2023 and 2022:

6 unchanged sentences

Outstanding, December 31, 2022 25,420,425 $ 3.74 6.32 $ 1,448

Granted 391,619 6.17

Exercised ( 3,585,829 ) 2.37 5,207

6 unchanged sentences

Options exercised early are subject to the vesting provisions mentioned above, and any unvested shares are subject to repurchase at the original price upon termination of employment, death, or disability.

There were no option exercises during the year ended December 31, 2023, 2022 and 2021 that were subject to repurchase.

The weighted average grant date fair value per option granted was $ 3.11 , during the year ended December 31, 2022 and $ 3.06 during the year ended December 31, 2021.

There were no options granted during the year ended December 31, 2023.

There were no option exercises during the years ended December 31, 2024, 2023 and 2022 that were subject to repurchase.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The weighted average grant date fair value per option granted was $ 3.11 during the year ended December 31, 2022.

There were no options granted during the years ended December 31, 2024 and 2023.

The total fair value of options vested was approximately $ 3.0 million, $ 4.5 million and $ 9.9 million during the years ended December 31, 2024, 2023 and 2022, respectively.

The Company recorded stock-based compensation expense related to options of $ 3.0 million, $ 4.0 million and $ 8.7 million for the years ended December 31, 2024, 2023 and 2022.

As of December 31, 2023, the unamortized expense related to outstanding options was $ 4.5 million.

The weighted average remaining amortization period over which the balance as of December 31, 2023 is to be amortized is 1.51 years.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to the unvested stock options was approximately $ 1.4 million, which we expect to recognize over a weighted-average period of 0.68 years.

For the purpose of determining the estimated fair value of share-based payment awards issued in the form of stock options, the Company uses the Black-Scholes option-pricing model.

The assumptions under the Black-Scholes option-pricing model during the years ended December 31, 2022 and 2021 were as follows for option awards:

The assumptions under the Black-Scholes option-pricing model during the year ended December 31, 2022 were as follows for option awards:

Dividend yield 0 %

2 unchanged sentences

Risk free interest rate 2.58 %

Restricted Stock Units Activity

R SUs granted generally vest over a four-year period, with 25 % cliff vesting after one year and then ratably on a monthly basis for the remaining three years .

Besides RSUs with vesting condition tied to requisite service period, the Company also issues RSUs with vesting conditions tied to certain market conditions (“Market-Based RSUs”) and RSUs with vesting conditions tied to certain performance criteria ("Performance-Based RSUs").

In connection with the SYNQ3 Acquisition, the Company granted 1,434,978 RSUs (the "Retention Pool"), 25 % of which is subject to service conditions that vest at the end of each of the upcoming three fiscal years and 75 % of which is subject to both service and performance-based vesting conditions at the end of each of the upcoming three fiscal years, respectively.

The performance level for each of the fiscal years 2024, 2025 and 2026 is based on tiered annual revenue targets, subject to a floor of $ 9.0 million, $ 21.0 million and $ 30.0 million, respectively, with vesting ranging from 50 % to 100 % of the RSUs granted depending on the level of achievement of the specified revenue target in each year.

The Company assesses the probability of vesting of the above performance-based awards from the Retention Pool every reporting period.

As of December 31, 2024, performance level of 2024 revenue amount was not met and performance levels of 2025 and 2026 were probable of being met.

The Company also granted 1,952,000 RSUs that vest over a four-year requisite service period to SYNQ3 employees during the year ended December 31, 2024.

Additionally, the Company granted 10,622,133 RSUs to other employees of the Company during the year ended December 31, 2024.

As a result, the Company granted total of 14,009,111 RSUs during the year ended December 31, 2024.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ESPP Activity

For the purpose of determining the estimated fair value of ESPP shares, the Company uses the Black-Scholes option-pricing model.

The assumptions under the Black-Scholes option-pricing model during the year ended December 31, 2023 and 2022 were as follows for ESPP awards:

Year Ended Year Ended

December 31, 2023 December 31, 2022

Dividend yield 0 % 0 %

Expected volatility 56 % 77 %

Expected term (years) 0.49 0.52

Risk free interest rate 5.26 % 4.53 %

During the year ended December 31, 2023 , the Company reco rded $ 0.4 million of stoc k-based compensation related to its ESPP.

There was $ 0.1 million of unrecognized stock-based compensation expense for the year ended December 31, 2023, related to the ESPP that is expected to be recognized over an average vesting period of 0.36 years .

Restricted Stock Unit Activity

The activity for nonvested Restricted Stock Units under the Plans was as follows for the year ended December 31, 2023, 2022 and 2021:

The activity for unvested Restricted Stock Units under the Plans was as follows for the years ended December 31, 2024, 2023 and 2022:

Number of Shares Weighted Average Grant Date Fair Value

Nonvested, December 31, 2021 — —

Unvested, December 31, 2022 16,716,383 4.14

Granted 11,158,301 2.38

1 unchanged sentence

Forfeited ( 3,852,909 ) 3.90

Nonvested, December 31, 2022 16,716,383 4.14

Unvested, December 31, 2023 16,343,591 3.39

Granted 14,009,111 4.14

1 unchanged sentence

Forfeited ( 1,239,891 ) 3.15

Nonvested, December 31, 2023 16,343,591 3.39

The Company recorded stock-based compensation expense of $ 1.3 million related to Performance-Based RSUs during the year ended December 31, 2023.

Unamortized expense related to Performance-Based RSUs was $ 6.6 million as of December 31, 2023.

Unvested, December 31, 2024 21,790,255 3.87

The Company recorded stock-based compensation expense of $ 1.1 million, $ 1.3 million and $ 0.4 million related to Performance-Based RSUs during the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to the unvested Performance-based RSUs was approximately $ 8.6 million.

There were 1,376,234 Performance-Based RSUs granted during the year ended December 31, 2024.

The Company recorded $ 0.6 million, $ 1.5 million and $ 1.1 million in stock-based compensation expense related to Market-Based RSUs during the year ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to the unvested Market-Based RSUs was approximately $ 10.7 thousand.

To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value.

The assumptions under the Monte Carlo simulation model and the calculated fair value of the Market-Based RSUs granted to employees during the year ended December 31, 2022 were as follows.

The Company did not grant Market-Based RSUs during the year ended December 31, 2023.

The Company did not grant Market-Based RSUs during the years ended December 31, 2024 and 2023.

Expected volatility 52 %

Expected term (years) 4

Drift rate 2.9 %

During the years ended December 31, 2024, 2023 and 2022, the fair value of RSUs that vested was $ 24.1 million, $ 25.5 million, and $ 12.0 million.

During the years ended December 31, 2024, 2023, and 2022, the Company recorded $ 27.2 million, $ 20.4 million, and $ 19.0 million of stock-based compensation related to RSUs.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to the unvested RSUs with service conditions was approximately $$ 67.6 million.

The total unrecognized stock-based compensation related to unvested RSUs is $ 76.2 million and this will vest over a weighted average period of 2.29 years.

Restricted Stock Awards Activity

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the SYNQ3 Acquisition, a total of 2,033,156 unvested restricted Class A Common Stock shares ("RSAs") were issued, 25 % of which are subject to service conditions that vest at the end of each of the upcoming three fiscal years in 3 tranches, and 75 % of which is subject to both service and performance-based vesting conditions in three tranches.

The performance level for each of the fiscal years 2024, 2025 and 2026 is based on tiered annual revenue targets, subject to a floor of $ 9.0 million, $ 21.0 million and $ 30.0 million, respectively, with vesting ranging from 50 % to 100 % of the RSAs granted depending on the level of achievement of the specified revenue target in each year.

The Company assesses the probability of vesting of the above performance-based awards every reporting period.

As of December 31, 2024, the performance level of the 2024 revenue amount was not met and performance levels of 2025 and 2026 were probable of being met.

The activity for unvested Restricted Stock Awards was as follows for the year ended December 31, 2024:

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2023 — —

Granted 2,033,156 1.98

Vested ( 169,430 ) 1.98

Unvested, December 31, 2024 1,863,726 1.98

The Company recorded stock-based compensation expense of $ 0.8 million related to RSAs during the year ended December 31, 2024.

As of December 31, 2024, the total unrecognized stock-based compensation expense related to the unvested RSAs subject to service-based vesting condit ion and unvested RSAs subject to performance-based vesting condition was approximately $ 0.7 million and $ 2.5 million, r espectively, over a weighted average period of 1.76 years.

Refer to Note 3 for further information on the SYNQ3 Acquisition.

ESPP Activity

For the purpose of determining the estimated fair value of ESPP shares, the Company uses the Black-Scholes option-pricing model.

The assumptions under the Black-Scholes option-pricing model during the years ended December 31, 2024, 2023, and 2022 were as follows for ESPP awards:

Year Ended Year Ended Year Ended

December 31, 2024 December 31, 2023 December 31, 2022

Dividend yield 0 % 0 % 0 %

Expected volatility 84 % 56 % 77 %

Expected term (years) 0.50 0.49 0.52

Drift rate 2.9 %

The Company recorded $ 1.5 million and $ 1.1 million in stock-based compensation expense related to Market-Based RSUs during the year ended December 31, 2023 and 2022.

Unamortized expense related to Market-Based RSUs was $ 0.6 million as of December 31, 2023.

There were no Market-Based RSU's granted during the year ended, December 31, 2023.

During the year ended December 31, 2023 and 2022, the fair value of RSUs that vested was $ 25.5 million and $ 12.0 million.

During the year ended December 31, 2023 and 2022 the Company recorded $ 20.4 million and $ 19.0 million of stock-based compensation related to RSUs.

As of December 31, 2023 and the unamortized expense related to RSUs was $ 50.5 million.

The weighted average remaining amortization period over which the balance as of December 31, 2023 is to be amortized is 2.32 years.

Risk free interest rate 4.40 % 5.26 % 4.53 %

During the years ended December 31, 2024 and 2023, the Company reco rded $ 0.5 million and $ 0.4 million of stoc k-based compensation related to its ESPP.

There was $ 0.4 million of unrecognized stock-based compensation expense

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for the year ended December 31, 2024, related to the ESPP that is expected to be recognized over an average vesting period of 0.36 years.

Equity Award Modifications

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The total incremental compensation cost resulting from these modifications is $ 3.2 million.

There were no significant modifications during the years ended December 31, 2022 and December 31, 2021.

Compensation Costs

There were no significant modifications during the years ended December 31, 2024 and 2022.

Stock-Based Compensation

The Company’s founders held 7,270,503 of Legacy SoundHound common stock pre-conversion prior to the Business Combination.

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Total $ 33,145 $ 27,931 $ 28,792

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company leases certain facilities under non-cancelable operating leases that expire at various dates through 2030.

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The finance leases are collateralized by the financed assets.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Aggregate non-cancelable future minimum lease payments under operating and finance leases were as follows as of December 31, 2024 (in thousands):

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Loss on change in fair value of ELOC program — ( 1,901 ) ( 1,075 )

Gain on bargain purchase 1,223 — —

Other income (expense), net ( 371 ) 190 32

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2024 2023 2022

Stock options 16,841,367 25,420,425 30,361,405

Restricted stock units 16,343,591 16,716,383 —

Estimated ESPP stock units 299,116 476,636 —

Stock-based awards 24,918,197 33,484,074 42,613,444

Common stock warrants 3,663,955 6,967,532 3,665,996

Redeemable convertible preferred stock — — 106,949,326

Series A Preferred Stock — 16,226,645 —

Unvested restricted share awards 338,859 — —

Total 28,921,011 56,678,251 46,279,440

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The table above does not include:

(i) 4,342,570 , zero , and zero shares of unvested stock-based awards and restricted stock awards, respectively, and (ii) 18,257,365 .

zero and zero shares of contingently issuable earnout shares, respectively;

outstanding as of December 31, 2024, 2023 and 2022, as these awards are subject to performance conditions that were not met as of those dates.

The table also excludes 274,191 , zero , and zero shares associated with the Contingent Holdback Consideration in connection with the SYNQ3 Acquisition, respectively, as these shares are subject to contingencies that were not met as of December 31, 2024, 2023 and 2022.

The shares issued and held in escrow for the Amelia Acquisition are participating securities that contractually entitle the holders of such shares to participate in the combined entity’s earnings but do not contractually require the holders of such shares to participate in the combined entity’s losses.

The weighted average shares outstanding used to calculate basic and diluted net income per share attributable to common stockholders excludes the 2,149,530 shares of the Company's Class A Common Stock held in escrow as they are considered contingently returnable shares until the indemnifications subject to escrow have been resolved.

The following is a geographical breakdown of income (loss) before income taxes:

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$ ( 359,928 ) $ ( 85,023 ) $ ( 113,824 )

The provision for income taxes consisted of the following:

The provision (benefit) for income taxes consisted of the following:

Year Ended December 31,

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Federal $ ( 10,492 ) $ — $ —

State ( 1,701 ) — —

Foreign 10 30 2,127

Total deferred provision $ ( 12,183 ) $ 30 $ 2,127

Total provision for income taxes $ 3,914 $ 2,889 $ 456

Total provision (benefit) for income taxes $ ( 9,247 ) $ 3,914 $ 2,889

Effective income tax expense rate 2.6 % ( 4.6 ) % ( 2.5 ) %

The Company has incurred net pre-tax losses in the United States only for all periods presented.

The Company recorded an income tax expense of $ 3.9 million, $ 2.9 million, and $ 0.5 million for the years ended December 31, 2023, 2022, and 2021 respectively, which reflects withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.

The Company recorded an income tax expense (benefit) of $( 9.2 ) million, $ 3.9 million, and $ 2.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The 2024 tax benefit relates to tax benefits from acquisitions, partially offset by withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.

The 2023 and 2022 tax expense relates to withholding tax paid for sales to customers in foreign jurisdictions and income tax related to foreign subsidiaries.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before income taxes as follows:

The provision (benefit) for income taxes differed from the amount computed by applying the federal statutory rate to our income before income taxes as follows:

Year Ended December 31,

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State income tax rate 2 3 7

Benefits from acquisition ( 12,189 ) — —

Foreign withholding and income tax 2,561 3,689 2,298

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Permanent book tax differences* 1,180 246 751

162(m) disallowance* 9,457 270 —

Change in fair value of contingent acquisition liabilities 46,761 — —

Other deferred adjustments ( 67 ) ( 1,701 ) —

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$ ( 9,247 ) $ 3,914 $ 2,889

*The 2023 amounts have been conformed to the 2024 presentation.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of our deferred tax assets and liabilities were as follows:

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Research and development credits 23,934 17,825

Property and equipment and intangible assets 227 178

Property and equipment* 1,936 223

Deferred revenue 5,260 767

Intangible assets* — 4

Interest expense 5,484 —

Stock-based compensation 2,704 2,246

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Right-of-use assets ( 1,017 ) ( 1,168 )

Intangible assets ( 40,202 ) —

Total deferred tax liabilities ( 41,219 ) ( 1,168 )

Net deferred tax assets $ 4 $ 11

Non-current deferred tax assets $ 1,179 $ 55

Non-current deferred tax liabilities (included as a component of other non-current liabilities) ( 1,168 ) ( 13 )

Net deferred tax assets $ 11 $ 42

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

*The 2023 amounts have been conformed to the 2024 presentation.

Based on available objective evidence, management believes it is more-likely-than-not that the domestic federal and state deferred tax assets;

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The valuation allowance increased by $ 37.3 million from the year ended December 31, 2023 to December 31, 2024.

The Company capitalized research and development expenditures incurred during the years ended December 31, 2023 and 2022, and amortizes such expenditures over 5 or 15 years, as applicable, pursuant to Section 174 of the Internal Revenue Code as required by the 2017 Tax Cuts and Jobs Act.

The mandatory capitalization requirement did not have a material impact on our net deferred tax assets or cash tax liabilities.

The Company has not provided U.S.

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The Company also had Canadian SR&ED tax credits of $ 1.6 million, which will expire starting in 2038 if not utilized.

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state tax laws, utilization of net operating loss carryforwards and tax credits may be subject to annual limitations due to certain ownership changes.

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Increase for tax positions of prior years

Decrease for tax positions of prior years ( 4 )

Increase for tax positions of current year 2,784

Balance as of December 31, 2024 $ 11,252

These unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance.

As of December 31, 2023, the

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company has not accrued any interest or penalties.

$ 0.9 million of the unrecognized tax benefits, if recognized, would affect the effective tax rate.

$ 10.4 million of the unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance.

As of December 31, 2024, the Company has accrued $ 0.2 million interest and penalties related to unrecognized tax benefits.

The Company does not anticipate any significant change in the Company’s uncertain tax positions within 12 months of this date.

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Below we provide our disclosures for transactions with the companies through June 30, 2022.

During the year ended December 31, 2022 and 2021, we recognized revenue from the companies of $ 5.2 million and $ 7.0 million, respectively.

During the year ended December 31, 2022, we recognized revenue from the companies of $ 5.2 million.

On January 20, 2023, our Chief Financial Officer and one of our directors each entered into Purchase Agreements, purchasing 3,334 shares of Series A Preferred Stock each for a total purchase price of $ 100,000 each.

SEGMENT INFORMATION

The Company organized its operations into a single reportable segment, managed on a consolidated basis.

The Company has determined that the Chief Executive Officer is its chief operating decision maker ("CODM").

The CODM assesses performance for the segment and decides how to allocate resources based on net loss that also is reported on the income statement as consolidated net loss.

The CODM compares net loss from budget to actual result to assess segment performance and adjust resource allocations as necessary.

In accordance with the adoption of ASU 2023-07 in 2024, the Company determined to disclose personnel costs which requires retrospective application to all prior periods presented in the financial statements.

The personnel-related costs

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

are the significant segment expenses included in the net loss that are regularly provided to the CODM.

Personnel-related costs were $ 114.1 million , $ 73.1 million and $ 94.3 million , respectively, and represented 60.5 % , 66.5 % and 68.9 % , respectively, of total operating expenses during the years ended December 31, 2024, 2023, and 2022 .

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

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and 3) the incorrect recording of in-kind dividends associated with the Company’s Series A Preferred Stock.

The identified errors were included in the Company's previously issued quarterly unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023, the three months ended March 31, 2023 and annual consolidated financial statements as of and for the year ended December 31, 2022.

The identified errors were included in the Company's previously issued annual consolidated financial statements as of and for the year ended December 31, 2022.

In accordance with SEC Staff Accounting Bulletin No.

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108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the errors and determined that the related impacts were not material to its consolidated financial statements for the prior year periods when they occurred, but the Company determined it would be appropriate to correct the errors in the current period in the Company’s consolidated statements of operations and comprehensive loss, consolidated balance sheets, consolidated statements of cash flows or consolidated statements of redeemable convertible preferred stock and stockholders’ deficit for any periods impacted.

The Company revised the previously issued condensed consolidated statements of operations and comprehensive loss, condensed consolidated balance sheets, condensed consolidated statements of cash flows and condensed consolidated statements of redeemable convertible preferred stock and stockholders’ deficit tables as of and for the three and six months ended June 30, 2023 and as of and for the three months ended March 31, 2023 as well as the previously issued consolidated statements of operations and comprehensive loss, consolidated balance sheets, consolidated statements of cash flows and consolidated statements of redeemable convertible preferred stock and stockholders’ deficit tables and as of and for the year ended December 31, 2022 to correct for such errors.

The Company revised the previously issued consolidated statements of operations and comprehensive loss and consolidated statements of cash flows, and consolidated statements of redeemable convertible preferred stock and stockholders’ deficit tables as of and for the year ended December 31, 2022 to correct for such errors.

All relevant prior period amounts affected by these revisions have been corrected in the notes in this Form 10-K.

The following tables reflect the impact of these revisions on the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2023 ( dollars in thousands, except per share amounts ):

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2023

Condensed Consolidated Balance Sheet As Previously Reported Adjustment As Revised

Accrued liabilities $ 16,381 $ ( 2,872 ) $ 13,509

Total current liabilities 27,003 ( 2,872 ) 24,131

Notes payable, net of current portion 66,428 15,872 82,300

Other non-current liabilities 16,824 ( 12,821 ) 4,003

Total liabilities 118,789 179 118,968

Additional paid-in capital 564,197 3,597 567,794

Accumulated deficit ( 550,403 ) ( 3,776 ) ( 554,179 )

Total stockholders’ equity 38,789 ( 179 ) 38,610

Total liabilities and stockholders’ equity $ 157,578 $ — $ 157,578

Three Months Ended June 30, 2023

Condensed Consolidated Statements Of Operations And Comprehensive Loss As Previously Reported Adjustment As Revised

General and administrative $ 6,377 $ 47 $ 6,424

Loss from operations ( 16,436 ) ( 47 ) ( 16,483 )

Other income (expense), net 493 ( 1,328 ) ( 835 )

Total other expense, net ( 5,079 ) ( 1,328 ) ( 6,407 )

Loss before provision for income taxes ( 21,515 ) ( 1,375 ) ( 22,890 )

Net loss ( 21,932 ) ( 1,375 ) ( 23,307 )

accrual of Series A Preferred Stock paid-in-kind dividends — ( 877 ) ( 877 )

Net loss attributable to common stockholders $ ( 21,932 ) $ ( 2,252 ) $ ( 24,184 )

Net loss per share:

Basic and diluted $ ( 0.10 ) $ ( 0.01 ) $ ( 0.11 )

Six Months Ended June 30, 2023

Condensed Consolidated Statements Of Operations And Comprehensive Loss As Previously Reported Adjustment As Revised

General and administrative $ 13,502 $ 211 $ 13,713

Loss from operations ( 41,474 ) ( 211 ) ( 41,685 )

Other income (expense), net 587 ( 2,225 ) ( 1,638 )

Total other expense, net ( 6,081 ) ( 2,225 ) ( 8,306 )

Loss before provision for income taxes ( 47,555 ) ( 2,436 ) ( 49,991 )

Net loss ( 48,301 ) ( 2,436 ) ( 50,737 )

accrual of Series A Preferred Stock paid-in-kind dividends — ( 1,559 ) ( 1,559 )

Net loss attributable to common stockholders $ ( 48,301 ) $ ( 3,995 ) $ ( 52,296 )

Net loss per share:

Basic and diluted $ ( 0.23 ) $ ( 0.02 ) $ ( 0.25 )

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2023

Condensed Consolidated Statement of Stockholders' Equity (Deficit) As Previously Reported Adjustment As Revised

Additional paid-in capital $ 564,197 $ 3,597 $ 567,794

Accumulated deficit ( 550,403 ) ( 3,776 ) ( 554,179 )

Net loss $ ( 21,932 ) $ ( 1,375 ) $ ( 23,307 )

Six Months Ended June 30, 2023

Condensed Consolidated Statements of Cash Flows As Previously Reported Adjustment As Revised

Net loss $ ( 48,301 ) $ ( 2,436 ) $ ( 50,737 )

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on change in fair value of ELOC program — 1,901 1,901

Changes in operating assets and liabilities

Other non-current assets 628 ( 265 ) 363

Accrued liabilities 5,045 250 5,295

Net cash used in operating activities ( 33,651 ) ( 550 ) ( 34,201 )

Proceeds from sales of common stock under the ELOC program, net 70,905 550 71,455

Net cash provided by financing activities $ 154,008 $ 550 $ 154,558

Noncash financing activities:

Accrued and unpaid debt issuance costs $ 16,461 $ ( 16,461 ) $ —

Non-cash debt discount 4,315 ( 179 ) 4,136

Issuance of common stock to settle commitment shares related to the ELOC program $ — $ 915 $ 915

The following tables reflect the impact of these revisions on the Company’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2023 ( dollars in thousands, except per share amounts ):

March 31, 2023

Condensed Consolidated Balance Sheet As Previously Reported Adjustment As Revised

Other non-current assets $ 2,074 $ ( 432 ) $ 1,642

Total assets 72,803 ( 432 ) 72,371

Additional paid-in capital 505,889 1,969 507,858

Accumulated deficit ( 528,471 ) ( 2,401 ) ( 530,872 )

Total stockholders’ deficit 2,382 ( 432 ) 1,950

Total liabilities and stockholders’ deficit $ 72,803 $ ( 432 ) $ 72,371

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended March 31, 2023

Condensed Consolidated Statements Of Operations And Comprehensive Loss As Previously Reported Adjustment As Revised

General and administrative $ 7,125 $ 165 $ 7,290

Loss from operations ( 25,038 ) ( 165 ) ( 25,203 )

Other income (expense), net 94 ( 896 ) ( 802 )

Total other expense, net ( 1,002 ) ( 896 ) ( 1,898 )

Loss before provision for income taxes ( 26,040 ) ( 1,061 ) ( 27,101 )

Net loss ( 26,369 ) ( 1,061 ) ( 27,430 )

accrual of Series A Preferred Stock paid-in-kind dividends — ( 682 ) ( 682 )

Net loss attributable to common stockholders $ ( 26,369 ) $ ( 1,743 ) $ ( 28,112 )

Net loss per share:

Basic and diluted $ ( 0.13 ) $ ( 0.01 ) $ ( 0.14 )

Three Months Ended March 31, 2023

Condensed Consolidated Statement of Stockholders' Equity (Deficit) As Previously Reported Adjustment As Revised

Additional paid-in capital $ 505,889 $ 1,969 $ 507,858

Accumulated deficit ( 528,471 ) ( 2,401 ) ( 530,872 )

Net loss $ ( 26,369 ) $ ( 1,061 ) $ ( 27,430 )

Three Months Ended March 31, 2023

Condensed Consolidated Statements of Cash Flows As Previously Reported Adjustment As Revised

Net loss $ ( 26,369 ) $ ( 1,061 ) $ ( 27,430 )

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on change in fair value of ELOC program — 571 571

Changes in operating assets and liabilities

Other non-current assets 19 167 186

Accrued liabilities 4,306 250 4,556

Net cash used in operating activities ( 14,467 ) ( 73 ) ( 14,540 )

Payment of financing costs associated with ELOC program — ( 250 ) ( 250 )

Proceeds from sales of common stock under the ELOC program, net 28,360 323 28,683

Net cash provided by financing activities $ 51,568 $ 73 $ 51,641

Noncash financing activities:

Issuance of common stock to settle commitment shares related to the ELOC program $ — $ 915 $ 915

The following tables reflect the impact of these revisions on the Company’s consolidated financial statements as of and for the year ended December 31, 2022 ( dollars in thousands, except per share amounts ):

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022

Consolidated Balance Sheet As Previously Reported Adjustment As Revised

Other non-current assets $ 1,656 $ ( 265 ) $ 1,391

Total assets 38,251 ( 265 ) 37,986

Accrued liabilities 7,462 1,075 8,537

Total current liabilities 37,496 1,075 38,571

Additional paid-in capital 466,857 — 466,857

Accumulated deficit ( 502,102 ) ( 1,340 ) ( 503,442 )

Total stockholders’ deficit ( 35,225 ) ( 1,340 ) ( 36,565 )

Total liabilities and stockholders’ deficit $ 38,251 $ ( 265 ) $ 37,986

Year Ended December 31, 2022

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Accumulated deficit $ ( 502,102 ) $ ( 1,340 ) $ ( 503,442 )

Net loss $ ( 115,373 ) $ ( 1,340 ) $ ( 116,713 )

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended December 31, 2022

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Net cash used in operating activities $ ( 94,019 ) $ — $ ( 94,019 )

SOUNDHOUND AI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SUBSEQUENT EVENTS

SYNQ3 Acquisition

On January 3, 2024, the Company acquired all of the issued and outstanding equity of Sync3, Inc.

("SYNQ3"), a leading provider of voice AI and other technology solutions to the restaurant industry, for total consideration of approximately $ 5.0 million in cash, subject to customary net working capital adjustments, and 8,968,610 shares of the Company's Class A Common Stock.

The Company has agreed to pay up to $ 4.0 million of additional consideration in cash and shares of Class A Common Stock to certain stockholders of SYNQ3 based on tiered annual revenue targets for each fiscal year 2024, 2025 and 2026, of which 20 % is to be paid in cash and the remaining in the Company's Class A Common Stock.

The stock consideration was based on a reference value of $ 2.23 per share upon the execution of the merger agreement dated December 6, 2023.

In connection with closing, approximately $ 0.5 million of additional consideration in cash and 1,179,524 shares of Class A Common Stock are being withheld for a period of 15 months to partially secure the indemnification obligations of SYNQ3's stockholders under the merger agreement.

Conversion of Preferred Stock Series A

On January 12, 2024, one investor optionally converted 35,000 shares of preferred stock into 1,199,364 shares of Class A Common Stock.

Sales Agreement Issuance

In January and February 2024, the Company sold 34,578,019 shares of our common stock under the Sales Agreement, at an average price of $ 3.37 per share and raised $ 116.4 million of gross proceeds.

On January 24, 2025, the Company entered into an Equity Distribution Agreement (the "Second Equity Distribution Agreement") with Cantor Fitzgerald & Co., Guggenheim Securities, LLC, Oppenheimer & Co.

Inc., Wedbush Securities Inc., Ladenburg Thalmann & Co.

and Northland Securities, Inc.

with respect to an at-the-market equity program under which the Company may offer and sell up to $ 250.0 million of shares of its Class A Common Stock from time to time through the Sales Managers.

Sales of our Class A Common Stock, if any, under the Second Equity Distribution Agreement will be made at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act.

The Sales Managers will be entitled to commission at a fixed rate of 2.0 % of the gross sales price per share for their services in acting as agent in the sale of the Company's Class A Common Stock.

In January and February 2025, the Company sold 4,248,900 shares of our common stock under the Second Equity Distribution Agreement, at an average price of $ 15.94 per share and raised $ 67.7 million of gross proceeds.

The commissions and offering costs borne by the Company were approximately $ 1.4 million.

Following this issuance, the Company has a remaining capacity to sell up to an additional $ 20.8 million of the Company's common stock under the Sales Agreement.

Following this issuance, the Company has a remaining capacity to sell up to an additional $ 182.3 million of the Company's common stock under the Second Equity Distribution Agreement.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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 8. Financial Statements and Supplementary Data