SOUNDHOUND AI, INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Report of Independent Registered Public Accounting Firm ( PricewaterhouseCoopers LLP , PCAOB ID: 238 ) 65 Report of Independent Registered Public Accounting Firm ( Armanino LLP , PCAOB ID: 32 ) 68 Consolidated Balance Sheets 69 Consolidated Statements of Operations and Comprehensive Loss 70 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit ) 71 Consolidated Statements of Cash Flows 75 Notes to Consolidated Financial Statements 77 64 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of SoundHound AI, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting 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, 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. The material weaknesses referred to above are described in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Basis for Opinions 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 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 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 65 Table of Contents 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 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 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 A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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 As described in Notes 2 and 4 to the consolidated financial statements, the Company derives its revenue primarily from the following performance obligations: (1) hosted services, (2) professional services, (3) monetization and (4) licensing. 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 to receive for those products or services. 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 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. 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) 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 66 Table of Contents 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 San Francisco, California March 11, 2025 We have served as the Company’s auditor since 2023. 67 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SoundHound AI, Inc. Opinion on the Financial Statements 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 These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. 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. 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. 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. We believe that our audit provides a reasonable basis for our opinion. /s/ Armanino LLP San Jose, California We have served as the Company's auditor since 2020. 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 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. 68 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 198,240 $ 95,260 Accounts receivable, net of allowances of $ 726 and $ 203 as of December 31, 2024 and 2023, respectively 23,159 4,050 Contract assets and unbilled revenue, net 26,645 11,780 Other current assets 7,476 2,452 Total current assets 255,520 113,542 Restricted cash equivalents, non-current 676 13,775 Right-of-use assets 4,692 5,210 Property and equipment, net 1,239 1,515 Goodwill 101,704 — Intangible assets, net 174,943 — Deferred tax asset 4 11 Contract assets and unbilled revenue, non-current, net 12,879 16,492 Other non-current assets 2,296 577 Total assets $ 553,953 $ 151,122 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 5,559 $ 1,653 Accrued liabilities 26,291 13,884 Operating lease liabilities 1,898 2,637 Finance lease liabilities 49 121 Income tax liability 2,750 1,618 Deferred revenue 23,876 4,310 Other current liabilities 7,319 — Total current liabilities 67,742 24,223 Operating lease liabilities, net of current portion 2,403 3,089 Deferred revenue, net of current portion 6,862 4,910 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 Total liabilities 371,300 122,954 Commitments and contingencies (Note 7) Stockholders’ equity (deficit): Series A Preferred Stock, $ 0.0001 par value; 1,000,000 shares authorized; 0 and 475,005 shares issued and outstanding, aggregate liquidation preference of $ — and $ 16,227 as of December 31, 2024 and December 31, 2023, respectively — 14,187 Class A Common Stock, $ 0.0001 par value; 455,000,000 shares authorized; 361,096,457 and 216,943,349 shares issued and outstanding as of December 31, 2024 and 2023, respectively 35 22 Class B Common Stock, $ 0.0001 par value; 44,000,000 shares authorized; 32,535,408 and 37,485,408 shares issued and outstanding as of December 31, 2024 and 2023, respectively 3 4 Additional paid-in capital 1,125,470 606,135 Accumulated deficit ( 943,060 ) ( 592,379 ) Accumulated other comprehensive income $ 205 199 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. 69 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share data) Year Ended December 31, 2024 2023 2022 Revenues $ 84,693 $ 45,873 $ 31,129 Operating expenses: Cost of revenues 43,309 11,307 9,599 Sales and marketing 29,126 18,893 20,367 Research and development 70,555 51,439 76,392 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 — Total operating expenses 426,046 114,481 136,801 Loss from operations ( 341,353 ) ( 68,608 ) ( 105,672 ) Other expense, net: Loss on early extinguishment of debt ( 15,629 ) ( 837 ) — Interest expense ( 12,168 ) ( 16,733 ) ( 6,893 ) Other income (expense), net 9,222 1,155 ( 1,259 ) Total other expense, net ( 18,575 ) ( 16,415 ) ( 8,152 ) 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 ) Cumulative dividends attributable to Series A Preferred Stock ( 416 ) ( 2,774 ) — Net loss attributable to SoundHound common shareholders ( 351,097 ) ( 91,711 ) ( 116,713 ) Other comprehensive loss: Unrealized gains on investments 6 199 — Comprehensive loss $ ( 350,675 ) $ ( 88,738 ) $ ( 116,713 ) Net loss per share: Basic and diluted $ ( 1.04 ) $ ( 0.40 ) $ ( 0.74 ) Weighted-average common shares outstanding: Basic and diluted 338,462,574 229,264,904 157,317,695 The accompanying notes are an integral part of these consolidated financial statements. 70 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share and per share data) Legacy SoundHound Redeemable Convertible Preferred Stock Legacy SoundHound Common Stock Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balances as of December 31, 2021 106,949,326 $ 279,503 68,258,556 $ 1 — $ — — $ — — $ — $ 43,491 $ — $ ( 386,729 ) $ ( 343,237 ) Issuance of common stock upon exercise of stock options — — 2,582,535 — — — — — — — 2,840 — — 2,840 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 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 71 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share and per share data) Legacy SoundHound Redeemable Convertible Preferred Stock Legacy SoundHound Common Stock Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount 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 72 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share and per share data) Legacy SoundHound Redeemable Convertible Preferred Stock Legacy SoundHound Common Stock Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount 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 73 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands, except share and per share data) Legacy SoundHound Redeemable Convertible Preferred Stock Legacy SoundHound Common Stock Series A Preferred Stock Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount 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 Net loss — — — — — — — — — — — — ( 350,681 ) ( 350,681 ) Other comprehensive income — — — — — — — — — — — 6 6 Balances as of December 31, 2024 — $ — — $ — — $ — 361,096,457 $ 35 32,535,408 $ 3 $ 1,125,470 $ 205 $ ( 943,060 ) $ 182,653 The accompanying notes are an integral part of these consolidated financial statements. 74 Table of Contents SOUNDHOUND AI, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net loss $ ( 350,681 ) $ ( 88,937 ) $ ( 116,713 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 16,054 2,313 4,037 Stock-based compensation 33,145 27,931 28,792 Loss on change in fair value of ELOC program — 1,901 1,075 Change in fair value of derivative and warrant liability — — 606 Amortization of debt issuance cost 1,621 5,400 2,287 Non-cash lease amortization 2,613 3,346 3,189 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 Other, net ( 580 ) 93 — Changes in operating assets and liabilities: Accounts receivable, net ( 10,264 ) ( 627 ) ( 1,354 ) Prepaid expenses — 1,590 ( 1,238 ) Other current assets ( 3,131 ) ( 821 ) 299 Contract assets ( 7,304 ) ( 19,578 ) ( 8,658 ) Other non-current assets ( 196 ) 671 ( 274 ) Accounts payable ( 7,636 ) ( 1,162 ) 302 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 non-current liabilities ( 415 ) 2,131 2,946 Net cash used in operating activities ( 108,878 ) ( 68,265 ) ( 94,019 ) Cash flows from investing activities: 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 ) Cash flows from financing activities: Proceeds from the issuance of Series A Preferred Stock, net of issuance costs — 24,942 — 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 Proceeds from Business Combination and PIPE, net of transaction costs — — 90,689 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 ) Net cash provided by financing activities 210,906 168,237 82,001 Effects of exchange rate changes on cash 225 ( 20 ) — Net change in cash, cash equivalents, and restricted cash equivalents 89,881 99,560 ( 13,347 ) Cash, cash equivalents, and restricted cash equivalents, beginning of year 109,035 9,475 22,822 Cash, cash equivalents, and restricted cash equivalents, end of year $ 198,916 $ 109,035 $ 9,475 75 Table of Contents SOUNDHOUND, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS — Continued For the Year Ended December 31, 2024 and 2023 (In thousands) Year Ended December 31, 2024 2023 2022 Reconciliation to amounts on the consolidated balance sheets: Cash and cash equivalents $ 198,240 $ 95,260 $ 9,245 Current portion of restricted cash equivalents — — — Non-current portion of restricted cash equivalents 676 13,775 230 Total cash, cash equivalents, and restricted cash equivalents shown in the consolidated statements of cash flows $ 198,916 $ 109,035 $ 9,475 Year Ended December 31, 2024 2023 2022 Supplemental disclosures of cash flow information: Cash paid for interest $ 6,337 $ 11,984 $ 4,364 Cash paid for income taxes $ 2,717 $ 2,356 $ 1,044 Noncash investing and financing activities: 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 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 Conversion of convertible note into common stock pursuant to Business Combination $ — $ — $ 20,239 Operating lease liabilities arising from obtaining right-of-use assets $ 1,559 $ — $ 650 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. 76 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ORGANIZATION Nature of Operations SoundHound AI, Inc. (“we,” “us,” “our,” “SoundHound” or the “Company”) turns sound into understanding and actionable meaning. SoundHound’s technology applications enable humans to interact with the things around them in the same way they interact with each other: by speaking naturally to mobile phones, cars, televisions, music speakers, coffee machines, and every other part of the emerging “connected” world. SoundHound's voice AI platform enables product creators to develop their own voice interfaces with their customers. The SoundHound Chat AI voice assistant allows businesses and brands to provide a next-generation voice experience for their users, seamlessly integrating Generative AI and a mix of real-time information domains. Houndify is an open-access platform that allows developers to leverage SoundHound's Voice AI technology. 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. 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. (“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 (the “Merger”), as well as the other transactions contemplated by the Merger Agreement (the Merger and such other transactions, the “Business Combination”). In connection with the closing (the “Closing”) of the Business Combination, Legacy SoundHound became a wholly owned subsidiary of ATSP and ATSP changed its name to SoundHound AI, Inc., and all of Legacy SoundHound common stock (“Legacy SoundHound Common Stock”) and Legacy SoundHound redeemable convertible preferred stock (“Legacy SoundHound Preferred Stock”) automatically converted into shares of the Company’s Class A common stock, par value of $ 0.0001 per share (the “Class A Common Stock”), and the Company’s Class B common stock, par value of $ 0.0001 per share (the “Class B Common Stock”, and collectively with the Class A Common Stock, the “Common Stock”). The Company’s Class A Common Stock and certain of the Company's warrants commenced trading on the Nasdaq Global Market (“Nasdaq”) under the symbols “SOUN” and “SOUNW,” respectively, on April 28, 2022. Refer to Note 3 for more information on the Business Combination. Legacy SoundHound was determined to be the accounting acquirer in the Business Combination based on the following facts: • Former Legacy SoundHound stockholders have a controlling voting interest in the Company; • The Company’s board of directors immediately after the closing of the Business Combination was comprised of five board members, primarily from the board of directors of Legacy SoundHound; and • Legacy SoundHound’s management continues to hold executive management roles for the Company following the Business Combination and are responsible for the day-to-day operations. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy SoundHound issuing stock for the net assets of ATSP, accompanied by a reverse recapitalization. The primary asset acquired from ATSP was related to the cash amounts that were assumed. Separately, the Company also assumed warrants that were deemed to be equity upon Closing of the Business Combination. No goodwill or other intangible assets were recorded as a result of the Business Combination. While ATSP was the legal acquirer in the Business Combination, because Legacy SoundHound was deemed the accounting acquirer, the historical financial statements of Legacy SoundHound became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial 77 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) statements included in this report reflect (i) the historical operating results of Legacy SoundHound prior to the Business Combination; (ii) the combined results of the Company and Legacy SoundHound following the Closing of the Business Combination; (iii) the assets and liabilities of Legacy SoundHound at their historical cost; and (iv) the Company’s equity structure for all periods presented. In accordance with guidance applicable to recapitalization transactions, the equity structure has been retroactively restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s Class A Common Stock and Class B Common Stock issued to Legacy SoundHound Common Stockholders and Legacy SoundHound Preferred Stockholders in connection with the Business Combination. 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 Since inception, the Company has generated recurring losses as well as negative operating cash flows and reported a net loss of $ 350.7 million for the year ended December 31, 2024. As of December 31, 2024, the Company had an accumulated deficit of $ 943.1 million. Management expects to continue to incur additional substantial losses in the foreseeable future. The Company has historically funded its operations primarily through equity or debt financings. 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 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. Refer to Note 23 for information regarding the Company's equity financing activity subsequent to December 31, 2024. 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. NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Significant Accounting Policies The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding annual financial reporting. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). Principles of Consolidation The Company’s consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be significant to the VIE. 78 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Foreign Currency The functional currency of the Company and its subsidiaries is the U.S. dollar. Foreign currency denominated transactions are converted into U.S. dollars at the average rates of exchange prevailing during the period. Assets and liabilities denominated in foreign currency are remeasured into U.S. 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, 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 The preparation of consolidated financial statements in conformity with U.S. 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 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. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from changes in the economic environment will be reflected in the financial statements in future periods. Actual results could differ materially from those estimates. Accounts Receivable, Net Accounts receivable consist of current trade receivables due from customers recorded at invoiced amounts, net of allowance for doubtful accounts. Accounts receivable do not bear interest and the Company generally does not require collateral or other security in support of accounts receivable. When the Company records customer receivables and contract assets arising from revenue transactions, an allowance is recorded for credit losses for the current expected credit losses ("CECL") inherent in the asset over its expected life. The allowance for credit losses is a valuation account deducted from the amortized cost basis of the assets to present their net carrying value at the amount expected to be collected. Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets. The Company estimates expected credit losses based on relevant information about past events, including historical experience, payment terms, environmental and industry factors, and reasonable and supportable forecasts that affect the collectability of the reported amount. When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics. Changes in the relevant information may materially affect the estimates of expected credit losses. 79 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property and Equipment, Net Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the respective assets. The estimated useful lives of the Company’s property and equipment are as follows: Computer equipment 3 – 4 years Software 3 years Furniture and fixtures 5 years Leasehold improvements Lesser of useful life or the term of the lease Maintenance and repairs that do not extend the life or improve the asset are expensed as incurred. 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 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. Impairment, if any, would be assessed using discounted cash flows or other appropriate measures of fair value. Through December 31, 2024, there have been no such impairments. Leases We determine if an arrangement is a lease at its inception. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We generally use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments, because the implicit rate of the lease is generally not known. Right-of-use ("ROU") assets related to our operating lease liabilities are measured at lease inception based on the initial measurement of the lease liability, plus any prepaid lease payments and less any lease incentives, as applicable. Our lease terms that are used in determining our operating lease liabilities at lease inception may include options to extend or terminate the leases when it is reasonably certain that we will exercise such options. 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 non-lease components. The Company elected to not separate lease and non-lease components for its asset class of equipment. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company’s cash equivalents consist of treasury bills and money market funds. The treasury bills are treated as available-for-sale securities. Cash equivalents are measured and reported at fair value using quoted prices in active markets for similar securities. The deposits exceed federally insured limits. Changes in fair value for cash equivalents classified as available for sale securities are recorded to other comprehensive loss. 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. As of December 31, 2022, the Company did not have any available-for-sale securities. 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 80 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) restrictions. Restricted cash is classified as current or non-current on the consolidated balance sheets based on the expected duration of the restriction. Non-current restricted cash relates to interest that is required to be held in escrow in an amount equal to the minimum required balance defined in the Credit Agreement. Concentrations of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, the balances of which frequently exceed federally insured limits. 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, 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, 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. Common Stock Offerings 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. Equity Issuance Costs The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity-classified financings as deferred offering costs until such financings are consummated. After consummation of the financing, these costs are recorded as a reduction of the proceeds received from the equity financing. If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the consolidated statements of operations. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers , when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) Identification of the contract(s) with a customer; (ii) Identification of the performance obligations in the contract; 81 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (iii) Determination of the transaction price, including the constraint on variable consideration; (iv) Allocation of the transaction price to the performance obligations in the contract; and (v) Recognition of revenue when, or as, performance obligations are satisfied. Contracts are accounted for when both 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. Under ASC 606, assuming all other revenue recognition criteria have been met, the Company recognizes revenue for arrangements upon the transfer of control of the Company’s performance obligations to its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in ASC 606. Revenues are recognized when control of the promised goods or services are transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company elected the practical expedient to recognize the incremental costs of obtaining a contract including sales commissions as an expense when incurred if the amortization period of such incremental cost would otherwise have been one year or less. Sales commissions are included in sales and marketing expense in the consolidated statements of operations and comprehensive loss. 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 products prior to the establishment of their technological feasibility. Warrants The Company determines whether to classify contracts, such as warrants, that may be settled in its own stock as equity of the entity or as a liability. An equity-linked financial instrument must be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value of the warrants is recognized as other income (expense), net in the consolidated statements of operations. Income Taxes The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when, in management’s estimate, it is more-likely-than-not that the deferred tax asset will not be realized. The Company adopted a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax return. The Company classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. The Company has recorded $ 0.2 million interest expense and penalties related to unrecognized tax benefits through December 31, 2024. Stock-Based Compensation The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the 82 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) requisite service period of the individual grant, generally equal to the vesting period, and uses the straight-line method to recognize stock-based compensation, except for restricted stock unit awards (“RSUs”) with vesting conditions tied to certain performance criteria ("Performance-Based RSUs"). Stock-based compensation costs for Performance-Based RSUs are recognized on a graded-vesting basis over the vesting period based on the most probable outcome of the performance conditions. If the minimum performance targets are not met, no compensation cost is recognized and any recognized compensation cost is reversed, except for awards subject to a market condition, The Company accounts for forfeitures as they occur. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options and employee stock purchase plan ("ESPP") shares. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of the awards, including the expected term of the award and the price volatility of the underlying stock. The Company calculates the fair value of the awards granted by using the Black-Scholes option-pricing model with the following assumptions: Expected Volatility — The Company estimates volatility for the awards by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the award grant for a term that is approximately equal to the awards’ expected term. Expected Term — The expected term of the Company’s awards represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint between the stock options’ vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For the valuation of ESPP shares, the Company uses the period of time from the valuation date to the purchase date. Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the awards’ expected term at the grant date. Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero . Restricted Stock Units The Company issues RSUs to grantees as compensation for services. The fair value of the RSUs is determined at the grant date based on the fair value of the Company’s Class A Common Stock and for RSUs with service conditions only, is recognized straight-line over the service period. Stock-based compensation related to Performance-Based RSUs is recognized to the extent it is determined that performance is probable of being achieved. The Company issues RSUs with vesting conditions tied to certain market conditions (“Market-Based RSUs”). To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value. Stock-based compensation related to Market-Based RSUs is recognized over the derived service period. Fair Value Measurements The Company defines fair value as the exchange price that would be received from an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company follows a three-level valuation hierarchy for disclosure of fair value measurements as follows: • Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. • Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. 83 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Preferred Stock The Company assesses its preferred stock instruments at issuance and each reporting period for classification and derivative features requiring bifurcation. The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. For stock presented as temporary equity that is not currently redeemable, the Company assesses the probability of the event that would lead to redemption. If it is probable that the equity instrument will become redeemable, the Company accretes changes in the redemption value over the period from the date of issuance, or from the date that it becomes probable that the instrument will become redeemable, if later, to the earliest redemption date of the instrument using an appropriate methodology. If an equity instrument classified as temporary equity is not probable of redemption, subsequent adjustment of the amounts presented in temporary equity is unnecessary. Net Loss Per Share Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, Series A Preferred Stock, stock options, ESPP shares, RSUs and warrants are considered to be potentially dilutive securities. See Note 15 for further information. Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common stock is not assumed to have been issued if their effect is anti-dilutive. The Company issued Series A Preferred Stock, which accrues cumulative dividends which are either paid in cash or compounding to the liquidation preference at the discretion of the board of directors. The Company accrues dividends as adjustments to net loss before net loss attributable to common stockholders. The Company applies the two-class method to calculate its basic and diluted net loss per share as the Company has issued shares that meet the definition of participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. The Company's participating securities contractually entitle the holders of such shares to participate in dividends, but do not contractually require the holders of such shares to participate in losses of the Company. 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 84 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) refinement. 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 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. 85 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Recent Accounting Pronouncements — Adopted The Company continually assess any ASUs or other new accounting pronouncements issued by the FASB to determine their applicability and impact. 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 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 December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No. 2023-09, which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for 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. NOTE 3. BUSINESS COMBINATIONS As discussed in Note 1, on April 26, 2022, the Business Combination was consummated. Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation (the “certificate of incorporation”), the Company is authorized to issue 500,000,000 shares of capital stock consisting of 455,000,000 shares of Class A Common Stock, 44,000,000 shares of Class B Common Stock, and 1,000,000 shares of preferred stock. All stock has a par value of $ 0.0001 per share. The holders of Class A Common Stock are entitled to one vote for each share of Class A Common Stock held and the holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval. The holders of Class A Common Stock and Class B Common Stock vote together as one class, other than on certain specific matters described in the Company's certificate of incorporation. The Business Combination was approved by ATSP’s stockholders at a special meeting thereof (the “Special Meeting”), held in lieu of the 2022 annual meeting of the Company’s stockholders. The Business Combination fulfilled the definition of an “initial business combination” as required by the ATSP’s Amended and Restated Certificate of Incorporation. This fulfillment resulted in ATSP ceasing to be a shell company upon the Closing. An aggregate of 12,767,950 shares of Class A Common Stock sold in ATSP’s initial public offering (the “public shares”) exercised their rights to redemption. The redemption right provided holders the right to have their public shares redeemed for a pro rata portion of the trust account holding the proceeds from ATSP’s initial public offering. 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 Common Stock; (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 86 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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; (4) each Legacy SoundHound RSU converted into a restricted stock unit of SoundHound, subject to substantially the same terms and conditions as were applicable under the SoundHound RSU prior to the Closing. SoundHound RSU holders received the same consideration holders would have received if the SoundHound RSU was converted into Legacy SoundHound Common Stock immediately prior to the Effective Time. In connection with the Merger Agreement, ATSP entered into subscription agreements (collectively, the “Subscription Agreements”) with certain accredited investors (the “Subscribers”). Pursuant to the Subscription Agreements, the Subscribers agreed to purchase, and ATSP agreed to sell to the Subscribers, an aggregate of 11,300,000 shares of Class A Common Stock (“PIPE Shares”), for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 113.0 million (the “PIPE Investment”). The PIPE shares are identical to the shares of Class A Common Stock that were held by the ATSP’s public stockholders at the time of the Closing, except that the PIPE Shares were not entitled to any redemption rights. The sale of PIPE Shares was consummated concurrently with the Closing. The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, ATSP was treated as the “acquired” company for financial reporting purposes. The net assets of Legacy SoundHound were stated at historical cost, with no goodwill or other intangible assets recorded. In accounting for the Business Combination and after redemptions, net proceeds received by the Company totaled $ 90.7 million. The table below shows the total net proceeds from the Business Combination and the PIPE Investment (in thousands): Cash - ATSP trust and cash (net of redemption) $ 5,357 Cash - PIPE Investment 113,000 Less: transaction costs ( 27,668 ) Net proceeds from Business Combination and PIPE Investment $ 90,689 Relating to the consummation of the Business Combination, the Company incurred $ 27.7 million in total transaction costs consisting of direct legal, accounting and other fees. $ 4.1 million of Legacy SoundHound transaction costs specific and directly attributable to the Business Combination were initially capitalized as deferred offering costs and included in other non-current assets on the consolidated balance sheets. Total transaction expenses were recorded as an offset against proceeds received on the closing of the Business Combination, accounted for as additional paid-in capital. 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. The number of shares of common stock issued immediately following the consummation of the Business Combination was as follows: Class A Common Stock - conversion of Legacy SoundHound Common Stock and Legacy SoundHound Preferred Stock outstanding prior to Business Combination 140,114,060 Class B Common Stock - conversion of Legacy SoundHound Common Stock and Legacy SoundHound Preferred Stock outstanding prior to Business Combination 40,396,600 Class A Common Stock - PIPE Investment 11,300,000 Class A Common Stock - issuance to ATSP shareholders 532,050 Class A Common Stock - issuance to Legacy SoundHound founders and representatives 4,161,000 Total shares of common stock immediately after Business Combination 196,503,710 87 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Holdback 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 88 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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: Cash 221 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 89 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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): Useful life Fair value Intangible Assets: (in years) 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 $ 12,705 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 90 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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): 91 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Preliminary: 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. 92 Table of Contents 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. 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 Amelia Acquisition Date. 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 $ 174,500 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. 93 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Unaudited Years Ended 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 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 acquisition date. The following table s ummarizes the preliminary fair values of the identifiable intangible assets acquired (in thousands) : 94 Table of Contents 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 $ 2,550 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. NOTE 4. REVENUE RECOGNITION Revenue Recognition The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. 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 to receive for those products or services. The Company’s arrangements with customers may contain multiple obligations. 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: (1) hosted services, (2) professional services, (3) monetization, and (4) licensing. Revenues are reported net of applicable sales and use taxes that are passed through to customers. The Company applies significant judgement in identifying and evaluating any terms and conditions in contracts which impact revenue recognition. The Company has the following performance obligations in contracts with customers: Hosted Services 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. These services are provided either on a usage basis (i.e., variable consideration) or on a fixed fee subscription basis. The Company recognizes revenue as each distinct service period is performed. 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. 95 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. 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 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. The Company considers three criteria in making their assessment including (1) the customer simultaneously receives and consumes the benefits; (2) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (3) the Company’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. 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 either input or 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. During the year ended December 31, 2023, $ 7.4 million of professional service revenue was recognized over time, with the remaining $ 0.9 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. During the year ended December 31, 2022, $ 2.2 million of professional service revenue was recognized over time, with the remaining $ 2.0 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. Monetization Monetization revenues are primarily derived from advertising payments associated with ad impressions placed on the SoundHound music identification application. The amount of revenue is based on actual monetization generated or usage, which represent a variable consideration with constrained estimates. Therefore, the Company recognizes the related revenues at a point in time when advertisements are placed, when commissions are paid or when the SoundHound application is downloaded. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as a principal or an agent in the transaction. The Company has determined that it does not act as the principal in monetization arrangements because it does not control the transfer of the service and it does not set the price. Based on these factors, the Company reports revenue on a net basis. Licensing 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 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. 96 Table of Contents 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”). Judgments are required to determine the SSP for each distinct performance obligation. 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 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; • Industry standards; • Major product groupings; and • Gross margin objectives and pricing practices, such as contractually stated prices, discounts offered and applicable price lists. These factors may vary over time, depending upon the unique facts and circumstances related to each deliverable. 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. 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): Year Ended December 31, 2024 2023 2022 Hosted services $ 57,246 $ 18,364 $ 17,743 Licensing 17,577 18,600 8,322 Professional services 9,488 8,275 4,220 Monetization 382 634 844 Total $ 84,693 $ 45,873 $ 31,129 97 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2024, 2023 and 2022, the disaggregated revenue by geographic location* was as follows (in thousands): Year Ended December 31, 2024 2023 2022 United States $ 46,751 $ 6,769 $ 3,344 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 Total $ 84,693 $ 45,873 $ 31,129 *Revenue by geographic region is allocated to individual countries based on the billing location of the customer. The end customer location may be different than the customer's billing location. 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, 2024 2023 2022 Over time $ 67,789 $ 25,757 $ 19,955 Point-in-time 16,904 20,116 11,174 Total $ 84,693 $ 45,873 $ 31,129 The Company also disaggregates revenue by service type. This disaggregation consists of Product Royalties, Service Subscriptions and Monetization. Product Royalties revenues are derived from Houndified Products, which are voice-enabled tangible products across the automotive and consumer electronics industries. 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 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. 98 Table of Contents 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): Year Ended December 31, 2024 2023 2022 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 Contract Balances The Company performs its obligations under a contract with a customer by providing access to software, licensing right to use software, or providing services in exchange for consideration from the customer. 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 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, 2023 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. 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. As of December 31, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was $ 83.3 million. Given the applicable contract terms, $ 48.9 million is expected to be recognized as revenue within one year , $ 32.1 million is expected to be recognized between 2 to 5 years and the remainder of $ 2.3 million is expected to be recognized after 5 years. This amount does not include contracts to which the customer is not committed, contracts for which the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed, or future sales-based or usage-based royalty payments in exchange for access to the Company’s hosted services. This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications or currency adjustments. 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. 99 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 5. GOODWILL AND INTANGIBLE ASSETS Goodwill 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 Useful life (in years) 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 2026 29,372 2027 26,923 2028 25,398 2029 24,761 Thereafter $ 38,155 Total $ 174,943 100 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6. PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of the following (in thousands): December 31, 2024 December 31, 2023 Computer equipment $ 19,480 $ 19,278 Software and voice recordings 10,033 9,714 Leasehold improvements 3,871 3,882 Furniture and fixtures 1,154 777 Total property and equipment, at cost 34,537 33,651 Less: accumulated depreciation and amortization ( 33,298 ) ( 32,136 ) Total property and equipment, net $ 1,239 $ 1,515 As of December 31, 2024 and 2023, property and equipment, net includes assets under finance lease obligations (see Note 16 for additional information) with an aggregate cost of approximately $ 0.6 million and $ 0.5 million, respectively, and accumulated depreciation of approximately $ 0.4 million and $ 0.1 million, respectively. Depreciation and amortization expense in respect of capitalized property and equipment totaled approximately $ 1.2 million, $ 2.3 million and $ 4.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. NOTE 7. ACCRUED LIABILITIES Accrued liabilities consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accrued compensation expenses $ 15,850 $ 6,961 Accrued vendor payables 8,141 3,792 Accrued lender fees — 2,603 Accrued litigation liabilities 1,750 — Other accrued liabilities 551 528 $ 26,291 $ 13,884 NOTE 8. COMMITMENTS AND CONTINGENCIES Contracts 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. Aggregate non-cancelable future minimum payments were as follows as of December 31, 2024 (in thousands): 2025 14,000 2026 16,000 2027 24,000 2028 24,000 Total $ 78,000 101 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Legal Proceedings From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. 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 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. NOTE 9. WARRANTS 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 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 102 Table of Contents 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 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 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: (i) would not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. 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 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. 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. NOTE 10. NOTE PAYABLE SNAP June 2020 Note In June 2020, the Company issued a promissory note (the “SNAP June 2020 Note”) to a Lender in exchange for $ 15.0 million in cash proceeds. The note had an annual interest rate of 5 % and a maturity date of June 26, 2022, if not converted earlier pursuant to conversion terms and change in control events. 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 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 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 $ 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. SVB March 2021 Note In March 2021, the Company entered into a loan and security agreement with a commercial bank to borrow $ 30.0 million. The loan bore interest at an annual rate equal to the greater of 9.00 % or 5.75 % above the Prime Rate. 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. 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 103 Table of Contents SOUNDHOUND AI, INC. 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. 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, resulting in a loss on debt extinguishment of $ 0.4 million. SCI June 2021 Note In June 2021, the Company entered into a loan and security agreement with a lender to obtain credit extensions to the Company. Extensions were available in $ 5.0 million increments up to a total commitment amount of $ 15.0 million. The Company drew an initial $ 5.0 million on June 14, 2021 and the remaining $ 10.0 million on December 1, 2021. The loan bore interest at an annual rate equal to the greater of 9.00 % or 5.75 % above the Prime Rate. During the year ended December 31, 2023, the interest rate was 13.75 %. 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. Term Loan 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 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 104 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Amelia Debt 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, 2024 December 31, 2023 Term Loan $ — $ 100,000 Unamortized discount and debt issuance costs — ( 15,688 ) Carrying value of long-term debt $ — $ 84,312 NOTE 11. RESTRUCTURING 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 105 Table of Contents SOUNDHOUND AI, INC. 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. The costs associated with the Restructuring Plan were recorded to the restructuring expense line item within our consolidated statements of operations as incurred. During the year ended December 31, 2023, we recorded $ 4.6 million of restructuring expenses in connection with the Restructuring Plan, of which $ 1.4 million were cash payments. The Restructuring Plan was substantially complete as of December 31, 2023. NOTE 12. FAIR VALUE MEASUREMENT The following table presents the fair value of the Company's financial instruments that are measured or disclosed at fair value on a recurring basis (in thousands): December 31, 2024 Level 1 Level 2 Level 3 Assets: Cash equivalents: Treasury bills $ 38,070 $ — $ — Money market funds 131,767 $ — $ — Total assets $ 169,837 $ — $ — Liabilities: 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 Assets: Cash equivalents: Treasury bills $ 35,961 $ — $ — Money market funds 54,542 $ — $ — Total assets $ 90,503 $ — $ — Equity Line of Credit 106 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Liabilities: Equity Line of Credit January 1, 2022 $ — Issuance of ELOC 1,075 December 31, 2022 1,075 Change in fair value 1,901 Settlements ( 2,976 ) December 31, 2023 $ — The Company estimated the Level 3 fair value of the liability related to the ELOC using contractual inputs of the commitment shares and reimbursement fees prior to the settlement. 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. Subsequent changes in the fair value of the derivative liability are 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 during the reporting period, the unused capacity under the ELOC as of the balance sheet date and the cost of raising other forms of capital. The Company adjusts the previous fair value estimate of the committed equity facility at each reporting period based on changes in the weighted average purchase price of shares purchased during the period, the unused capacity available under the ELOC, expected stock price volatility and other macroeconomic factors which impact the cost of raising comparable forms of capital. The changes in the fair value of the committed equity facility were an increase of $ 1.9 million for the year ended December 31, 2023, which is included in other (income) expense, net on the consolidated statements of operations and comprehensive income (loss). 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. Derivative Liability (SNAP June 2020 Note) To determine the fair value of the embedded derivative associated with the SNAP June 2020 Note, the Company utilized the income approach model using the With and Without method. Using the With and Without method, the Company modeled expected cash flows to the noteholder under Next Equity Financing, Change in Control, SPAC/Private Investment in Public Equity, and IPO scenarios. The value of the embedded derivative was determined as the differential value from the perspective of the With and Without Method. The Company utilized the following assumptions at the valuation date: December 31, 2021 Probability of Next Equity Financing 3 % Probability of SPAC/PIPE 95 % Probability of IPO 2 % 100 % Weighted average term (years) 0.27 Weighted average discount rate 25 % 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 107 Table of Contents SOUNDHOUND AI, INC. 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. On April 26, 2022, the Closing of the Business Combination, the embedded derivative was valued at fair value which was equivalent to its intrinsic value. The embedded derivative had a fair value of $ 4.1 million. 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 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 year ended December 31, 2022 (in thousands): Year Ended December 31, 2022 Remeasurement of conversion feature — loss $ ( 606 ) The following table sets forth a summary of changes in fair value of the Company’s derivative liability and warrant liability for which fair value was determined by Level 3 inputs: Derivative Liability Warrant Liability Balance as of December 31, 2021 $ 3,488 $ — Change in fair value $ 606 $ — Extinguishment of embedded derivative upon conversion of convertible note $ ( 4,094 ) $ — Balance as of December 31, 2022 $ — $ — Term Loan and Term Loan Warrant The fair value of the Company's variable rate Term Loan approximates aggregate principal amount as the interest rate of the loan approximates market rates. The Company issued a Class A Common Stock warrant in connection with the Term Loan (see Note 9 for additional information). The warrant was recorded based on the allocation of its relative fair value of the debt proceeds of $ 4.1 million. The warrants were classified as equity instruments at inception with a corresponding discount recorded at issuance against the outstanding note payable in connection with the Term Loan. The common stock warrant is not subject to remeasurement at each subsequent balance sheet date due to its classification as an equity instrument as it is considered indexed to the Company’s stock. The Term Loan warrant expires in April 2033. The Company determined the fair value of the Term Loan common stock warrant at issuance using the Black-Scholes option-pricing model using the following assumptions: Expected dividend rate — % Risk-free interest rate 3.60 % Expected volatility 52 % Expected term (in years) 5 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. 108 Table of Contents SOUNDHOUND AI, INC. 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 4.6 % 4.0 % 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. 109 Table of Contents 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 4.2 % 4.2 % Expected dividend yield 0.0 % 0.0 % 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. NOTE 13. PREFERRED STOCK Legacy SoundHound Preferred Stock Legacy SoundHound Preferred Stock was not mandatorily redeemable. 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 110 Table of Contents SOUNDHOUND AI, INC. 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: Shares Authorized Shares Issued Liquidation Preference Carrying Value Series A 19,106,048 19,106,048 $ 28,239 $ 4,967 Series B 33,702,134 33,702,134 66,360 11,038 Series C 5,687,525 5,687,525 38,163 11,837 Series C-1 4,436,090 4,436,090 89,298 16,061 Series D 20,258,299 20,258,299 527,992 85,648 Series D-1 8,418,535 8,418,535 277,812 49,957 Series D-2 8,418,530 8,418,530 277,811 49,949 Series D-3 6,922,165 6,922,165 276,887 50,046 Series D-3A 20,835,869 — — — 127,785,195 106,949,326 $ 1,582,562 $ 279,503 Upon the closing of the Business Combination, the outstanding shares of Series A, B, C, C-1, D, D-1, D-2, and D-3 preferred stock were converted into 106,949,326 shares of SoundHound AI Class A Common Stock at the exchange ratio of 1-for-1. Shares Authorized and Shares Issued above have been retroactively adjusted to reflect the exchange of 1 share of Legacy SoundHound stock into 5.5562 shares of the Company's Class A or Class B Common Stock. As a result of the conversion of the Legacy SoundHound redeemable convertible preferred stock, the Company reclassified the amount of redeemable convertible preferred stock to additional paid in capital. Upon the consummation of the Business Combination, the Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share. The number of authorized shares of preferred stock may also be increased or decreased by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the Company entitled to vote thereon, without a separate vote of the holders of preferred stock. 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 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 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 . Redemption 111 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Series A Preferred Stock is not mandatorily redeemable. Conversion 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, 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. 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. 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. Voting Rights The Investors do not have voting rights, except with respect to certain protective provisions and as required by the Delaware General Corporation Law. However, as long as the Series A Preferred Stock are outstanding, the Company may not take certain actions that may materially and adversely impact the powers, preferences, or rights of the Investors without the consent of at least a majority of the Investors. NOTE 14. COMMON STOCK The Company had 250,030,433 shares of Legacy SoundHound common stock authorized for issuance prior to the closing of the Business Combination. On April 26, 2022, following the Business Combination and pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 500,000,000 shares of capital stock, consisting of (a) 455,000,000 shares of Class A Common Stock with a par value of $ 0.0001 per share, (b) 44,000,000 shares of Class B Common Stock with a par value of $ 0.0001 per share, and (c) 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share. The outstanding shares of the Company’s common stock are fully paid and non-assessable. As a result of the Business Combination, 73,561,334 shares of Legacy SoundHound common stock, along with 106,949,326 shares of Legacy SoundHound preferred stock, were converted into 180,510,660 shares of the Company’s common stock, consisting of 140,114,060 shares of Class A Common Stock and 40,396,600 shares of the Company’s Class B Common Stock. On all matters to be voted upon, subject to the rights of any holders of any series of preferred stock, holders of shares of Class A Common Stock and Class B Common Stock will vote together as a single class on all matters submitted to the stockholders for their vote or approval. Holders of Class A Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval. 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 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 112 Table of Contents 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 (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 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. 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 On July 28, 2023, the Company entered into a Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., H.C. Wainwright & Co., LLC, and D.A. Davidson & Co. (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. 113 Table of Contents 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. Inc. (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. NOTE 15. 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 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 114 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. The ESPP provides eligible employees with an opportunity to purchase common stock from the Company at a discount through accumulated payroll deductions. The ESPP is being implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the Company’s Board of Directors may specify offerings but generally provides for a duration of 27 months. The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than 85 % of the lower of the fair market value per share of the Company’s common stock on either the offering date or on the purchase date. The ESPP also includes a six-month look-back provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date. The first offering period under the ESPP began on November 1, 2022. 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: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in Thousands) Outstanding, December 31, 2021 30,361,405 $ 3.45 6.24 $ 168,705 Granted 391,619 6.17 Exercised ( 3,595,706 ) 1.16 22,534 Forfeited or cancelled ( 1,736,893 ) 4.63 Outstanding, December 31, 2022 25,420,425 $ 3.74 6.32 $ 1,448 Exercised ( 3,585,829 ) 2.37 5,207 Forfeited or cancelled ( 4,993,229 ) 5.24 Outstanding, December 31, 2023 16,841,367 3.59 4.77 1,392 Exercised ( 9,806,309 ) 2.91 $ 72,806 Forfeited or cancelled ( 1,109,147 ) 4.76 Outstanding, December 31, 2024 5,925,911 $ 4.44 5.08 $ 91,268 Exercisable, December 31, 2024 5,454,004 4.16 4.92 85,529 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 years ended December 31, 2024, 2023 and 2022 that were subject to repurchase. 115 Table of Contents 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, 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 year ended December 31, 2022 were as follows for option awards: 2022 Dividend yield 0 % Expected volatility 51 % Expected term (years) 5.88 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. 116 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Unvested, December 31, 2022 16,716,383 4.14 Granted 11,158,301 2.38 Vested ( 7,678,184 ) 3.32 Forfeited ( 3,852,909 ) 3.90 Unvested, December 31, 2023 16,343,591 3.39 Granted 14,009,111 4.14 Vested ( 7,322,556 ) 3.44 Forfeited ( 1,239,891 ) 3.15 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 years ended December 31, 2024 and 2023. Year Ended December 31, 2022 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 117 Table of Contents 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 Forfeited — 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 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 118 Table of Contents 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 In connection with the Restructuring Plan (as defined in Note 10), the Company entered into severance arrangements with 166 affected employees. Pursuant to these arrangements, these employees received acceleration of vesting of RSUs and extensions of the post-termination exercise period of stock option awards. All award modifications related to restructuring activities were expensed in the year ended December 31, 2023. The total incremental compensation cost resulting from these modifications is $ 3.2 million. 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. The founders exchanged their shares for Legacy SoundHound Class B common stock immediately prior to the closing of the business combination. Upon the Business Combination, the founders exchanged their Legacy SoundHound Class B shares in exchange for 40,396,600 shares of Class B Common Stock according to the Conversion Ratio. As the Class B Common Stock shares have ten votes per share, the exchange resulted in incremental stock-based compensation expense of $ 1.0 million which is included in general and administrative expenses on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022. Stock-based compensation is classified in the following expense accounts on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024, 2023 and 2022 (in thousands): Year Ended December 31, 2024 2023 2022 Cost of revenue $ 458 $ 412 $ 99 Sales and marketing 4,818 3,601 2,794 Research and development 16,203 11,992 13,986 General and administrative 11,666 8,784 11,913 Restructuring costs — 3,142 — Total $ 33,145 $ 27,931 $ 28,792 NOTE 16. LEASES The Company leases certain facilities under non-cancelable operating leases that expire at various dates through 2030. Some leases include renewal options, which would permit extensions of the expiration dates at rates approximating fair market rental values. The Company also enters into certain finance leases for computer equipment. The finance leases are collateralized by the financed assets. 119 Table of Contents 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): Operating Lease Finance Lease Year Ending December 31: 2025 $ 2,152 $ 56 2026 996 18 2027 483 — 2028 444 — 2029 444 — Thereafter 302 — Total 4,821 74 Less: imputed interest ( 520 ) ( 7 ) Present value of lease liabilities 4,301 67 Less: current portion ( 1,898 ) ( 49 ) Lease liabilities, net of current portion $ 2,403 $ 18 The components of lease cost were as follows during the years ended December 31, 2024, 2023 and 2022 (in thousands): Year Ended December 31, 2024 2023 2022 Operating lease cost $ 2,628 $ 3,177 $ 3,423 Short-term lease cost $ 972 $ 1,298 $ 466 Finance lease cost: Amortization of finance leased assets $ 134 $ 161 $ 995 Interest on lease liabilities $ 11 $ 23 $ 79 The table below presents additional information related to our leases as of December 31, 2024: Operating Lease Finance Lease Weighted average remaining lease term (years) 3.60 1.22 Weighted average discount rate 8.41 % 12.74 % The Company’s rent expense totaled approximately $ 4.5 million, $ 5.3 million and $ 3.9 million during the years ended December 31, 2024, 2023 and 2022, respectively. 120 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 17. OTHER INCOME (EXPENSE), NET Other income (expense), net on the consolidated statements of operations and comprehensive loss is comprised of the following for the years ended December 31, 2024, 2023 and 2022 (in thousands): Year Ended December 31, 2024 2023 2022 Other income (expense), net: Interest income $ 8,370 $ 2,866 $ 390 Change in fair value of derivative and warrant liability — — ( 606 ) 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 Total other income (expense), net $ 9,222 $ 1,155 $ ( 1,259 ) NOTE 18. NET LOSS PER SHARE The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 Numerator: Net loss (in thousands) $ ( 350,681 ) $ ( 88,937 ) $ ( 116,713 ) Cumulative dividends attributable to Series A Preferred Stock ( 416 ) ( 2,774 ) — Net loss attributable to SoundHound common shareholders (in thousands) ( 351,097 ) ( 91,711 ) ( 116,713 ) Denominator: Weighted average shares outstanding – basic and dilutive 338,462,574 229,264,904 157,317,695 Basic and diluted net loss per share $ ( 1.04 ) $ ( 0.40 ) $ ( 0.74 ) For the years ended December 31, 2024, 2023 and 2022, the diluted net loss per share is equal to the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive. The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 Stock-based awards 24,918,197 33,484,074 42,613,444 Common stock warrants 3,663,955 6,967,532 3,665,996 Series A Preferred Stock — 16,226,645 — Unvested restricted share awards 338,859 — — Total 28,921,011 56,678,251 46,279,440 121 Table of Contents SOUNDHOUND AI, INC. 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. NOTE 19. INCOME TAXES The following is a geographical breakdown of income (loss) before income taxes: Year Ended December 31, 2024 2023 2022 Domestic $ ( 363,347 ) $ ( 86,724 ) $ ( 116,964 ) Foreign 3,419 1,701 3,140 $ ( 359,928 ) $ ( 85,023 ) $ ( 113,824 ) The provision (benefit) for income taxes consisted of the following: Year Ended December 31, 2024 2023 2022 Current provision: Federal $ — $ — $ — State 2 3 7 Foreign 2,934 3,881 755 Total current provision $ 2,936 $ 3,884 $ 762 Deferred provision: Federal $ ( 10,492 ) $ — $ — State ( 1,701 ) — — Foreign 10 30 2,127 Total deferred provision $ ( 12,183 ) $ 30 $ 2,127 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 (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. 122 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 2024 2023 2022 Federal statutory income tax rate 21.0 % 21.0 % 21.0 % Tax provision at statutory rate $ ( 75,585 ) $ ( 17,855 ) $ ( 23,903 ) State income tax rate 2 3 7 Benefits from acquisition ( 12,189 ) — — Foreign withholding and income tax 2,561 3,689 2,298 Foreign rate differential ( 338 ) ( 136 ) ( 115 ) Research and development credits ( 4,888 ) ( 2,105 ) ( 1,731 ) Change in valuation allowance 39,083 18,604 24,272 Stock based compensation ( 15,224 ) 2,899 1,540 Permanent book tax differences* 1,180 246 751 Sec. 162(m) disallowance* 9,457 270 — Change in fair value of contingent acquisition liabilities 46,761 — — Other deferred adjustments ( 67 ) ( 1,701 ) — Other — — ( 230 ) $ ( 9,247 ) $ 3,914 $ 2,889 *The 2023 amounts have been conformed to the 2024 presentation. 123 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of our deferred tax assets and liabilities were as follows: Year Ended December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 127,680 $ 89,880 Research and development credits 23,934 17,825 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 Operating lease liabilities 1,014 1,333 Section 174 research and development capitalization 40,648 21,186 Accruals and reserves 2,780 588 Other 2 — Total deferred tax assets 211,442 134,052 Valuation allowance ( 170,219 ) ( 132,873 ) Total deferred tax assets, net 41,223 1,179 Deferred tax liabilities: 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 *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; and excess Canadian SR&ED tax credits will not be fully realized due to the Company’s cumulative losses arising in the United States, and its inability to utilize excess tax credits in Canada. Accordingly, the Company has recorded a valuation allowance on deferred tax assets in excess of deferred tax liabilities against its federal and state deferred tax assets and excess Canadian SR&ED tax credits as of December 31, 2024, and 2023. The valuation allowance increased by $ 37.3 million from the year ended December 31, 2023 to December 31, 2024. The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2024 because it intends to indefinitely reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will not be material. As of December 31, 2024, the Company had net operating loss carryforwards of $ 548.4 million of U.S. federal and $ 208.1 million of state net operating loss carryforwards available to reduce future taxable income. The federal and state net operating loss carryforwards will start to expire in 2025 and 2028, respectively, with the exception of $ 403.3 million federal net operating loss carryforwards and $ 11.0 million state net operating loss carryforwards, which can be carried forward indefinitely. The Company had federal and state research and development credit carryforwards of $ 21.4 million and $ 13.3 million, respectively, as of December 31, 2024. The federal credits will expire starting in 2029 if not utilized. The state credits can be carried forward indefinitely. The Company also had Canadian SR&ED tax credits of $ 1.6 million, which will expire starting in 2038 if not utilized. 124 Table of Contents 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. The Company’s net operating loss carryforwards and tax credits could expire before utilization if subject to annual limitations. The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. As of December 31, 2024, the tax years 2005 through the current period remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized. Changes in gross unrecognized tax benefits during the periods presented were as follows (in thousands): Balance as of December 31, 2021 $ 5,068 Increase for tax positions of prior years — Increase for tax positions of current year 1,062 Balance as of December 31, 2022 $ 6,130 Increase for tax positions of prior years 370 Increase for tax positions of current year 1,095 Balance as of December 31, 2023 7,595 Increase for tax positions of prior years 877 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 $ 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. NOTE 20. RELATED PARTY TRANSACTIONS The Company entered into revenue contracts to perform professional services for certain companies who are also investors in the Company. As of June 30, 2022, these entities are no longer related parties. Below we provide our disclosures for transactions with the companies through June 30, 2022. 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. NOTE 21. 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 125 Table of Contents 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 . NOTE 22. REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS During the period ended September 30, 2023, the Company identified immaterial prior period errors related to the following: 1) accounting for the ELOC as a derivative instrument; 2) classification of Lender Fees and allocation of the warrants in connection with the Term Loan; 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 annual consolidated financial statements as of and for the year ended December 31, 2022. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 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 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 consolidated financial statements as of and for the year ended December 31, 2022 ( dollars in thousands, except per share amounts ): Year Ended December 31, 2022 Consolidated Statements of Operations And Comprehensive Loss As Previously Reported Adjustment As Revised General and administrative $ 30,178 $ 265 $ 30,443 Loss from operations ( 105,407 ) ( 265 ) ( 105,672 ) Other income (expense), net ( 184 ) ( 1,075 ) ( 1,259 ) Total other expense, net ( 7,077 ) ( 1,075 ) ( 8,152 ) Loss before provision for income taxes ( 112,484 ) ( 1,340 ) ( 113,824 ) Net loss $ ( 115,373 ) $ ( 1,340 ) $ ( 116,713 ) Net loss per share: Basic and diluted $ ( 0.73 ) $ ( 0.01 ) $ ( 0.74 ) Year Ended December 31, 2022 Consolidated Statement of Stockholders' Equity (Deficit) As Previously Reported Adjustment As Revised Accumulated deficit $ ( 502,102 ) $ ( 1,340 ) $ ( 503,442 ) 126 Table of Contents SOUNDHOUND AI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2022 Consolidated Statements of Cash Flows As Previously Reported Adjustment As Revised Net loss $ ( 115,373 ) $ ( 1,340 ) $ ( 116,713 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on change in fair value of ELOC program — 1,075 1,075 Changes in operating assets and liabilities Other non-current assets ( 539 ) 265 ( 274 ) Net cash used in operating activities $ ( 94,019 ) $ — $ ( 94,019 ) NOTE 23. SUBSEQUENT EVENTS 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. Inc. 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 $ 182.3 million of the Company's common stock under the Second Equity Distribution Agreement. 127 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None.