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Item 1. Business

2023-03-28 compared with 2022-03-09 · 318 added, 317 removed, 0 unchanged (100% of the section changed)

In this Annual Report on Form 10-K (the “Form 10-K”), references to the “Company” and to “we,” “us,” and “our” refer to Archimedes Tech SPAC Partners Co.

We are a blank check company formed under the

laws of the State of Delaware on September 15, 2020.

We were formed for the purpose of entering into a merger, share exchange, asset

acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities,

which we refer to as a “target business.” To date, our efforts have been limited to organizational activities as well as activities

related to identifying target businesses and consummating our initial business combination with a target business.

Our initial business

combination and value creation strategy is to identify, acquire and, after our initial business combination, assist in the growth of a

technology business in the United States.

Our focus will be on the artificial intelligence, cloud services and automotive technology sectors.

However, we are not limited to the technology industry, or the named sectors, and we may pursue a business combination opportunity in

any business or industry we choose and we may pursue a company with operations or opportunities outside of the United States.

Our Chairman, Dr.

Ball, and special advisor, Mr.

Brent Callinicos, both have long track records of senior management leadership in high growth technology companies.

Within the technology industry, our initial focus will be on the artificial intelligence, cloud services and automotive technology sectors.

Our management team possesses a strong understanding of the SPAC structure and market.

Our Chief Executive Officer, Stephen N.

Cannon, has served as a member of management for seven SPACs that have completed initial public offerings, four of which have consummated a business combination.

Ball, our Chairman, is the founder and General Partner of Impact Venture Capital, or Impact VC.

Impact VC is a Silicon Valley based venture firm investing in early-stage applied artificial intelligence startup companies since 2016.

Previously Mr.

Ball held several senior level management positions in high growth technology companies.

He was the Chief Financial Officer for C3.AI from 2015 to 2016.

Prior to that Dr.

Ball spent over a decade with Oracle Corp, including acting as Senior Vice President & Treasurer, and previously was a senior financial professional for Flextronics International, Cisco Systems, Avery Dennison, and AT&T.

Ball has served as advisor and board member of several technology companies, including currently serving as chairman of the audit committee for the board of Glu Mobile Inc.

Ball is also the co-author of the book “Unlocking the Ivory Tower”.

Brent Callinicos is our special advisor.

Callinicos is currently an angel investor, active in investing in early-stage technology companies.

Callinicos was formerly the Chief Operating Officer and Chief Financial Officer of Virgin Hyperloop One.

Prior to that, Mr.

Callinicos was the Chief Financial Officer of Uber Technologies Inc.

Prior to that, Mr.

Callinicos was the Vice President, Treasurer and Chief Accountant of Google Inc., now known as Alphabet Inc.

Prior to that, Mr.

Callinicos held several senior management roles at Microsoft, including as Treasurer, Vice President of Worldwide Licensing and Pricing, and CFO of the Platforms and Services Division.

Callinicos has served as an advisor to several technology companies and currently sits on several boards.

Cannon, our Chief Executive Officer, has served as a member of management for seven SPACs that have completed initial public offerings, four of which have consummated a business combination.

The fifth SPAC, Ackrell SPAC Partners I Co., completed its IPO in December 2020 and announced on December 23, 2021 that it had entered into a definitive business combination agreement with Blackstone Products, a consumer brand of outdoor cooking products.

The sixth SPAC, Archimedes SPAC Partners Co.

Completed its IPO in March 2021 and announced on November 16, 2021 that it had entered into a business combination agreement with SoundHound Inc., a company that focuses on Voice AI technology.

The seventh SPAC, Global SPAC Partners Co.

Completed its IPO in April 2021 and announced on December 22, 2021 that it had entered into a business combination agreement with Gorilla Technology Group Inc., a company that focuses on Edge analytics AI solutions.

Sheehan, our Chief Operating Officer, and Long Long, our Chief Financial Officer, are also currently serving as members of the board and management, respectively, for Ackrell SPAC Partners I Co.

In addition, Long Long is also serving as Chief Financial Officer for Global SPAC Partners Co.

Edwards, a director of ours, served as Chief Operating Officer and director for Twelve Seas Investment Co., a SPAC which successful closed its business combination in December 2019.

While we may pursue a business combination target in any business, industry or geographical location, we intend to focus our search for businesses in the technology industry, and our focus will be on the artificial intelligence, cloud services and automotive technology sectors.

Our management team consists of seasoned professionals who have experience spanning the technology industry, including the sectors within the technology industry that we intend to focus on initially, mergers and acquisitions, corporate finance, corporate governance and compliance, legal and regulatory matters and investment management.

We believe that our officers’ and directors’ industry expertise, transaction experience and relationships may provide us with a substantial number of attractive potential business combination targets.

The past performance of our management team or of their affiliates is not a guarantee either (i) that we will be able to identify a suitable candidate for our initial business combination or (ii) of success with respect to any business combination we may consummate.

You should not rely on the historical record of our management team’s or their affiliates’ performance as indicative of our future performance.

Business Strategy

We believe that there are a range of target businesses that could benefit from our industry knowledge, relationships, capital and public vehicle.

Our strategy is to identify and complete our initial business combination with a target operating in the technology industry.

Our focus will be on the artificial intelligence, cloud services and automotive technology sectors.

While we intend to initially focus on potential opportunities in the United States, the technology industry is global and we may pursue opportunities internationally.

We intend to leverage our team’s collective experience in the technology industry and capital markets to successfully complete a business combination, and then continue to support our target business with our industry relationships, insights and regulatory knowledge, financial expertise and capital resources.

Competitive Strengths

We believe we are well positioned to find and attract an exciting technology business, and to help them as a newly public company grow and thrive, offering a partnership that extends far beyond our capital.

Our management team’s deep operational experience, product experience, extensive networks, and track records as investors, advisors, and board members make us an attractive partner.

We are dedicated to finding bold founders, operators, and inventors who are committed to building a leading business and would benefit from access to the public markets as well as working with our team.

We have a proven track record of success in the technology industry as senior executives, investors and board members and are confident that we can partner with other founders, shareholder and management to help support building a category-defining business.

We believe we possess the following tools to drive value creation at a company:

recognizing key technology trends:

Our team has demonstrated a long history of managing and growing businesses at the epicenter

of major technology trends.

More recently, certain team members have been active in identifying and investing, at earlier stages, in

companies focused on the next big trend, such as artificial intelligence, cloud services and automotive technology.

technology industry especially, history has shown that small early stage companies, of even just five years ago, are often among the

most exciting group of companies seeking a public listing in the near future.

We believe our recent activity in identifying

investment opportunities in early stage companies in key technology trends, is an advantage when combined with our track record of

managing and growing successful public technology companies, and unique in our ability to identify and successful secure an initial

business combination.

Experience identifying strong management teams:

With key members of our team having had significant senior executive roles at key technology companies, we believe we have an ability

to identify the characteristics of successful business leaders, and effective in engaging with these management teams.

In addition, key

members of our team have more recently been investing in many founder-led businesses.

of operating experience:

The members of our team are seasoned operators having held executive level roles in various companies.

We have experience in developing and executing strategy, building and retaining teams, and executing business combinations among

other activities.

network and connections to company founders:

Our team has numerous existing connections to company founders and business leaders

across sectors within the technology industry.

We have invested in many companies, served on many boards and have worked with many

influential founders and senior management teams within the technology industry, and specifically the sectors we intend to initially

We believe our network and our connections will assist in the successful selection of our initial business combination and

subsequent guidance of the company.

Prior SPAC Experience:

Our management team possesses a strong understanding of the SPAC structure and market.

Our CEO, Stephen

Cannon, has served as a member of management for seven SPACs that have completed initial public offerings, four of which have

consummated business combinations.

The stock price performance of Mr.

Cannon’s prior SPACs has not always been positive

for investors.

For example, the common shares of the four SPACs that previously consummated business combinations are currently

trading below $10.00 per share.

Cannon’s other SPAC never consummated its IPO due to market

Investment Criteria

We are leveraging the extensive network and experience of our management team in identifying a suitable target within the technology industry and structuring a business combination that is attractive to both the target and our public stockholders.

We have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses.

While we intend to use these criteria and guidelines in evaluating prospective businesses, we may deviate from these criteria and guidelines should we see fit to do so:

and Sustainable Competitive Advantages:

We intend to target businesses that differentiate themselves from their peers in

ways that are difficult to replicate and have clear competitive advantages.

Members of our team have accomplished track records of

founding, operating, and investing in the technology industry and intend to focus on prospective businesses that engage with

technology to serve customers in novel and transformational manner.

We believe our team’s expertise and understanding of

innovative businesses will be paramount in identifying and assessing initial business combination candidates.

Growth Potential:

We intend to seek businesses that are well positioned to grow in their respective markets and which have

clear plans on how to leverage additional capital to accelerate growth.

We expect to target businesses that have had, or expect to

have, strong cash flow generation.

We believe that our team’s collective experiences engaging with innovative businesses

positions us well to identify, nurture, and expand high potential businesses.

Management Teams:

We intend to seek to target businesses that have strong, experienced and dynamic management teams, many of

whom will be founders of the businesses, but whom we believe may benefit from our financial, managerial and investment expertise as

well as our extensive industry networks and insights.

We believe that identifying such management teams is particularly important

given our target industry.

We intend to only evaluate a business that, based on our due diligence and industry experience, represents an

attractive valuation relative to publicly listed companies with similar characteristics or in similar industry segments.

to seek businesses in which we believe we can add operational value through mentorship of management, knowledge of operating

challenges, experience with industry dynamics, expertise in navigating public markets, and strategic relationships with investors,

among others.

Benefit from Being a Public Company:

We intend to pursue a business that will benefit from being a public company, including

potentially having broader access to capital and a public currency for acquisitions.

These criteria are not intended to be exhaustive.

Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective.

In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which is made available to us.

This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage, although we have no current intention to engage any such third parties.

Effecting a Business Combination

We are not presently engaged in, and we will not engage in, any substantive commercial business for an indefinite period of time.

We intend to utilize cash derived from the proceeds of our initial public offering and the private placement of private units, our capital stock, debt or a combination of these in effecting a business combination.

A business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital but which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself.

These include time delays, significant expense, loss of voting control and compliance with various federal and state securities laws.

In the alternative, we may seek to consummate a business combination with a company that may be financially unstable or in its early stages of development or growth.

While we may seek to effect simultaneous business combinations with more than one target business, we will probably have the ability, as a result of our limited resources, to effect only a single business combination.

Selection of a Target Business and Structuring of a Business Combination

Subject to our management team’s pre-existing fiduciary obligations and the limitations that a target business have a fair market value of at least 80% of the balance in the trust account (excluding the taxes payable on the interest earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination, as described below in more detail, and that we must acquire a controlling interest in the target business, our management will have virtually unrestricted flexibility in identifying and selecting a prospective target business.

The time and costs required to select and evaluate a target business and to structure and complete the business combination cannot presently be ascertained with any degree of certainty.

Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will result in a loss to us and reduce the amount of capital available to otherwise complete a business combination.

Fair Market Value of Target Business

Nasdaq listing rules require that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account (excluding the taxes payable on the interest earned on the trust account) at the time of the execution of a definitive agreement for our initial business combination.

Notwithstanding the foregoing, if we are not then listed on Nasdaq for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.

We currently anticipate structuring a business combination to acquire 100% of the equity interests or assets of the target business or businesses.

We may, however, structure our initial business combination where we merge directly with the target business or where we acquire less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.

Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction.

For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target.

In this case, we could acquire a 100% controlling interest in the target;

however, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination.

If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of trust account balance test.

The fair market value of the target will be determined by our board of directors based upon one or more standards generally accepted by the financial community (such as actual and potential sales, earnings, cash flow and/or book value).

The proxy solicitation materials or tender offer documents used by us in connection with any proposed transaction will provide public stockholders with our analysis of the fair market value of the target business, as well as the basis for our determinations.

If our board is not able to independently determine that the target business has a sufficient fair market value, we will obtain an opinion from an unaffiliated, independent investment banking firm, or another independent entity that commonly renders valuation opinions, with respect to the satisfaction of such criteria.

Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.

We will not be required to obtain an opinion from an investment banking firm as to the fair market value if our board of directors independently determines that the target business complies with the 80% threshold.

Lack of Business Diversification

Although this process may entail the simultaneous acquisitions of several operating businesses and we may seek to effect a business combination with more than one target business, we expect to complete our business combination with a single business.

Therefore, at least initially, the prospects for our success may be entirely dependent upon the future performance of a single business operation.

Unlike other entities which may have the resources to complete several business combinations of entities operating in multiple industries or multiple areas of a single industry, it is probable that we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses.

By consummating a business combination with only a single entity, our lack of diversification may:

subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to a business combination, and

result in our dependency upon the performance of a single operating business or the development or market acceptance of a single or limited number of products, processes or services.

If we determine to simultaneously acquire several businesses and such businesses are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other acquisitions, which may make it more difficult for us, and delay our ability, to complete the business combination.

With multiple acquisitions, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business.

Limited Ability to Evaluate the Target Business’ Management

Although we intend to scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination, we cannot assure you that our assessment of the target business’ management will prove to be correct.

In addition, we cannot assure you that the future management will have the necessary skills, qualifications or abilities to manage a public company.

Furthermore, the future role of our officers and directors, if any, in the target business following a business combination cannot presently be stated with any certainty.

While it is possible that some of our key personnel will remain associated in senior management or advisory positions with us following a business combination, it is unlikely that they will devote their full time efforts to our affairs subsequent to a business combination.

Moreover, they would only be able to remain with the company after the consummation of a business combination if they are able to negotiate employment or consulting agreements in connection with the business combination.

Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for them to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the business combination.

While the personal and financial interests of our key personnel may influence their motivation in identifying and selecting a target business, their ability to remain with the company after the consummation of a business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination.

Additionally, we cannot assure you that our officers and directors will have significant experience or knowledge relating to the operations of the particular target business.

Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business.

We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers we do recruit will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

Stockholders May Not Have the Ability to Approve an Initial Business Combination

In connection with any proposed business combination, we will either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their subunits to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein.

If we determine to engage in a tender offer, such tender offer will be structured so that each stockholder may tender all of his, her or its subunits rather than some pro rata portion of his, her or its subunits.

The decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their subunits to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval.

If we decide to allow our stockholders to sell their subunits to us in a tender offer, we will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC’s proxy rules.

We will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination.

We chose our net tangible asset threshold of $5,000,001 to ensure that we would avoid being subject to Rule 419 promulgated under the Securities Act of 1933, as amended.

However, if we seek to consummate an initial business combination with a target business that imposes any type of working capital closing condition or requires us to have a minimum amount of funds available from the trust account upon consummation of such initial business combination, we may need to have more than $5,000,001 in net tangible assets either immediately prior to or upon consummation and this may force us to seek third party financing which may not be available on terms acceptable to us or at all.

As a result, we may not be able to consummate such initial business combination and we may not be able to locate another suitable target within the applicable time period, if at all.

Public stockholders may therefore have to wait 18 months in order to be able to receive a pro rata share of the trust account.

Our sponsor, initial stockholders, officers and directors have agreed (1) to vote any shares of common stock owned by them in favor of any proposed business combination, (2) not to convert any founder shares or subunits in connection with a stockholder vote to approve a proposed initial business combination and (3) not sell any founder shares of subunits in any tender in connection with a proposed initial business combination.

None of our officers, directors, sponsor, initial stockholders or their affiliates has indicated any intention to purchase units, subunits or warrants in this offering or from persons in the open market or in private transactions.

However, if we hold a meeting to approve a proposed business combination and a significant number of stockholders vote, or indicate an intention to vote, against such proposed business combination, our officers, directors, sponsor, initial stockholders or their affiliates could make such purchases in the open market or in private transactions in order to influence the vote.

Notwithstanding the foregoing, our officers, directors, sponsor, initial stockholders and their affiliates will not make purchases of units, subunits or warrants if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act, which are rules designed to stop potential manipulation of a company’s stock.

Conversion Rights

At any meeting called to approve an initial business combination, public stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, less any taxes then due but not yet paid.

Alternatively, we may provide our public stockholders with the opportunity to sell their subunits to us through a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, less any taxes then due but not yet paid.

Our sponsor, initial stockholders and our officers and directors will not have conversion rights with respect to any founder shares or subunits owned by them, directly or indirectly.

Additionally, the holders of the representative shares will not have conversion rights with respect to the representative shares.

Furthermore, public stockholders who redeem or tender their subunits for their pro rata share of the trust account will continue to have the right to exercise any warrants held by them which are not included in a subunit, but will automatically forfeit the warrants included in the redeemed subunits.

This is different than other similarly structured blank check companies where a redeeming or tendering stockholder is able to keep any warrants he may still hold, whether included in a unit or held separately.

Common stock alone will not be entitled to receive the redemption amount.

Accordingly, investors may have a disincentive to exercise the redemption rights because they will automatically forfeit, without the receipt of any additional consideration, the portion of the warrant included in the subunit.

We may require public holders of subunits, whether they are a record holder or hold their subunits in “street name,” to either (i) tender their certificates to our transfer agent or (ii) deliver their subunits to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, in each case prior to a date set forth in the proxy materials sent in connection with the proposal to approve the business combination.

There is a nominal cost associated with the above-referenced delivery process and the act of certificating the subunits or delivering them through the DWAC System.

The transfer agent will typically charge the tendering broker $45.00 and it would be up to the broker whether or not to pass this cost on to the holder.

However, this fee would be incurred regardless of whether or not we require holders seeking to exercise conversion rights.

The need to deliver subunits is a requirement of exercising conversion rights regardless of the timing of when such delivery must be effectuated.

However, in the event we require stockholders seeking to exercise conversion rights prior to the consummation of the proposed business combination and the proposed business combination is not consummated this may result in an increased cost to stockholders.

Any proxy solicitation materials we furnish to stockholders in connection with a vote for any proposed business combination will indicate whether we are requiring stockholders to satisfy such certification and delivery requirements.

Accordingly, a stockholder would have from the time the stockholder received our proxy statement up until the vote on the proposal to approve the business combination to deliver his shares if he wishes to seek to exercise his conversion rights.

This time period varies depending on the specific facts of each transaction.

However, as the delivery process can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by simply contacting the transfer agent or his broker and requesting delivery of his shares through the DWAC System, we believe this time period is sufficient for an average investor.

However, we cannot assure you of this fact.

Please see the risk factor titled “ In connection with any stockholder meeting called to approve a proposed initial business combination, we may require stockholders who wish to convert their subunits in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights ” for further information on the risks of failing to comply with these requirements.

Any request to convert such subunits once made, may be withdrawn at any time up to the vote on the proposed business combination or the expiration of the tender offer.

Furthermore, if a holder of a public subunit delivered his certificate in connection with an election of their conversion and subsequently decides prior to the applicable date not to elect to exercise such rights, he may simply request that the transfer agent return the certificate (physically or electronically).

If the initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their conversion rights would not be entitled to convert their subunits for the applicable pro rata share of the trust account as of two business days prior to the consummation of the initial business combination.

In such case, we will promptly return any subunits delivered by public holders.

Liquidation if No Business Combination

Our amended and restated certificate of incorporation provides that we will have only 18 months to complete an initial business combination from the closing of this offering.

If we have not completed an initial business combination by such date, we will (i) cease all operations except for the purpose of winding up and (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public subunits, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including any interest not previously released to us but net of taxes payable, divided by the number of then outstanding public subunits, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law.

Public stockholders will also forfeit the one-quarter of a warrant included in the subunits being redeemed.

As promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, we will dissolve and liquidate, subject to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

Our sponsor, initial stockholders, officers and directors have agreed that they will not propose any amendment to our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their subunits to us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public subunits if we do not complete a business combination within 18 months from the closing of the Company’s initial offering unless we provide our public stockholders with the opportunity to convert their subunits upon such approval at a per-subunit price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest not previously released to us but net of franchise and income taxes payable, divided by the number of then outstanding public subunits.

This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, initial stockholders, executive officers, directors or any other person.

Under the Delaware General Corporation Law, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.

The pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our outstanding public subunits in the event we do not complete our initial business combination within the required time period may be considered a liquidation distribution under Delaware law.

If the corporation complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.

It is our intention to redeem our public subunit as soon as reasonably possible following our 18 th month after the initial public offering, and, therefore, we do not intend to comply with those procedures.

As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.

Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of 100% of our public subunits in the event we do not complete our initial business combination within the required time period is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the Delaware General Corporation Law, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.

Because we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent ten years.

However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.

We are required to seek to have all third parties

(including any vendors or other entities we engage after this offering) and any prospective target businesses enter into agreements with

us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account.

As a result, the

claims that could be made against us will be limited, thereby lessening the likelihood that any claim would result in any liability extending

to the trust.

We therefore believe that any necessary provision for creditors will be reduced and should not have a significant impact

on our ability to distribute the funds in the trust account to our public stockholders.

Nevertheless, UHY LLP, our independent

registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the

monies held in the trust account.

Furthermore, there is no guarantee that other vendors, service providers and prospective target businesses

will execute such agreements.

Nor is there any guarantee that, even if they execute such agreements with us, they will not seek recourse

against the trust account.

Our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced

below $10.00 per subunit by the claims of target businesses or claims of vendors or other entities that are owed money by us for services

rendered or contracted for or products sold to us, but we cannot assure you that it will be able to satisfy its indemnification obligations

if it is required to do so.

We have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified

whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities

of our company.

Therefore, we believe it is unlikely that our sponsor will be able to satisfy its indemnification obligations if it is

required to do so.

Additionally, the agreement our sponsor entered into specifically provides for two exceptions to the indemnity it has

it will have no liability (1) as to any claimed amounts owed to a target business or vendor or other entity who has executed

an agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account,

or (2) as to any claims for indemnification by the underwriters of this offering against certain liabilities, including liabilities

under the Securities Act.

As a result, if we liquidate, the per-subunit distribution from the trust account could be less than $10.00

due to claims or potential claims of creditors.

We anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after the 18 th month and anticipate it will take no more than 10 business days to effectuate such distribution.

The holders of the founder shares and private subunits have waived their rights to participate in any liquidation distribution from the trust account with respect to such shares and subunits.

There will be no distribution from the trust account with respect to our warrants, which will expire worthless.

We will pay the costs of any subsequent liquidation from our remaining assets outside of the trust account.

If such funds are insufficient, our sponsor has contractually agreed to advance us the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $15,000) and has contractually agreed not to seek repayment for such expenses.

If we are unable to complete an initial business combination and expend all of the net proceeds of our initial public offering, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the initial per-subunit redemption price would be $10.00.

The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of public stockholders.

Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete a business combination within the required time period, if the stockholders seek to have us convert or purchase their respective subunits upon a business combination which is actually completed by us or upon certain amendments to our amended and restated certificate of incorporation prior to consummating an initial business combination.

In no other circumstances shall a stockholder have any right or interest of any kind to or in the trust account.

If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders.

To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return to our public stockholders at least $10.00 per subunit.

If we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders.

Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders promptly after 18 months from the closing of this offering, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets.

Furthermore, our board may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.

We cannot assure you that claims will not be brought against us for these reasons.

Amended and Restated Certificate of Incorporation

Our amended and restated certificate of incorporation contains certain requirements and restrictions that apply to us until the consummation of our initial business combination.

These provisions cannot be amended without the approval of a majority of our stockholders.

If we seek to amend any provisions of our amended and restated certificate of incorporation that would affect our public stockholders’ ability to convert or sell their subunits to us in connection with a business combination as described herein or affect the substance or timing of our obligation to redeem 100% of our public subunits if we do not complete a business combination within 18 months from the closing of this offering, we will provide dissenting public stockholders with the opportunity to convert their public subunits in connection with any such vote.

This conversion right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive officer, director or director nominee, or any other person.

Our sponsor, officers and directors have agreed to waive any conversion rights with respect to any founder shares, private subunits, private shares and any public subunits they may hold in connection with any vote to amend our amended and restated certificate of incorporation.

Specifically, our amended and restated certificate of incorporation provides, among other things, that:

we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which stockholders may seek to convert their subunits, regardless of whether they vote for or against the proposed business combination or do not vote at all, into their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), or (2) provide our stockholders with the opportunity to sell their subunits to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account (net of taxes payable), in each case subject to the limitations described herein;

we will consummate our initial business combination only if we have net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation and, if we seek stockholder approval, a majority of the outstanding shares of common stock voted are voted in favor of the business combination;

if our initial business combination is not consummated within 18 months from the closing of this offering, then we will redeem all of the outstanding public subunits and thereafter liquidate and dissolve our company;

we may not consummate any other business combination, merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar transaction prior to our initial business combination;

prior to our initial business combination, we may not issue additional stock that participates in any manner in the proceeds of the trust account, or that votes as a class with the common stock sold in this offering on an initial business combination.

In identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours.

Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates.

Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors.

While we believe that there may be numerous potential target businesses that we could acquire with the net proceeds of this offering, our ability to compete in acquiring certain sizable target businesses may be limited by our available financial resources.

The following also may not be viewed favorably by certain target businesses:

our obligation to seek stockholder approval of a business combination or engage in a tender offer may delay the completion of a transaction;

our obligation to convert or repurchase subunits held by our public stockholders may reduce the resources available to us for a business combination;

our outstanding warrants, and the potential future dilution they represent.

Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination.

Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privately-held entities having a similar business objective as ours in acquiring a target business with significant growth potential on favorable terms.

If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business.

We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively.

We have three executive officers.

These individuals are not obligated to devote any specific number of hours to our matters and intend to devote only as much time as they deem necessary to our affairs.

We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business.

We do not intend to have any full time employees prior to the consummation of a business combination.

As a smaller reporting company, we are not required to make disclosures under this Item.

UNRESOLVED STAFF COMMENTS

Not applicable.

SoundHound’s mission is to voice-enable the world with conversational intelligence through an independent AI platform enabling humans to interact with products and services like they interact with each other — by speaking naturally.

Company Overview

SoundHound is a leading innovator of conversational intelligence, offering an independent Voice AI platform that enables businesses across industries to deliver high quality conversational experiences to their customers.

Built on proprietary Speech-to-Meaning ® and Deep Meaning Understanding ® technologies developed over the past 17 years, our advanced Voice AI platform provides exceptional speed and accuracy.

We envision a future where people interact with products on a daily basis through voice-enabled AI.

Our technology provides a conversational voice-enabled user interface, allowing a more natural and more productive way of interacting with the products and services we use.

SoundHound is also committed to enabling product creators to design, customize, differentiate, innovate, and monetize the voice interfaces to their own products and services, as opposed to outsourcing to a third-party assistant.

More often than not, we currently interact with voice-enabled third-party assistants using halted speech patterns, consciously dividing queries into limited, broken, and unnatural instructions.

By contrast, using SoundHound, businesses can voice-enable their products so consumers can say things like, “Turn off the air conditioning and lower the windows,” while in their cars, “Find romantic comedies released in the last year,” while streaming on their TV, and even place food orders before arriving at a restaurant by talking to their cars, TVs, or other “internet of things” (“IoT”) devices.

Additionally, SoundHound’s technology can address complex user queries such as, “Show me all restaurants within half a mile of the Space Needle that are open past 9pm on Wednesdays and have outdoor seating,” and follow-on qualifications such as “Okay, don’t show me anything with less than 3 stars or fast food.”

SoundHound’s technology is currently being used globally by customers that include Hyundai, Mercedes-Benz, Pandora, Snap, VIZIO, Square, Toast, Oracle, KIA, and Stellantis.

We have seen significant inflection in customer adoption of our technology, as measured through activity on our Houndify platform, which surpassed 1 billion annual queries in 2021 and experienced over 85% growth during 2022.

Our current customers, which in many cases have contractual obligations that average multiple years (often between three to five years), span multiple industries and geographies, and together have an estimated combined reach of over two billion end users.

We consider our long-term customers our “partners” and, by growing these strategic relationships, SoundHound’s revenues have grown by more than 45% year over year each fiscal year over the past four years.

We support our customers by providing them access to Houndify ® — an open-access platform that allows developers to leverage SoundHound’s Voice AI technology and a library of over 100 content domains, including commonly used domains for points of interest, weather, flight status, sports, and more.

To ensure that our content domains continue to evolve and grow, our platform is built on our breakthrough Collective AI ® — an architecture for connecting domain knowledge, which encourages collaboration and contribution among developers, is always learning, and is greater than the sum of its parts.

This architecture allows us to improve the understanding capability of our platform super-linearly and even exponentially based on linear contributions because of how the domains interact with one another.

They can be inter-connected and can learn from each other and, as developers contribute to the platform, its understanding capability can grow exponentially.

Our technology is backed by SoundHound’s investments in intellectual property, with over 120 patents granted and over 140 patents pending, spanning multiple fields including speech recognition, natural language, machine learning, monetization, and more.

We have achieved this critical momentum in part thanks to a leadership team with deep expertise and proven ability to attract and retain talent.

Market Opportunity

A significant addressable market

To take advantage of opportunities created by the expansion of Voice AI, companies across industries are turning to independent providers with disruptive technology offerings to help them design and build custom voice assistants.

The demand for Voice AI technology is growing exponentially as companies compete to lead the market with the best technology, excellent customer relationships, and greatest innovations.

Industry sources predict that 90% of new vehicles globally will have voice assistants by 2028 and that there will be 75 billion connected devices worldwide by 2025.

The number of devices with their own voice assistant is expected to surpass the world’s population within four years.

Across industries, 94% of large companies expect to use Voice AI within two years, according to a Pindrop Security, Inc.

study, indicating the imperative most companies feel to provide a voice user interface to their products and services.

Custom, branded voice assistants are allowing companies to improve their customer interactions at every touchpoint.

In a recent study by Opus Research (sponsored by SoundHound), 77% of business leaders across eight industries stated that voice assistants drive value through improved customer support and 76% agreed that they help companies to control their brand identity and user experience.

For those already employing a voice assistant, 81% are using the technology to improve customer service and 52% are using them for sales activity.

For the estimated 75 billion IoT devices in existence by 2025, we believe many of them won’t have the physical or economical room to add a keyboard or touch screen, but they can easily have a small, inexpensive microphone.

With a microphone, companies can add Voice AI to their products, unleashing the full capabilities of the internet to their end users.

Voice AI can bring these products “to life”, and convert IoT to AI IoT.

According to Juniper Research, the broader market for Voice AI transactions will exceed $160 billion by 2026, enabled by a growing need for Voice AI in many industries.

All these trends are adding up to exponential growth for Voice AI in a variety of markets, including IoT, automotive, retail, hospitality, enterprise, healthcare, contact center, and banking and finance.

We believe that Voice AI is poised to be the next disruption in computing and the timing is right for our company and our vision.

Human-computer interfaces became popularized through computers offering a keyboard and mouse.

After that came mobile devices with touch screens.

We now have IoT devices with Voice AI.

After the internet became mainstream, every company needed to have a website.

After the mobile ecosystem became mature, every company needed to have a mobile strategy.

We note that some very successful companies were created purely on the mobile ecosystem.

We believe the same concept will apply to the world of Voice AI where every company will need to have a strategy and there will exist success stories built on top of platforms like ours.

These interfaces will co-exist:

for example, mobile and touch screens did not completely replace computers with a keyboard and mouse, therefore Voice AI will also co-exist with computers and mobile.

However, with billions of IoT devices that don’t have a keyboard or a mouse or a touch screen, voice will be the preferred or the only way to interact with these devices.

Our market position is strengthened by the significant technical barriers to entry that often face potential participants in the Voice AI space, reducing the likelihood that significant competitors will enter the market in the near term.

Technical Development

In 2005, when, as recent graduates from Stanford, our founders began envisioning a future where we would be talking to products just as we do other people.

Inspired to make their vision a reality, the Company was founded with a simple and powerful mission:

Add Voice AI to everything.

To this day, the Company is still run by its original founding team.

SoundHound’s technology represents the evolution of several disruptive breakthroughs in voice-AI and sound recognition developed over the past 15+ years.

Using innovative audio and music identification technology, in 2009, our founders launched the SoundHound music identification app.

Since its inception, the app has received over 315 million downloads.

In parallel, the founding team worked in stealth on a fundamentally new technology — one that had the potential to revolutionize human-to-computer voice interaction.

Up until then, all voice interactions relied on speech-to-text and then text-to-meaning.

Our engineers knew that for a true voice engine to flourish, it needed to understand speech directly, just like humans do.

In 2015, SoundHound introduced the Houndify Voice AI platform incorporating breakthrough Speech-to-Meaning and Deep Meaning Understanding technologies, which, to SoundHound’s knowledge represented voice interaction technologies not yet broadly available at the time as its foundation.

In 2022, SoundHound introduced Dynamic Interaction™, a category-level breakthrough in conversational AI that raises the bar for human-computer interaction by not only recognizing and understanding speech, but also responding and acting in real-time.

Where existing voice technology requires wake words and relies on turn-taking with awkward pauses to process requests, Dynamic Interaction uses the twin technologies of fragment parsing – which breaks speech down to partial-utterances and processes them in real-time – and full-duplex audio-visual integration to create an instantaneous, next-generation experience in human-computer interaction.

Additionally, in March 2023, we unveiled a new product called "SoundHound Chat AI", which we believe will usher in a new phase of voice-enabled, conversational AI by combining the power of software engineering and machine learning generative AI.

SoundHound’s Vision

A typical reaction to SoundHound’s technology is “Wow!

Even humans cannot do this.” This is the crux of our vision:

Create a Voice AI platform that exceeds human capabilities and brings value and delight via an ecosystem of billions of products enhanced by innovation and monetization opportunities.

Computers are better than humans at computing, but they’re not always better than humans at performing certain tasks.

For example, we used to easily beat computers in the game of chess, but now computers can even top grandmasters.

When it comes to language understanding, the general perception is computers are not yet as good as humans.

People talk using complex conversations with each other, but when they talk to voice assistants, they lower their expectations and use short, simple, keyword-based queries.

We aim to change that by making computers better than humans in language understanding.

As a result, SoundHound can make humans more productive and help make the world a better place.

To provide another example, if a user is looking for a restaurant, but anything other than Chinese (because they had Chinese food yesterday) they can ask the concierge of a hotel:

“Show me restaurants, excluding Chinese”, and the concierge can point the customer in the right direction.

But when talking to a typical voice assistant, users often don’t ask the question:

“show me restaurants, excluding Chinese”, because they don’t expect that it will work.

And in fact, most other voice assistants will offer Chinese restaurants when asked to show restaurants excluding Chinese.

With SoundHound’s technology, users can ask even more complicated questions, such as:

“show me Asian restaurants in San Francisco, excluding Chinese and Japanese, and only show the ones that have more than three stars and are open after 9:00 PM on Wednesdays.” In addition, users can follow up and ask it to refine the criteria such as “remove Korean and Vietnamese, sort by rating then by price, and only show the ones that are good for kids and have a patio.”

Additionally, through SoundHound's AI-driven restaurant voice ordering solution, SoundHound for Restaurants, automated voice technology can be deployed by any restaurant to take food and drink orders over the phone, via menu kiosks or at the drive-thru.

Its sophisticated technology learns the menu of each business and can answer questions, accept modifications and even upsell, helping the restaurant process more orders quickly and efficiently.

Our vision further includes empowering billions of devices around the world using our technology, with innovation and monetization opportunities for the product creators that integrate the Houndify platform.

It means product creators can not only use Voice AI to make their product better they can also generate incremental recurring revenues from customer interactions.

Our vision also places a high emphasis on user experience.

Before monetization growth can occur, delivering value and delight to end users is paramount.

As a result, the most effective monetizable interactions will be those that flow naturally based on context, create value for the end-user, and would not be perceived by users as intrusive advertisements.

We note that today’s voice assistants are far from being able to answer every question and perform every task, and our vision is long-term.

However, we have already achieved superhuman capabilities in many of the domains that we have delivered to our customers.

Technology Breakthroughs

SoundHound’s momentum in the Voice AI market can, in large part, be attributed to our large number of technology breakthroughs.

These are anchored by three important innovations:

Speech-to-Meaning, Deep Meaning Understanding and Collective AI.

Speech-to-Meaning

Speech-to-Meaning refers to SoundHound’s ability to convert speech to meaning simultaneously and in real time.

Most traditional approaches first convert speech to text, and then convert text to meaning.

This approach can be both slower and less accurate.

It’s slower because the two steps are done in sequence, and the additional processing time of the second step can be noticeable by the end user.

It can also be less accurate because if the first step of speech to text makes a mistake, the resulting incorrect text is then sent to the second step, and the error further propagates.

Our development of Speech to Meaning technology was inspired by the human brain.

As we listen to someone speaking, our brain does not convert speech to text, and then text to meaning.

Instead, our brain converts speech to meaning simultaneously and in real time.

With Speech-to-Meaning, as you speak to SoundHound’s technology, it performs both speech recognition and language understanding simultaneously, which results in faster response time and higher accuracy, because real-time language understanding can feed into the real-time speech recognizer as additional information to reduce errors.

Deep Meaning Understanding

Deep Meaning Understanding is our innovative approach to language understanding that allows our Voice AI platform to understand highly complex conversation.

For example it can understand:

“Show me hotels in San Francisco that are less than $600, but not less than $300, are pet friendly, have a gym and a pool with at least three stars staying for two nights, and don’t include anything that doesn’t have Wi-Fi.”

A complex search like this will take many minutes to perform on a website with complex forms, but it can be done within a few seconds using SoundHound technology, which we believe to be unique in its ability to handle complex queries of this nature at scale.

Collective AI

The third breakthrough is called Collective AI:

an architecture that gives potential to SoundHound to improve the understanding capability of its platform exponentially based on linear contributions

Most other platforms add skills or domains that are separate and don’t interact with each other.

For them, linear contribution results in linear growth in understanding, which is less scalable.

With the Collective AI architecture, SoundHound domains can be interconnected and learn from each other.

As developers contribute to the platform, the platform’s understanding capability can grow exponentially.

SoundHound Products

Houndify platform

SoundHound’s Voice AI platform combines advanced AI with engineering expertise to help brands build conversational voice assistants.

From proprietary components to customizable and scalable solutions, we offer tools to build a highly accurate and responsive voice user interface.

The suite of Houndify tools includes Application Programming Interfaces (“API”) for text and voice queries, support for custom commands, extensive library of content domains, inclusive Software Development Kit platforms, collaboration capabilities, diagnostic tools, and built-in analytics.

Houndify provides a web API that takes in text queries or audio and returns actionable JavaScript Object Notation to anyone with an internet connection wanting to add Voice AI to any product or application.

Automatic Speech Recognition (“ASR”)

Our highly optimized, tunable, and scalable ASR engine supports vocabulary sizes containing millions of words.

Houndify’s machine learning infrastructure allows us to tune the engine to achieve optimal Computer Processing Unit (“CPU”) performance while delivering high accuracy rates.

Houndify’s language and acoustic modelling architecture also uses machine learning to increase word recognition accuracy.

Rapid iteration is possible due to our accelerated training pipeline and architecture that improves as data is collected.

Highly accurate transcriptions result from advanced acoustic models trained to perform in a variety of scenarios — including in severely noisy environments and when accented language is spoken.

Natural Language Understanding (“NLU”)

Our proprietary Speech-to-Meaning technology tracks speech in real-time and understands the context, even before the user has finished speaking.

Instead of the typical two-step process of transcribing speech into text and then passing the text into an NLU model, Houndify can accomplish both of these tasks in one step, delivering faster and more accurate results.

Houndify’s ability to process and understand speech the instant a user stops speaking gives voice assistants the ability to respond faster.

Understanding speech in real-time without requiring additional processing or waiting for the user to finish speaking creates responsive and natural conversations between people and products.

By understanding context, Houndify responds accurately to users by distinguishing between similar words and names.

Our NLU can discern the difference between words that sound the same, but have different spellings and meanings.

For example, if users want to navigate to 272 Hoch Street in Dayton, Ohio, it won’t look for Hawk Street.

Using our proprietary Deep Meaning Understanding technology, a custom voice assistant can handle complex queries with compound criteria including conversational follow up, address multiple questions and filter results simultaneously — accurately and quickly answering users’ most complex questions.

Wake words are the entry point into branded voice experiences, allowing users to invoke the assistant by literally speaking the company’s name.

Examples range from “Hey Pandora” in a mobile app to “Hey Peugeot” within a vehicle.

Rigorous development and testing enable our wake words to perform in noisy environments and minimize false-positives or false-negatives.

We use advanced machine learning algorithms and Deep Neural Networks to provide broad robustness to our high-volume training data, resulting in high accuracy.

Custom Domains

Our library of over 100 public domains is available with a free Houndify account.

Houndify public domains give developers instant access to a broad range of content to fit their unique use cases.

This includes multi-category content intended to appeal to broad range of audiences, including, for instance, sports scores, weather, podcasts, travel information, recipes, stock prices, among many others.

Companies can enhance product functionality or proprietary operations with Houndify Private Domains, allowing customization and development of more specific content.

Customers who subscribe for this service have full access to their private domains securely on the Houndify platform while retaining the ability to iterate and update content.

For example, an automotive manufacturer can make helpful updates about the car’s user manual over time.

In this way, SoundHound becomes a long-term “partner” to its customers, helping companies create the domains that they need in order to improve brand value for their own customers or end users.

Text-to-speech (“TTS”)

A high quality TTS helps companies create a unique voice that differentiates them from the competition.

Brands can fully express their personality by choosing the gender, tone, and personality that will become their vocal identity.

Our machine learning algorithms transform recorded voices into large databases of spoken sounds to form entire vocabularies of natural language — adapted to the user’s environment.

We can transform any voice to generate a high-quality TTS with a small CPU footprint.

Edge (Embedded)

A fully-embedded voice solution for brands seeking the convenience of a voice user interface without the privacy or connectivity concerns of the internet.

Includes full access to custom commands and the ability to instantly update commands during development.

To harness the capabilities of full cloud connectivity with the reliability of embedded voice technology.

Houndify Edge Hybrid solutions are designed to ensure that devices are always-on and responsive to commands.

Allows for over-the-air product updates and a broader voice experience with the level of cloud-connectivity that best matches the product and its users.

Competitive Strengths and Differentiators

Independent Disruptor

We believe there is a growing void and demand for an independent Voice AI platform such as SoundHound.

Looking across industries, there has been a notable rise of independent disruptors.

These new companies were able to beat the legacy giants using focused technologies and business models.

The majority of participants in the Voice AI industry can be characterized as either “big tech” companies (meaning large corporations offering Voice AI as an extension of other services) and “legacy vendors” (meaning long-time Voice-AI industry participants with older technologies).

Voice AI offerings from big tech companies are primarily an extension of their services.

In many cases, rather than strengthening or interacting with the host product, big tech offerings tend to take over the entire product experience, thus “hijacking” the company’s brand, users, and data.

As a result, brands relying on big tech Voice AI frequently experience decreased ability to innovate, differentiate, and customize the way that their products interact with Voice AI platforms and/or end users.

In some cases, these big tech Voice AI providers even compete with the customers whose products their technologies support, making them increasingly less attractive as a choice for a voice interface.

The Voice AI market currently also includes “legacy vendors,” a number of whom offer dated technologies at a high price.

Furthermore, in many cases, legacy vendor technologies still require significant effort by product creators to turn legacy AI product offerings into solutions that can compete with the quality of Voice AI products currently offered by big tech companies, which is oftentimes neither economical nor practical.

Due to the high barrier to entry in Voice AI, the number of full solution platform providers is very limited.

In our view, it takes many years and significant investment to build all the components of Voice AI.

It then takes further time and resources to make the solutions competitive, mature, and viable for adoption.

Finally, it requires significant investment to globalize the solution in multiple languages and regions.

Although the number of platforms is limited, we note that the big tech players have significant resources.

Against this landscape, SoundHound has achieved its successes to date through technology innovation, business model innovation, and global alliances that we believe make us well-positioned to continue to grow and execute our business plan.

We view the current environment as an opportunity to provide disruptive technologies with capabilities we believe are superior to existing alternatives, allowing customers to maintain their brand, control the user experience, get access to the data, and define their own privacy policies, while being able to customize, differentiate, innovate, and monetize.

Revenue Model

Market Momentum

Our entry into the Voice AI space began with 10 years of constant innovation in “stealth” building disruptive technologies in Voice AI using innovative approaches.

Our goal was to build a differentiated Voice AI technology that we fully own and which is significantly better than other solutions in the market.

We achieved that goal and unveiled the result in 2015, launching it as the Houndify platform in 2016.

Building a Diverse, Global Customer Base

SoundHound continues to expand the capabilities that make us well-positioned to serve the needs of customers globally.

We have grown our solution from a single language capability to 25 languages.

Our customers include a range of product and service providers of all sizes, spanning a range of industries, including automotive, IoT, apps, restaurants, and more.

Many of our global customers have end users in multiple regions and industries and we have seen our products successfully used by them across multiple contexts and purposes.

Three pillars for growth

We have identified three pillars for revenue growth:

Royalties, Subscription, and Monetization, and all three pillars contribute to our current revenues today.

While the majority of current revenues come from royalties, over time we expect

our revenues from subscription and monetization pillars to increase and eventually represent a larger portion of our overall revenues.

(1) Royalties :

This involves voice-enabling a product.

The product creator pays us a royalty based on volume, usage, or duration.

SoundHound collects royalties when Houndify is integrated into a product such as a car, smart speaker, or appliance.

(2) Subscription :

This involves voice-enabling a service that doesn’t rely on a physical product.

Examples include when SoundHound enables customer service or food ordering for restaurants or content management, appointments, or voice commerce, we generate subscription revenue from the service providers.

(3) Monetization :

This pillar creates an ecosystem that enables monetization services in products and services from both pillar one and pillar two.

When users of a voice-enabled product access the voice-enabled monetization, this creates new leads and transactions.

SoundHound generates monetization revenue for generating these leads and transactions, and will share revenue with the product creators.

Through December 31, 2022, we have not generated revenue from leads and transactions on voice-enabled products from voice-enabled services other than from the SoundHound AI music identification app.

Going forward, SoundHound expects monetization revenue to be generated through a combination of advertising revenue from the music identification app and from leads and transactions on voice-enabled products from voice-enabled services.

For example, imagine a driver asks their Houndify-enabled car what restaurants are on the way home.

The car can then respond with options, including restaurants that are also on the Houndify platform.

These restaurants can accept orders directly from the car and the user can order using their voice.

In that case, we will have unlocked a seamless transaction.

Accordingly, the restaurant will pay us for that order and we will share that revenue with the car manufacturer.

In this example, each party receives value in the ecosystem.

The restaurant gets value because they generated a new lead and booked a sale.

The driver gets value because they have placed an order just by speaking to their car.

And finally, the car manufacturer delivered value to the end user and generated additional revenue from the usage of their product.

We expect the disruptive three-pillar business model will create a monetization flywheel.

As more products integrate into our platform, more users will use it, and more services will choose to integrate as well.

This creates even more usage,

and results in a flow of revenue share to product creators, which further encourages even greater adoption and integration with our platform, and the cycle will perpetually continue and expand.

This ecosystem has a compound impact on our business.

First, it increases adoption because more products will be motivated to integrate into our platform.

Without the three-pillar model, only products that can afford the cost of Voice AI would be able to adopt it.

With this model, products will be able to see a path to add incremental recurring revenue from the usage of their product, increasing overall return on investment while making their product better, which will increase overall adoption.

Second, our total available market increases with new revenue streams and puts SoundHound on a trajectory with much higher potential.

SoundHound’s undeniable criteria for adoption

When it comes to criteria for adoption, our goal is to win on every dimension.

We believe our product will be adopted for the following reasons:

The first two criteria customers typically consider are technology and brand control.

We strive to provide our customers with the best technology, and we provide a white label solution giving our customers control of their brands.

In some industries you may have to choose between technology and brand control.

In our case, we offer our customers the best of both, we enable them to offer disruptive technologies to their users while maintaining control of their brand and user experience.

With our disruptive monetization strategy, we also provide a path to monetization.

By choosing our platform, product creators can generate additional revenue while making their product better using Voice AI, providing further incentive to choose our platform.

We offer a superior ecosystem with Collective AI along with definable privacy controls, which are becoming increasingly important in the industry of Voice AI.

Additionally, there is no conflict of interest between us and our partners and customers as we do not compete with them (as some other Voice AI vendors do).

We also offer edge and hybrid solutions.

This means our technology can optionally run without a cloud connection for increased flexibility and privacy.

Our focus is on delivering the most advanced Voice AI in the world and thus allowing our partners to differentiate and innovate their overall experiences for their brands.

We strongly believe that product creators know their product and users best.

The idea of a single third-party assistant taking over their product is not reflective of our anticipated future.

We envision that every product will have its own identity, and they will have Voice AI customized in different ways.

They can each tap into a single Collective AI to access the ever-growing set of domains, but the product creators can innovate on top of Collective AI and create value for the end users in their own way.

Research and Development

Research and development have been the foundation of our company since its origin.

We have invested significantly over the years in making conversational Voice AI technology by leveraging advanced technologies across signal processing, speech recognition, machine learning and more.

The complexities of our design and the associated technological breakthroughs has required more than ten years of research and development activities to fine tune our technology for commercial use.

We continue to explore different innovation strategies to strengthen our capabilities.

In particular, we are continually working to improve the speed and accuracy of our Voice AI solutions and make customer adoption easier and faster.

We have protected our innovations throughout with patents and trade secrets, and we have continued to strengthen our competitive positioning by staying on top of the latest advancements in the Voice AI industry.

We expect to continue to keep research and development and, more broadly, innovation and product quality at the forefront of our strategy and core focus.

To further our transformative strategy as a leading innovator, we expect research and development to remain a significant part of our growth and investment.

Our research and development activities are centered in our Santa Clara headquarters, but we also carry out research and development in other locations, including internationally.

Our employees’ expertise ranges from cloud-based software development to embedded hardware integration.

Sales and Marketing

We take an insight-driven, account-based marketing approach to build and expand our relationships with commercial partners.

We collect feedback directly from commercial partners to garner insights that help drive the business and product.

We also work with analysts and higher education institutions to conduct studies, test and validate technology performance, providing key proof points for commercial partners considering our products.

In parallel, marketing and communications drive our brand equity and narrative through ongoing announcements, campaigns, events, speaking opportunities, and public relations efforts.

Our demand generation efforts span the full customer funnel to target prospects across a variety of channels including:

advertising, email, social media, and search engines.

We employ Account-Based Marketing (“ABM”) leveraging leading-edge platforms supported by fully-current Marketing Automation tools to capture and nurture business leads through to Marketing Qualified Leads (“MQL”), Sales Accepted Leads (“SAL”), and Sales Qualified Leads (“SQL”) ultimately to drive towards return-on-investment-positive marketing expenditures.

Sales and marketing will play a critical role in the next phase of our evolution as a company, with key ongoing investments in our team and leadership.

While our products are already scaling with existing customers, we see significant opportunities to grow into new markets and verticals.

Increased sales and marketing efforts will enable us to capitalize on the tremendous momentum we are building and we expect to continue expanding resources to grow our personnel and leadership team focused on sales and marketing.

As part of a targeted restructuring, the Company will increase its focus on SoundHound for Restaurants while reducing investment in new verticals and already completed language development projects.

It will maintain its growing licensing business in smart devices, TV and automotive verticals.

Key Strategic Global Partners

SoundHound sees strategic partnerships as the foundation for our ongoing growth and success.

Our deep collaboration with leading companies across industries has allowed our technology to reach millions of customers.

Largely through our existing customer base, query volume exceeded 1 billion at the end of 2021 and experienced over 85% growth during 2022.

Information provided to us by our strategic partners suggest that our customers’ products have a reach of over a billion users.

Some of the strategic partners that are featured here utilizes SoundHound’s product integrations:

MBUX (multiple models in North America)

• Hyundai/KIA:

Dynamic Voice Recognition (multiple models in North America and India)

Select models in Japan and Europe

Voice Scan and Captioning features

In-app Voice Mode

Smart TV Voice Remote for multiple product lines

• White Castle:

Voice AI Drive Through

• Stellantis N.V.:

Multiple models in Europe

Intellectual Property

SoundHound’s intellectual property portfolio includes over 120 patents granted and over 140 patents pending.

These patents cover areas such as speech recognition, natural language understanding, machine learning, human interfaces, and others, including monetization and advertising.

Out of our over 260 patents granted and pending, more than 40 of these patents are in conversational monetization.

Because we predict that search traffic will change from keyword-based queries to conversational interactions, we have a large number of patents in the area of conversational advertising.

Human Capital

At SoundHound, our success is driven by the quality of our people, who we believe are among the best and brightest in the industry.

We strive to create an environment that supports employee success and a culture where everyone has a voice in driving innovation.

As of December 31, 2022, we had approximately 430 full-time employees, of which approximately 57% were in the United States and 43% were in our international locations.

Our restructuring efforts in January 2023 included a reduction of our then-current workforce by approximately 40%.

We have not experienced work stoppages and believe our employee relations are good.

Employee Experience

Emerging from the COVID-19 pandemic, we have further increased our focus on delivering a great employee experience, anchored by meaningful work, career opportunities and well-being, to continue to attract and retain high quality talent.

We support employee well-being from multiple dimensions, including economic, health, development, and lifestyle with a comprehensive suite of compensation, benefits and flexible work options.

For the vast majority of SoundHound’s employees, productivity is not tied to being in an office and collaboration can happen between people anywhere.

SoundHound’s modern approach to work gives our employees more flexibility to choose where and how to work.

Depending on their role, many of our employees can choose their office location, as well as work from home some or all of the time.

We believe this allows us to engage with a wider pool of talent and retain employees who want or need more flexibility.

Diversity and Inclusion

We recognize that everyone deserves respect and equal treatment, regardless of gender, race, ethnicity, age, disability, sexual orientation, gender identity, cultural background or religious belief.

We are creating an inclusive workplace through community-building, training and internal awareness.

In 2022, we continued to support our many community partners and employee resource groups that build community for employees from underrepresented groups.

Government Regulations

We are subject to various laws, regulations, and permitting requirements of federal, state, and local authorities, related to health and safety, consumer privacy, anti-corruption and export controls.

The foregoing may include the U.S.

Foreign Corrupt Practices Act of 1977, the U.S.

Export Administration Regulations, Money Laundering Control Act of 1986 and any other equivalent or comparable laws of other countries.

We believe that we are in material compliance with all such laws, regulations, and permitting requirements.

Legal Proceedings

From time to time, we may become involved in actions, claims, suits and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to personal injuries sustained using our products and services, intellectual property infringement, breaches of contract or warranties or employment-related matters.

We are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition and results of operations.

Available Information

Our website is located at www.soundhound.com , and our investor relations website is located at investors.soundhound.com .

Access to copies of our SEC filings, corporate governance information, and other items that may be material or of interest to our investors is available via our investor relations website.

The contents of our websites are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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

What changed 10-K

Item 1. Business