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

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

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

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

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

As of ~~January~~November 10, 2022, there were ~~17,461,000~~157,517,926 shares of the Company’s Class A common stock, ~~including shares of common stock underlying the units and subunits,~~ $0.0001 par value per share, issued and ~~outstanding.~~

References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Archimedes Tech SPAC Partners Co., unless the context otherwise indicates.

~~This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Archimedes Tech SPAC Partners Co. as of~~outstanding, and ~~for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021 (the “First Amended Filing”).~~

On November 15, 2021, Archimedes Tech SPAC Partners Co. (the “Company”) filed its Form 10-Q for the quarterly period ending September 30, 2021 (the “Q3 Form 10-Q”), which included a Note 2, Revision of Prior Period Financial Statements, (“Note 2”) that describes a revision to the Company’s classification of public subunits (and the underlying40,396,600 shares of common stock) subject to redemption issued as part of the units sold in the Company’s initial public offering (“IPO”) on March 15, 2021. As described in Note 2, upon its IPO, the Company classified a portion of its public subunits (and the underlying shares of common stock) in permanent equity. The Company’s management re-evaluated the conclusion and, as a result, corrected the error by reclassifying all common stock underlying the public subunits subject to redemption as temporary equity. This resulted in a revision to the initial carrying value of the common stock underlying the public subunits subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), and common stock.

The Company determined the changes were not qualitatively material to the Company’s previously issued financial statements and did not restate its financial statements. Instead, the Company revised its prior period financial statements in Note 2 to its Q3 Form 10-Q. Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors support a conclusion that the misstatements are material on a quantitative basis. As such, upon further consideration of the change, the Company determined the change in classification of the common stock underlying the public subunits and change to the Company’s presentation of earnings per share is material quantitatively and the Company should restate its previously issued financial statements.

~~Therefore, on December 21, 2021, the Company’s management and the audit committee~~ of the Company’s board of directors (the “Audit Committee”) concluded that the Company’s previously issued (i) audited balance sheet as of March 15, 2021 included in the Company’s Form 8-K filed with the SEC on March 19, 2021, (ii) unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 filed with the SEC on July 27, 2021 (part of the “Affected Periods”), should be restated to report all public subunits as temporary equity and should no longer be relied upon. As such, the Company will restate its financial statements for the aforementioned periods in this Quarterly Report on Form 10-Q/A.

~~Additionally, the Company had re-evaluated the fair~~Class B common stock, $0.0001 par value of the representative shares that had been issued on January 13, 2021, prior to the IPO, and concluded that the fair value the Company had previously used for the representative shares was incorrect. The correction to the value of the representative shares would impact the allocation of the proceeds recorded by the Company upon the closing of the IPO on March 15, 2021, which in turn impacts the deemed dividend and thus the earnings per share, ~~of the Company that was reported in the Company’s financial statements as of March 31, 2021, June 30, 2021,~~issued and ~~September 30, 2021 included in the Form 10-Q filed on July 27, 2021, August 27, 2021, and November 15, 2021, respectively (part of the “Affected Periods”).~~

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “report”) of SoundHound AI, Inc. (“we,” “us,” “our,” “SoundHound AI,” or the “Company”) contains “forward-looking statements” (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned that significant known and unknown risks, uncertainties and other important factors (including those over which we may have no control and others listed in report and in the “Risk Factors” section of our amendment to our current report on Form 8-K, which was originally filed with the SEC on May 2, 2022 and amended by Amendment No. 1 to Current Report on Form 8-K (collectively referred to as the “Form 8-K”)) may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

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

•execution of our business strategy, including launching new product offerings and expanding information and technology capabilities;

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

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

•the ability to recognize the anticipated benefits of our recent business combination, which may be affected by, among other things, competition and the ability of SoundHound AI to manage its growth;

•the ability of SoundHound AI to protect intellectual property and trade secrets;

•the ability to obtain additional capital, including equity or debt financing;

•changes in applicable laws or regulations and extensive and evolving government regulations that impact the Company’s operations and business;

•the ability to attract or maintain a qualified workforce;

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

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

•the effects of the COVID-19 pandemic or any similar public health developments on SoundHound AI’s business;

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

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

•other risks and uncertainties described under the section titled “Risk Factors” of our Form 8-K.

Table of Contents

These forward-looking statements involve numerous and significant risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results of operations or the results of other matters that we anticipate herein could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” section contain in this report and in the “Business,” “Risk Factors” and other sections of the Form 8-K. You should thoroughly read this report and the documents that we refer to with the understanding that our actual future results may be materially different from, and worse than, what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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

iii

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

Table of Contents

~~ARCHIMEDES TECH SPAC PARTNERS CO.~~

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	33,412	$	21,626
Restricted cash equivalents	—		460
Accounts receivable, net of allowances of $109 as of September 30, 2022 and December 31, 2021	2,789		2,060
Prepaid expenses	3,774		1,276
Debt issuance cost	122		1,132
Contract assets	1,407		54
Other current assets	861		863
Total current assets	42,365		27,471
Restricted cash equivalents, non-current	230		736
Right-of-use assets	8,833		10,291
Property and equipment, net	4,146		6,155
Deferred tax asset	2,169		2,169
Debt issuance cost	204		—
Deferred offering costs	—		1,264
Contract assets, non-current	4,823		—
Other assets	1,071		1,117
Total assets	$	63,841	$	49,203

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	2,894	$	3,760
Accrued liabilities	7,242		7,298
Operating lease liabilities	3,281		3,281
Finance lease liabilities	179		1,301
Income tax liability	2,858		2,737
Deferred revenue	5,312		6,042
Convertible note	—		29,868
Derivative liability	—		3,488
Notes payable	16,533		29,964
Total current liabilities	38,299		87,739

Operating lease liabilities, net of current portion	6,236		8,611
Financing lease liabilities, net of current portion	168		292
Deferred revenue, net of current portion	8,874		14,959
Notes payable, net of current portion	22,508		—
Other liabilities	2,133		1,336
Total liabilities	78,218		112,937
Commitments and contingencies (Note 7)

Legacy SoundHound redeemable convertible preferred stock; $0.0001 par value; 0 and 146,218,514 shares authorized; 0 and 106,949,326 shares issued and outstanding, liquidation preference of $0 and $284,826 as of September 30, 2022 and December 31, 2021, respectively	—		279,503
Stockholders’ deficit:
Legacy SoundHound Common Stock, $0.0001 par value; 250,030,433 shares authorized; 0 and 68,258,556 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	—		1
Class A Common Stock, $0.0001 par value; 455,000,000 shares authorized; 157,296,065 and 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	16		—
Class B Common Stock, $0.0001 par value; 44,000,000 shares authorized; 40,396,600 and 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	4		—
Additional paid-in capital	457,025		43,491
Accumulated deficit	(471,422)		(386,729)
Total stockholders’ deficit	(14,377)		(343,237)
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit	$	63,841	$	49,203

September 30,
2021 December 31,
2020
(unaudited)
Assets
Current assets
Cash and cash equivalent $ 628,652 $ -
Prepaid expenses 134,478 -
Total current assets 763,130 -
Marketable securities held in Trust Account 133,007,230 -
Total Assets $ 133,770,360 $ -

Liabilities and Stockholders’ Equity
Current liabilities
Accrued offering costs and expenses $ 126,019 $ -
Due to related party - 716
Total current liabilities 126,019 716
Warrant liability 161,359 -
Total liabilities $ 287,378 $ 716

Commitments and Contingencies
Common stock subject to possible redemption, 13,300,000 shares and 0 shares at redemption value as of September 30, 2021 and December 31, 2020, respectively $ 133,007,230 $ -

Stockholders’ Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding $ - $ -
Common stock, $0.0001 par value; 100,000,000 shares and 31,000,000 shares authorized, 4,161,000 shares and 0 shares issued and outstanding (excluding 13,300,000 shares and 0 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020, respectively 416 -
Additional paid-in-capital 821,700 -
Accumulated deficit (346,364 ) (716 )
Total Stockholders’ Equity $ 475,752 $ (716 )

Total Liabilities and Stockholders’ Equity $ 133,770,360 $ -

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

Table of Contents

SOUNDHOUND AI, INC.

~~ARCHIMEDES TECH SPAC PARTNERS CO.~~

~~UNAUDITED~~ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

For the
Three Months
Ended
September 30,
2021 For the
Nine Months
Ended
September 30,
2021 For the Period from September 15, 2020 (Inception) to September 30, 2020
Formation and operating costs $ 229,484 $ 461,826 $ 716
Loss from operations (229,484 ) (461,826 ) (716 )

Other income
Trust interest income 3,352 7,230 -
Unrealized gain on change in fair value of warrants 35,057 108,948 -
Total other income 38,409 116,178 -

Net loss $ (191,075 ) $ (345,648 ) $ (716 )

Basic and diluted weighted average shares outstanding, common stock subject to redemption 13,300,000 9,675,824 -
Basic and diluted net (loss) income per share attributable to common stock subject to redemption $ (0.01 ) $
0.37
$ -

Basic and diluted weighted average shares outstanding, common stock 4,161,000 3,891,044 -
Basic and diluted net loss per share attributable to common stockholders $ (0.01 ) $ (1.01 ) $ -


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues	$	11,186	$	4,028	$	21,628	$	16,046
Operating expenses:
Cost of revenues	2,583		1,657		6,844		4,878
Sales and marketing	6,672		1,175		13,623		3,259
Research and development	19,352		14,344		54,864		42,810
General and administrative	9,587		4,022		22,952		11,387
Total operating expenses	38,194		21,198		98,283		62,334
Loss from operations	(27,008)		(17,170)		(76,655)		(46,288)

Other expense, net:
Interest expense	(1,166)		(2,683)		(5,715)		(5,725)
Other income (expense), net	116		(2,738)		(718)		(4,280)
Total other expense, net	(1,050)		(5,421)		(6,433)		(10,005)
Loss before provision for income taxes	(28,058)		(22,591)		(83,088)		(56,293)
Provision for income taxes	864		1,190		1,605		1,400
Net loss	(28,922)		(23,781)		(84,693)		(57,693)
Other comprehensive gain:
Unrealized holding gain on available-for-sale securities, net of tax	—		—		—		1
Comprehensive loss	$	(28,922)	$	(23,781)	$	(84,693)	$	(57,692)

Net loss per share:
Basic and diluted	$	(0.15)	$	(0.35)	$	(0.59)	$	(0.86)

Weighted-average common shares outstanding:
Basic and diluted	197,006,980		67,718,940		143,338,517		67,021,176

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

Table of Contents

SOUNDHOUND AI, INC.

~~ARCHIMEDES TECH SPAC PARTNERS CO.~~

~~UNAUDITED~~ CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN~~REDEEMABLE CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share data)

(Unaudited)


Three Months Ended September 30, 2022
	Legacy SoundHound Redeemable Convertible Preferred Stock			Legacy SoundHound Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of June 30, 2022	—	$	—	—	$	—	156,266,549	$	16	40,396,600	$	4	$	447,136	$	—	$	(442,500)	$	4,656
Issuance of Class A common shares upon exercise of stock options	—	—		—	—		514,931	—		—	—		716		—		—		716
Issuance of common stock upon vesting of restricted stock units	—	—		—	—		514,585	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		—	—		9,173		—		—		9,173
Net loss	—	—		—	—		—	—		—	—		—		—		(28,922)		(28,922)

Balance as of September 30, 2022	—	$	—	—	$	—	157,296,065	$	16	40,396,600	$	4	$	457,025	$	—	$	(471,422)	$	(14,377)


Three Months Ended September 30, 2021
	Legacy SoundHound Redeemable Convertible Preferred Stock			Legacy SoundHound Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of June 30, 2021	106,303,970	$	273,687	67,633,891	$	1	—	$	—	—	$	—	$	39,084	$	—	$	(341,101)	$	(302,016)
Issuance of common stock upon exercise of stock options	—	—		212,297	—		—	—		—	—		234		—		—		234


Stock-based compensation	—	—		—	—		—	—		—	—		1,315		—		—		1,315
Net loss	—	—		—	—		—	—		—			—		—		(23,781)		(23,781)

Balance as of September 30, 2021	106,303,970	$	273,687	67,846,188	$	1	—	$	—	—	$	—	$	40,633	$	—	$	(364,882)	$	(324,248)

Table of Contents

SOUNDHOUND AI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(In thousands, except share and per share data)

(Unaudited)


Nine Months Ended September 30, 2022
	Legacy SoundHound Redeemable Convertible Preferred Stock			Legacy SoundHound Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2021	19,248,537	$	279,503	12,280,051	$	1	—	$	—	—	$	—	$	43,491	$	—	$	(386,729)	$	(343,237)
Retroactive application of Business Combination (Note 3)	87,700,789	(279,503)		55,978,505	(1)		—	—		—	—		279,504		—		—		279,503
Adjusted balance, beginning of period	106,949,326	—		68,258,556	—		—	—		—	—		322,995		—		(386,729)		(63,734)
Issuance of common stock upon exercise of stock options	—	—		2,582,535	—		—	—		—	—		2,840		—		—		2,840
Net exercise of outstanding warrants	—	—		673,416	—		—	—		—	—		—		—		—		—
Conversion of convertible note	—	—		2,046,827	—		—	—		—	—		20,239		—		—		20,239
Effect of reverse recapitalization, net of costs (Note 3)	(106,949,326)	—		(73,561,334)	—		140,114,060	14		40,396,600	4		(18)		—		—		—
PIPE financing	—	—		—	—		11,300,000	1		—	—		86,584		—		—		86,585
Issuance of Class A common shares pursuant to the Business Combination	—	—		—	—		4,693,050	1		—	—		4,105		—		—		4,106
Issuance of Class A common shares upon exercise of stock options	—	—		—	—		557,030	—		—	—		780		—		—		780
Issuance of common stock upon vesting of restricted stock units	—	—		—	—		631,925	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		—	—		19,500		—		—		19,500
Net loss	—	—		—	—		—	—		—	—		—		—		(84,693)		(84,693)

Balance as of September 30, 2022	—	$	—	—	$	—	157,296,065	$	16	40,396,600	$	4	$	457,025	$	—	$	(471,422)	$	(14,377)

Table of Contents


Nine Months Ended September 30, 2021
	Legacy SoundHound Redeemable Convertible Preferred Stock			Legacy SoundHound Common Stock			Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2020	19,132,387	$	273,687	11,818,761	$	1	—	$	—	—	$	—	$	30,836	$	(1)	$	(307,189)	$	(276,353)
Retroactive application of Business Combination (Note 3)	87,171,583	—		53,849,015	—		—	—		—	—		—		—		—		—
Adjusted balance, beginning of period	106,303,970	273,687		65,667,776	1		—	—		—	—		30,836		(1)		(307,189)		(276,353)
Issuance of common stock upon exercise of stock options	—	—		2,178,412	—		—	—		—	—		1,906		—		—		1,906
Issuance of common stock warrants	—	—		—	—		—	—		—	—		3,842		—		—		3,842
Other comprehensive gain, net of tax	—	—		—	—		—	—		—	—		—		1		—		1
Stock-based compensation	—	—		—	—		—	—		—	—		4,049		—		—		4,049
Net loss	—	—		—	—		—	—		—			—		—		(57,693)		(57,693)

Balance as of September 30, 2021	106,303,970	$	273,687	67,846,188	$	1	—	$	—	—	$	—	$	40,633	$	—	$	(364,882)	$	(324,248)

Common Stock Additional
Paid-in Accumulated Total
Stockholders’
Shares Amount Capital Deficit Equity
Balance as of December 31, 2020 - $ - $ - $ (716 ) $ (716 )
Sale of 12,000,000 Units through IPO 12,000,000 1,200 119,998,800 - 120,000,000
Sale of 1,300,000 Units through over-allotment 1,300,000 130 12,999,870 - 13,000,000
Sale of 416,000 Private Units in private placement 416,000 42 4,159,958 - 4,160,000
Issuance of representative shares 420,000 42 2,024,421 - 2,024,463
Common stock issued to initial stockholders 3,450,000 345 24,655 - 25,000
Forfeiture of founder shares (125,000 ) (13 ) 13 - -
Underwriting fee - - (2,660,000 ) - (2,660,000 )
Offering costs charged to the stockholders’ equity - - (2,449,810 ) - (2,449,810 )
Initial classification of warrant liability - - (270,307 ) - (270,307 )
Reclassification of offering costs related to Public Shares - - 4,779,936 - 4,779,936
Net loss - - - (154,573 ) (154,573 )
Subsequent measurement of common stock subject to possible redemption (13,300,000 ) (1,330 ) (124,412,583 ) - (124,413,913 )
Subsequent measurement of common stock subject to redemption - - (13,366,023 ) - (13,366,023 )
Subsequent measurement of common stock subject to redemption (interest earned on trust account) - - (3,878 ) (3,878 )

Balance as of June 30, 2021 4,161,000 $ 416 $ 825,052 $ (155,289 ) $ 670,179
Net loss - - - (191,075 ) (191,075 )
Subsequent measurement of common stock subject to redemption (interest earned on trust account) - - (3,352 ) - (3,352 )

Balance as of September 30, 2021 4,161,000 $ 416 $ 821,700 $ (346,364 ) $ 475,752

Common Stock Additional
Paid-in Accumulated Total
Stockholders’
Shares Amount Capital Deficit Equity
Balance as of September 15, 2020 (inception) - $ - $ - $ - $ -
Net loss - - - (716 ) (716 )

Balance as of September 30, 2020 - $ - $ - $ (716 ) $ (716 )

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

Table of Contents

SOUNDHOUND AI, INC.

~~ARCHIMEDES TECH SPAC PARTNERS CO.~~

~~UNAUDITED~~ CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(84,693)	$	(57,693)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,197		4,169
Stock-based compensation	19,500		4,049
Change in fair value of derivative and warrant liability	606		3,791
Amortization of debt issuance cost	2,237		2,953
Non-cash lease amortization	2,168		2,412
Deferred income taxes	—		1,035
Changes in operating assets and liabilities:
Accounts receivable, net	(729)		(2,061)
Prepaid expenses	(2,498)		(75)
Other current assets	2		(552)
Contract assets	(6,176)		—
Other assets	46		(222)
Accounts payable	398		(32)
Accrued liabilities	1,440		1,724
Operating lease liabilities	(3,085)		(2,710)
Deferred revenue	(6,815)		(7,138)
Other liabilities	797		(747)
Net cash used in operating activities	(73,605)		(51,097)

Cash flows from investing activities:
Purchases of property and equipment	(1,188)		(234)
Net cash used in investing activities	(1,188)		(234)

Cash flows from financing activities:
Proceeds from issuance of convertible notes, net of issuance cost	—		5,044
Proceeds from note payable, net of issuance cost	—		29,833
Proceeds from the issuance of common stock upon exercise of options	3,620		1,906
Proceeds from Business Combination and PIPE, net of transaction costs	90,689		—
Payments on notes payable	(7,450)		—
Payments on finance leases	(1,246)		(1,885)
Net cash provided by financing activities	85,613		34,898
Net change in cash, cash equivalents, and restricted cash equivalents	10,820		(16,433)
Cash, cash equivalents, and restricted cash equivalents, beginning of period	22,822		44,982
Cash, cash equivalents, and restricted cash equivalents, end of period	$	33,642	$	28,549

Reconciliation to amounts on the condensed consolidated balance sheets:
Cash and cash equivalents	$	33,412	$	27,259
Current portion of restricted cash equivalents	—		230
Non-current portion of restricted cash equivalents	230		1,060
Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows	$	33,642	$	28,549

Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,302	$	1,475
Cash paid for income taxes	$	787	$	260

Noncash investing and financing activities
Operating lease liabilities and right-of-use assets through adoption of ASC 842	$	—	$	11,428
Conversion of convertible note into common stock pursuant to Business Combination	$	20,239	$	—
Conversion of redeemable convertible preferred stock to common stock pursuant to Business Combination	$	279,503	$	—
Debt discount through issuance of common stock warrants	$	—	$	3,842
Operating lease liabilities arising from obtaining right-of-use assets	$	650	$	3,422
Property and equipment acquired under finance leases or debt	$	—	$	650

For the
Nine Months
Ended
September 30,
2021 For the Period from September 15, 2020 (Inception) to September 30,
2020

Cash flows from Operating Activities:
Net loss $ (345,648 ) $ (716 )
Adjustments to reconcile net loss to net cash used in operating activities
Unrealized gain on change in fair value of warrants (108,948 ) -
Interest earned on marketable securities held in Trust Account (7,230 ) -
Changes in current assets and current liabilities:
Prepaid expenses (134,478 ) -
Accrued offering costs and expenses 126,019 716
Due to related party (716 ) -
Net cash used in operating activities (471,001 ) -

Cash Flows from Investing Activities:
Investment held in Trust Account (133,000,000 ) -
Net cash used in investing activities (133,000,000 ) -

Cash flows from Financing Activities:
Proceeds from IPO and over-allotment 133,000,000 -
Payment of underwriting fees (2,660,000 ) -
Proceeds from private placement 4,160,000 -
Proceeds from issuance of promissory note to related party 125,000 -
Payment to promissory note to related party (125,000 ) -
Proceeds from issuance of common stock to initial stockholders 25,000 -
Payment of deferred offering costs (425,347 ) -
Net cash provided by financing activities 134,099,653 -

Net change in cash 628,652 -
Cash, beginning of the period - -
Cash, end of the period $ 628,652 $ -

Supplemental disclosure of cash flow information
Initial value of common stock subject to possible redemption $ 124,413,913 $ -
Reclassification of offering costs related to Public Shares $ (4,779,936 ) $ -
Subsequent measurement of common stock subject to redemption $ 13,366,023 $ -
Subsequent measurement of common stock subject to redemption (interest earned on trust account) $ 7,230 $ -
Forfeiture of founder shares $ 13 $ -
Initial classification of warrant liability $ 270,307 $ -

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

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION

Nature of Operations

ARCHIMEDES TECH SPAC PARTNERS CO.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

~~Note 1 — Organization~~SoundHound AI, Inc. (“SoundHound” or the “Company”) turns sound into understanding and ~~Business Operations~~

actionable meaning. SoundHound’s technology applications enable humans to interact with the things around them in the same way they interact with each other: by speaking naturally to mobile phones, cars, televisions, music speakers, coffee machines, and every other part of the emerging “connected” world. The conversation voice AI platform is called “Houndify”, where product creators can develop their own voice interfaces with their customers. Hound is primarily used as a prototyping tool to demonstrate what Houndify can deliver. Products and services built on the Houndify platform are referred to as Houndified Products and Houndified Services. The SoundHound music app allows customers to identify and play songs by singing or humming into the smartphone’s microphone, or by identifying the sound playing in the background from external sources.

~~Organization~~On April 26, 2022 (the “Closing Date”), pursuant to a merger agreement dated as of November 15, 2021 by and ~~General~~

among Archimedes Tech SPAC Partners Co. (“ATSP”), ATSPC Merger Sub, Inc. and SoundHound, Inc. (“Legacy SoundHound”), the parties consummated the merger of ATSPC Merger Sub, Inc. with and into Legacy SoundHound, with Legacy SoundHound continuing as the surviving corporation (the ~~“Company”~~“Merger”) ~~is a blank check company formed under~~, as well as the ~~laws of~~other transactions contemplated by the ~~State of Delaware on September 15, 2020. The Company was formed for~~Merger Agreement (the Merger and such other transactions, 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 (the “Business Combination”). In connection with the closing (the “Closing”) of the Business Combination, Legacy SoundHound became a wholly owned subsidiary of ATSP and ATSP changed its name to SoundHound AI, Inc., and all of Legacy SoundHound common stock (“Legacy SoundHound Common Stock”) and Legacy SoundHound redeemable convertible preferred stock (“Legacy SoundHound Preferred Stock”) automatically converted into shares of the Company’s Class A common stock, par value of $0.0001 per share (the “Class A Common Stock”), and the Company’s Class B common stock, par value of $0.0001 per share (the “Class B Common Stock”, and collectively with the Class A Common Stock, the “common stock”). The Company’s ~~focus will be~~Class A Common Stock and warrants commenced trading on the ~~artificial intelligence, cloud services~~Nasdaq Global Market (“Nasdaq”) under the symbols “SOUN” and ~~automotive technology sectors. However,~~“SOUNW,” respectively, on April 28, 2022. Refer to Note 3 to these condensed consolidated financial statements for more information on the ~~Company is not limited to~~Business Combination.

Legacy SoundHound determined that it was the ~~technology industry, or these sectors therein, and~~accounting acquirer in the ~~Company may pursue a~~ Business Combination ~~opportunity in any business or industry it chooses, and it may pursue a company with operations or opportunities outside~~based on an analysis of the ~~United States.~~criteria outlined in Accounting Standards Codification 805,

Business Combinations

. The determination was primarily based on the following facts:

•Former Legacy SoundHound stockholders have a controlling voting interest in the Company;

•The ~~Company has selected December 31 as its fiscal year end.~~

AsCompany’s board of September 30, 2021, the Company had not commenced any revenue-generating operations. All activity for the period from September 15, 2020 (inception) through September 30, 2021 relates to the Company’s formation, the initial public offering (the “IPO”) described below, and, sincedirectors immediately after the closing of the ~~IPO,~~Business Combination was comprised of five board members, primarily from the ~~search~~board of directors of Legacy SoundHound; and

•Legacy SoundHound’s management continues to hold executive management roles for the Company following the Business Combination and are responsible for the day-to-day operations.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy SoundHound issuing stock for the net assets of ATSP, accompanied by a ~~prospective initial~~reverse recapitalization. The primary asset acquired from ATSP was related to the cash amounts that were assumed. Separately, the Company also assumed warrants that were deemed to be equity upon Closing of the Business Combination. ~~The Company will not generate any operating revenues until after~~No goodwill or other intangible assets were recorded as a result of the ~~completion of its initial~~Business Combination.

While ATSP was the legal acquirer in the Business Combination, atbecause Legacy SoundHound was deemed the ~~earliest. The Company will generate non-operating income~~accounting acquirer, the historical financial statements of Legacy SoundHound became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the ~~form~~historical operating results of ~~interest income on cash and cash equivalents from~~Legacy SoundHound prior to the ~~proceeds derived from~~Business Combination; (ii) the ~~IPO and will recognize changes in the fair value of warrant liability as other income or expense, as applicable.~~

On November 15, 2021, the Company entered into a definitive merger agreement with SoundHound Inc., a voice artificial intelligence company, pursuant to which the two companies agreed to consummate a Business Combination (the “Merger Agreement”). The total consideration to be paid by the Company to SoundHound is $2 billion in equitycombined results of the Company and Legacy SoundHound following the Closing of

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

the Business Combination; (iii) the assets and liabilities of Legacy SoundHound at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In accordance with ~~outstanding~~guidance applicable to these circumstances, the equity structure has been retroactively restated in all comparative periods up to the Closing Date, to reflect the number of shares of the Company’s Class A Common Stock and Class B Common Stock issued to Legacy SoundHound ~~stock options~~Common Stockholders and ~~warrants included on a net exercise basis. In~~Legacy SoundHound Preferred Stockholders in connection with the Business ~~Combination, certain accredited investors committed to purchase 11.1 million~~Combination. As such, the shares ~~of Class A common stock of the combined company at a price of $10.00~~and corresponding capital amounts and earnings per share ~~for total gross proceeds of $111 million, in a private placement that is scheduled~~related to ~~close concurrently with the Business Combination.~~

~~Additional information about the Merger Agreement~~Legacy SoundHound Preferred Stock and ~~related transactions can be found in the Current Report on Form 8-K filed on November 16, 2021.~~

~~The Company’s sponsor is Archimedes Tech SPAC Sponsors LLC, a Delaware limited liability company (the “Sponsor”).~~

~~References to the Company’s “initial stockholders” refer to the Company’s stockholders~~Legacy SoundHound Common Stock prior to the ~~IPO, excluding~~Business Combination have been retroactively restated as shares reflecting the ~~holders of the Representative Shares (See Note 8).~~

~~Financing~~

The registration statement for the Company’s IPO was declared effective on March 10, 2021 (the “Effective Date”). As discussed in Note 4, on March 15, 2021, the Company consummated the IPO of 12,000,000 units, (the “Public Units”), at $10.00 per Public Unit, generating gross proceeds of $120,000,000.

Each Public Unit consists of (i) one subunit (the “Public Subunit”), which consists of one share of common stock (the “Public Share”) and one-quarter of one redeemable warrant, and (ii) one-quarter of one redeemable warrant (collectively, the redeemable warrants includedconversion ratio established in the ~~Public Units and Public Subunits, the “Public Warrants”); each whole Public Warrant will be exercisable to purchase one share of common stock at a price of $11.50 per share.~~

Business Combination.

Simultaneously with the closing of the IPO, the Company consummated the sale of 390,000 private units (the “Private Units”) at a price of $10.00 per Private Unit in a private placement (the “Private Placement”) to the Sponsor and EarlyBirdCapital, Inc. (“EarlyBirdCapital”), generating gross proceeds of $3,900,000, which is discussed in Note 5. Each Private Unit consists of (i) one subunit (the “Private Subunits”), which consists of one share of common stock (the “Private Shares”) and one-quarter of one redeemable warrant, and (ii) one-quarter of one redeemable warrant (collectively, the redeemable warrants included in the Private Units and Private Subunits, the “Private Warrants”).

Going Concern

~~Transaction costs amounted to $4,849,810 consisting of $2,400,000 of underwriting discount and $2,449,810 of other offering costs.~~

The Company granted the underwriters in the IPO a 45-day option to purchase up to 1,800,000 additional Public Units to cover over-allotments, if any. On March 19, 2021, the underwriters partially exercised the over-allotment option to purchase 1,300,000 Public Units (the “Over-allotment Units”), generating an aggregate of gross proceeds of $13,000,000, and incurred transaction costs of $260,000 in underwriting discount. In connection with the underwriters’ exercise of their over-allotment option, the Company also consummated the sale of an additional 26,000 Private Units at $10.00 per Private Unit to the Sponsor and EarlyBirdCapital, generating gross proceeds of $260,000.

~~Trust Account~~

Following the closing of the IPO on March 15, 2021 and the underwriters’ partial exercise of over-allotment option on March 19, 2021, $133,000,000 from the net proceeds of the sale of the Public Units in the IPO and the sale of the Private Units was placed in a trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). The funds held in the Trust Account is and will be invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, so that the Company is not deemed to be an investment company under the Investment Company Act. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its income or other tax obligations, the proceeds will not be released from the Trust Account until the earlier of the completion of a Business Combination or the redemption of 100% of the outstanding Public Subunits ifSince inception, the Company has not completed a Business Combination in the required time period. The proceeds held in the Trust Account may be used as consideration to pay the sellers of a target business with which the Company completes a Business Combination. Any amounts not paid as consideration to the sellers of the target business may be used to finance operations of the target business.

~~Initial Business Combination~~

The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the value of the assets held in the Trust Account (excluding taxes payable on the interest earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a 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 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to complete a Business Combination successfully.

The shares of common stock subject to redemption are recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.

The Company will continue in existence only until 18 months from the closing of the IPO (the “Combination Period”). However, if the Company is unable to complete the initial Business Combination within the Combination Period, the Company 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-subunit price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest not previously released to the Company (net of taxes payable), divided by the number of then outstanding Public Subunits, which redemption will completely extinguish public stockholders’ rights as holders of Public Subunits (including the right to receive further liquidation distributions, if any), subject to applicable law. Public stockholders will also forfeit the one-quarter of one warrant included in the Public Subunits being redeemed. As promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and its board of directors, the Company will dissolve and liquidate, subject to its obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

A public stockholder will be entitled to receive funds from the Trust Account (including interest earned on his, her or its portion of the Trust Account to the extent not previously released to the Company) only in the event of (i) the redemption of 100% of the outstanding Public Subunits if the Company has not completed a Business Combination in the required time period, (ii) if that public stockholder converts such Public Subunits, or sells such Public Subunits to the Company in a tender offer, in connection with a Business Combination which the Company consummates or (iii) the Company seeks to amend any provisions of its amended and restated certificate of incorporation that would affect the public stockholders’ ability to convert or sell their Public Subunits to the Company in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem 100% of the Public Subunits if the Company does not complete a Business Combination within the Combination Period. This redemption right shall apply in the event of the approval of any such amendment to the Company’s amended and restated certificate of incorporation, whether proposed by the Sponsor, initial stockholders, executive officers, directors or any other person. In no other circumstances will a public stockholder have any right or interest of any kind to or in the Trust Account.

The 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 shares in connection with a stockholder vote to approve a proposed initial Business Combination and (3) not to sell any shares in any tender in connection with a proposed initial Business Combination.

The Sponsor has agreed that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.00 per Public Subunit by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company, but the Company cannot assure that it will be able to satisfy its indemnification obligations if it is required to do so. The Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of the Company. Therefore, the Company believes it is unlikely that the Sponsor will be able to satisfy its indemnification obligations if it is required to do so.

~~Liquidity and Going Concern~~

As of September 30, 2021, the Company had cash outside the Trust Account of $628,652 available for its working capital needs. All remaining cash and securities were held in the Trust Account and is generally unavailable for the Company’s use prior to an initial Business Combination and is restricted for use either in a Business Combination or to redeem Public Subunits. As of September 30, 2021, none of the amount on deposit in the Trust Account was available to be withdrawn as described above.

Prior to the completion of the IPO, the Company’s liquidity needs had been satisfied through receipt of $25,000 from the sale of Founder Shares (see Note 6), advances from the Sponsor in an aggregate amount of $125,000 under an unsecured promissory note, which were repaid upon the closing of the IPO (see Note 6). Subsequent to the consummation of the IPO and Private Placement, the Company’s liquidity needs have been satisfied through the net proceeds from the IPO and Private Placement held outside of the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, the Company’s Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, provide the Company Working Capital Loans, as defined below (see Note 6). To date, there were no amounts outstanding under any Working Capital Loans.

The Company anticipates that the $628,652 outside of the Trust account as of September 30, 2021 will not be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time. Furthermore, if the Company is not able to consummate a Business Combination by September 15, 2022, it will trigger the Company’s automatic winding up, liquidation and dissolution. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

~~Note 2 — Restatement of Prior Period Financial Statements~~

As a result of recent guidance to Special Purpose Acquisition Companies by the SEC regarding redeemable equity instruments, the Company revisited its application of ASC 480-10-S99 on the Company’s financial statements. The Company had previously classified a portion of its Public Subunits (and the underlying shares of common stock) in permanent equity. Subsequent to the re-evaluation, the Company’s management concluded that all of its Public Subunits should be classified as temporary equity. Additionally, the Company’s management re-evaluated the fair value of the Representative Shares and concluded that the fair value the Company had previously used for the Representative Shares were incorrect and needs to be restated. The identified errors impacted the Company’s Form 8-K filing on March 19, 2021 containing the IPO balance sheet as of March 15, 2021, Form 10-Q filing on July 27, 2021 containing financial statements as of March 31, 2021, Form 10-Q filing on August 27, 2021 containing financial statements as of June 30, 2021, and Form 10-Q filing on November 15, 2021 containing financial statements as of September 30, 2021. In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements;” the Company evaluated the errors and has determined that the related impacts were material to the aforementioned 8-K and 10-Q filings, and that correcting the cumulative impact of such errors would be significant to our financial statements for the three months and nine months ended September 30, 2021. Accordingly, the Company has corrected such material errors by restating its prior financial statements and classified all Public Subunits as temporary equitygenerated recurring losses as well as ~~restating the fair value~~negative operating cash flows and reported a net loss of the Representative Shares. The Company will also correct previously reported financial information for such material errors in future filings, as applicable. The following summarizes the effect of the revision on each financial statement line item.

~~Impact of the Restatement~~

~~The impact of the restatement on the audited balance sheet as of March 15, 2021~~$28.9 million and ~~unaudited interim condensed financial statements as of and for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021 are presented below.~~

As Previously
Reported Adjustments As Restated
Balance Sheet at March 15, 2021
Common stock subject to possible redemption $ 116,095,120 $ 3,904,880 $ 120,000,000
Common stock 465 (39 ) 426
Additional paid-in capital 5,004,068 (4,158,254 ) 845,814

Balance Sheet at March 31, 2021
Common stock subject to possible redemption $ 128,744,590 $ 4,255,935 $ 133,000,525
Common stock 459 (43 ) 416
Additional paid-in capital 5,084,297 (4,255,892 ) 828,405

Statement of Operations for the three months ended March 31, 2021
Basic and diluted weighted average shares outstanding, common stock subject to redemption 2,059,408 247,259 2,306,667
Basic and diluted weighted average shares outstanding, common stock 3,856,614 (514,481 ) 3,342,133
Basic and diluted net income (loss) per share, common stock subject to redemption $ 0.00 $ 3.41 $ 3.41
Basic and diluted net income (loss) per share, common stock not subject to redemption $ (0.02 ) $ (2.36 ) $ (2.38 )

Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2021
Issuance of representative shares - Additional Paid-in-Capital $ 3,458 $ 2,020,963 $ 2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit) 3,500 2,020,963 2,024,463
Offering costs charged to the Stockholders' equity (428,847 ) (2,020,963 ) (2,449,810 )
Reclassification of offering costs related to public shares $ - $ 4,779,936 $ 4,779,936
Subsequent measurement of common stock subject to redemption $ - $ (13,366,023 ) $ (13,366,023 )

Statement of Cash Flows for the three months ended March 31, 2021
Supplemental disclosure of cash flow information
Initial value of common stock subject to possible redemption $ 115,841,700 $ 8,572,213 $ 124,413,913
Change in value of common stock subject to possible redemption $ 12,902,890 $ (12,902,365 ) $ -
Reclassification of offering costs related to public shares $ - $ (4,779,936 ) $ (4,779,936 )
Subsequent measurement of common stock subject to redemption $ - $ 13,366,023 $ 13,366,023
Subsequent measurement of common stock subject to redemption (interest earned on trust account) $ - $ 525 $ 525

Statement of Operations for the six months ended June 30, 2021
Basic and diluted net income (loss) per share, common stock subject to redemption $ 0.46 $ 0.08 $ 0.54
Basic and diluted net income (loss) per share, common stock not subject to redemption $ (1.00 ) $ (0.17 ) $ (1.17 )

Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2021
Issuance of representative shares - Additional Paid-in-Capital $ 3,458 $ 2,020,963 $ 2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit) 3,500 2,020,963 2,024,463
Offering costs charged to the Stockholders' equity (428,847 ) (2,020,963 ) (2,449,810 )
Reclassification of offering costs related to public shares $ 2,886,166 $ 1,893,770 $ 4,779,936
Subsequent measurement of common stock subject to redemption $ (11,472,253 ) $ (1,893,770 ) $ (13,366,023 )

Statement of Cash Flows for the six months ended June 30, 2021
Reclassification of offering costs related to public shares $ (2,886,166 ) $ (1,893,770 ) $ (4,779,936 )
Subsequent measurement of common stock subject to redemption $ 11,472,253 $ 1,893,770 $ 13,366,023

Statement of Operations for the nine months ended September 30, 2021
Basic and diluted net income (loss) per share, common stock subject to redemption $ 0.31 $ 0.06 $ 0.37
Basic and diluted net income (loss) per share, common stock not subject to redemption $ (0.87 ) $ (0.14 ) $ (1.01 )

Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2021
Issuance of representative shares - Additional Paid-in-Capital $ 3,458 $ 2,020,963 $ 2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit) 3,500 2,020,963 2,024,463
Offering costs charged to the Stockholders' equity (428,847 ) (2,020,963 ) (2,449,810 )
Reclassification of offering costs related to public shares $ 2,886,166 $ 1,893,770 $ 4,779,936
Subsequent measurement of common stock subject to redemption $ (11,472,253 ) $ (1,893,770 ) $ (13,366,023 )

Statement of Cash Flows for the nine months ended September 30, 2021
Reclassification of offering costs related to public shares $ (2,886,166 ) $ (1,893,770 ) $ (4,779,936 )
Subsequent measurement of common stock subject to redemption $ 11,472,253 $ 1,893,770 $ 13,366,023

~~Note 3 — Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results$84.7 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, the Company had an accumulated deficit of $471.4 million. Management expects to continue to incur additional substantial losses in the foreseeable future primarily as a result of research and development activities. The Company has historically funded its operations primarily through equity or debt financings.

Total cash and cash equivalents on hand as of September 30, 2022 was $33.4 million. Although the Company has incurred recurring losses each year since its inception, the Company expects it will be able to fund its operations for at least the next twelve months. The Company may seek additional funding through debt or equity financing arrangements (e.g., Equity Line of Credit ("ELOC") (see Note 19)), implement incremental expense reduction measures or a combination thereof to continue financing its operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. The Company's condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include adjustments to reflect the possible future effects on the recoverability and classification of recorded assets or the amounts of liabilities that might be necessary should the Company be unable to continue as a going concern.

Other Risk and Uncertainties

The COVID-19 outbreak in the United States has caused business disruption through mandated and voluntary closings of businesses and shelter in place orders. In response, the U.S. Government enacted the CARES Act, which includes significant provisions to provide relief and assistance to affected organizations. There is considerable uncertainty around potential future closings, shelter in place orders, containment of the recent COVID-19 variants and the ultimate impact of the CARES Act and other government initiatives.

The COVID-19 pandemic and its resulting economic and other effects could result in significant adverse effects on our customers’ cash flow and their ability to manufacture, distribute, and sell products incorporating our voice-enabling technologies. This in turn may restrict the ability of our customers to pay invoices for royalties, licensing fees and usage fees, or may result in a reduction in the royalties, licensing fees and usage fees that the Company earns which are often based on the number of units sold or distributed by customers. This reduction could cause adverse effects on the business, results of operations, financial condition, cash flows and ability to raise operating capital. In addition, economic effects resulting from the COVID-19 pandemic may adversely change consumer behavior and demand, including products sold by customers, which may result in a significant reduction in our revenue and adversely impact results of operations and financial condition. The COVID-19 pandemic has adversely affected our business and results of operations to date, and the duration and extent to which this will impact our future results remains uncertain.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Further, inflation has risen significantly worldwide and the United States has recently experienced historically high levels of inflation. This inflation and government efforts to combat inflation, such as recent and future significant increases to benchmark interest rates and other related monetary policies, have and could continue to increase market volatility and have an adverse effect on the domestic and international financial markets and general economic conditions.

Additionally, U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business. The recent military conflict in Ukraine has led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Although our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine to date, it is impossible to predict the extent to which our operations, or those of our customers’ suppliers and manufacturers, will be impacted in the short and long-term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict but could be substantial.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Significant Accounting Policies

The (a) condensed consolidated balance sheet as of December 31, 2021, which has been derived from audited financial statements as filed in the Company’s Form 8-K, which was originally filed with the SEC on May 2, 2022 and amended by Amendment No. 1 to Current Report on Form 8-K, and (b) the unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding annual financial reporting. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”), and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). The condensed consolidated financial statements have been prepared on a basis consistent with the audited consolidated financial statements and in the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results ~~that may be expected through~~for the fiscal year ending December 31, ~~2021.~~

2022 or any future interim period.

~~The accompanying unaudited condensed~~Certain information and note disclosures normally included in annual financial statements ~~should~~prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the company believes that the disclosures made are adequate to make the information not misleading.

Principles of Consolidation

The Company’s condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

We consolidate any variable interest entity (“VIE”) where we have determined we are the primary beneficiary. The primary beneficiary is the entity which has both: (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the entity that could potentially be ~~read~~significant to the VIE.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Reclassification

Certain prior period balances have been reclassified to conform to the current year presentation. Such changes include reclassifications or combinations of certain accounts on the condensed consolidated balance sheets.

These reclassifications had no impact on total assets, total liabilities, net loss or comprehensive loss or accumulated deficit in ~~conjunction~~the previously reported consolidated financial statements for the year ended December 31, 2021.

Foreign Currency

The functional currency of the Company and its subsidiaries is the U.S. dollar. Foreign currency denominated transactions are converted into U.S. dollars at the average rates of exchange prevailing during the period. Assets and liabilities denominated in foreign currency are remeasured into U.S. dollars at current exchange rates at the balance sheet date for monetary assets and liabilities and at historical exchange rates for non-monetary assets and liabilities. During the three and nine months ended September 30, 2022, the Company recognized net losses related to foreign currency transactions and remeasurements of $0.1 million and $0.4 million, respectively, in the condensed consolidated statements of operations and comprehensive loss as other income (expense), net. During the three and nine months ended September 30, 2021, the Company recognized net losses related to foreign currency transactions and remeasurements of $0.3 million and $0.5 million, respectively, in the condensed consolidated statements of operations and comprehensive loss as other income (expense), net.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the ~~audited~~amounts reported and disclosures in the condensed consolidated financial statements and ~~notes thereto included~~accompanying notes. Such estimates include revenue recognition, allowance for doubtful accounts, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense. The Company bases its estimates on historical experience, the current economic environment and on assumptions it believes are reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from changes in the ~~Form 8-K~~economic environment will be reflected in the financial statements in future periods. Actual results could differ materially from those estimates.

Segment Information

The Company has determined that the Chief Executive Officer is its chief operating decision maker. The Company’s Chief Executive Officer reviews financial information on a consolidated basis for purposes of allocating resources and ~~the final prospectus filed by~~evaluating financial performance. Accordingly, the Company ~~with the SEC on March 19, 2021 and March 12, 2021, respectively.~~

has determined that it operates as a single reportable segment.

Emerging Growth Company Status

The Company is an ~~“emerging~~emerging growth company” (“EGC”) as defined in ~~Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by~~ the Jumpstart ~~our~~Our Business Startups Act of 2012 ~~(the “JOBS~~(“JOBS Act”), and it may take advantage of ~~certain exemptions from various~~reduced reporting requirements that are otherwise applicable to ~~other~~ public ~~companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of~~companies. Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

~~Further, Section 102(b)(1)~~107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies ~~(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act)~~ are required to comply with ~~the new or revised financial accounting~~those standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period whichThis means that when a standard is issued or revised and it has different application dates for public ~~or private~~and nonpublic companies, the Company ~~as an emerging growth company, can~~has the option to adopt the new or revised standard at the time ~~private~~nonpublic companies adopt the new or revised ~~standard. This may make comparison~~standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of ~~the Company’s financial statements with another public company which is neither~~such extended transition period or (ii) no longer qualifies as an emerging growth ~~company nor an emerging growth company which~~company. The Company has ~~opted out of using~~elected to use the extended transition period ~~difficult~~for complying with new or ~~impossible because of the potential differences in~~revised accounting standards ~~used.~~

~~Use of Estimates~~

The preparation of unaudited condensed financial statement in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statement. Actual results could differ from those estimates.

~~Cash and Cash Equivalents~~

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has $628,652 of cash held outside of the Trust Account as of September 30, 2021 and no cash held outside of the Trust Account as of December 31, 2020. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.

~~Marketable Securities Held in Trust Account~~

~~At September 30, 2021,~~unless the Company ~~had $133,007,230 in the Trust Account which may be utilized for Business Combination. As~~otherwise early adopts select standards.

Table of ~~September 30, 2021, the assets held in the Trust Account were invested in Treasury Securities consisting of money market funds.~~Contents

~~Fair Value Measurements~~

SOUNDHOUND AI, INC.

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

●

~~Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;~~

●

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

●

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

The fair value of the Company’s certain assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet. The fair values of cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses, and due to related party are estimated to approximate the carrying values as of September 30, 2021 due to the short maturities of such instruments.

The Company’s warrant liability and the fair value of its Representative Shares are based on valuation models utilizing management judgment and pricing inputs from observable and unobservable markets with less volume and transaction frequency than active markets. Significant deviations from these estimates and inputs could result in a material change in fair value. The fair value of the warrant liability and the fair value of its Representative Shares are classified as Level 3. See Note 7 for additional information on assets, liabilities and Representative Shares measured at fair value.

~~Concentration~~Concentrations of Credit Risk

and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of a cash ~~account~~and cash equivalents. The Company regularly monitors its credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in ~~a financial institution, which, at times, may exceed~~actual loss.

As of September 30, 2022, accounts receivable balances due from two customers collectively totaled 65% of the ~~Federal Depository Insurance Coverage~~Company’s condensed consolidated accounts receivable balance. As of ~~$250,000. At~~December 31, 2021, accounts receivable balances due from five customers collectively totaled 86% of the Company’s condensed consolidated accounts receivable balance.

For the nine months ended September 30, 2022, the Company had four customers that accounted for 77% of revenue, and for the nine months ended September 30, 2021, ~~and December 31, 2020,~~ the Company ~~has not experienced losses on this account and management believes~~had two customers that accounted for 57% of revenue.

For the three months ended September 30, 2022, the Company ~~is not exposed to significant risks on such account.~~

~~Common Stock Subject to Possible Redemption~~

~~The Company accounts~~had one customer that accounted for its common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument63% of revenue, and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.

~~Net Income (Loss) Per Common Share~~

The Company complies with accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. The statements of operations include a presentation of income (loss) per redeemable Public Share and income (loss) per founder non-redeemable share following the two-class method of income (loss) per share. In order to determine the net income (loss) attributable to both the public redeemable shares and founder non-redeemable shares, the Company first considered the total income (loss) allocable to both sets of shares. This is calculated using the total net income (loss) less any dividends paid. For purposes of calculating net income (loss) per share, any remeasurement of the accretion to redemption value of the common stock subject to possible redemption was considered to be dividends paid to the public stockholders. Subsequent to calculating the total income (loss) allocable to both sets of shares, the Company split the amount to be allocated using a ratio of 76% for the Public Shares and 24% for the founder non-redeemable shares for the three months ended September 30, 2021, the Company had three customers that accounted for 50% of revenue.

Equity Issuance Costs

The Company capitalizes certain legal, professional, accounting and ~~a ratio of 71% for the Public Shares and 29% for the founder non-redeemable shares for the nine months ended September 30, 2021, reflective~~other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the ~~respective participation rights.~~

financing, these costs are recorded as a reduction of the proceeds received from the equity financing. On April 26, 2022, upon closing of the Business Combination, the Company offset equity proceeds by $4.1 million of deferred offering costs.

Revenue Recognition

The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

(i)Identification of the contract(s) with a customer;

(ii)

~~The earnings per share presented~~Identification of the performance obligations in the ~~condensed statements~~contract;

(iii)Determination of ~~operations~~the transaction price, including the constraint on variable consideration;

(iv)Allocation of the transaction price to the performance obligations in the contract; and

(v)Recognition of revenue when, or as, performance obligations are satisfied.

Contracts are accounted for when both parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is ~~based~~probable. Any payments received from customers that do not meet criteria for having a contract are recorded as deposit liabilities on the ~~following:~~

condensed consolidated balance sheet.

For the three months ended For the nine months ended
September 30, 2021 September 30, 2021
Net loss $ (191,075 ) $ (345,648 )
Accretion of temporary equity to redemption value (3,352 ) (13,373,253 )
Net loss including accretion of temporary equity to redemption value $ (194,427 ) $ (13,718,901 )

For the three months ended For the nine months ended
September 30, 2021 September 30, 2021
Redeemable Non-redeemable Redeemable Non-redeemable
Basic and diluted net loss per share:
Numerator:
Allocation of net loss including accretion of temporary equity $ (148,095 ) $ (46,332 ) $ (9,784,253 ) $ (3,934,648 )
Accretion of temporary equity to redemption value 3,352 - 13,373,253 -
Allocation of net income (loss) $ (144,743 ) $ (46,332 ) $ 3,589,000 $ (3,934,648 )

Denominator:
Weighted-average shares outstanding 13,300,000 4,161,000 9,675,824 3,891,044
Basic and diluted net income (loss) per share $ (0.01 ) $ (0.01 ) $ 0.37 $ (1.01 )

In connection with the underwriters’ partial exercise of their over-allotment option on March 19, 2021, 325,000 Founder Shares were no longer subject to forfeiture. These shares were excluded from the calculation of weighted average shares outstanding until they were no longer subject to forfeiture.

~~As of September 30, 2021,~~Under ASC 606, assuming all other revenue recognition criteria have been met, the Company ~~did not have any dilutive securities~~recognizes revenue for arrangements upon the transfer of control of the Company’s performance obligations to its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

of account in ASC 606. The Company currently generates its revenues through the following performance obligations: (1) hosted services, (2) professional services, (3) monetization and (4) licensing.

Research and Development

The Company’s research and development costs are expensed as incurred. These costs include salaries and other ~~contracts that could, potentially, be exercised or converted into common stock~~personnel related expenses, contractor fees, facility costs, supplies and ~~then share in the Company’s earnings. As a result, diluted income (loss) per share is the same as basic income (loss) per share for the periods presented.~~

~~Offering Costs~~depreciation of equipment associated with the ~~Initial Public Offering~~

design and development of new products prior to the establishment of their technological feasibility.

Warrants

The Company ~~complies with the requirements~~determines whether to classify contracts, such as warrants, that may be settled in its own stock as equity of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are relatedentity or as a liability. An equity-linked financial instrument must be considered indexed to the ~~IPO and were charged~~Company’s own stock to ~~stockholders’~~qualify for equity upon the completion of the IPO. Accordingly, as of March 15, 2021, offering costs in the aggregate of $4,849,810 have been charged to stockholders’ equity (consisting of $2,400,000 of underwriting discount and $2,449,810 of other offering costs).

~~Derivative Financial Instruments~~

classification. The Company ~~evaluates its financial instruments to determine if such instruments~~classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are ~~derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are recorded~~accounted for at fair value ~~on the grant date~~ and ~~re-valued~~remeasured at each reporting date ~~with changes~~until exercise, expiration or modification that results in equity classification. Any change in the fair value ~~reported~~of the warrants is recognized as other income (expense), net in the condensed consolidated statements of ~~operations. Derivative assets~~operations and liabilities are classified on the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. comprehensive loss.

Income Taxes

The Company ~~has determined the warrants are a derivative instrument.~~

~~Income Taxes~~

~~The Company follows~~accounts for income taxes under the asset and liability method, ~~of accounting for income taxes under ASC 740, “Income Taxes.” Deferred~~whereby deferred tax assets and liabilities are ~~recognized for~~determined based on the ~~estimated future tax consequences attributable to differences~~difference between the financial ~~statements carrying amounts~~statement and tax basis of ~~existing~~ assets and liabilities ~~and their respective tax bases. Deferred tax assets and liabilities are measured~~ using enacted tax rates ~~expected to apply to taxable income~~ in effect for the ~~years~~year in which ~~those temporary~~the differences are expected to ~~be recovered or settled. The effect on~~affect taxable income. A valuation allowance is established when, in management’s estimate, it is more-likely-than-not that the deferred tax ~~assets and liabilities of~~asset will not be realized. The Company adopted a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

~~ASC 740 prescribes a recognition~~more-likely-than-not threshold ~~and a measurement attribute~~ for ~~the~~ financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. ~~For those benefits~~The Company records a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be ~~recognized, a~~taken on the Company’s tax ~~position must be more likely than not to be sustained upon examination by taxing authorities.~~ return.

The Company ~~recognizes accrued~~classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. There has been no interest expense or penalties related to unrecognized tax benefits recorded through September 30, 2022.

Stock-Based Compensation

The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, and uses the straight-line method to recognize stock-based compensation. The Company accounts for forfeitures as they occur. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of stock options, including the option’s expected term and the price volatility of the underlying stock. The Company calculates the fair value of options granted by using the Black-Scholes option-pricing model with the following assumptions:

Expected Volatility — The Company estimates volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the option’s expected term.

Expected Term — The expected term of the Company’s options represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint between the stock options’ vesting term and contractual expiration period to compute the expected term, as the Company does

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the options’ expected term at the grant date.

Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero.

Restricted Stock Units

The Company issues restricted stock unit awards (“RSUs”) to grantees as compensation for services. The fair value of the RSUs is determined at the grant date based on the fair value of the Company’s Class A Common Stock and for RSUs with service conditions only, is recognized straight-line over the service period.

The Company issues RSUs with vesting conditions tied to certain performance criteria (“Performance-Based RSUs”). Stock-based compensation related to Performance-Based RSUs is recognized to the extent it is determined that performance is probable of being achieved.

The Company issues RSUs with vesting conditions tied to certain market conditions (“Market-Based RSUs”). To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value. Stock-based compensation related to Market-Based RSUs is recognized over the derived service period.

Fair Value Measurements

The Company defines fair value as the exchange price that would be received from an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Company follows a three-level valuation hierarchy for disclosure of fair value measurements as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

•Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The Company’s derivative liabilities and warrants are measured at fair value on a recurring basis and are classified as Level 3 liabilities. The Company records subsequent adjustments to reflect the increase or decrease in estimated fair value at each reporting date on the condensed consolidated statements of operations and comprehensive loss.

Redeemable Convertible Preferred Stock

Legacy SoundHound Preferred Stock did not have a mandatory redemption date. The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. Legacy SoundHound Preferred Stock was redeemable upon a deemed liquidation event which the Company determined was not solely within its control and thus has classified shares of Legacy SoundHound Preferred Stock as temporary equity until such time as the

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

conditions are removed or lapse. Since the occurrence of a deemed liquidation event was not probable, the carrying values of the shares of Legacy SoundHound Preferred Stock were not being accreted to their redemption values.

As a result of the Business Combination, the shares of Legacy SoundHound Preferred Stock outstanding immediately prior to the effective time of the Business Combination (the “Effective Time”) were converted into 106,949,326 shares of the Company’s Class A Common Stock. Refer to Note 11 for further information.

Convertible Notes and Derivative Liabilities

The Company evaluates its convertible notes, and other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives requiring bifurcation. The Company accounts for conversion features that meet the criteria for bifurcation as liabilities at fair value and adjusts the derivative instruments to fair value at each reporting period. The conversion features qualify as derivatives, as they continuously reset as the underlying stock price increases or decreases to provide a fixed value of equity to the holders at any conversion date. The conversion features are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized as a component of other income ~~tax expense. There were no unrecognized tax benefits~~(expense), net in the condensed consolidated statements of operations and ~~no amounts accrued~~comprehensive loss. The fair value of the conversion features has been estimated using a probability-weighted discount model with and without the conversion feature until extinguished on April 26, 2022 in connection with the Business Combination See Note 10 for additional information.

The Company held its convertible notes at amortized cost and amortized the associated debt discount created from bifurcated derivatives and issuance costs under the effective interest or straight-line method until maturity or early conversion pursuant to the contractual terms of the arrangement.

Net Loss Per Share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and ~~penalties~~potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, Preferred Stock, stock options, RSUs, warrants and convertible notes are considered to be potentially dilutive securities. See Note 16 for further information.

Accordingly, in periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common stock is not assumed to have been issued if their effect is anti-dilutive.

Recent Accounting Pronouncement — Adopted

From time to time, new accounting pronouncements, or Accounting Standards Updates, are issued by the FASB or other standard setting bodies and adopted by the Company as of September 30, 2021, respectively. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

~~The Company’s deferred tax assets were deemed to be de minimis as of September 30, 2021.~~

~~Risks and Uncertainties~~

~~Management continues to evaluate~~the specified effective date. Unless otherwise discussed, the impact of ~~the COVID-19 pandemic and has concluded~~recently issued standards that ~~while it is reasonably possible that the virus could~~are not yet effective will not have a ~~negative effect~~material impact on the Company’s financial position or results of ~~its~~ operations ~~cash flows and/or search~~upon adoption. During the nine months ended September 30, 2022, no additional accounting pronouncements were adopted. Refer to Note 2 of our audited consolidated financial statements for the fiscal year ended December 31, 2021 contained within the Company’s Form S-1/A filed July 13, 2022 for a ~~target company,~~complete list of adopted accounting pronouncements. We have described the ~~specific impact is~~key accounted pronouncements below:

In February 2016, FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). Topic 842 aims to increase transparency and comparability among organizations by

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

requiring lessees to recognize leases with a term greater than 12 months as a right-of-use (“ROU”) asset and corresponding lease liabilities on the balance sheet, regardless of lease classification, and requiring disclosure of key information about leasing arrangements. The lease liability should be initially measured at the present value of the remaining contractual lease payments. Subsequently, the ROU assets will be amortized generally on a straight-line basis over the lease term, and the lease liability will bear interest expense and be reduced for lease payments. The Company adopted Topic 842 on January 1, 2021 using the modified retrospective approach, and financial information for the comparative period was not ~~readily determinable~~updated.

In addition, the Company elected the transition package of three practical expedients which allow companies not to reassess (i) whether agreements contain leases, (ii) the classification of leases, and (iii) the capitalization of initial direct costs. Further, the Company elected to separate lease and non-lease components for the building asset class and elected to not separate lease and non-lease components for the equipment asset class. The Company also made an accounting policy election to recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and recognize no ROU or lease liability for those leases.

The Company’s lease portfolio consists primarily of real estate assets and computer equipment. Some of these leases also require the Company to pay maintenance, utilities, taxes, insurance, and other operating expenses associated with the leased space. Based upon the nature of the items leased and the structure of the leases, the Company’s leases classified as operating leases continue to be classified as operating leases and capital leases will be accounted for as financing leases under the new accounting standard.

As a result of the adoption of the new lease accounting guidance, the Company recognized on January 1, 2021:

•Operating lease liabilities of approximately $11.4 million, which represent the present value of the remaining lease payments, as of the date of adoption, discounted using the ~~condensed financial statements.~~ Company’s incremental borrowing rate on a lease-by-lease basis, and

•Operating lease ROU assets of approximately $9.8 million which represent the operating lease liabilities of $11.4 million, adjusted for (1) deferred rent of approximately $0.8 million, (2) lease incentives or tenant improvement allowance of $1.1 million and (3) prepaid rent of $0.3 million.

The ~~condensed financial statements~~adoption of the new lease accounting standard did not have any other material impact on the Company’s consolidated balance sheet and did not impact the Company’s operating results and cash flows.

When the Company’s leases do not ~~include any adjustments that might result from~~provide an implicit rate, an incremental borrowing rate is used based on the ~~outcome~~information available at the adoption date and commencement date for leases entered into after the adoption date in determining the present value of ~~this uncertainty.~~

lease payments. The Company applies a benchmark rate and adjusts it for Company specific risk, collateral, term of the lease and economic factors for the economy in which the lease was maintained. See Leases in Note 14 for further information.

~~Recently Adopted Accounting Standards~~

In ~~August 2020,~~December 2019, the FASB issued ASU ~~2020-06,~~ ~~Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity~~~~(Subtopic 815-40):~~No. 2019-12, Simplifying the Accounting for ~~Convertible Instruments and Contracts~~Income Taxes (“Topic 740”) (“ASU 2019-12”). ASU 2019-12 eliminates the need for an organization to analyze whether the following apply in ~~an Entity’s Own Equity~~ ~~(“ASU 2020-06”), which simplifies~~a given period (1) exception to the incremental approach for intra-period tax allocation (2) exceptions to accounting for ~~convertible instruments by removing major separation models required under current GAAP. The~~basis differences when there are ownership changes in foreign investments and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also ~~removes certain settlement conditions~~is designed to improve financial statement preparers’ application of income tax-related guidance and simplify U.S. GAAP for (1) franchise taxes that are ~~required for equity-linked contracts~~partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to ~~qualify for scope exception,~~tax, and ~~it simplifies the diluted earnings per share calculation~~(4) enacted changes in ~~certain areas.~~tax laws in interim periods. The Company adopted ~~ASU 2020-06~~the standard on January 1, ~~2021. Adoption~~2022. ASU 2019-12 did not result in any material impact on the Company’s condensed consolidated financial statements.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Recent Accounting Pronouncement — Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08 Business Combinations (“ASC 805”) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers guidance requiring entities to apply ASC 606 to recognize and measure contract assets and contract liabilities in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers and other similar contracts that are accounted for in accordance with ASC 606, at fair value on the acquisition date. Under the new guidance the acquirer will recognize contract assets and contract liabilities at the same amounts recorded by the acquiree. The modifications improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of, and after a business combination. The amendment is effective for the Company in fiscal years beginning after December 15, 2023. Early adoption of the amendment is permitted. The Company anticipates that it will not have a material impact on its condensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU ~~did~~2016-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (“Topic 326”), Targeted Transition Relief, which amends the transition guidance for ASU 2016-13. The ASU provides entities with the option to irrevocably elect the fair value option in Subtopic 825-10 on an instrument-by-instrument basis. ASU 2019-10 and ASU 2016-13 are effective for years beginning after December 15, 2022, with early adoption permitted. The Company anticipates that it will not have a material impact on its condensed consolidated financial statements and related disclosures.

3. BUSINESS COMBINATION

As discussed in Note 1, on April 26, 2022, the Business Combination was consummated. Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 500,000,000 shares of capital stock consisting of 455,000,000 shares of Class A Common Stock, 44,000,000 shares of Class B Common Stock, and 1,000,000 shares of preferred stock. All stock has a par value of $0.0001 per share. The holders of Class A Common Stock are entitled to one vote for each share of Class A Common Stock held. The holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval. No shares of preferred stock were issued and outstanding as of September 30, 2022.

The Business Combination was approved by ATSP’s stockholders at a special meeting thereof (the “Special Meeting”), held in lieu of the 2022 annual meeting of the Company’s stockholders. The Business Combination fulfilled the definition of an “initial business combination” as required by the ATSP’s Amended and Restated Certificate of Incorporation. This fulfillment resulted in ATSP ceasing to be a shell company upon the Closing.

An aggregate of 12,767,950 shares of Class A Common Stock sold in ATSP’s initial public offering (the “public shares”) exercised their rights to redemption. The redemption right provided holders the right to have their shares redeemed for a pro rata portion of the trust account holding the proceeds from ATSP’s initial public offering. The value of the shares is calculated as of two (2) business days prior to the date of the Special Meeting, which was $10.00 per share, or $127.7 million in the aggregate.

As a result of the Business Combination, among other things (1) all outstanding shares of Legacy SoundHound Common Stock as of immediately prior to the Closing (including Legacy SoundHound Common Stock resulting from the Legacy SoundHound Preferred Stock Conversion), were exchanged at an conversion ratio of 5.5562 (the “Conversion Ratio”) for an aggregate of 140,114,060 shares of Class A Common Stock and 40,396,600 Class B Common Stock; (2) each outstanding warrant to purchase shares of Legacy SoundHound Common Stock

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

automatically converted into a warrant to purchase, subject to substantially the same terms and conditions as were applicable under these warrants prior to the Effective Time, shares of Class A Common Stock, proportionately adjusted for the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Conversion Ratio and were net exercised upon the Closing; (3) each outstanding option to purchase shares of Legacy SoundHound Common Stock converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under these options prior to the Effective Time, shares of Class A Common Stock equal to the number of shares subject to such option prior to the Effective Time multiplied by the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Conversion Ratio; (4) each Legacy SoundHound RSU converted into a restricted stock unit of SoundHound, subject to substantially the same terms and conditions as were applicable under the SoundHound RSU prior to the Closing. SoundHound RSU holders received the same consideration holders would have received if the SoundHound RSU was converted into Legacy SoundHound Common Stock immediately prior to the Effective Time.

In connection with the Merger Agreement, ATSP entered into subscription agreements (collectively, the “Subscription Agreements”) with certain accredited investors (the “Subscribers”). Pursuant to the Subscription Agreements, the Subscribers agreed to purchase, and ATSP agreed to sell to the Subscribers, an aggregate of 11,300,000 shares of Class A Common Stock (“PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $113.0 million (the “PIPE Investment”). The PIPE shares are identical to the shares of Class A Common Stock that were held by the ATSP’s public stockholders at the time of the Closing, except that the PIPE Shares were not entitled to any redemption rights. The sale of PIPE Shares was consummated concurrently with the Closing.

The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, ATSP was treated as the “acquired” company for financial reporting purposes (See Note 1). The net assets of Legacy SoundHound were stated at historical cost, with no goodwill or other intangible assets recorded.

In accounting for the Business Combination and after redemptions, net proceeds received by the Company totaled $90.7 million. The table below shows the total net proceeds from the Business Combination and the PIPE Investment (in thousands):


Cash - ATSP trust and cash (net of redemption)	$	5,357
Cash - PIPE Investment	113,000
Less: transaction costs	(27,668)
Net proceeds from Business Combination and PIPE Investment	$	90,689

Relating to the consummation of the Business Combination, the Company incurred $27.7 million in total transaction costs consisting of direct legal, accounting and other fees. $4.1 million of Legacy SoundHound transaction costs specific and directly attributable to the Business Combination were initially capitalized as deferred offering costs on the condensed consolidated balance sheets. Total transaction expenses were recorded as an offset against proceeds received on the closing of the Business Combination, accounted for as additional paid-in capital.

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

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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


Class A Common Stock - conversion of Legacy SoundHound Common Stock and Legacy SoundHound Preferred Stock outstanding prior to Business Combination			140,114,060
Class B Common Stock - conversion of Legacy SoundHound Common Stock and Legacy SoundHound Preferred Stock outstanding prior to Business Combination			40,396,600
Class A Common Stock - PIPE Investment			11,300,000
Class A Common Stock - issuance to ATSP shareholders			532,050
Class A Common Stock - issuance to Legacy SoundHound founders and representatives			4,161,000
Total shares of common stock immediately after Business Combination			196,503,710

4. REVENUE RECOGNITION

Revenue Recognition

The Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues are generally recognized upon the transfer of control of promised products or services provided to customers, reflecting the amount of consideration the Company expects to receive for those products or services. The Company enters into contracts that can include various products or services, which are generally capable of being distinct and accounted for as separate performance obligations.

The Company derives its revenue primarily from the following performance obligations: (1) hosted services, (2) professional services, (3) monetization, and (4) licensing. Revenue is reported net of applicable sales and use taxes that are passed through to customers.

The Company’s arrangements with customers may contain multiple obligations. Individual services are accounted for separately if they are distinct — that is, if a service is separately identifiable from other items in the contract and a customer can benefit from it in its own or with other resources that are readily available to the customer.

The Company has the following performance obligations in contracts with customers:

Hosted Services

Hosted services, along with non-distinct customization, integration, maintenance and support professional services, allow customers to access the Houndify platform over the contract period without taking possession of the software. The contract terms of hosted services range from one year to twenty years.

The Company has determined that the hosted services arrangements are a single performance obligation comprised of a series of distinct services, since each day of providing access to hosted services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided. These services are provided either on a usage basis (i.e., variable consideration) or on a fixed fee subscription basis. The Company recognizes revenue as each distinct service period is performed (i.e., recognized as incurred).

Hosted services generally include up-front services to develop and/or customize the Houndify application to each customer’s specification. Judgement is required to determine whether these professional services are distinct from the hosted services. In making this determination, factors such as the degree of integration, the customers’ ability to start using the software prior to customization, and the availability of these services from other independent vendors are considered.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

Professional Services

Revenue from distinct professional services, such as non-integrated development services, is either recognized over time based upon the progress towards completion of the project, or at a point in time at project completion. The Company assesses distinct professional services to determine whether the transfer of control is over-time or at a point in time. The Company considers three criteria in making their assessment, including (1) the customer simultaneously receives and consumes the benefits; (2) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (3) the Company’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date. If none of the criteria are met, revenue is determined to be recognized at a point in time.

For distinct professional services determined to be recognized over-time, measuring the stage of completion of a project requires significant judgement and estimates, including actual efforts spent in relation to estimated total costs and percentage of completion based on input and output measures. During the three months ended September 30, 2022, $0.4 million of professional service revenue was recognized over time, with the remaining $0.3 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. During the nine months ended September 30, 2022, $1.2 million of professional service revenue was recognized over time, with the remaining $1.4 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer.

Monetization

Monetization revenues are primarily derived from advertising payments associated with ad impressions placed on the SoundHound music identification application. The Company derives an immaterial amount of revenue from sales commissions earned from song purchases facilitated by the SoundHound app and App store fees paid for ads-free downloads of the SoundHound music identification app. The amount of revenue is based on actual monetization generated or usage, which represent a variable consideration with constrained estimates. Therefore, the Company recognizes the related revenues at a point in time when advertisements are placed, when commissions are paid or when the SoundHound application is downloaded. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company is acting as a principal or an agent in the transaction. The Company has determined that it does not act as the principal in monetization arrangements because it does not control the transfer of the service and it does not set the price. Based on these factors, the Company reports revenue on a net basis.

Licensing

The Company licenses voice solutions that are embedded in customer products. Licensing revenue is a distinct performance obligation that is recognized when control is transferred to the customer, which is at a point in time for non-customized solutions. Revenues generated from licensing is based on royalty models with a combination of minimum guarantees and per unit pricing. Royalty periods are generally subsequent to when control of the license passes to the customer. The Company records licensing revenue as a usage-based royalty from customers’ usage of intellectual property in the same period in which the underlying sale occurs. The Company provides assurance-type warranty services and to date, post-contract support has been an immaterial performance obligation within the context of the contract.

When a contract has multiple performance obligations, the transaction price is allocated to each performance obligation based on its relative estimated standalone selling price (“SSP”). Judgments are required to determine the SSP for each distinct performance obligation. SSP is determined by maximizing observable inputs from pricing of standalone sales, when possible. Since prices vary from customer to customer based on customer relationship,

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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

•Costs of developing and supplying each performance obligation;

•Industry standards;

•Major product groupings; and

•Gross margin objectives and pricing practices, such as contractually stated prices, discounts offered, and applicable price lists.

These factors may vary over time, depending upon the unique facts and circumstances related to each deliverable. If the facts and circumstances underlying the factors considered change or should future facts and circumstances lead the Company to consider additional factors, the Company’s best estimate of SSP may also change.

For the three and nine months ended September 30, 2022 and 2021, revenues under each performance obligation were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Hosted services	$	4,878	$	3,170	$	12,672	$	9,680
Professional services	694		591		2,644		5,329
Monetization	225		267		652		1,037
Licensing	5,389		—		5,660		—
Total	$	11,186	$	4,028	$	21,628	$	16,046

For the three and nine months ended September 30, 2022 and 2021, the disaggregated revenue by geographic location was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	2,654	$	1,283	$	5,901	$	3,586
Japan	925		921		2,775		2,875
Germany	1,070		817		2,897		7,034
France	650		506		2,947		899
Korea	5,751		320		6,403		1,180
Other	136		181		705		472
Total	$	11,186	$	4,028	$	21,628	$	16,046

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three and nine months ended September 30, 2022 and 2021, the disaggregated revenue by recognition pattern was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Over time revenue	$	5,251	$	3,611	$	13,852	$	10,513
Point-in-time	5,935		417		7,776		5,533
Total	$	11,186	$	4,028	$	21,628	$	16,046

The Company also disaggregates revenue by service type. This disaggregation consists of Product Royalties, Service Subscriptions and Monetization. Product Royalties revenue is derived from Houndified Products, which are voice-enabled tangible products across the automotive and consumer electronics industries. Revenue from Product Royalties is based on volume, usage, or life of the products, which are driven by number of devices, users, or unit of time. Service Subscription revenue is generated through Houndified Services, which include customer services, food ordering, content, appointments, and voice commerce. Subscription revenue is derived from monthly fees based on usage-based revenue, revenue per query or revenue per user. Both Houndified Products and Houndified Services may include professional services that develop and customize the Houndify platform to fit customers’ specific needs. Revenue from Monetization is generated from the SoundHound music identification app and is primarily attributable to user ad impression revenue. For the three and nine months ended September 30, 2022 and 2021, the disaggregated revenue by service type was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Product royalties	$	10,265	$	3,380	$	19,534	$	13,833
Service subscriptions	696		381		1,442		1,176
Monetization	225		267		652		1,037
Total	$	11,186	$	4,028	$	21,628	$	16,046

Contract Balances

The Company performs its obligations under a contract with a customer by licensing access to software or providing services in exchange for consideration from the customer. The timing of the Company’s performance often differs from the timing of the customer’s payment, which results in the recognition of a receivable, a contract asset, or a contract liability. During the three and nine months ended September 30, 2022, we recognized $5.3 million of licensing revenue from our Houndify Edge solution, which we delivered to a customer during the three months ended September 30, 2022, related to minimum guarantee units to be utilized over the life of the contract and resulted in a corresponding increase in our Contract assets balance. The Company has not recorded any asset impairment charges related to contract assets during the periods presented in the condensed consolidated financial statements.

Revenue recognized included in the balances of the deferred revenue at the beginning of the reporting period during three and nine months ended September 30, 2022, was $2.0 million and $5.4 million, respectively, as compared to $2.3 million and $7.4 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was $23.4 million. Given the applicable contract terms, $10.4 million is expected to be recognized as revenue within one year, $9.6 million is expected to be recognized between two to five years and the remainder of $3.4 million is expected to be recognized after five years. This amount does not include contracts to which the customer is not committed, contracts for which

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

the Company recognizes revenue equal to the amount the Company has the right to invoice for services performed or future sales-based or usage-based royalty payments in exchange for access to the Company’s hosted services. This amount is subject to change due to future revaluations of variable consideration, terminations, other contract modifications or currency adjustments. The estimated timing of the recognition of remaining unsatisfied performance obligations is subject to change and is affected by changes to scope, changes in timing of delivery of products and services or contract modifications.

The Company’s long-term contracts do not have significant financing components, as there is generally payment and performance in each year of the contract. If there is a period of one year or longer between the transfer of promised services and payment, it is generally for reasons other than financing and, thus, the Company does not adjust the transaction price for financing components.

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

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Computer equipment	$	20,947	$	20,571
Software and voice recordings	9,271		8,687
Leasehold improvements	3,850		3,567
Furniture and fixtures	765		729
Total property and equipment, at cost	34,833		33,554
Less: accumulated depreciation and amortization	(30,687)		(27,399)
Total property and equipment, net	$	4,146	$	6,155

Property and equipment, net includes assets under finance lease obligations (see Note 14 for additional information) with an aggregate cost of approximately $0.9 million and $7.0 million as of September 30, 2022 and December 31, 2021, respectively, and accumulated depreciation of approximately $0.4 million and $4.3 million as of September 30, 2022 and December 31, 2021, respectively. Depreciation and amortization expense totaled approximately $0.9 million and $3.2 million for the three and nine months ended September 30, 2022, respectively, as compared to $1.3 million and $4.2 million for the three and nine months ended September 30, 2021, respectively.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. ACCRUED LIABILITIES

Accrued liabilities on the condensed consolidated balance sheets was comprised of the following (in thousands):


	September 30, 2022		December 31, 2021
Accrued compensation expenses	$	5,536	$	3,802
Accrued interest	230		1,369
Accrued vendor payables	1,256		1,109
Accrued professional services	155		934
Other accrued liabilities	65		84
	$	7,242	$	7,298

7. COMMITMENTS AND CONTINGENCIES

Contracts

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

Aggregate non-cancelable future minimum payments were as follows as of September 30, 2022 (in thousands):


Remainder of 2022	$	1,000
2023	7,000
2024	11,000
2025	14,000
2026	16,000
Thereafter	48,000
Total	$	97,000

Legal Proceedings

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. In the opinion of management, there are no pending claims for which the outcome is expected to result in a material adverse effect on the financial position, results of operations or cash ~~flows.~~flows of the Company.

Other Matters

The Company has not historically collected U.S. state or local sales and use tax, or other similar taxes, in any jurisdiction. On June 21, 2018, the U.S. Supreme Court decided, in

South Dakota v. Wayfair, Inc., that state and local jurisdiction may, in certain circumstances, enforce sales and use tax collection obligations on remote vendors that have no physical presence in such jurisdiction. A number of states have already begun, or have positioned themselves to begin, requiring sales and use tax collection from remote vendors. The details and effective dates of these collection requirements vary from state to state. The Company continues to analyze potential sales tax exposure using a state-by-state assessment. In accordance with ASC 450, Contingencies, the Company estimated and recorded a liability of $1.1 million as of September 30, 2022 and December 31, 2021.

~~Note 4 — Initial Public Offering~~

~~Pursuant~~Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. WARRANTS

As a result of the Business Combination (see Note 3), the Company has retroactively adjusted the Legacy SoundHound warrants outstanding and corresponding strike price prior to April 26, 2022 to give effect to the ~~IPO on March 15,~~Conversion Ratio used to determine the number of shares of common stock into which they were converted.

Series C Warrants

In connection with the issuance of the April 2013 Note and November 2013 Note, the Company issued detachable warrants to purchase 248,408 and 496,827 shares of Legacy SoundHound Series C Preferred Stock (“Series C Warrants”), respectively, at $1.21 per share to the lenders, which were immediately exercisable. In December 2021, all outstanding 745,235 shares of warrants related to April 2013 Note and November 2013 were net exercised, leading to a net issuance of 645,356 shares of Legacy SoundHound Series C Preferred Stock. As of September 30, 2022 and December 31, 2021, the fair value of the warrant liability was $0.

Warrants Related to Convertible Notes and Note Payable

In connection with the issuance of the Company’s 2021 note payable (“SVB March 2021 Note”) and 2021 convertible note (“SCI June 2021 Note”), the Company ~~sold 12,000,000 Public Units at a~~issued detachable warrants to purchase 708,808 and 354,404 shares of Legacy SoundHound common stock, respectively, with an exercise price of ~~$10.00~~$3.67 per share to the lenders, which were immediately exercisable.

The Company recorded the warrants initially at fair value (see Note 10 for additional information) as paid-in-capital on the condensed consolidated balance sheets based on the allocation of its relative fair value of the debt proceeds. See Note 10 for additional information on the fair value calculation. The fair value in relation to the SVB March 2021 Note was allocated to the notes as a discount. The fair value in relation to the SCI June 2021 Note was capitalized as an asset, as the underlying debt bears similarity to a revolving commitment. As the warrants were classified as equity, they are not subject to remeasurement at the end of each reporting period. The initial allocated fair value of the warrants as of March 31, 2021 and June 14, 2021 was $2.3 million and $1.5 million, respectively. The warrants had a ten-year expiration date from the applicable closing date of March 2031 and June 2031, respectively.

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

Warrants Related to the Business Combination

Public ~~Unit.~~Warrants

Prior to the Business Combination, ATSP issued Public Warrants. Each Public ~~Unit consists of (i) one Public Subunit, which consists of one Public Share and one-quarter of one Public~~ Warrant ~~and (ii) one-quarter of one Public Warrant. Each whole warrant~~ entitles the holder to the right to purchase one share of common stock at aan exercise price of $11.50 per share. ~~Each whole~~No fractional shares were issued upon exercise of the Public Warrants. The Company may redeem the outstanding warrants, for $0.01 per warrant, ~~will~~upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable, 30if the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the ~~completion of an initial Business Combination~~warrants become exercisable and ~~will expire~~ending on the ~~fifth anniversary~~third trading day before the Company sends the notice of ~~the completion of an initial Business Combination, or earlier upon~~ redemption ~~or liquidation.~~

~~On March 19, 2021, the underwriters partially exercised the over-allotment option to purchase 1,300,000 Public Units, at a purchase price of $10.00 per Public Unit, generating gross proceeds~~ to the warrant holders. Upon issuance of a redemption notice by the Company, ~~of $13,000,000.~~

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

~~Following~~Subsequent to the closing of the ~~IPO on March 15, 2021~~Business Combination, the Company’s Public Warrants continue to be classified as equity instruments, as they are indexed to the Company’s stock. As of September 30, 2022, there were 3,457,996 Public Warrants issued and outstanding.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Private Warrants

Prior to the ~~underwriters’ partial exercise of over-allotment option on March 19, 2021, $133,000,000 from~~Business Combination, ATSP issued Private Warrants. The Private Warrants were initially issued in the ~~net proceeds of the sale of~~same form as the Public Units in the IPO and the sale of the Private Units was placed in the Trust Account. The funds held in Trust Account is and will be invested only in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, so that the Company is not deemed to be an investment company under the Investment Company Act.

~~Note 5 — Private Placement~~

~~Simultaneously~~Warrants with the closing of the IPO, the Sponsor and EarlyBirdCapital purchased an aggregate of 390,000 Private Units at a price of $10.00 per Private Unit in a private placement (the “Private Placement”), generating gross proceeds of $3,900,000.

On March 19, 2021, simultaneous with the exercise of the over-allotment option, the Sponsor and EarlyBirdCapital purchased an aggregate of 26,000 additional Private Units, at a purchase price of $10.00 per Private Unit, generating gross proceeds to the Company of $260,000.

~~The Private Units (and underlying Private Subunits, Private Shares, and Private Warrants) are identical to the Public Units except~~exception that the Private ~~Warrants included in the Private Units:~~Warrants: (i) ~~will~~would not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants.

~~The Company’s initial stockholders have agreed (A)~~Pursuant to ~~vote~~ASC 815, the Private ~~Shares contained in~~Warrants were initially considered a liability instrument as they met the Private Subunits in favor of any proposed Business Combination, (B) not to convert any Private Subunits in connection with a stockholder vote to approve a proposed initial Business Combination or sell any Private Shares to the Company in a tender offer in connection with a proposed initial Business Combination and (C) that the Private Subunits shall not participate in any liquidating distribution from the Trust Account upon winding up if a Business Combination is not consummated. In the eventdefinition of a ~~liquidation prior to~~derivative. Upon the ~~initial~~Closing of the Business Combination, the Company modified its Private ~~Units will likely~~Warrants to be ~~worthless.~~

identical to its Public Warrants. Therefore, the Private Warrants met requirements for classification as equity instrument, as they are indexed to the Company’s stock. On the Closing Date, there were 208,000 Private Warrants issued and outstanding. Refer to Note ~~6 — Related Party Transactions~~

10 for fair value measurement of these warrants.

~~Founder Shares~~

9. CONVERTIBLE NOTE AND NOTES PAYABLE

SNAP June 2020 Note

~~On January 4, 2021,~~

In June 2020, the ~~Sponsor paid $25,000,~~Company issued a promissory note, the SNAP June 2020 Note, to a Lender in exchange for $15.0 million in cash proceeds. This note has an annual interest rate of 5% and a maturity date of June 26, 2022, if not converted earlier pursuant to conversion terms and change in control events as described below. All unpaid interest and principal are due and payable upon request of the Lender on or ~~approximately $0.009~~after the SNAP June 2020 Note’s maturity date.

The outstanding principal balance and unpaid accrued interest of the SNAP June 2020 Note are convertible pursuant to the following terms (“SNAP June 2020 Note Conversion Feature” or “Conversion Feature”): automatic conversion into equity shares in the next equity financing round (“SNAP June 2020 Note Qualified Financing,” or “Qualified Financing”) at a conversion price equal to either (a) the lowest cash price per share paid by investors in such qualified financing (which will reflect at least a 20% discount to ~~cover certain offering costs~~the price per share paid by other investors purchasing securities in ~~consideration for 2,875,000 shares~~additional closings), or (b) if there are no additional closings, 0.80 times the price per share paid by investors purchasing equity securities in the Qualified Financing. The SNAP June 2020 Note Qualified Financing shall be at least $30.0 million, which excludes the conversion of ~~common stock, par value $0.0001 (the “Founder Shares”). Up~~the SNAP June 2020 Note and any other indebtedness.

Furthermore, upon a change of control event, the Company shall settle the SNAP June 2020 Note in cash, pursuant to ~~375,000 Founder Shares are subject to forfeiture by~~ the ~~Sponsor depending~~following terms (“Redemption Feature”):

•200% of the then outstanding principal amount of the respective note plus any unpaid accrued interest on the ~~extent to which~~original principal of such note; and

•100% of the ~~underwriters’ over-allotment option is exercised. On March 10, 2021,~~then outstanding principal amount of the respective note plus any unpaid accrued interest on the original principal of such note, provided that if the change of control transaction closes between the Company ~~effected~~and the Lender or an affiliate of the Lender.

The Company evaluated whether the SNAP June 2020 Note contains embedded features that meet the definition of derivatives under ASC 815, Derivatives and Hedging. The Conversion Feature qualifies as a derivative as it continuously resets as the underlying stock ~~dividend~~price increases or decreases so as to provide a variable number of ~~0.2~~ shares for a fixed value of equity to the holders at any conversion date. As such, the Conversion Feature is bifurcated and accounted for as a derivative liability to be remeasured at the end of each ~~founder share outstanding, resulting~~reporting period. The Company recorded the bifurcated Conversion Feature initially at fair value with the residual value being allocated to the SNAP June 2020 Note as a debt discount. The fair value of the Conversion Feature upon issuance in ~~an aggregate of 3,450,000 founder shares outstanding and held by the Sponsor and~~September 2020 was $2.5 million, which was recorded as a derivative liability on the Company’s ~~directors (up to 450,000~~condensed consolidated balance sheet. The Redemption Feature of the SNAP June 2020 Note does not meet the definition of a derivative. Therefore, the Redemption Feature is not bifurcated.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The total amount of debt discount at issuance for the SNAP June 2020 Note was $2.5 million. The Company amortized the aggregate debt discount using the effective interest method. The Company recognized total interest expense of $0.7 million associated with the SNAP June 2020 Note for the nine months ended September 30, 2022, out of which ~~are subject~~$0.4 million relates to ~~forfeiture by~~ the ~~Sponsor if~~amortization of the ~~underwriters’ over-allotment option is not exercised in full). On March 19, 2021,~~debt discount. The Company recognized total interest expense of $0.5 million and $1.5 million associated with the ~~underwriters partially exercised~~SNAP June 2020 Note for the ~~over-allotment option to purchase 1,300,000 Public Units. As a result, 125,000 founder shares were forfeited as of~~three and nine months ended September 30, ~~2021.~~

On2021, respectively, out of which $0.3 million and $0.9 million relates to the ~~date~~amortization of the ~~IPO,~~debt discount. The debt discount related to the Founder Shares were placed into an escrow account maintained in New York, New York by Continental Stock Transfer& Trust Company, acting as escrow agent. Subject to certain limited exceptions, these shares will not be transferred, assigned, sold or released from escrow (subject to certain limited exceptions) for a periodSNAP June 2020 Note is amortized over the life of the instrument, beginning at note issuance and ending on ~~(1) with respect to 50% of the founder shares, the earlier of one year after the date of the consummation of the Company’s initial Business Combination and~~April 26, 2022, the date on which the ~~closing price of the Company’s shares of common stock equals or exceeds $12.50 per share (as adjusted for share splits, share capitalizations, reorganizations~~note was converted.

The SNAP June 2020 Note contains a conversion feature in which outstanding principal and ~~recapitalizations) for~~ any 20 trading days within any 30-trading day period commencing after Company’s initial Business Combination and (2) with respect to the remaining 50% of the founder shares, one year after the date of Company’s consummation of the initial Business Combination, or earlier, in either case, if, subsequent to the initial Business Combination,unpaid accrued interest automatically converts into equity securities. This conversion occurs when the Company ~~consummates~~issues and sells equity securities in a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.

~~Promissory Note — Related Party~~

On January 4, 2021, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO (the “Promissory Note”). These loans were non-interest bearing, unsecured and were due at the earlier of March 31, 2021 or the closing of the IPO.

~~On February 1, 2021, the Sponsor funded~~bona fide equity financing with total proceeds to the Company ~~$100,000 pursuant to~~totaling more than $30.0 million, excluding the Promissory Note. On February 10, 2021, the Sponsor funded to the Company an additional $25,000 pursuant to the Promissory Note, for an aggregate amount of $125,000. On March 15, 2021, the Promissory Note in an aggregate amount of $125,000 was fully repaid by the Company to the Sponsor.

~~Related Party Loans~~

~~In order to meet the working capital needs following the consummation~~face value of the IPO if the funds not held in the Trust Account are insufficient, the Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretionSNAP June 2020 Note (“~~Working Capital Loans”~~SNAP June 2020 Note Qualified Financing”). ~~Each Working Capital Loan would be evidenced by~~

As a ~~promissory note. The notes would either be paid upon consummation~~result of the ~~initial~~ Business Combination, ~~without interest, or, at~~on the ~~holder’s discretion, up to $1,500,000 of~~Closing Date, the notes may be converted into units at a price of $10.00 per unit. The units would consist of (i) one subunit, which consists of one share of common stock and one-quarter of one warrant, and (ii) one-quarter of one warrant, where the common stock and warrants would be identical to the common stock and warrants included in the Private Units. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no otherSNAP June 2020 Note conversion feature was triggered, as total proceeds from the ~~Trust Account would be used~~Business Combination exceeded the minimum amount to qualify as a SNAP June 2020 Note Qualified Financing. As a result, on the Closing Date, all outstanding principal of $15.0 million and accrued interest of $1.4 million were converted into 368,384 shares of Class A Common Stock. In addition, the remaining debt discount of $0.2 million and related derivative liability with fair value of $4.1 million as of the Closing Date were extinguished.

The following table summarizes the unamortized debt discount, fair value of conversion feature, and accrued interest as of April 26, 2022 and December 31, 2021 (in thousands).


	April 26, 2022		December 31, 2021
Unamortized debt discount	$	230	$	657
Fair value of conversion feature	$	4,094	$	3,488
Accrued interest	$	1,375	$	1,136

Accrued interest is included in accrued liabilities on the condensed consolidated balance sheets to reflect the classification of the SNAP June 2020 Note as short-term in nature on December 31, 2021.

SVB March 2021 Note

In March 2021, the Company entered into a loan and security agreement with a commercial bank to borrow $30.0 million along with the issuance of warrants to purchase 127,570 shares of Legacy SoundHound’s common stock. The warrant’s allocated fair value was $2.3 million at issuance. The SVB March 2021 Note also contains a final payment provision of $1.1 million. The warrants were recognized as a debt discount at issuance and recorded as a reduction of the debt balance under a relative fair value approach. The Company recorded the final payment as an increase to the principal balance and debt discount for ~~such repayment. At~~the entire payment amount. The Company was amortizing the discounts on an effective interest basis over the period from issuance through the Early Maturity Date (as defined below).

The loan bears interest at an annual rate equal to the greater of 9% or 5.75% above the Prime Rate. As of September 30, ~~2021, no such Working Capital Loans~~2022, the interest rate was 12.0%. Payments were ~~outstanding.~~

~~Administrative Service Fee~~

~~Commencing on~~interest-only for the ~~Effective Date~~first twelve months and are now principal and interest through maturity. The Company recorded stated interest expense in the condensed consolidated statements of operations and comprehensive loss for the ~~registration statement through~~three and nine months ended September 30, 2022 of $0.7 million and $2.1 million, respectively, of which $0.2 million remained unpaid as accrued interest at September 30, 2022. During the ~~acquisition of a target business, the Company will pay an affiliate of the Chief Executive Officer, an aggregate fee of $10,000 per month for providing the Company with office space~~three and ~~certain office and secretarial services. As of~~nine months ended September 30, 2021, the Company ~~has~~ recorded ~~$30,000~~interest expense of $0.7 million and ~~67,097,~~$1.4 million, respectively, ~~for~~of which $0.2 million remained unpaid as accrued interest at September 30, 2021. The total amount of debt discount at issuance was $3.5 million. As of September 30, 2022 and December 31, 2021, the unamortized debt discount totaled $0.1 million and $1.1 million, respectively. During the

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

three and nine months ended September 30, 2022, the Company recorded a nominal amount and $1.0 million in interest expense related to the debt discounts, respectively. During the three and nine months ended September 30, 2021, the Company recorded $0.8 million and $1.6 million in interest expense related to the debt discounts, respectively.

The original term loan amortization date was April 1, 2022, with an opportunity for a six-month extension if certain performance milestones are met. The original maturity date of the loan was April 26, 2022 (“Early Maturity Date”), with an opportunity for extension to September 2024 or March 2025 if certain performance milestones are met, including the conversion of the SNAP June 2020 Note. In April 2022, the Company entered into a loan modification agreement with Silicon Valley Bank, which extended the note’s Early Maturity Date to May 26, 2022 which also extended the period of amortization of the discount.

As a result of the Business Combination, the SNAP June 2020 Note converted on the Closing Date and the performance milestone was met, satisfying the requirements to extend the maturity date to September 1, 2024 Accordingly, the Company has classified $13.1 million of the balance as long-term and $12.0 million of the balance as short-term as of September 30, 2022 compared to the entirety of the balance as short-term as of December 31, 2021.

SCI June 2021 Note

In June 2021, the Company entered into a loan and security agreement with a lender to obtain credit extensions to the Company. Extensions may be requested in $5.0 million increments up to a total commitment amount of $15.0 million. The Company drew an initial $5.0 million on June 14, 2021 and the remaining $10.0 million on December 1, 2021. The SCI June 2021 Note also contains a final payment provision of 3.5% on each draw or $0.5 million in total. Additionally, warrants were issued alongside the convertible note to purchase 63,785 shares of Legacy SoundHound’s common stock. The warrant’s allocated fair value was $1.5 million at issuance. The Company recorded the final payment as an increase to the principal balance and debt discount for the ~~period~~entire payment amount upon each draw.

As the warrants and discounts of $2.2 million are directly attributable to the total commitment of $15.0 million, the Company has presented its unamortized debt issuance cost associated with this note as a current asset, recorded as debt issuance cost on the condensed consolidated balance sheets. The Company is amortizing the cost on a straight-line basis from ~~March 10, 2021~~the issuance date through the maturity date of May 31, 2025. The Company recorded a nominal amount and $0.8 million in interest expense related to the debt discounts during the three and nine months ended September 30, ~~2021.~~

2022, respectively, and $0.4 million and $0.6 million in interest expense related to the debt discounts during the three and nine months ended September 30, 2021, respectively. As of September 30, 2022 and December 31, 2021, the unamortized debt discount totaled $0.3 million and $1.1 million, respectively.

The loan bears interest at an annual rate equal to the greater of 9% or 5.75% above the Prime Rate. As of September 30, 2022, the interest rate was 12.0%. Payments were interest-only for the first twelve months and are now principal and interest through maturity. The Company incurred and paid $0.4 million and $1.1 million in stated interest in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022, respectively, and $0.1 million in stated interest during both the three and nine months ended September 30, 2021.

The loan amortization date was June 1, 2022, with an opportunity for a six-month extension if certain performance milestones are met. The maturity date of the loan is the earlier of May 31, 2025 or when the SNAP June 2020 Note is either paid in full or matures on June 26, 2022. Upon mutual consent of the Company and its Agent, the outstanding principal amount of term loan advances may be converted into equity securities that are issued by SoundHound in an Initial Public Offering (“IPO”) or by a Special Purpose Acquisition Company (“SPAC”) during a private placement sale of SoundHound’s equity securities that closes substantially concurrently with the closing of a SPAC acquisition. If conversion occurs in connection with an IPO, the conversion of the principal amount shall be into the same class and series of equity securities for the initial price per security to the public sold in the IPO. If

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

conversion occurs in connection with a SPAC, the conversion of principal amount shall be into the equity securities purchased by other investors in the SPAC at the same share price and upon the same terms.

As a result of the Business Combination, the SNAP June 2020 Note converted into the Company’s securities on the Closing Date. As the SNAP June 2020 Note was not paid in full and did not mature on June 26, 2022 due to its conversion, the maturity date of the SCI June 2021 Note is May 31, 2025. Accordingly, the Company has classified $9.5 million of the balance as long-term and $4.6 million of the balance as short-term as of September 30, 2022 compared to the entirety of the balance as short-term as of December 31, 2021. Additionally, as the Company and its Agent did not mutually consent to the equity conversion that could have been triggered by the Business Combination, the conversion feature no longer existed subsequent to the Closing Date. As of September 30, 2022, the SCI June 2021 Note was classified as a note payable.

The below tables summarize the Company’s debt balances as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022
	SVB March 2021 Note		SCI June 2021 Note		Total
Notes payable	$	12,000	$	4,593	$	16,593
Notes payable, net of current portion	13,050		9,479		22,529
Unamortized loan discount	(81)		—		(81)
Total	$	24,969	$	14,072	$	39,041
Unamortized debt issuance cost recorded as an asset	$	—	$	326	$	326


	December 31, 2021
	SVB March 2021 Note
Note payable, current portion	$	31,050
Unamortized loan discount	(1,086)
Carrying value	$	29,964


	December 31, 2021
	SNAP June 2020 Note		SCI June 2021 Note		Total
Convertible notes, current portion	$	15,000	$	15,525	$	30,525
Unamortized loan discount	(657)		—		(657)
Total	$	14,343	$	15,525	$	29,868
Unamortized debt issuance cost recorded as an asset	$	—	$	1,132	$	1,132

Additionally, interest expense on the condensed consolidated statements of operations and comprehensive loss is inclusive of stated interest incurred on the Company’s debt instruments during the relevant periods, as well as the amortization of debt discounts and issuance costs. The life of each instrument may be shortened if a lender demands payment if certain events occur that are outside the control of the Company.

Table of Contents

~~Note 7 — Fair Value Measurements~~

~~Non-Recurring Fair Value Measurement~~

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. FAIR VALUE MEASUREMENTS

The following ~~table presents information about~~tables present the fair value of the Company’s ~~Representative Shares~~financial instruments that ~~were~~are measured or disclosed at fair value on a ~~non-recurring~~recurring basis (in thousands):


	Fair Value Measurements as of September 30, 2022
	Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	166	$	—	$	—
Total	$	166	$	—	$	—


	Fair Value Measurements as of December 31, 2021
	Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	4,863	$	—	$	—
Liabilities:
Derivative liability	—		—		(3,488)
Total	$	4,863	$	—	$	(3,488)

The fair values of the derivative liabilities were determined based on significant inputs not observable in the market, which represent Level 3 measurements within the fair value hierarchy.

Series C Warrants (April 2013 and November 2013)

The Company revalued the Series C warrants as of ~~January 13,~~September 30, 2021, resulting in a change in fair value of $1.8 million and ~~indicates~~$2.7 million during the three and nine months ended September 30, 2021, respectively. This change in fair value was recorded as a component of other income (expense), net, in the accompanying condensed consolidated statements of operations and comprehensive loss.

The Company determined the fair value of the April 2013 Series C redeemable convertible preferred stock warrants using the Black-Scholes option-pricing model using the following assumptions:


	September 30, 2021
Expected dividend rate	0	%
Risk-free interest rate	0.26	%
Expected volatility	44	%
Expected term (in years)	1.89

Upon exercise in December 2021, the warrants were recorded as Series C Preferred Stock at their fair value of $5.8 million upon net share settlement.

Common Stock Warrants (SVB March 2021 Note and SCI June 2021 Note)

The Company issued common stock warrants in connection with the SVB March 2021 Note and SCI June 2021 Note (See Note 8 for additional information). The SVB March 2021 Note and SCI June 2021 Note warrants were

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

recorded based on the allocation of its relative fair value of the debt proceeds of $2.3 million and $1.5 million, respectively. The warrants were classified as equity instruments at inception with a corresponding discount recorded at issuance against the outstanding notes in connection with the SVB March 2021 Note or as an asset in connection with the SCI June 2021 Note. The common stock warrants are not subject to remeasurement at each subsequent balance sheet date due to their classification as equity instruments as they are considered indexed to the Company’s stock. The SVB March 2021 Note warrants expire in March 2031 and the SCI June 2021 Note warrants expire in June 2031.

The Company determined the fair value of the SVB March 2021 Note and SCI June 2021 Note common stock warrants at issuance using the Black-Scholes option-pricing model using the following assumptions, respectively:


SVB March 2021 Note Common Stock Warrants
Expected dividend rate	0	%
Risk-free interest rate	1.74	%
Expected volatility	47	%
Expected term (in years)	10.00


SCI June 2021 Note Common Stock Warrants
Expected dividend rate	0	%
Risk-free interest rate	1.51	%
Expected volatility	47	%
Expected term (in years)	10.00

Upon the Closing of the Business Combination, all outstanding warrants associated with the SVB March 2021 Note and SCI June 2021 Note were exercised, leading to a net issuance of 673,416 shares of Class A Common Stock.

Public and Private Common Stock Warrants

The Public Warrants and Private Warrants were issued prior to the Business Combination by ATSP. The Public Warrants and Private Warrants initially differed in classification, as the Public Warrants were considered equity instruments indexed to ATSP’s stock, while the Private Warrants were considered liability instruments. However, upon the Closing of the Business Combination, the Company modified its Private Warrants to be identical to its Public Warrants. At the time of conversion from a liability instrument to an equity instrument, the fair value of the Private Warrants was $0.1 million.

Following the Business Combination and as of September 30, 2022, both warrants are classified as equity instruments, as they are indexed to the Company’s stock. The common stock warrants are not subject to remeasurement at each subsequent balance sheet date due to their classification as equity instruments. Refer to Note 3 and Note 8 for further information on the Public Warrants and Private Warrants. The fair value of the Public Warrants and Private Warrants are measured using quoted market prices.

Derivative Liability (SNAP June 2020 Note)

To determine the fair value of the embedded derivative associated with the SNAP June 2020 Note, the Company utilized the income approach model using the With and Without method. Using the With and Without method, the Company modeled expected cash flows to the noteholder under Next Equity Financing, Change in Control, SPAC/Private Investment in Public Equity, and IPO scenarios. The value of the embedded derivative was determined as the

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

differential value from the perspective of the With and Without Method. The Company utilized the following assumptions at the valuation date:


	December 31, 2021
Probability of Next Equity Financing	3	%
Probability of SPAC/PIPE	95	%
Probability of IPO	2	%
	100	%
Weighted average term (years)	0.27
Weighted average discount rate	25.00	%

The significant unobservable inputs used in the fair value measurement of the derivative liability are the remaining expected term, the discount rate, and the probability of financing for each scenario. Significant increases (decreases) in the term would result in significantly lower (higher) fair value measurements. Significant increases (decreases) in the discount rate would result in significantly lower (higher) fair value measurements.

On April 26, 2022, the Closing of the Business Combination, the embedded derivative was valued at fair value which was equivalent to its intrinsic value. The embedded derivative had a fair value of $4.1 million. As the Closing of the Business Combination triggered the Conversion Feature contained within the SNAP June 2020 Note, therefore converting the note’s principal to equity, the embedded derivative associated with the note was extinguished. The Company recorded the remeasurement of derivative liabilities in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. The fair value of the embedded derivative was recorded as additional paid-in capital upon extinguishment on the condensed consolidated balance sheet.

The following table summarizes the fair value remeasurement of the embedded derivative for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Remeasurement of conversion feature – loss	$	—	$	(640)	$	(606)	$	(1,090)

The following tables set forth a summary of changes in fair value of the Company’s derivative liability and warrant liability for which fair value was determined by Level 3 inputs (in thousands):


	Derivative Liability		Warrant Liability
Balance as of December 31, 2020	$	2,380	$	2,004
Change in fair value	1,090		2,701
Balance as of September 30, 2021	$	3,470	$	4,705

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Derivative Liability		Warrant Liability
Balance as of December 31, 2021	$	3,488	$	—
Change in fair value	606		—
Extinguishment of embedded derivative upon conversion of convertible note	(4,094)		—
Balance as of September 30, 2022	$	—	$	—

There were no transfers of financial instruments between the three levels of the fair value hierarchy ofduring the ~~valuation techniques the Company utilized to determine such fair value.~~

January 13, Quoted
Prices In
Active
Markets Significant
Other
Observable
Inputs Significant
Other
Unobservable
Inputs
2021 (Level 1) (Level 2) (Level 3)
Stockholders’ Equity:
Representative Shares $ 2,024,463 $ $ - $ 2,024,463
$ 2,024,463 $ $ - $ 2,024,463

The estimated fair value of the Representative Shares on January 13, 2021, the date the Representative Shares were issued, was determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model utilizing the probability weighted expected return method are assumptions related to the expected stock-price volatility (pre-merger), the risk-free interest rate, and the expected restricted term.nine months ended September 30, 2022. The Company ~~estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of~~had no other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected restricted term of the Representative Shares. The expected restricted term of the Representative Shares is simulated based on management assumptions regarding the timing and likelihood of completing the IPO and a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factorsfinancial assets or ~~assumptions change, the estimated fair values could be materially different.~~

~~The key inputs into the Monte Carlo simulation model for the Representative Shares were as follows at January 13, 2021:~~

Input January 13,
2021
Restricted term (years) 1.11
Expected volatility 12.5 %
Risk-free interest rate 0.12 %
Stock price $ 9.37
Dividend yield 0 %

~~Recurring Fair Value Measurement~~

~~The following table presents information about the Company’s assets and~~ liabilities that were required to be measured at fair value on a recurring ~~basis as of September 30, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.~~

September 30, Quoted
Prices In
Active
Markets Significant
Other
Observable
Inputs Significant
Other
Unobservable
Inputs
2021 (Level 1) (Level 2) (Level 3)
Assets:
U.S. Mutual Fund held in Trust Account $ 133,007,230 $ 133,007,230 $ - $ -
$ 133,007,230 $ 133,007,230 $ - $ -
Liabilities:
Warrant Liability $ 161,359 $ - $ - $ 161,359
$ 161,359 $ - $ - $ 161,359

The estimated fair value of the warrant liability on March 15, 2021 and September 30, 2021 is determined using Level 3 inputs. Inherent in a Monte-Carlo simulation model are assumptions related to expected stock-price volatility (pre-merger and post-merger), expected term, dividend yield and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The expected life of the warrants is simulated based on management assumptions regarding the timing and likelihood of completing a business combination. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The assumptions used in calculating the estimated fair values represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

basis.

~~The key inputs into the Monte Carlo simulation model for the warrant liability were as follows at March 15, 2021:~~

11. PREFERRED STOCK

Input March 15,
2021
Expected term (years) 5.99
Expected volatility 24.3 %
Risk-free interest rate 1.06 %
Stock price $ 9.36
Dividend yield 0 %
Exercise price $ 11.5

~~The key inputs into the Monte Carlo simulation model for the warrant liability were as follows at September 30, 2021:~~

Input September 30,
2021
Expected term (years) 5.52
Expected volatility 14.8 %
Risk-free interest rate 1.07 %
Stock price $ 9.61
Dividend yield 0 %
Exercise price $ 11.5

~~The following table sets forth a~~A summary of the ~~changes in the fair value of the warrant liability for the nine months ended September 30, 2021:~~

Warrant
Liability
Fair value as of December 31, 2020 $ -
Initial fair value of warrant liability upon issuance at IPO 270,307
Change in fair value (108,948 )

Fair value as of September 30, 2021 $ 161,359

~~Note 8 — Commitments and Contingencies~~

~~Registration Rights~~

~~The holders of the Founder Shares and Representative Shares (as defined below)~~Legacy SoundHound Preferred Stock authorized, issued and outstanding onas of the date of the ~~IPO,~~Business Combination is as ~~well as~~follows:


	Shares Authorized	Shares Issued	Liquidation Preference		Carrying Value

Series A	19,106,048	19,106,048	$	28,239	$	4,967
Series B	33,702,134	33,702,134	66,360		11,038
Series C	5,687,525	5,687,525	38,163		11,837
Series C-1	4,436,090	4,436,090	89,298		16,061
Series D	20,258,299	20,258,299	527,992		85,648
Series D-1	8,418,535	8,418,535	277,812		49,957
Series D-2	8,418,530	8,418,530	277,811		49,949
Series D-3	6,922,165	6,922,165	276,887		50,046
Series D-3A	20,835,869	—	—		—
	127,785,195	106,949,326	$	1,582,562	$	279,503

Upon the ~~holders~~closing of the ~~Private Units~~Business Combination, the outstanding shares of Series A, B, C, C-1, D, D-1, D-2, and ~~any units~~D-3 preferred stock were converted into 106,949,326 shares of SoundHound AI Class A Common Stock at the ~~Sponsor, officers, directors or their affiliates may be issued in payment~~exchange ratio of ~~Working Capital Loans made~~5.5562. Shares Authorized and Shares Issued above have been retroactively adjusted to reflect the exchange. As a result of the conversion of the Legacy SoundHound redeemable convertible preferred stock, the Company ~~(and all underlying securities), will be entitled~~reclassified the amount of redeemable convertible preferred stock to registration rights pursuant to an agreement signed on March 10, 2021. The holders of a majority of these securities are entitled to make up to two demands that the Company use its best efforts to register such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Representative Shares, Private Units and units issued to the Sponsor, officers, directors or their affiliates in payment of Working Capital Loans made to the Company (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. Notwithstanding anything to the contrary, EarlyBirdCapital may only make a demand on one occasion and only during the five-year period beginning on March 10, 2021. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the consummation of a Business Combination; provided, however, that EarlyBirdCapital may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the registration statement. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

~~Underwriters Agreement~~

~~EarlyBirdCapital and I-Bankers Securities, Inc. (the “Underwriters”) have a 45-day option from the date of the IPO to purchase up to an~~ additional 1,800,000 Public Units to cover over-allotments, if any. The Underwriters were entitled to a cash underwriting discount of two percent (2%) of the gross proceeds of the IPO, or $2,400,000 (or up to $2,760,000 if the underwriters’ over-allotment is exercised in full). On March 15, 2021, the Company paid in ~~aggregate, a fixed underwriting discount of $2,400,000.~~

capital.

~~On March 19, 2021, the Underwriters partially exercised the over-allotment option to purchase 1,300,000 Public Units and were, in aggregate, paid a fixed underwriting discount of $260,000.~~

~~EarlyBirdCapital will have the right of first refusal for a period commencing from~~Upon the consummation of the ~~IPO until the consummation of the initial~~ Business Combination, ~~(or~~ the liquidation of the Trust Account in the event that the Company fails to consummate the initial Business Combination within the Combination Period) to act as book running manager, placement agent and/or arranger for all financings where the Company seeks to raise equity, equity-linked, debt or mezzanine financings relating to or in connection with the initial Business Combination.

In addition, under certain circumstances EarlyBirdCapital will be granted, for a period of one year from the closing of the IPO, the right to act as lead underwriter for the next U.S. registered public offering of securities, undertaken by any of the Company’s officers, for the purpose of raising capital and placing 90% or more of the proceeds in a trust or escrow account to be used to acquire one or more operating businesses in the technology industry that have not been identified at the time of the IPO.

~~Business Combination Marketing Agreement~~

The Company has engaged EarlyBirdCapital as an advisor in connection with the Business Combination to assist the Company in holding meetings with its stockholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the initial Business Combination, assist the Company in obtaining stockholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay EarlyBirdCapital a cash fee for such services upon the consummation of its initial Business Combination in an amount equal to 3.5% of the gross proceeds of the IPO (exclusive of any applicable finders’ fees which might become payable); provided that up to 30% of the fee may be allocated at the Company’s sole discretion to other FINRA members (including, with EarlyBirdCapital’s prior consent which shall not be unreasonably withheld, companies affiliated with the Company or its officers or directors) that assist the Company in identifying or consummating an initial Business Combination.

~~Representative Shares~~

On January 13, 2021, the Company has issued to EarlyBirdCapital and its designees an aggregate of 350,000 representative shares at a purchase price of $0.0001 per share (the “Representative Shares”). The fair value of the Representative Shares was determined to be $2,024,463 (See Note 7). On March 10, 2021, the Company effected a stock dividend of 0.2 shares of common stock for every share of common stock outstanding, resulting in an additional 70,000 representative shares issued to EarlyBirdCapital for no consideration and an aggregate of 420,000 representative shares outstanding. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares without the Company’s prior consent until the completion of the initial Business Combination. In addition, the holders of the Representative Shares have agreed (i) to waive their conversion rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of the initial Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete its initial Business Combination within the Combination Period.

The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following March 10, 2021 pursuant to Rule 5110(g)(1) of the FINRA Manual. Pursuant to FINRA Rule 5110(g)(1), these securities will not be sold during the IPO, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the March 10, 2021 or commencement of sales of the IPO, except to any underwriter and selected dealer participating in the IPO and their bona fide officers or partners, provided that all securities so transferred remain subject to the lock-up restriction above for the remainder of the time period.

~~Business Combination Legal Services Agreement~~

The Company has entered into an agreement with its legal counsel, Loeb & Loeb (“Loeb”), whereby the Company is required to pay a total of $250,000 in retainer fees to Loeb for services related to the initial Business Combination upon the completion of certain milestones. The balance of any additional legal fees incurred related to the initial Business Combination will be due at the closing of the SPAC Merger. As of September 30, 2021, the Company had paid a total of $50,000 of retainer fees to Loeb.

~~Note 9 — Stockholders’ Equity~~

~~Preferred Stock —~~ ~~The~~ Company is authorized to issue 1,000,000 shares of preferred stock atwith a par value of $0.0001 per share. AsThe number of ~~September 30, 2021, there were no~~authorized shares of preferred stock ~~issued~~may also be increased or ~~outstanding.~~

decreased by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the Company entitled to vote thereon, without a separate vote of the holders of preferred stock. Any new series of preferred stock may be designated, fixed and determined as provided by the Board without approval of the holders of common stock or preferred stock. The preferred stock holders have the rights to elect one or more directors as per the Company’s restated certificate of incorporation. The Company has no preferred stock outstanding as of September 30, 2022.

~~Common Stock —~~ Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. COMMON STOCK

The Company had 250,030,433 shares of Legacy SoundHound common stock authorized for issuance prior to the closing of the Business Combination.

On April 26, 2022, the Company consummated a Business Combination which was accounted for as a reverse recapitalization (refer to Note 3 for additional information). Pursuant to the Company’s restated certificate of incorporation, the Company is authorized to issue ~~100,000,000~~500,000,000 shares of ~~common~~capital stock, consisting of (a) 455,000,000 shares of Class A Common Stock with a par value of $0.0001 per share, (b) 44,000,000 shares of Class B Common Stock with a par value of $0.0001 per share, and (c) 1,000,000 shares of preferred stock with a par value of $0.0001 per share. ~~At September 30, 2021, there were 4,161,000~~The outstanding shares of the Company’s common stock ~~issued~~are fully paid and ~~outstanding, excluding 13,300,000~~non-assessable.

As a result of the Business Combination, 73,561,334 shares of Legacy SoundHound common stock, along with 106,949,326 shares of Legacy SoundHound preferred stock, were converted into 180,510,660 shares of the Company’s common stock, consisting of 140,114,060 shares of Class A Common Stock and 40,396,600 shares of the Company’s Class B Common Stock. On all matters to be voted upon, subject to ~~possible redemption.~~

~~Public Warrants~~

~~Each whole warrant entitles~~ the ~~holder to purchase one common~~rights of any holders of any series of preferred stock, at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the completion of an initial Business Combination. The warrants will expire on the fifth anniversary of the completion of an initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

However, no warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Public Warrants is not effective within 90 days following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of ~~common stock equal~~Class A Common Stock and Class B Common Stock will vote together as a single class on all matters submitted to the ~~quotient obtained by dividing (x)~~stockholders for their vote or approval. Holders of Class A Common Stock are entitled to one vote per share on all matters submitted to the ~~product~~stockholders for their vote or approval. Holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval.

Each share of Class B Common Stock shall automatically convert into one fully paid and nonassessable share of Class A Common Stock. Shares of Class B Common Stock will be convertible into shares of Class A Common Stock and will be automatically convert into shares of Class A Common Stock upon the occurrence of certain future events, generally including transfers, subject to limited excepts set forth in the amended charter. The conversion of Class B Common Stock to Class A Common Stock will have the effect, over time, of increasing the relative voting power of those holders of Class B Common Stock who retain their shares in the long term. As a result, it is possible that one or more of the persons or entities holding our Class B Common Stock could gain significant voting control as other holders of Class B Common Stock sell or otherwise convert their shares into Class A Common Stock.

13. STOCK INCENTIVE PLANS

In April 2016, we adopted the 2016 Equity Incentive Plan (the “2016 Plan”) as a successor and continuation of the 2006 Plan. Under the 2016 Plan, the Company was permitted to grant awards of stock options and RSUs, as well as stock appreciation rights and other stock awards. During the year ended December 31, 2021, the Company amended the 2016 Plan to increase the number of shares of common stock ~~underlying~~reserved for issuance by 6,667,478 to an aggregate of 48,347,329. As of the ~~warrants, multiplied~~Closing Date of the Business Combination, the Company no longer has shares available for issuance under the 2016 Plan.

The 2016 Plan provides for incentive stock options to be granted to employees at an exercise price not less than 100% of the fair value at the grant date as determined by the ~~difference between~~Board of Directors, unless the optionee is a 10% stockholder, in which case the option price will not be less than 110% of such fair market value. Options granted generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise ~~price~~by the Board of Directors at the time of grant, and generally vest over a four-year period, with a 25% cliff vesting after one year and then ratably on a monthly basis for the remaining three years. RSUs granted generally vest over a four-year period, with 25% cliff vesting after one year and then ratably on a quarterly basis for the remaining three years.

On April 26, 2022, the stockholders of the ~~warrants~~Company approved the SoundHound AI, Inc. 2022 Incentive Award Plan (the “2022 Incentive Plan”)(collectively, with the 2006 Plan and the ~~“fair market value”(defined below) by (y)~~2016 Plan, the “Plans”), which became effective upon the Closing. The Company initially reserved 19,650,371 shares of Class A Common Stock for the issuance of awards under the 2022 Incentive Plan (“Initial Limit”). The Initial Limit represents 10% of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

increase each year over a ten-year period. The Incentive Award Plan provides for the grant of stock options, which may be ISOs or non-statutory stock options (“NSOs”), stock appreciation rights (“SARs”), restricted shares, restricted stock units and other stock or cash-based awards that the Incentive Award Plan Administrator determines are consistent with the purpose of the Incentive Award Plan and the interests of the Combined Company, or collectively, awards. As of September 30, 2022, the Company has 5,601,945 awards remaining for issuance.

On April 26, 2022, the stockholders of the Company approved the SoundHound AI, Inc. 2022 Employee Stock Purchase Plan (the “ESPP”), which became effective upon the Closing. An aggregate of 3,930,074 shares of the Company’s Class A Common Stock has been reserved for issuance or transfer pursuant to rights granted under the ESPP (“Aggregate Number”). The Aggregate Number represents 2% of the aggregate number of shares of the Company’s common stock outstanding immediately after the Closing and is subject to increase each year over a ten-year period. The ESPP provides eligible employees with an opportunity to purchase common stock from the Company at a discount through accumulated payroll deductions. The ESPP will be implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, the Company’s Board of Directors may specify offerings but generally provides for a duration of 27 months. The first purchase period had not begun as of September 30, 2022. The purchase price will be specified pursuant to the offering, but cannot, under the terms of the ESPP, be less than 85% of the lower of the fair market ~~value.~~value per share of the Company’s common stock on either the offering date or on the purchase date. The ~~“fair market value”~~ESPP also includes a six-month look-back provision for the purchase price if the stock price on the purchase date is less than the stock price on the offering date.

Option Activity

Stock option activity under the Plans was as follows for the nine months ended September 30, 2022:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Average Intrinsic Value (in Thousands)
Outstanding, December 31, 2021	30,361,405	$	3.45	6.78	$	168,923

Granted	391,619	6.17
Exercised	(3,139,565)	1.16			21,751
Forfeited or cancelled	(663,656)	4.51
Outstanding, September 30, 2022	26,949,803	$	3.73	6.53	14,790
Exercisable, September 30, 2022	18,698,462	$	2.83	5.66	14,511

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Stock option activity under the Plans was as follows for the nine months ended September 30, 2021:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Average Intrinsic Value (in Thousands)
Outstanding, December 31, 2020	28,772,180	$	2.38	6.75	$	36,987

Granted	5,203,804	6.84
Exercised	(2,178,412)	0.87			5,947
Forfeited or cancelled	(1,801,023)	3.11
Outstanding, September 30, 2021	29,996,549	$	3.22	6.85	172,816
Exercisable, September 30, 2021	17,350,839	$	2.06	5.22	119,390

Options exercised early are subject to the vesting provisions mentioned above, and any unvested shares are subject to repurchase at the original price upon termination of employment, death, or disability. There were no option exercises during the nine months ended September 30, 2022 or year ended December 31, 2021 that were subject to repurchase.

The total fair value of options vested was approximately $3.8 million and $7.2 million during the three and nine months ended September 30, 2022, respectively, as compared to $0.9 million and $2.9 million for the three and nine months ended September 30, 2021, respectively.

For the purpose of determining the estimated fair value of share-based payment awards issued in the form of stock options, the Company uses the Black-Scholes option-pricing model as permitted under the provisions for share-based payment awards.

The assumptions under the Black-Scholes option-pricing model and the weighted average calculated fair value of the options granted to employees during the nine-month periods ended September 30, 2022 and September 30, 2021 are as follows:


	September 30, 2022		September 30, 2021
Expected dividend yield	0	%	0	%
Expected volatility	51	%	42	%
Expected term (years)	5.88		6.01
Risk free interest rate	2.58	%	1.11	%

As of September 30, 2022, the unamortized expense related to outstanding options was $18.8 million. The weighted average remaining amortization period over which the balance as of September 30, 2022 is to be amortized is 2.54 years. No income tax benefit was recognized for this ~~purpose will mean~~compensation expense in the ~~average reported last sale price~~condensed consolidated statements of operations and comprehensive loss, as the Company does not anticipate realizing any such benefit in the future.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Restricted Stock Unit Activity

Restricted stock unit activity under the Plans was as follows for the nine months ended September 30, 2022:


	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding, December 31, 2021	—	$	—
Granted	15,802,990	5.02
Vested	(631,925)	3.79
Forfeited	(68,772)	9.77
Outstanding, September 30, 2022	15,102,293	$	5.02

The Company assessed an accounting grant date on June 2, 2022 for the issuance of 2,310,000 RSUs, 870,000 Performance-Based RSUs and 770,000 Market-Based RSUs to certain named executives and other executive offers based on the approval of employment agreements by the Board of Directors or Compensation Committee as respectively authorized which contained the key terms of the ~~shares~~equity award agreements.

The Company recorded stock-based compensation expense of $0.2 million related to Performance-Based RSUs during the three and nine months ended September 30, 2022. Unamortized expense related to Performance-Based RSUs was $7.3 million as of September 30, 2022.

To derive the fair value of Market-Based RSUs, the Company applies a Monte Carlo simulation to determine the grant date fair value. Stock-based compensation related to Market RSUs is recognized over the derived service period.

The assumptions under the Monte Carlo simulation model and the calculated fair value of the Market-Based RSUs granted to employees during the nine months ended September 30, 2022 were as follows:


	September 30, 2022
Expected volatility	52	%
Expected term (years)	4
Drift rate	2.9	%

The weighted average grant date fair value of the Market-Based RSUs was $3.91. The Company recorded $0.6 million in stock-based compensation expense related to Market-Based RSUs during the three and nine months ended September 30, 2022. Unamortized expense related to Market-Based RSUs was $3.0 million as of September 30, 2022.

During the three and nine months ended September 30, 2022, the fair value of RSUs that vested was $2.7 million and $3.6 million, respectively. During the three and nine months ended September 30, 2022 the Company recorded $7.1 million and $11.6 million, respectively, of stock-based compensation related to RSUs. As of September 30, 2022, the unamortized expense related to RSUs was $56.8 million. The weighted average remaining amortization period over which the balance as of September 30, 2022 is to be amortized is 3.07 years. No income tax benefit was recognized for this compensation expense in the condensed consolidated statements of operations and comprehensive loss, as the Company does not anticipate realizing any such benefit in the future.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Employee Stock-Based Compensation

The Company’s founders held 7,270,503 of Legacy SoundHound common stock ~~for the 5 trading days ending on the trading day~~pre-conversion prior to the ~~date of exercise.~~

Business Combination. The ~~Company may call the warrants~~founders exchanged their shares for redemption (excluding the Private Warrants and any warrants underlying additional units issued to the Sponsor, initial stockholders, officers, directors or their affiliates in payment of Working Capital Loans made to the Company), in whole and not in part, at a price of $0.01 per warrant,

●

~~at any time after the warrants become exercisable,~~

●

~~upon not less than 30 days’ prior written notice of redemption to each warrant holder,~~

●

If, and only if, the reported last sale price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period commencing after the warrants become exercisable and ending on the third business dayLegacy SoundHound Class B common stock immediately prior to ~~the notice of redemption to warrant holders; and~~

●

~~if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.~~

~~In addition, if (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with~~ the closing of the ~~initial~~business combination. Upon the Business Combination, ~~at an issue price or effective issue price~~the founders exchanged their Legacy SoundHound Class B shares in exchange for 40,396,600 shares of ~~less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance~~Class B Common Stock according to the ~~Sponsor, initial stockholders or their affiliates, without taking into account any Founder Shares held by them prior to such issuance), (y)~~Conversion Ratio. As the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the Market Value is below $9.20Class B Common Stock shares have ten votes per share, the ~~exercise price~~exchange resulted in incremental stock-based compensation expense of $1.0 million which is included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss for the nine month period ended September 30, 2022.

During the three and nine months ended September 30, 2022, the Company’s stock compensation expense was $9.2 million and $19.5 million, respectively, as compared to $1.3 million and $4.0 million for the three and nine months ended September 30, 2021, respectively. Stock-based compensation is classified in the following operating expense accounts on the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenues	$	57	$	—	$	68	$	—
Sales and marketing	1,077		92		1,873		294
Research and development	4,668		943		9,011		2,939
General and administrative	3,371		280		8,548		816
Total	$	9,173	$	1,315	$	19,500	$	4,049

14. LEASES

The Company leases certain facilities under non-cancelable operating leases that expire at various dates through 2026. Some leases include renewal options, which would permit extensions of the ~~warrants will be adjusted (to~~expiration dates at rates approximating fair market rental values. The Company also enters into certain finance leases for computer equipment. The finance leases are collateralized by the ~~nearest cent)~~financed assets.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Aggregate non-cancelable future minimum lease payments under operating and finance leases were as follows as of September 30, 2022:


	Operating Lease		Financing Lease

Remainder of 2022	$	939	$	63
2023	3,688		189
2024	3,194		122
2025	875		12
2026	418		—
Thereafter	1,533		—
Total	10,647		386
Less: imputed interest	(1,130)		(39)
Present value of lease liabilities	9,517		347
Less: current portion	(3,281)		(179)
Lease liabilities, net of current portion	$	6,236	$	168

The components of lease cost were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	851	$	790	$	2,570	$	2,466
Short-term lease cost	184		151		321		434
Financing lease cost:
Amortization of finance leased assets	170		623		946		1,912
Interest of lease liabilities	12		209		71		676

The table below presents additional information related to beour leases as of September 30, 2022:


	Operating Lease		Financing Lease
Weighted average remaining lease term (years)	3.68		1.96
Weighted average discount rate	5.92	%	10.61	%

The Company’s total rent expense for the three and nine months ended September 30, 2022 was $1.0 million and $2.9 million, respectively. The Company’s total rent expense for the three and nine months ended September 30, 2021 was $0.9 million and $2.9 million, respectively.

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

15. OTHER INCOME (EXPENSE), NET

Other income (expense), net on the condensed consolidated statements of operations and comprehensive loss is comprised of the following for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Other income (expense), net
Interest income	$	186	$	—	$	225	$	6
Change in fair value of derivative and warrant liability	—		(2,478)		(606)		(3,792)
Other expense, net	(70)		(260)		(337)		(494)
Total other income (expense), net	$	116	$	(2,738)	$	(718)	$	(4,280)

16. NET LOSS PER SHARE

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net loss (in thousands)	$	(28,922)	$	(23,781)	$	(84,693)	$	(57,693)
Denominator:
Weighted average shares outstanding – basic and dilutive	197,006,980		67,718,940		143,338,517		67,021,176
Basic and diluted net loss per share	$	(0.15)	$	(0.35)	$	(0.59)	$	(0.86)

For the three and nine months ended September 30, 2022 and 2021, the diluted earnings per share is equal to ~~115%~~the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive.

The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive for the three and nine months ended September 30, 2022 and 2021:


	As of September 30,
	2022	2021
Stock options	26,949,803	29,996,549
Restricted stock units (RSUs)	15,102,293	—
Series C warrants	—	745,235
Common stock warrants	3,665,996	1,063,214
Redeemable convertible preferred stock	—	106,303,970
Total	45,718,092	138,108,968

Table of Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

17. INCOME TAXES

The tax expense and the effective tax rate were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Loss before income taxes	$	(28,058)		$	(22,591)		$	(83,088)		$	(56,293)
Income tax expense	864			1,190			1,605			1,400
Effective tax rate	(3.08)		%	(5.27)		%	(1.93)		%	(2.49)		%

The Company’s recorded effective tax rate differs from the U.S. statutory rate primarily due to an increase in the domestic valuation allowance caused by tax losses, foreign withholding taxes and foreign tax rate differentials from the U.S. domestic statutory tax rate.

18. RELATED PARTY TRANSACTIONS

The Company entered into revenue contracts to perform professional services for certain companies who are also investors in the Company. These companies are holders of the ~~greater~~Company’s Class A Common Stock. As a result of ~~(i)~~ the ~~Market Value or (ii)~~Business Combination during the ~~price at which~~second quarter of 2022, each company's ownership interest in us was reduced to less than 5%. Consequently, considering all aspects of our relationships with the ~~Company issues~~companies, as of June 30, 2022, we no longer consider the ~~additional shares~~companies related parties. Below we provide our disclosures for transactions with the companies through June 30, 2022.

During the six months ended June 30, 2022, we recognized revenue from the companies of ~~common stock or equity-linked securities,~~$5.2 million. During the three and nine months ended September 30, 2021, we recognized revenue from the ~~$18.00 redemption trigger price will be adjusted~~companies of $1.6 million and $5.2 million, respectively. As of December 31, 2021, we had accounts receivable and deferred revenue balances related to ~~180%~~the companies of ~~this amount.~~

$0.6 million and $15.2 million, respectively.

~~Note 10 — Subsequent Events~~

19. SUBSEQUENT EVENT

Equity Line of Credit

On ~~November 15, 2021,~~August 16, 2022, the Company entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and related registration rights agreement (the “CFPI Registration Rights Agreement”) with CF Principal Investments LLC (“CFPI”). Pursuant to the ~~Merger~~Common Stock Purchase Agreement, ~~with SoundHound Inc., a voice artificial intelligence company, pursuant to which the two companies agreed to consummate a Business Combination. The total consideration to be paid by~~ the Company, has the right to ~~SoundHound is $2 billion in equity~~sell to CFPI up to the lesser of the Company, with outstanding SoundHound stock options and warrants included on a net exercise basis. In connection with the Business Combination, certain accredited investors committed to purchase 11.1 million(i) 25,000,000 shares of Class A common stock and (ii) the Exchange Cap (as defined in the Common Stock Purchase Agreement), subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. As of November 14, 2022, the Company’s Registration Statement on Form S-1 registering the resale of the ~~combined company~~ELOC Shares had not yet been declared effective. If declared effective and certain other conditions are met permitting the Commencement (as defined in the Common Stock Purchase Agreement) of the offering, the Company expects to utilize proceeds from the ELOC for working capital and other general corporate purposes.

After the Commencement, the Company will have the right from time to time at its sole discretion until the first day of the month next following the 36-month period from and after the Commencement, to direct CFPI to purchase up to a specified maximum amount of shares of Class A common stock as set forth in the Common Stock Purchase Agreement by delivering written notice to CFPI prior to the commencement of trading on any trading day. The Company will control the timing and amount of any sales of the Class A common stock to CFPI. Actual sales of shares to CFPI under the Common Stock Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, and the trading price of ~~$10.00 per share, for total gross proceeds~~the Common Stock.

Table of ~~$111 million, in a private placement~~Contents

SOUNDHOUND AI, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The purchase price of the shares that ~~is scheduled~~the Company elects to ~~close concurrently~~sell to CFPI pursuant to the Common Stock Purchase Agreement will be the volume weighted average price of the Common Stock during the applicable purchase date on which the Company has timely delivered written notice to CFPI directing it to purchase the shares under the Common Stock Purchase Agreement. The Company will receive 97% of the volume weighted average price of the Common Stock so sold.

In connection with the ~~Business Combination.~~

~~Additional information about~~execution of the ~~Merger~~Common Stock Purchase Agreement, the Company issued CFPI 250,000 shares (the “Commitment Shares”) as consideration for its irrevocable commitment to purchase the shares upon the terms and ~~related transactions can be found~~subject to the satisfaction of the conditions set forth in the ~~Current Report~~Common Stock Purchase Agreement. Pursuant to a separate side letter agreement between the Company and CFPI, the Company and CFPI have agreed that if the net proceeds with respect to Commitment Shares either sold by CFPI by the 121st day after Commencement, subject to an extension under certain circumstances (the “True-Up Date”), or held by CFPI on ~~Form 8-K filed~~the True-Up Date (based on ~~November 16, 2021.~~

the closing price of the Class A common stock on the Nasdaq Global Market on the trading day immediately prior to the True-Up Date), in the aggregate, are less than $1.0 million, the Company will pay to CFPI the difference between $1.0 million and the applicable net proceeds. Alternatively, in the event that such net proceeds exceed $1.0 million, CFPI will pay to the Company the difference between the applicable net proceeds and $1.0 million.

Table of Contents

~~ITEM~~

Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~References to the “Company,” “Archimedes Tech SPAC Partners Co.” “our,” “us” or “we” refer to Archimedes Tech SPAC Partners Co.~~ The following discussion and analysis of the ~~Company’s~~ financial condition and results of operations of SoundHound should be read together with our unaudited interim condensed consolidated financial statements as of September 30, 2022 and for the three and nine month periods ended September 30, 2022 and 2021, together with related notes thereto, and our audited financial statements included in ~~conjunction~~Form 8-K, which was originally filed with the ~~unaudited condensed financial statements~~SEC on May 2, 2022 and amended by Amendment No. 1 to Current Report on Form 8-K. Some of the ~~notes thereto~~information contained in this discussion and analysis or set forth elsewhere in this ~~report. Certain~~the Form 10-Q, including information ~~contained in the discussion~~with respect to SoundHound’s plans and ~~analysis set forth below~~strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties.

~~Cautionary Note~~ As a result of many factors, including those factors set forth in the “Risk Factors” and “Cautionary Statement Regarding ~~Forward-Looking Statements~~

~~This Quarterly Report on~~Forward Looking Statements” section of this the Form 10-Q/A includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause10-Q, our actual results ~~levels of activity, performance or achievements to be~~could differ materially ~~different~~ from ~~any future~~the results ~~levels of activity, performance or achievements expressed~~described in or implied by the forward-looking statements contained in the following discussion and analysis. Unless otherwise indicated or the context otherwise requires, references in this section to “SoundHound,” “we,” “us,” “our” and other similar terms refer to SoundHound AI, Inc.

Company Overview

We are 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, Deep Meaning Understanding and Collective AI breakthrough technologies developed over the past 16 years, our advanced Voice AI platform provides exceptional speed and accuracy and enables humans to interact with products and services like they interact with each other — by speaking naturally.

We believe voice-enabled conversational user interface is a more natural interface for nearly all use cases, and product creators should have the ability to design, customize, differentiate, innovate and monetize the interface to their own product, as opposed to outsourcing it to a third-party assistant. For example, 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 IoT devices. Additionally, SoundHound’s technology can address complex user queries such ~~forward-looking statements.~~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.”

The SoundHound developer platform, Houndify, is 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. Houndify’s Collective AI is an architecture for connecting domain knowledge that encourages collaboration and contribution among developers, is always learning, and is greater than the sum of its parts — ensuring the platform continues to become smarter at a faster rate.

SoundHound’s technology is live in production and at scale with companies around the globe, including Hyundai, Mercedes-Benz, Pandora, Deutsche Telekom, Snap, VIZIO, KIA and Stellantis. As a testament to its capabilities, the Houndify platform surpassed 1 billion annual queries in 2021. Additionally, traffic has experienced over 100% growth through the first three quarters of 2022, compared to the same period in 2021.

Our current partners span multiple industries and geographies, and together have a combined reach of over 2 billion end users.

Our market position is strengthened by the technical barriers to entry in the Voice AI space, which tend to discourage new market participants. Furthermore, our technology is backed by significant investments in intellectual property, with over 250 granted or pending patents, spanning multiple fields including speech recognition, natural language understanding, machine learning, monetization and more. We have achieved this critical momentum in part thanks to a long-tenured leadership team with deep expertise and proven ability to attract and retain talent. We believe that SoundHound has extensive technical expertise and a proven track record of innovation and value creation for us to continue to attract customers in the growing market for Voice AI transactions, which is estimated to grow to $160.0 billion per year by 2026.

We believe that SoundHound is well-positioned to fill the growing void and demand for an independent Voice AI platform. The Voice AI offerings from big tech companies are primarily an extension of their more core services and offerings. Rather than strengthening a customer’s product, it can take over the entire experience, thus disintermediating the

Table of Contents

company’s brand, users and data. As a result, brands relying on big tech mostly lose their ability to innovate, differentiate and customize. In some cases, these providers even compete with the products they support, making them increasingly less attractive as a choice for a voice interface.

The alternative options are generally legacy vendors tending to use dated technologies at a high price. Furthermore, many of these technologies still require significant effort by the product creators to turn them into solutions that can compete with the quality of the big tech offering, which in many cases is not practical. Due to the high barrier to entry in Voice AI, there are not many independent players.

This creates a great opportunity for SoundHound: we believe that we provide disruptive technologies that are superior to the alternatives, with better terms, 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.

When it comes to criteria for adoption, our goal is to win on every dimension. 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 an additional path to monetization for our customer base. 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 believe that we offer a superior ecosystem, benefiting from our Collective AI product architecture along with offering customers 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. This is the future that we are focusing on enabling.

When a product is voice enabled, we see three stages of integration and value propositions. The first stage is to enable the core use cases of the product. For example, the product could be a TV, a coffee machine, a car, a wearable device, a robot, a smart speaker or an appliance, and with your voice you can ~~identify forward-looking statements~~control the functionality of the device and the product. On a TV, you can ask it to change the channel, increase the volume, rewind by ~~terminology~~30 seconds, search for movies and even add personalization by adding a TV show to your favorites. Note that this is different from adding a third-party voice assistant to the product. Our view is that every product needs to have an interface, and voice-AI is a natural and compelling interface that unlocks new use cases and potential. Consider just the simple example of rewinding or fast forwarding by a specific duration. That is a command that can be done with voice within a few seconds, but it can take many steps to do using alternative interfaces such as ~~“may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,”~~a remote control or a companion app.

Once the core features of a product are voice-enabled, it can be further enhanced in the second stage of integration: the addition of third-party content and domains. SoundHound has extensive partnerships with content providers and, through these partnerships, can fulfill many needs of our customers. For example, your TV, car or even a coffee machine can answer questions about weather, sports scores, stock prices or flight status, and even search for local businesses. The addition of these public domains further enhances the value proposition of the product.

Finally, as the third step, you enter the world of monetization where you can add features that deliver value to the end user, and also generate revenues that we share with the product creators. To summarize with an example, imagine walking up to your coffee machine and asking for a triple shot extra hot latte. While you are waiting for your drink, you can ask for weather and sports scores, and if you desire, you can even order bagels from your favorite nearby bakery.

Table of Contents

There are three pillars to our revenue model. The first pillar is Product Royalties, where we voice enable a product and the product creator pays us a royalty based on volume, usage or duration. SoundHound collects royalties when Houndify is placed in a car, smart speaker or an appliance, for example.

The second pillar is Service Subscription. This is when, for example, SoundHound enables customer service or food ordering for restaurants or content management, appointments and voice commerce. And, for that, we generate subscription revenue from the service providers. Pillars one and two can grow independently and they are proven, established business models.

The third pillar creates a monetization ecosystem that brings the services from pillar two to the products in pillar one. When the users of a voice-enabled product in pillar one access the voice-enabled services of pillar two, these services generate new leads and transactions. SoundHound generates monetization revenue from the services for generating these leads and transactions, and we will share the revenue with the product creators of pillar one. For example, when the driver of a voice-enabled car places an order to a restaurant that’s also voice enabled, we will have unlocked a seamless transaction. Accordingly, the restaurant will pay us for that order, and we will share that revenue with the product creator or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings.

~~Overview~~

We were formed on September 15, 2020 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 target businesses. Our efforts to identify a prospective target business will not be limited to a particular industry or geographic region, though we intend to focus our search on a business operatingcar manufacturer. In this example, each party receives value in the ~~technology industry. We intend~~ecosystem. The restaurant is happy because they generated a new lead and booked a sale. The user is happy because they have received value through a natural ordering process, simply by speaking to ~~utilize cash derived~~their car. And the car manufacturer is happy because they delivered value to the end user and generated additional revenue from the ~~proceeds~~usage of ~~this offering, our securities, debt or~~their product. During the periods presented in the condensed consolidated financial statements, we have not generated revenue from leads and transactions on voice-enabled products from voice-enabled services other than from the SoundHound music identification app. Going forward, SoundHound expects monetization revenue to be generated through a combination of ~~cash, securities~~advertising revenue from the music identification app and ~~debt,~~from leads and transactions on voice-enabled products from voice-enabled services.

We expect this 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 ~~effecting~~ a ~~business combination.~~

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 increases adoption and increases our addressable market. All ~~activity through September 30, 2021 relates~~three pillars contribute to our ~~formation, IPO, which was consummated on March 15, 2021,~~revenues today in 2022. While the majority of the contribution is currently from our first pillar of royalties, over time, the subscription and ~~search for~~monetization portions are expected to grow and make a ~~prospective initial business combination target.~~

bigger contribution to our overall revenue.

Recent Developments

ATSP Merger

On November 15, 2021, weArchimedes Tech SPAC Partners Co. (“ATSP”), SoundHound, Inc. (“Legacy SoundHound”) and ATSPC Merger Sub, Inc. (“Merger Sub”) entered into a ~~definitive~~ merger agreement ~~with SoundHound Inc., a voice artificial intelligence company,~~(“Merger Agreement”) pursuant to which Merger Sub merged with and into Legacy SoundHound, with Legacy SoundHound continuing as the ~~two companies agreed to consummate a~~surviving corporation resulting in the reverse recapitalization of SoundHound (the “Business Combination”). The Business Combination was completed on April 26, 2022 (the ~~“Merger Agreement”~~“Closing”). ~~The total consideration to be paid to SoundHound is $2 billion in equity of the Company, with outstanding SoundHound stock options and warrants included on a net exercise basis.~~ In connection with the Closing of the Business Combination, ~~certain accredited investors committed~~the Company issued $113.0 million of securities in the PIPE investment. Upon the Closing of the Business Combination, ATSP changed its name to ~~purchase 11.1~~SoundHound AI, Inc.

Cash proceeds of the Business Combination were funded through a combination of $5.4 million in cash held in trust by ATSP (following satisfaction of redemptions by public stockholders) with 532,050 shares of SoundHound AI Class A common stock remaining outstanding, and $113.0 million in aggregate gross proceeds from PIPE investors in exchange for 11,300,000 shares of SoundHound Class A common stock that closed substantially contemporaneously with the Closing of the Business Combination. The combined company incurred $27.7 million of expenses related to the transaction. After giving effect to these transactions, SoundHound received $90.7 million in net proceeds, which are intended to be used for general corporate purposes, including investments in sales, marketing and advancement of product development, but which may also be used to acquire other companies in the Voice AI industry. SoundHound has not entered into any agreements to acquire companies in the Voice AI industry, nor does it require consummation of mergers or acquisitions of other businesses to achieve its stated goals. That said, if there are candidates that makes strategic, operational and financial sense, the combined company may consider such opportunities from time to time as they become available.

Table of Contents

Accounting Impact of the Business Combination

The Business Combination was accounted for as a “reverse recapitalization,” with no goodwill or other intangible assets recorded, in accordance with GAAP. A reverse recapitalization did not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy SoundHound in many respects.

Under this method of accounting, ATSP was treated as the “acquired” company for financial reporting purposes. For accounting purposes, SoundHound was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of SoundHound (i.e., a capital transaction involving the issuance of stock by ATSP for the stock of SoundHound). Accordingly, the consolidated assets, liabilities and results of operations of SoundHound became the historical financial statements of the combined company, and ATSP’s assets, liabilities and results of operations were consolidated with SoundHound’s beginning on the acquisition date. Operations prior to the Business Combination were presented as those of SoundHound in future reports. The net assets of SoundHound were recognized at carrying value, with no goodwill or other intangible assets recorded.

Impact of COVID-19

As the full impact of the COVID-19 pandemic on our business continues to develop, we are closely monitoring the global situation. As a ~~price~~supplier to multiple industries, including the automotive industry, we are adversely impacted by the decline in the production of ~~$10.00 per share, for total gross proceeds~~certain of ~~$111 million,~~our customers’ products in ~~a private placement that is scheduled to close concurrently~~connection with the ~~Business Combination.~~

~~Additional information about the Merger Agreement and related transactions can be found~~COVID-19 pandemic, including reductions in automotive production, chip shortages in the ~~Current Report~~semiconductor industry and broader supply chain challenges across the globe. We are unable at this time to predict the full impact of COVID-19 on ~~Form 8-K filed~~our operations, liquidity and financial results, and, depending on ~~November 16, 2021.~~

~~Results~~the magnitude and duration of ~~Operations~~

~~As of September 30, 2021, we have not commenced any operations. All activity for~~ the period from September 15, 2020 (inception) through September 30, 2021 relates to our formation, IPO and, after our IPO, identifying a target company for a Business Combination. We will not generate any operating revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the IPO and placed in the Trust Account.

For the three months ended September 30, 2021, we had a net loss of $191,075, which was comprised of operating costs of $229,484, interest income of $3,352 from marketable securities held in our Trust Account, and unrealized gain on change in fair value of warrants of $35,057.

~~For~~COVID-19 pandemic, such impact may be material. During the nine months ended September 30, 2021, the COVID-19 pandemic had an impact on our billings and revenue recognized from per unit royalties for Houndify Solutions and, although the impact during the three and nine months ended September 30, 2022 was not considered material, the extent of impact in future periods is not currently determinable. However, we expect billings to increase as car manufacturers continue to recover from delayed production due to the pandemic. Accordingly, it may not be indicative of future results and trends for reasons other than COVID-19 discussed herein may not be indicative of future operating results and trends. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, these measures have impacted, and may continue to impact, our business, as well as our customers and consumers.

SoundHound continues to monitor its operations and government recommendations and has modified its operations because of the COVID-19 pandemic, including making remote work more accessible to its employees. SoundHound does not yet know the full extent of potential impacts on our business and operations. Given the extant uncertainty, SoundHound cannot reasonably estimate the impact on our future results of operations, cash flows or financial condition.

Known Trends, Demands, Commitments, Events or Uncertainties Impacting Our Business

SoundHound believes that its performance and future success depend on many factors that present significant opportunities for us but also pose risks and challenges, including the following:

•Investments in Technology. Our business model since inception has been to invest significantly in our Houndify platform technology in the form of dedicated research and development. We will continue to invest in the development of our software platform to deliver consumers with continually improving value and delight. Our investments include continuous enhancements to our ASR and NLU models, investments in data to help refine and improve our underlying algorithms, and other costs to attract and retain a world-class technical workforce.

•Revenue Growth. Our commercial success, including acceptance and use of our applications, will depend on a number of factors, some of which are beyond our control, such as size of the market opportunity, successful integration with original equipment manufacturers (“OEM”), competition and demand from the public and members of the conversational AI community. Our product offerings have disruptive effects in the ways human interact with computers and we are developing new, innovative economic models that we believe will enhance value to customers, partners and shareholders. For our revenue growth to continue, we will need to invest in sales and marketing to ensure our messaging, capabilities and offerings are well understood and valued by customers. With our primary focus on enterprise customers, we also need to align with enterprise sales cycles, which can be

Table of Contents

longer than consumer cycles. Additionally, as we build new customer relationships, we continually focus on maintaining and growing our existing relationships through long-term partnerships through significant upfront investment in customer specific engineering projects. Our revenue consists of subscription revenue, royalties, and monetization revenues, which we consider recurring if our customer contract does not terminate the relationship and we continue to provide the customer with same or other services in the subsequent year. For example, if we perform a one-time non-recurring engineering project for a customer and that same customer engages with us afterwards for a Product Royalty contract, the revenue in both years, regardless of the specific service, would contribute towards our overall customer retention rate. By contrast, if SoundHound provides an annual subscription contract to a customer and that customer does not execute an agreement for services for the subsequent annual period, SoundHound would not consider that customer as retained. As determined on the foregoing basis, based on the number of customers to whom we provide services during one year compared to the prior year period, our customer retention rate as of September 30, 2022 was at least 80%.

•Cost of Revenues. The results of our business will depend in part on our ability to establish and increase our gross margins by scaling our business model and effectively managing our costs to produce our applications. Our revenue will be directly supported by data center investments in technology, both on premise and in the cloud. The associated workloads, along with supporting labor costs, will need to be managed effectively as we scale to improve our margins over time. Our Houndify platform is also powered by a library of over 100 content domains, including commonly used domains for points of interest, weather, flight status, sports and more.

•Seasonality. Our ability to accurately forecast demand for our technology could be negatively affected by many factors, including seasonal demand. We anticipate that we will experience fluctuations in customer and user demand based on seasonality. Given that we address markets across several different industry verticals, the associated overall seasonality impact to us may not be consistent year-to-year.

•Development of International Markets. We have rapidly expanded our capabilities and global reach. We have globalized our solution from 1 to 25 languages, with a roadmap of 39 languages and 114 acoustic variations. We view opportunities for conversational Voice AI to be global in reach, and we expect our growth to be fueled across multiple geographies.

•Industry Risks. In addition to the COVID-19 pandemic as addressed herein, the military conflict between Russia and Ukraine, which began on February 24, 2022, has had an adverse impact on the global economy and financial markets. Although our business has not been materially impacted by this ongoing military conflict, it is impossible to predict the extent to which our operations, or those of our customers’ suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict but could be substantial. Further, inflation has risen significantly worldwide and the United States has recently experienced historically high levels of inflation. This inflation and government efforts to combat inflation, such as recent and future significant increases to benchmark interest rates and other related monetary policies, have and could continue to increase market volatility and have an adverse effect on the domestic and international financial markets and general economic conditions.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with U.S. GAAP for the three and nine months ended September 30, 2022 and 2021.

Components of Our Results of Operations

Revenues

SoundHound generates revenues through: (1) “Product Royalties,” meaning royalties from voice-enabled products which are driven by volume, usage or life of applicable products and are affected by number of devices, users and units of usage time, (2) “Service Subscriptions,” meaning subscription revenues, derived from monthly fees based on usage-based revenue, revenue per query or revenue per user, and (3) “Monetization,” meaning revenues generated from focused ad targeting to users of products and services that employ our technologies. Currently, our monetization revenue is derived from our music identification application primarily in the form of ad impression revenue — revenue generated when an ad

Table of Contents

is shown in our music identification app — and, to a ~~net loss~~lesser extent, affiliate revenue for referrals to music stores for content sales and downloads of ~~$345,648,~~our premium music application.

“Houndified Products,” meaning products of our customers that employ SoundHound technology, and “Houndified Services,” meaning services provided to customers related to SoundHound technology, provide our customers with access to our Houndify platform over a contractual period without taking possession of the software. This generally includes revenues derived from up-front services (“professional services”) that develop and customize the Houndify platform to fit customers’ specific needs. These professional services are included in both our Product Royalties and Service Subscriptions revenues. Non-distinct professional services are recognized over the contractual life of the contract, whereas revenues from distinct professional services are recognized as the services are performed or when the services are complete depending on the arrangement.

We have and may continue to experience volatility for our remaining performance obligations and deferred revenue as a result of the timing for completing our performance obligations. We had remaining performance obligations in the amount of $23.4 million as of September 30, 2022, consisting of both billed and unbilled consideration. Deferred revenue consists of billings or payments received in advance of revenue being recognized and can fluctuate with changes in billing frequency and other factors. As a result of these factors, as well as our mix of revenue streams and billing frequencies, we do not believe that changes in our remaining performance obligations and deferred revenue in a given period are directly correlated with our revenue growth in that period.

We anticipate that we will experience fluctuations in our revenues from quarter-to-quarter due to a variety of factors, including the supply and demand of end user products such as automobiles, the size and success of our sales force and the number of users who are aware of and use our applications. See Note 4 to our unaudited condensed consolidated financial statements included within this Quarterly Report on Form 10-Q for more information.

Operating Expenses

We classify our operating expenses into the following four categories, which ~~was~~are cost of revenues, sales and marketing, research and development, and general and administrative. Excluding cost of revenues, each expense category includes overhead, including rent and related occupancy costs, which is allocated based on headcount.

Cost of Revenues

SoundHound’s cost of revenues are comprised of ~~operating~~direct costs associated directly with SoundHound’s revenue streams as described above. This primarily includes costs and depreciation related to hosting for cloud-based services, such as data centers, electricity charges, content fees and certain personnel-related expenses that are directly related to these revenue streams.

Sales and Marketing

Sales and marketing expenses consist of personnel-related expenses related costs of ~~$461,826,~~the sales and marketing team, promotional campaigns, advertising fees and other marketing related costs. Advertising costs are expensed to sales and marketing when incurred. We expect that our sales and marketing expenses will continue to increase as we continue to increase headcount and program spend to support a greater investment in go-to-market strategies and customer engagement.

Research and Development

Our research and development expenses are our largest operating expense as we continue to develop our software platforms and produce new technological capabilities.

The costs of these activities consist primarily of personnel-related expenses, third-party consultants and costs associated with technological supplies and materials, along with other direct and allocated expenses such as facility costs, depreciation and other shared expenses. We expense research and development costs in the periods in which they are incurred. We expect that our research and development expenses will continue to increase as we continue to invest in development activities related to our current and future applications.

Table of Contents

General and Administrative

General and administrative expenses consist of personnel-related costs, accounting and legal expenses, third-party consulting costs, insurance and allocated overhead including rent, depreciation and utilities.

We expect that our general and administrative expenses will increase due to our operations as a public company, including expenses related to compliance with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as increased expenses for insurance (including director and officer insurance), investor relations activities and other administrative and professional services such as accounting, legal, regulatory and tax. We also expect our administrative expenses, including personnel related expenses, to increase as we increase our headcount and expand our facilities and information technology to support our operations as a public company. Our general and administrative expenses may fluctuate from period-to-period due to seasonality.

Interest Expense

Interest expense consists of stated interest incurred on our outstanding convertible notes and debt during the relevant periods, as well as the amortization of debt discounts and issuance costs over the life of the instruments or a shorter period if a lender can demand payment in the event certain events occur that are outside of the control of the Company.

The issuance of debt instruments with direct transaction costs and the bifurcation of embedded derivatives and warrant instruments has resulted in debt discounts. Direct transaction costs consist of various transaction fees, such as bank and legal fees, that are incurred upon issuance. Overall, the discounts from debt issuance costs result in an increased amount of interest expense over the amortization period.

Other Income (Expense), Net

Change in Fair Value of Derivative and Warrant Liability

We account for certain warrants and conversion features as liabilities at fair value and adjust the instruments to fair value at each reporting period. We determined that the conversion feature associated with one of our debt instruments is a freestanding derivative instrument. The derivative and warrant liabilities’ changes in fair value that result from remeasurement at each balance sheet date is recognized in the Company’s condensed consolidated statement of operations and comprehensive loss as other income (expense), net.

Other Income (Expense), Net

Other income (expense), net consists of ~~$7,230 from marketable securities held~~realized and unrealized gains and losses related to foreign currency revaluation. As the functional currency of the Company and its subsidiaries is the U.S. dollar, transactions denominated in foreign currency are converted into U.S. dollars at the average rates of exchange prevailing during the period. Assets and liabilities denominated in foreign currency are remeasured into U.S. dollars at current exchange rates at the balance sheet date for monetary assets and liabilities and at historical exchange rates for non-monetary assets and liabilities.

Provision for Income Taxes

Income tax expense includes federal, state and foreign taxes and is based on reported income before income taxes. We are in a cumulative loss position for tax purposes based on historical earnings. As of December 31, 2021, the Company had net operating loss carry forwards of approximately $301.5 million and $102.9 million available to reduce future taxable income, if any, for both federal and state income tax purposes, respectively. Additionally, as of December 31, 2021, the Company had net operating loss carryforwards of $3.4 million relating to net operating losses in Germany (“Germany Net Operating Losses”). The federal and state net operating loss carry forwards will start to expire in 2025 and 2028, respectively, with the exception of $212.9 million in federal net operating loss carryforwards, which can be carried forward indefinitely. The Germany Net Operating Losses can be carried forward indefinitely. The Company also had federal and state research and development credit carry forwards of approximately $8.9 million and $8.0 million, respectively, at December 31, 2021. The federal credits will expire starting in 2029 if not utilized. State research and development tax credits will carry forward indefinitely.

Table of Contents

In addition, we may in the future experience ownership changes as a result of changes in our ~~Trust Account,~~stock ownership (some of which are not in our control). For these reasons, or other factors outside of our control, such as future regulatory or other changes, our ability to utilize our NOL carryforwards and ~~unrealized gain~~other tax attributes to reduce future tax liabilities may be limited.

Results of Operations

The following tables set forth the significant components of our results of operations for the three and nine months ended September 30, 2022 and 2021 ($ in thousands):


	Three Months Ended September 30,				Change
	2022		2021		$		%
Revenues	$	11,186	$	4,028	$	7,158	178	%
Operating expenses:
Cost of revenues	2,583		1,657		926		56	%
Sales and marketing	6,672		1,175		5,497		468	%
Research and development	19,352		14,344		5,008		35	%
General and administrative	9,587		4,022		5,565		138	%
Total operating expenses	38,194		21,198		16,996		80	%
Loss from operations	(27,008)		(17,170)		(9,838)		57	%

Other expense, net:
Interest expense	(1,166)		(2,683)		1,517		(57)	%
Other income (expense), net	116		(2,738)		2,854		(104)	%
Total other expense, net	(1,050)		(5,421)		4,371		(81)	%
Loss before provision for income taxes	(28,058)		(22,591)		(5,467)		24	%
Provision for income taxes	864		1,190		(326)		(27)	%
Net loss	$	(28,922)	$	(23,781)	$	(5,141)	22	%


	Nine Months Ended September 30,				Change
	2022		2021		$		%
Revenues	$	21,628	$	16,046	$	5,582	35	%
Operating expenses:
Cost of revenues	6,844		4,878		1,966		40	%
Sales and marketing	13,623		3,259		10,364		318	%
Research and development	54,864		42,810		12,054		28	%
General and administrative	22,952		11,387		11,565		102	%
Total operating expenses	98,283		62,334		35,949		58	%
Loss from operations	(76,655)		(46,288)		(30,367)		66	%

Other expense, net:
Interest expense	(5,715)		(5,725)		10		—	%
Other income (expense), net	(718)		(4,280)		3,562		(83)	%
Total other expense, net	(6,433)		(10,005)		3,572		(36)	%
Loss before provision for income taxes	(83,088)		(56,293)		(26,795)		48	%
Provision for income taxes	1,605		1,400		205		15	%
Net loss	$	(84,693)	$	(57,693)	$	(27,000)	47	%

Table of Contents

Revenues

The following tables summarize our revenues by type and geographic regions for the three and nine months ended September 30, 2022 and 2021 ($ in thousands):


	Three Months Ended September 30,				Change
	2022		2021		$		%
Product royalties	$	10,265	$	3,380	$	6,885	204	%
Service subscriptions	696		381		315		83	%
Monetization	225		267		(42)		(16)	%
Total	$	11,186	$	4,028	$	7,158	178	%


	Nine Months Ended September 30,				Change
	2022		2021		$		%
Product royalties	$	19,534	$	13,833	$	5,701	41	%
Service subscriptions	1,442		1,176		266		23	%
Monetization	652		1,037		(385)		(37)	%
Total	$	21,628	$	16,046	$	5,582	35	%


	Three Months Ended September 30,				Change
	2022		2021		$		%
United States	$	2,654	$	1,283	$	1,371	107	%
Japan	925		921		4		0	%
Germany	1,070		817		253		31	%
France	650		506		144		28	%
Korea	5,751		320		5,431		1697	%
Other	136		181		(45)		(25)	%
Total	$	11,186	$	4,028	$	7,158	178	%


	Nine Months Ended September 30,				Change
	2022		2021		$		%
United States	$	5,901	$	3,586	$	2,315	65	%
Japan	2,775		2,875		(100)		(3)	%
Germany	2,897		7,034		(4,137)		(59)	%
France	2,947		899		2,048		228	%
Korea	6,403		1,180		5,223		443	%
Other	705		472		233		49	%
Total	$	21,628	$	16,046	$	5,582	35	%

Total revenues increased by $7.2 million, or 178%, in the three months ended September 30, 2022 compared to the same period in 2021. The increase is primarily attributable to $5.3 million of licensing revenue from our Houndify Edge solution, which we delivered to a customer during the three months ended September 30, 2022, related to minimum guarantee units to be utilized over the life of the contract and resulted in a corresponding increase in our Contract assets balance. The increase in revenue is also due to a $1.7 million increase in hosted services during the three months ended September 30, 2022.

Table of Contents

Total revenues increased by $5.6 million, or 35%, in the nine months ended September 30, 2022, compared to the same period in 2021. The increase is primarily attributable to the $5.3 million of Houndify Edge licensing revenue and a $3.0 million increase in hosted services partially offset by a $2.7 million decrease in professional services during the nine months ended September 30, 2022. The decrease in professional services is primarily due to the recognition of $4.3 million in nonrecurring royalties revenue as a result of a contract modification to end a distinct professional service contract prior to completion with a customer in Germany during the nine months ended September 30, 2021.

In addition to the revenue growth experienced in Korea due to the $5.3 million Houndify Edge licensing agreement, we benefited from growth across the United States, France and other smaller foreign regions from scaling our Houndify Products with large automotive and device makers. We experienced additional revenue growth from Houndified Products in geographic regions of France and the United States of $0.1 million and $1.4 million, and $2.0 million and $2.3 million, respectively, during the three and nine months ended September 30, 2022 compared to the same periods in 2021. In France, our revenue increased due to distinct customization services sold to an existing large automotive company which also commenced production of our Houndified Product in their vehicles. In the United States, the increase is primarily attributable to an increase in royalties from one customer due to higher usage and hosting. Additionally, we experienced a $4.1 million decrease in revenue from Germany during the nine months ended September 30, 2022 compared to the same period in 2021. This was primarily due to a one-time contract modification to end a distinct professional service contract prior to completion during the nine months ended September 30, 2021. This customer was retained through ongoing hosting services. Revenue in both periods came principally from customers across the automotive and IoT sectors, with less significant amounts derived from other industry verticals.

Cost of Revenues

Cost of revenues increased by $0.9 million, or 56%, and $2.0 million, or 40%, in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. The increases are primarily related to incurring additional data center and hosting costs due to system migrations in order to support our revenue growth. Gross margin increased to 77% during the three months ended September 30, 2022 compared to 59% during the same period in 2021 primarily due to increased margins on the Houndify Edge licensing agreement described above. Gross margin decreased to 68% during the nine months ended September 30, 2022 compared to 70% during the same period in 2021 primarily due to the one-time contract modification to end the distinct professional service contract prior to completion with a customer in Germany during the second quarter of 2021 offset by the increased margins on the Houndify Edge agreement described above. While our gross margin may continue to fluctuate in the near-term due to revenue contributions from varying product mixes, we expect it will stabilize as we continue to expand our revenue from subscriptions and monetization.

Research and Development

Research and development expenses increased by $5.0 million, or 35%, and $12.1 million, or 28%, in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. This increase in research and development expenses was primarily related to our investment in technology and engineering and increasing our full-time engineer headcount by to ensure we remain at the forefront of innovation, while also helping to develop and scale new products and services. Research and development headcount increased by 13% and was accompanied by higher salaries and compensation packages for executive hires as well as an additional $3.7 million and $6.1 million of stock-based compensation expense in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

Sales and Marketing

Sales and marketing expenses increased by $5.5 million, or 468%, and $10.4 million, or 318%, in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. This increase is due to a 184% increase in sales and marketing headcount and increased program spend to support a greater investment in go-to-market strategies and customer engagement and drive growth in our revenue from subscriptions and monetization.

General and Administrative

General and administrative costs increased by $5.6 million, or 138%, and $11.6 million, or 102%, in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. This increase represents investments in our human resources, finance and legal functions, including increased personnel-related expenses as we prepared and began to function as a public entity. General and administrative headcount increased by 83% and was

Table of Contents

accompanied by higher salaries and compensation packages for executive hires as well as an additional $3.1 million and $7.7 million of stock-based compensation expense in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Our expansion efforts, focused both on geographical reach and service compatibility, led to an increase of operational costs and resources incurred. Expenses related to the Business Combination also contributed to an increase in costs related to third-party specialists during the nine months ended September 30, 2022. In addition, an increase in other public readiness costs includes directors’ and officers’ insurance, capital markets advisory, accounting and legal support for SEC filings following the Business Combination. We also continued our efforts in reviewing and realigning our cost structure based on teams' evolving responsibilities. As a result, we shifted resources from research and development to general and administrative activities to better align with the investments being made to fuel the growth as we scale as a new public company.

Interest Expense

Interest expense decreased by $1.5 million, or 57%, in the three months ended September 30, 2022 compared to the same period in 2021. The decrease in interest expense was primarily attributable to the conversion of the promissory note issued in June 2020 (“SNAP June 2020 Note”). On April 26, 2022, all outstanding principal of $15.0 million and accrued interest of $1.4 million were converted into Class A Common Stock. As our debt balance significantly decreased in the second quarter of 2022, our interest expense and amortization of debt issuance costs have decreased as well. In addition, the Business Combination extended the SVB March 2021 Note’s maturity date, leading to a reduction in interest expense due to discounts being amortized over longer periods starting on April 26, 2022.

Interest expense decreased by a nominal amount in the nine months ended September 30, 2022 compared to the same period in 2021. The decrease in interest expense was primarily attributable to the conversion of the SNAP June 2020 Note, as described above, and largely offset by the issuance of the SVB March 2021 Note and SCI June 2021 Note, resulting in $30.0 million and $15.0 million draws, respectively. These debt instruments were accompanied by the issuances of related common stock warrants, resulting in debt discounts to be amortized over the life of the instrument. The increase in our debt balance related to these draws in 2021 has led to increases in interest expense and amortization of debt issuance costs during the nine months ended September 30, 2022.

Other Income (Expense), Net

The following tables summarize our other income (expense), net, by type (in thousands):


	Three Months Ended September 30,				Change
	2022		2021		$		%
Interest income	$	186	$	—	$	186	—	%
Change in fair value of derivative and warrant liability	—		(2,478)		2,478		(100)	%
Other expense, net	(70)		(260)		190		(73)	%
	$	116	$	(2,738)	$	2,854	(21)	%


	Nine Months Ended September 30,				Change
	2022		2021		$		%
Interest income	$	225	$	6	$	219	3650	%
Change in fair value of derivative and warrant liability	(606)		(3,792)		3,186		(84)	%
Other expense, net	(337)		(494)		157		(32)	%
	$	(718)	$	(4,280)	$	3,562	(83)	%

Change in Fair Value of Derivative and Warrant Liability

The losses attributable to the change in fair value of ~~warrants of $108,948.~~

~~For~~derivative and warrant liability decreased by $2.5 million, or 100%, and $3.2 million, or 84%, in the ~~period from September 15, 2020 (inception) through~~three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. The changes were primarily attributable to $1.8 million and $2.7 million in losses, from the change in fair value of the warrant liability during the three and nine months ended September 30, 2021, respectively, as compared

Table of Contents

to no change in the fair value of the warrant liability during the three and nine months ended September 30, 2022, due to the exercise of Series C Warrants in December 2021, which extinguished the Company’s corresponding warrant liability.

The balance during the nine months ended September 30, 2022 solely reflects the change in fair value of the embedded derivative from the SNAP June 2020 ~~we had~~Note. The fair value of the derivative liability decreased by $0.6 million during the nine months ended September 30, 2022, compared to decreases of $0.7 million and $1.1 million during the three and nine months ended September 30, 2021, respectively. The changes in fair value of the derivative liability represent corresponding gains or losses on the Condensed Consolidated Statement of Operations and Comprehensive Loss due to changes in probability assumptions of a ~~net loss of $716, which was comprised of operating costs of $716.~~

change in control or SPAC transaction.

Provision for Income Taxes

(in thousands)


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2022		2021		$		%		2022		2021		$		%
Income tax expense	$	864	$	1,190	$	(326)	(27)	%	$	1,605	$	1,400	$	205	15	%

Liquidity and Capital Resources

Sources and Uses of Liquidity

~~On March 15, 2021,~~As a result of the Business Combination, we ~~consummated the IPO of 12,000,000 Public Units at a price of $10.00 per Public Unit, generating~~raised gross proceeds of ~~$120,000,000. Simultaneously with the closing~~$118.4 million including a combination of ~~the IPO, we consummated the sale~~$5.4 million in cash held in trust by ATSP (following satisfaction of ~~390,000 Private Units at a price~~redemptions by public stockholders), and $113.0 million in aggregate gross proceeds from PIPE investors. The combined company incurred $27.7 million of ~~$10.00 per Private Unit in a private placement~~expenses related to the ~~Sponsor~~transaction.

We had $33.4 million in cash and ~~EarlyBirdCapital, generating gross proceeds of $3,900,000.~~

On March 19, 2021, the underwriters partially exercised the over-allotment option to purchase 1,300,000 Public Units, at a purchase price of $10.00 per Public Unit, generating gross proceeds of $13,000,000. In connection with the underwriters’ exercise of their over-allotment option, we also consummated the sale of an additional 26,000 Private Units at $10.00 per Private Unit to the Sponsor and EarlyBirdCapital, generating gross proceeds of $260,000.

~~As of September 30, 2021, we had $628,652 of~~ cash ~~held outside of the Trust Account for our working capital needs.~~

Prior to the completion of the IPO, our liquidity needs had been satisfied through a payment from the Sponsor of $25,000 for the founder shares, and the loan under an unsecured promissory note from the Sponsor of $125,000. We fully paid the note to the Sponsor on March 15, 2021. Subsequent to the consummation of the IPO and Private Placement, our liquidity needs have been satisfied through the proceeds from the consummation of the Private Placement not held in the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor, initial stockholders, officers, directors and their affiliates may, but are not obligated to, provide us Working Capital Loans. To date, there were no amounts outstanding under any Working Capital Loans.

~~We anticipate that the $628,652 outside of the Trust account~~equivalents as of September 30, ~~2021~~2022. Although the Company has incurred recurring losses each year since its inception, the Company expects it will ~~not~~ be ~~sufficient~~able to ~~allow us to operate~~fund its operations for at least the next ~~12 months, assuming that~~twelve months. The Company may seek additional funding through debt or equity financing arrangements (e.g., Equity Line of Credit ("ELOC") (see Note 19)), implement incremental expense reduction measures or a ~~Business Combination is not consummated during that time. Moreover, we may need~~combination thereof to ~~obtain additional~~continue financing its operations. Although management continues to ~~consummate our Initial Business Combination but~~pursue these plans, there is no assurance that ~~new financing~~the Company will be ~~available~~successful in obtaining sufficient funding on terms acceptable to usthe Company to fund continuing operations, if at all. The Company's condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include adjustments to reflect the possible future effects on ~~commercially acceptable terms. Furthermore, if we are not able to consummate a Business Combination by September 15, 2022, it will trigger our automatic winding up, liquidation~~the recoverability and ~~dissolution. These conditions raise substantial doubt about our ability~~classification of recorded assets or the amounts of liabilities that might be necessary should the Company be unable to continue as a going concern.

Equity Line of Credit

On August 16, 2022, the Company entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and related registration rights agreement (the “CFPI Registration Rights Agreement”) with CF Principal Investments LLC (“CFPI”). Pursuant to the Common Stock Purchase Agreement, the Company, has the right to sell to CFPI up to the lesser of (i) 25,000,000 shares of Class A common stock and (ii) the Exchange Cap (as defined in the Common Stock Purchase Agreement), subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. As of November 14, 2022, the Company’s Registration Statement on Form S-1 registering the resale of the ELOC Shares had not yet been declared effective. If declared effective and certain other conditions are met permitting the Commencement (as defined in the Common Stock Purchase Agreement) of the offering, the Company expects to utilize proceeds from the ELOC for working capital and other general corporate purposes.

Table of Contents

delivering written notice to CFPI prior to the commencement of trading on any trading day. The Company will control the timing and amount of any sales of the Class A common stock to CFPI. Actual sales of shares to CFPI under the Common Stock Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, and the trading price of the Common Stock.

The purchase price of the shares that the Company elects to sell to CFPI pursuant to the Common Stock Purchase Agreement will be the volume weighted average price of the Common Stock during the applicable purchase date on which the Company has timely delivered written notice to CFPI directing it to purchase the shares under the Common Stock Purchase Agreement. The Company will receive 97% of the volume weighted average price of the Common Stock so sold.

In connection with the execution of the Common Stock Purchase Agreement, the Company issued CFPI 250,000 shares (the “Commitment Shares”) as consideration for its irrevocable commitment to purchase the shares upon the terms and subject to the satisfaction of the conditions set forth in the Common Stock Purchase Agreement. Pursuant to a separate side letter agreement between the Company and CFPI, the Company and CFPI have agreed that if the net proceeds with respect to Commitment Shares either sold by CFPI by the 121st day after Commencement, subject to an extension under certain circumstances (the “True-Up Date”), or held by CFPI on the True-Up Date (based on the closing price of the Class A common stock on the Nasdaq Global Market on the trading day immediately prior to the True-Up Date), in the aggregate, are less than $1.0 million, the Company will pay to CFPI the difference between $1.0 million and the applicable net proceeds. Alternatively, in the event that such net proceeds exceed $1.0 million, CFPI will pay to the Company the difference between the applicable net proceeds and $1.0 million.

Contractual and Other Obligations

Because we expect to continue significantly increasing our investments in software application and development, we enter into various contracts and agreements to increase our availability of capital. Cash that is received through these obligations is used to meet both short and long-term liquidity requirements as discussed above. These requirements generally include funding for the research and development of software, the development of applications that enable voice interaction, marketing programs and personnel-related costs. The primary types of obligations into which we enter include contractual obligations, operating and finance lease obligations and a diversified spread of debt instruments. See Note 7 and Note 14 to our unaudited condensed consolidated financial statements included within this Quarterly Report on Form 10-Q for more information.

Debt Financing

Below are our material debt agreements as of September 30, 2022:

•SVB March 2021 — In March 2021, we entered into a loan and security agreement with a commercial bank to borrow $30.0 million (“SVB March 2021 Note”). In April 2022, the Company entered into a loan modification agreement, which extended the SVB March 2021 Note’s early maturity date from April 26, 2022 to May 26, 2022. As the SNAP June 2020 Note converted on April 26, 2022 the performance milestone was met and the SVB March 2021 Note’s maturity date was extended to September 1, 2024.

•SCI June 2021 Note — In June 2021, we issued a note pursuant to a loan and security agreement with a lender to borrow up to a commitment amount of $15.0 million in $5.0 million increments (“SCI June 2021 Note”). Through December 31, 2021, we had borrowed $15.0 million. The maturity date of the loan is May 31, 2025.

Table of Contents

Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2022 and 2021 (in thousands):


	Nine Months Ended September 30,
	2022		2021
Net cash used in operating activities	$	(73,605)	$	(51,097)
Net cash used in investing activities	(1,188)		(234)
Net cash provided by financing activities	85,613		34,898
	$	10,820	$	(16,433)

Cash Flows Used in Operating Activities

Net cash used in operating activities was $73.6 million during the nine months ended September 30, 2022 compared to $51.1 million during the nine months ended September 30, 2021. The $22.5 million increase in cash used in operating activities was primarily due to our increased net loss, adjusted for non-cash expenses, including stock-based compensation and depreciation and amortization, as well as an increase in our contract assets balance of $6.0 million.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $1.2 million during the nine months ended September 30, 2022 compared to $0.2 million during the nine months ended September 30, 2021. The $1.0 million increase in cash used in investing activities was driven by purchases of property and equipment.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities was $85.6 million during the nine months ended September 30, 2022 compared to $34.9 million during the nine months ended September 30, 2021. The $50.7 million increase in cash provided by financing activities was primarily due to the $90.7 million in net proceeds from the Business Combination and a $1.7 million increase in proceeds from common stock options exercised during the nine months ended September 30, 2022. This was partially offset by net proceeds of $34.9 million from the issuance of the SVB March 2021 Note and the SCI June 2021 Note during the nine months ended September 30, 2021 and payments on our notes payable of $7.5 million during the nine months ended September 30, 2022.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Commitments and Contingencies

We have no material changes to our commitments and contingencies as of September 30, 2022 as disclosed in the contractual obligations and commitment section in our audited consolidated financial statements as of December 31, 2021 included within our Form S-1/A.

Indemnification Agreements

We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal.

Table of Contents

Critical Accounting Policies and Significant Management Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements included elsewhere in the Form 10-Q that have been prepared in accordance with U.S. GAAP. The preparation of ~~the unaudited condensed~~these financial statements ~~in conformity with US GAAP~~ requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the ~~unaudited condensed~~ financial statements, ~~and~~as well as the reported ~~amounts of~~income (loss) generated and expenses incurred during the reporting ~~period.~~periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results ~~could~~may differ from ~~those estimates. We have identified the following as~~these estimates under different assumptions or conditions and any such differences may be material.

For a discussion of our critical accounting ~~policies:~~

~~Common Stock Subject to Possible Redemption~~

~~The Company accounts for its common stock subject to possible redemption~~policies, see “Management’s discussion and analysis of financial condition and results of operations of SoundHound” in ~~accordance with~~our most recently filed Form S-1/A, and the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock feature certain redemption rights that is considered to be outside of the Company’s control and subjectnotes to the occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.

~~Net Loss Per Common Share~~

Net loss per common share is computed by dividing net loss by the weighted average number of common stock outstanding for each of the periods. The calculation of diluted loss per common share does not consider the effect of the warrants issued in connection with the (i) IPO, (ii) exercise of overallotment and (iii) Private Placement since the exercise price of the warrants is higher than the market price. The warrants are exercisable to purchase 6,858,000 shares of common stockconsolidated financial statements appearing in the ~~aggregate.~~

Form S-1/A as of December 31, 2021.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.~~

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk~~

Risk.

Not required for smaller reporting companies.

As of September 30, 2021, we were not subject to any market or interest rate risk. The net proceeds held in the Trust Account have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less, or in certain money market funds that invest solely in U.S. treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Item 4. Controls and ~~Procedures~~Procedures.

(a)

~~Disclosure~~Evaluation of disclosure controls and procedures ~~are~~

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), our management carried out an evaluation, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and ~~other~~ procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures as of September 30, 2022 are ~~designed~~effective to ensure that information required to be disclosed by us in ~~our~~the reports ~~filed~~that we file or ~~submitted~~submit under the Exchange Act, iswas recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and ~~forms. Disclosure controls~~forms, and ~~procedures include, without limitation, controls and procedures designed to ensure~~ that such information ~~required to be disclosed in our reports filed or submitted under the Exchange Act~~ is accumulated and communicated to our management, including our ~~Chief Executive Officer~~CEO and ~~Chief Financial Officer,~~CFO, to allow timely decisions regarding required disclosure.

~~Evaluation of Disclosure Controls~~In designing and ~~Procedures~~

~~As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of~~evaluating our disclosure controls and procedures, our management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that our management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on this evaluation, the CEO and CFO have concluded that, as of ~~September 30, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, during~~the end of the period covered by this report, ~~our~~the Company’s disclosure controls and procedures were at the reasonable assurance level.

(b)Changes in Internal Control over Financial Reporting

There has not ~~effective because of a material weakness~~been any change in our internal control over financial ~~reporting. A material weakness is a deficiency, or a combination of deficiencies,~~reporting (as defined in ~~internal control over financial reporting, such that there is a reasonable possibility that a material misstatement~~Rules 13a-15(f) and 15d-15(f) of the ~~Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the material weakness identified in~~Exchange Act) that occurred during our internal controls related to the Company’s accounting for complex financial instruments. This material weakness resulted in the restatement of the Company’s balance sheet as of March 15, 2021, and its interim financial statements for the quarter ended March 31, 2021; June 30, 2021; and September 30, 2021.

~~Changes in Internal Control Over Financial Reporting~~

~~During the most recently completed~~ fiscal quarter ended September 30, 2021, we have enhanced our internal controls over financial reporting relating to redeemable equity instruments and Representative Shares by continuing to recognize all Public Subunits as temporary equity and adopting a more robust approach to assessing the fair value of our equity instruments. We believe our efforts are effective in identifying and appropriately applying applicable accounting requirements but we believe we will need additional time to monitor and assess our efforts to evaluate their ultimate effectiveness. There have been no changes in our internal controls over financial reporting, except as previously noted,2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

~~ITEM~~

Item 1. ~~LEGAL PROCEEDINGS~~

Legal Proceedings.

We are not a party to any material pending legal proceedings, nor are we aware of any pending litigation or legal proceeding against us that would have a material adverse effect upon our results of operations or financial condition.

~~None.~~

~~ITEM~~

Item 1A. ~~RISK FACTORS~~

Risk Factors.

Not required for smaller reporting companies. However, as of the date of this Quarterly Report, ~~other than as described below,~~ there have been no material changes to the risk factors disclosed in our ~~final prospectus for our IPO~~current report on Form 8-K, which was originally filed with the SEC on ~~March 12, 2021. Factors that could cause our actual results~~May 2, 2022 and amended by Amendment No. 1 to ~~differ materially from those in this Quarterly~~Current Report ~~are any of the risks described in our final prospectus for our IPO filed with the SEC~~ on ~~March 12, 2021.~~Form 8-K. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

~~ITEM~~

Item 2. ~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

Unregistered Sales of Equity Securities and Use of Proceeds.

There were no sales of equity securities during the period covered by this Quarterly Report that were not either registered under the Securities Act ~~and~~or were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K filed by the ~~company.~~

Company.

~~ITEM~~

Item 3. ~~DEFAULTS UPON SENIOR SECURITIES~~

Defaults Upon Senior Securities

None.

~~None.~~

~~ITEM~~

Item 4. ~~MINE SAFETY DISCLOSURES~~

Mine Safety Disclosures

Not applicable.

~~ITEM~~

Item 5. ~~OTHER INFORMATION~~

Other Information

None.

Table of Contents

~~None.~~

~~ITEM~~

Item 6. ~~EXHIBITS~~

Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form ~~10-Q/A.~~

10-Q.


No.						Description of Exhibit
31.1*						Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						Inline XBRL Instance Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	~~Filed herewith.~~
**	~~Furnished.~~

* Filed herewith.

** Furnished.

Table of Contents

SIGNATURES

~~SIGNATURES~~

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	~~ARCHIMEDES TECH SPAC PARTNERS CO.~~SOUNDHOUND AI, INC

Date: ~~January 10,~~November 14, 2022	By:	/s/ ~~Stephen N. Cannon~~Dr. Keyvan Mohajer
	Name:	~~Stephen N. Cannon~~Dr. Keyvan Mohajer
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Date: ~~January 10,~~November 14, 2022	By:	/s/ ~~Long Long~~Nitesh Sharan
	Name:	~~Long Long~~Nitesh Sharan
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

This Amendment No. 1 (&#x201c;Amendment No. 1&#x201d;) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Archimedes Tech SPAC Partners Co. as of and for the period ended September 30, 2021, as filed with the Securities and Exchange Commission (&#x201c;SEC&#x201d;) on November 15, 2021 (the &#x201c;First Amended Filing&#x201d;).On November 15, 2021, Archimedes Tech SPAC Partners Co. (the &#x201c;Company&#x201d;) filed its Form 10-Q for the quarterly period ending September 30, 2021 (the &#x201c;Q3 Form 10-Q&#x201d;), which included a Note 2, Revision of Prior Period Financial Statements, (&#x201c;Note 2&#x201d;) that describes a revision to the Company&#x2019;s classification of public subunits (and the underlying shares of common stock) subject to redemption issued as part of the units sold in the Company&#x2019;s initial public offering (&#x201c;IPO&#x201d;) on March 15, 2021. As described in Note 2, upon its IPO, the Company classified a portion of its public subunits (and the underlying shares of common stock) in permanent equity. The Company&#x2019;s management re-evaluated the conclusion and, as a result, corrected the error by reclassifying all common stock underlying the public subunits subject to redemption as temporary equity. This resulted in a revision to the initial carrying value of the common stock underlying the public subunits subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), and common stock.The Company determined the changes were not qualitatively material to the Company&#x2019;s previously issued financial statements and did not restate its financial statements. Instead, the Company revised its prior period financial statements in Note 2 to its Q3 Form 10-Q. Although the qualitative factors that management assessed tended to support a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. The qualitative and quantitative factors support a conclusion that the misstatements are material on a quantitative basis. As such, upon further consideration of the change, the Company determined the change in classification of the common stock underlying the public subunits and change to the Company&#x2019;s presentation of earnings per share is material quantitatively and the Company should restate its previously issued financial statements.Therefore, on December 21, 2021, the Company&#x2019;s management and the audit committee of the Company&#x2019;s board of directors (the &#x201c;Audit Committee&#x201d;) concluded that the Company&#x2019;s previously issued (i) audited balance sheet as of March 15, 2021 included in the Company&#x2019;s Form 8-K filed with the SEC on March 19, 2021, (ii) unaudited interim financial statements included in the Company&#x2019;s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 filed with the SEC on July 27, 2021 (part of the &#x201c;Affected Periods&#x201d;), should be restated to report all public subunits as temporary equity and should no longer be relied upon. As such, the Company will restate its financial statements for the aforementioned periods in this Quarterly Report on Form 10-Q/A.Additionally, the Company had re-evaluated the fair value of the representative shares that had been issued on January 13, 2021, prior to the IPO, and concluded that the fair value the Company had previously used for the representative shares was incorrect. The correction to the value of the representative shares would impact the allocation of the proceeds recorded by the Company upon the closing of the IPO on March 15, 2021, which in turn impacts the deemed dividend and thus the earnings per share of the Company that was reported in the Company&#x2019;s financial statements as of March 31, 2021, June 30, 2021, and September 30, 2021 included in the Form 10-Q filed on July 27, 2021, August 27, 2021, and November 15, 2021, respectively (part of the &#x201c;Affected Periods&#x201d;).The Company determined the changes were not qualitatively material to the Company&#x2019;s previously issued financial statements and did not restate or revise its financial statements. However, after management re-evaluated this conclusion in conjunction with the Company&#x2019;s decision to restate its previously issued financial statements to report all of the Company&#x2019;s redeemable public subunits as temporary equity, management concluded that the Company should restate its previously issued financial statements to correct the fair value of the representative shares as well.Therefore, on January 7, 2022, the Company&#x2019;s management and the audit committee of the Company&#x2019;s board of directors (the &#x201c;Audit Committee&#x201d;) concluded that the Company&#x2019;s previously issued unaudited interim financial statements included in the Company&#x2019;s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, June 30, 2021, and September 30, 2021 filed with the SEC on July 27, 2021, August 27, 2021, and November 15, 2021, respectively, should be restated to correct the fair value of the representative shares and should no longer be relied upon. As such, the Company will restate its financial statements for the aforementioned periods in this Quarterly Report on Form 10-Q/A.The Company does not expect any of the above changes will have any impact on its cash position and cash held in the trust account established in connection with the IPO.After re-evaluation, the Company&#x2019;s management has concluded that, in light of the errors described above, a material weakness existed in the Company&#x2019;s internal control over financial reporting during the Affected Periods and that the Company&#x2019;s disclosure controls and procedures were not effective. The Company&#x2019;s remediation plan with respect to such material weakness is described in more detail below in this Quarterly Report on Form 10-Q/A. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 true --12-31 Q3 0001840856 iso4217:USD xbrli:shares


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


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


~~ARCHIMEDES TECH SPAC PARTNERS CO.~~SOUNDHOUND AI, INC.
(Exact name of registrant as specified in its charter)

~~2093 Philadelphia Pike #1968, Claymont, DE 19703~~
5400 Betsy Ross Drive, Santa Clara, CA 95054
(Address of ~~Principal Executive Offices, including zip code)~~principal executive offices) (Zip Code)

~~(650) 560-4753~~
(408) 441-3200
(Registrant’s telephone number, including area code)


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


PART I. FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements		1

	Condensed Consolidated Balance Sheets as of ~~September~~Se ptember 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021		12

	~~Unaudited~~ Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, ~~2021~~2022 and ~~for the period from September 15, 2020 (inception) through September 30, 2020~~2021		23

	~~Unaudited~~ Condensed Consolidated Statements of ~~Changes in~~Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, ~~2021~~2022 and ~~for the period from September 15, 2020 (inception) through September 30, 2020~~2021		34

	~~Unaudited~~ Condensed ~~Statement~~Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~for the period from September 15, 2020 (inception) through September 30, 2020~~2021		47

	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements		58

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1843

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2057

Item 4.	Controls and Procedures		2057

PART II. OTHER INFORMATION		2158

Item 1.	Legal Proceedings		2158

Item 1A.	Risk Factors		2158

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2158

Item 3.	Defaults Upon Senior Securities		2158

Item 4.	Mine Safety Disclosures		2158

Item 5.	Other Information		2158

Item 6.	Exhibits		2159

SIGNATURES		2260

	September 30, 2021			December 31, 2020
	(unaudited)
Assets
Current assets
Cash and cash equivalent	$	628,652		$	-
Prepaid expenses		134,478			-
Total current assets		763,130			-
Marketable securities held in Trust Account		133,007,230			-
Total Assets	$	133,770,360		$	-

Liabilities and Stockholders’ Equity
Current liabilities
Accrued offering costs and expenses	$	126,019		$	-
Due to related party		-			716
Total current liabilities		126,019			716
Warrant liability		161,359			-
Total liabilities	$	287,378		$	716

Commitments and Contingencies
Common stock subject to possible redemption, 13,300,000 shares and 0 shares at redemption value as of September 30, 2021 and December 31, 2020, respectively	$	133,007,230		$	-

Stockholders’ Equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding	$	-		$	-
Common stock, $0.0001 par value; 100,000,000 shares and 31,000,000 shares authorized, 4,161,000 shares and 0 shares issued and outstanding (excluding 13,300,000 shares and 0 shares subject to possible redemption) as of September 30, 2021 and December 31, 2020, respectively		416			-
Additional paid-in-capital		821,700			-
Accumulated deficit		(346,364	)		(716	)
Total Stockholders’ Equity	$	475,752		$	(716	)

Total Liabilities and Stockholders’ Equity	$	133,770,360		$	-

	For the Three Months Ended September 30, 2021			For the Nine Months Ended September 30, 2021			For the Period from September 15, 2020 (Inception) to September 30, 2020
Formation and operating costs	$	229,484		$	461,826		$	716
Loss from operations		(229,484	)		(461,826	)		(716	)

Other income
Trust interest income		3,352			7,230			-
Unrealized gain on change in fair value of warrants		35,057			108,948			-
Total other income		38,409			116,178			-

Net loss	$	(191,075	)	$	(345,648	)	$	(716	)

Basic and diluted weighted average shares outstanding, common stock subject to redemption		13,300,000			9,675,824			-
Basic and diluted net (loss) income per share attributable to common stock subject to redemption	$	(0.01	)	$	0.37		$	-

Basic and diluted weighted average shares outstanding, common stock		4,161,000			3,891,044			-
Basic and diluted net loss per share attributable to common stockholders	$	(0.01	)	$	(1.01	)	$	-

	Common Stock						Additional Paid-in			Accumulated			Total Stockholders’
	Shares			Amount			Capital			Deficit			Equity
Balance as of December 31, 2020		-		$	-		$	-		$	(716	)	$	(716	)
Sale of 12,000,000 Units through IPO		12,000,000			1,200			119,998,800			-			120,000,000
Sale of 1,300,000 Units through over-allotment		1,300,000			130			12,999,870			-			13,000,000
Sale of 416,000 Private Units in private placement		416,000			42			4,159,958			-			4,160,000
Issuance of representative shares		420,000			42			2,024,421			-			2,024,463
Common stock issued to initial stockholders		3,450,000			345			24,655			-			25,000
Forfeiture of founder shares		(125,000	)		(13	)		13			-			-
Underwriting fee		-			-			(2,660,000	)		-			(2,660,000	)
Offering costs charged to the stockholders’ equity		-			-			(2,449,810	)		-			(2,449,810	)
Initial classification of warrant liability		-			-			(270,307	)		-			(270,307	)
Reclassification of offering costs related to Public Shares		-			-			4,779,936			-			4,779,936
Net loss		-			-			-			(154,573	)		(154,573	)
Subsequent measurement of common stock subject to possible redemption		(13,300,000	)		(1,330	)		(124,412,583	)		-			(124,413,913	)
Subsequent measurement of common stock subject to redemption		-			-			(13,366,023	)		-			(13,366,023	)
Subsequent measurement of common stock subject to redemption (interest earned on trust account)		-			-			(3,878	)					(3,878	)

Balance as of June 30, 2021		4,161,000		$	416		$	825,052		$	(155,289	)	$	670,179
Net loss		-			-			-			(191,075	)		(191,075	)
Subsequent measurement of common stock subject to redemption (interest earned on trust account)		-			-			(3,352	)		-			(3,352	)

Balance as of September 30, 2021		4,161,000		$	416		$	821,700		$	(346,364	)	$	475,752

	For the Nine Months Ended September 30, 2021			For the Period from September 15, 2020 (Inception) to September 30, 2020

Cash flows from Operating Activities:
Net loss	$	(345,648	)	$	(716	)
Adjustments to reconcile net loss to net cash used in operating activities
Unrealized gain on change in fair value of warrants		(108,948	)		-
Interest earned on marketable securities held in Trust Account		(7,230	)		-
Changes in current assets and current liabilities:
Prepaid expenses		(134,478	)		-
Accrued offering costs and expenses		126,019			716
Due to related party		(716	)		-
Net cash used in operating activities		(471,001	)		-

Cash Flows from Investing Activities:
Investment held in Trust Account		(133,000,000	)		-
Net cash used in investing activities		(133,000,000	)		-

Cash flows from Financing Activities:
Proceeds from IPO and over-allotment		133,000,000			-
Payment of underwriting fees		(2,660,000	)		-
Proceeds from private placement		4,160,000			-
Proceeds from issuance of promissory note to related party		125,000			-
Payment to promissory note to related party		(125,000	)		-
Proceeds from issuance of common stock to initial stockholders		25,000			-
Payment of deferred offering costs		(425,347	)		-
Net cash provided by financing activities		134,099,653			-

Net change in cash		628,652			-
Cash, beginning of the period		-			-
Cash, end of the period	$	628,652		$	-

Supplemental disclosure of cash flow information
Initial value of common stock subject to possible redemption	$	124,413,913		$	-
Reclassification of offering costs related to Public Shares	$	(4,779,936	)	$	-
Subsequent measurement of common stock subject to redemption	$	13,366,023		$	-
Subsequent measurement of common stock subject to redemption (interest earned on trust account)	$	7,230		$	-
Forfeiture of founder shares	$	13		$	-
Initial classification of warrant liability	$	270,307		$	-

	As Previously Reported			Adjustments			As Restated
Balance Sheet at March 15, 2021
Common stock subject to possible redemption	$	116,095,120		$	3,904,880		$	120,000,000
Common stock		465			(39	)		426
Additional paid-in capital		5,004,068			(4,158,254	)		845,814

Balance Sheet at March 31, 2021
Common stock subject to possible redemption	$	128,744,590		$	4,255,935		$	133,000,525
Common stock		459			(43	)		416
Additional paid-in capital		5,084,297			(4,255,892	)		828,405

Statement of Operations for the three months ended March 31, 2021
Basic and diluted weighted average shares outstanding, common stock subject to redemption		2,059,408			247,259			2,306,667
Basic and diluted weighted average shares outstanding, common stock		3,856,614			(514,481	)		3,342,133
Basic and diluted net income (loss) per share, common stock subject to redemption	$	0.00		$	3.41		$	3.41
Basic and diluted net income (loss) per share, common stock not subject to redemption	$	(0.02	)	$	(2.36	)	$	(2.38	)

Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2021
Issuance of representative shares - Additional Paid-in-Capital	$	3,458		$	2,020,963		$	2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit)		3,500			2,020,963			2,024,463
Offering costs charged to the Stockholders' equity		(428,847	)		(2,020,963	)		(2,449,810	)
Reclassification of offering costs related to public shares	$	-		$	4,779,936		$	4,779,936
Subsequent measurement of common stock subject to redemption	$	-		$	(13,366,023	)	$	(13,366,023	)

Statement of Cash Flows for the three months ended March 31, 2021
Supplemental disclosure of cash flow information
Initial value of common stock subject to possible redemption	$	115,841,700		$	8,572,213		$	124,413,913
Change in value of common stock subject to possible redemption	$	12,902,890		$	(12,902,365	)	$	-
Reclassification of offering costs related to public shares	$	-		$	(4,779,936	)	$	(4,779,936	)
Subsequent measurement of common stock subject to redemption	$	-		$	13,366,023		$	13,366,023
Subsequent measurement of common stock subject to redemption (interest earned on trust account)	$	-		$	525		$	525

Statement of Operations for the six months ended June 30, 2021
Basic and diluted net income (loss) per share, common stock subject to redemption	$	0.46		$	0.08		$	0.54
Basic and diluted net income (loss) per share, common stock not subject to redemption	$	(1.00	)	$	(0.17	)	$	(1.17	)

Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2021
Issuance of representative shares - Additional Paid-in-Capital	$	3,458		$	2,020,963		$	2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit)		3,500			2,020,963			2,024,463
Offering costs charged to the Stockholders' equity		(428,847	)		(2,020,963	)		(2,449,810	)
Reclassification of offering costs related to public shares	$	2,886,166		$	1,893,770		$	4,779,936
Subsequent measurement of common stock subject to redemption	$	(11,472,253	)	$	(1,893,770	)	$	(13,366,023	)

Statement of Cash Flows for the six months ended June 30, 2021
Reclassification of offering costs related to public shares	$	(2,886,166	)	$	(1,893,770	)	$	(4,779,936	)
Subsequent measurement of common stock subject to redemption	$	11,472,253		$	1,893,770		$	13,366,023

Statement of Operations for the nine months ended September 30, 2021
Basic and diluted net income (loss) per share, common stock subject to redemption	$	0.31		$	0.06		$	0.37
Basic and diluted net income (loss) per share, common stock not subject to redemption	$	(0.87	)	$	(0.14	)	$	(1.01	)

Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2021
Issuance of representative shares - Additional Paid-in-Capital	$	3,458		$	2,020,963		$	2,024,421
Issuance of representative shares - Stockholders' Equity (Deficit)		3,500			2,020,963			2,024,463
Offering costs charged to the Stockholders' equity		(428,847	)		(2,020,963	)		(2,449,810	)
Reclassification of offering costs related to public shares	$	2,886,166		$	1,893,770		$	4,779,936
Subsequent measurement of common stock subject to redemption	$	(11,472,253	)	$	(1,893,770	)	$	(13,366,023	)

Statement of Cash Flows for the nine months ended September 30, 2021
Reclassification of offering costs related to public shares	$	(2,886,166	)	$	(1,893,770	)	$	(4,779,936	)
Subsequent measurement of common stock subject to redemption	$	11,472,253		$	1,893,770		$	13,366,023

	For the three months ended			For the nine months ended
	September 30, 2021			September 30, 2021
Net loss	$	(191,075	)	$	(345,648	)
Accretion of temporary equity to redemption value		(3,352	)		(13,373,253	)
Net loss including accretion of temporary equity to redemption value	$	(194,427	)	$	(13,718,901	)

	January 13,		Quoted Prices In Active Markets	Significant Other Observable Inputs		Significant Other Unobservable Inputs
	2021		(Level 1)	(Level 2)		(Level 3)
Stockholders’ Equity:
Representative Shares	$	2,024,463	$	$	-	$	2,024,463
	$	2,024,463	$	$	-	$	2,024,463

Input	January 13, 2021
Restricted term (years)		1.11
Expected volatility		12.5	%
Risk-free interest rate		0.12	%
Stock price	$	9.37
Dividend yield		0	%

	September 30,		Quoted Prices In Active Markets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets:
U.S. Mutual Fund held in Trust Account	$	133,007,230	$	133,007,230	$	-	$	-
	$	133,007,230	$	133,007,230	$	-	$	-
Liabilities:
Warrant Liability	$	161,359	$	-	$	-	$	161,359
	$	161,359	$	-	$	-	$	161,359

Input	March 15, 2021
Expected term (years)		5.99
Expected volatility		24.3	%
Risk-free interest rate		1.06	%
Stock price	$	9.36
Dividend yield		0	%
Exercise price	$	11.5

	Warrant Liability
Fair value as of December 31, 2020	$	-
Initial fair value of warrant liability upon issuance at IPO		270,307
Change in fair value		(108,948	)

Fair value as of September 30, 2021	$	161,359