Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2023 | May 09, 2023 | |
Document Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-40193 | |
Entity Registrant Name | SOUNDHOUND AI, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 86-1286799 | |
Entity Address, Address Line One | 5400 Betsy Ross Drive | |
Entity Address, City or Town | Santa Clara | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 95054 | |
City Area Code | (408) | |
Local Phone Number | 441-3200 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001840856 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2023 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Class A Common Stock | ||
Document Information | ||
Title of 12(b) Security | Class A Common stock, par value $0.0001 per share | |
Trading Symbol | SOUN | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 177,215,906 | |
Warrant | ||
Document Information | ||
Title of 12(b) Security | Redeemable Warrants | |
Trading Symbol | SOUNW | |
Security Exchange Name | NASDAQ | |
Class B Common Stock | ||
Document Information | ||
Entity Common Stock, Shares Outstanding | 39,735,408 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 46,331 | $ 9,245 |
Accounts receivable, net | 2,660 | 3,414 |
Prepaid expenses | 1,651 | 2,514 |
Contract assets | 1,546 | 1,671 |
Other current assets | 1,069 | 859 |
Total current assets | 53,257 | 17,703 |
Restricted cash equivalents, non-current | 230 | 230 |
Right-of-use assets | 7,393 | 8,119 |
Property and equipment, net | 2,754 | 3,447 |
Deferred tax asset | 55 | 55 |
Contract assets, non-current | 7,040 | 7,041 |
Other non-current assets | 2,074 | 1,656 |
Total assets | 72,803 | 38,251 |
Current liabilities: | ||
Accounts payable | 2,542 | 2,798 |
Accrued liabilities | 12,306 | 7,462 |
Operating lease liabilities | 3,157 | 3,282 |
Finance lease liabilities | 147 | 160 |
Income tax liability | 1,213 | 1,314 |
Deferred revenue | 5,319 | 5,812 |
Notes payable | 16,828 | 16,668 |
Total current liabilities | 41,512 | 37,496 |
Operating lease liabilities, net of current portion | 5,045 | 5,715 |
Finance lease liabilities, net of current portion | 102 | 128 |
Deferred revenue, net of current portion | 5,433 | 7,543 |
Notes payable, net of current portion | 14,035 | 18,299 |
Other non-current liabilities | 4,294 | 4,295 |
Total liabilities | 70,421 | 73,476 |
Commitments and contingencies (Note 6) | ||
Stockholders’ equity (deficit): | ||
Series A Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; 835,011 and 0 shares issued and outstanding, aggregate liquidation preference of $25,050 and $0 as of March 31, 2023 and December 31, 2022, respectively | 24,942 | 0 |
Additional paid-in capital | 505,889 | 466,857 |
Accumulated deficit | (528,471) | (502,102) |
Total stockholders’ equity (deficit) | 2,382 | (35,225) |
Total liabilities and stockholders’ equity (deficit) | 72,803 | 38,251 |
Class A Common Stock | ||
Stockholders’ equity (deficit): | ||
Common stock issued | 18 | 16 |
Class B Common Stock | ||
Stockholders’ equity (deficit): | ||
Common stock issued | $ 4 | $ 4 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock shares issued (in shares) | 835,011 | 0 |
Preferred stock shares outstanding (in shares) | 835,011 | 0 |
Liquidation Preference | $ 25,050,000 | $ 0 |
Class A Common Stock | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 455,000,000 | 455,000,000 |
Common stock, shares issued (in shares) | 174,714,741 | 160,297,664 |
Common stock, shares outstanding (in shares) | 174,714,741 | 160,297,664 |
Class B Common Stock | ||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 44,000,000 | 44,000,000 |
Common stock, shares issued (in shares) | 39,735,408 | |
Common stock, shares outstanding (in shares) | 39,735,408 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Revenues | $ 6,707 | $ 4,290 |
Operating expenses: | ||
Cost of revenues | 1,976 | 1,773 |
Sales and marketing | 4,875 | 2,581 |
Research and development | 14,184 | 16,650 |
General and administrative | 7,125 | 4,003 |
Restructuring | 3,585 | 0 |
Total operating expenses | 31,745 | 25,007 |
Loss from operations | (25,038) | (20,717) |
Other expense, net: | ||
Interest expense | (1,096) | (2,977) |
Other income (expense), net | 94 | (1,057) |
Total other expense, net | (1,002) | (4,034) |
Loss before provision for income taxes | (26,040) | (24,751) |
Provision for income taxes | 329 | 352 |
Net loss | $ (26,369) | $ (25,103) |
Net loss per share: | ||
Basic (in Dollars per share) | $ (0.13) | $ (0.36) |
Diluted (in Dollars per share) | $ (0.13) | $ (0.36) |
Weighted-average common shares outstanding: | ||
Basic (in shares) | 205,082,328 | 69,604,188 |
Diluted (in shares) | 205,082,328 | 69,604,188 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands | Total | Equity Line Of Credit Program | Previously Reported | Adjustment | Preferred Stock | Common Stock | Common Stock Previously Reported | Common Stock Adjustment | Additional Paid-in Capital | Additional Paid-in Capital Equity Line Of Credit Program | Additional Paid-in Capital Previously Reported | Accumulated Deficit | Accumulated Deficit Previously Reported | Class A | Class A Common Stock | Class A Common Stock Equity Line Of Credit Program | Class A Common Stock Previously Reported | Class B | Class B Common Stock | Class B Common Stock Previously Reported |
Increase (Decrease) in Temporary Equity | ||||||||||||||||||||
Balance at the beginning | $ 279,503 | $ 279,503 | ||||||||||||||||||
Balance at the beginning (in Shares) at Dec. 31, 2021 | 106,949,326 | 19,248,537 | 87,700,789 | |||||||||||||||||
Balance at the end at Mar. 31, 2022 | $ 279,503 | |||||||||||||||||||
Balance at the ending (in Shares) at Mar. 31, 2022 | 106,949,326 | |||||||||||||||||||
Balance at the beginning at Dec. 31, 2021 | $ (343,237) | $ (343,237) | $ 1 | $ 1 | $ 43,491 | $ 43,491 | $ (386,729) | $ (386,729) | $ 0 | $ 0 | $ 0 | $ 0 | ||||||||
Balance at the beginning (in shares) at Dec. 31, 2021 | 68,258,556 | 12,280,051 | 55,978,505 | 0 | 0 | 0 | 0 | |||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 2,474 | 2,474 | ||||||||||||||||||
Issuance of common stock upon exercise of stock options (in Shares) | 2,429,625 | |||||||||||||||||||
Stock-based compensation | 2,464 | 2,464 | ||||||||||||||||||
Net loss | (25,103) | (25,103) | ||||||||||||||||||
Balance at the end at Mar. 31, 2022 | (363,402) | $ 1 | 48,429 | (411,832) | $ 0 | $ 0 | ||||||||||||||
Balance at the end (in shares) at Mar. 31, 2022 | 70,688,181 | 0 | 0 | |||||||||||||||||
Increase (Decrease) in Temporary Equity | ||||||||||||||||||||
Balance at the beginning | 279,503 | |||||||||||||||||||
Balance at the beginning at Dec. 31, 2022 | $ (35,225) | $ 0 | 466,857 | (502,102) | $ 16 | $ 4 | ||||||||||||||
Balance at the beginning (in shares) at Dec. 31, 2022 | 0 | 0 | ||||||||||||||||||
Balance at the beginning (in shares) at Dec. 31, 2022 | 160,297,664 | 160,297,664 | 39,735,408 | |||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | $ 2,425 | 2,425 | ||||||||||||||||||
Issuance of common stock upon exercise of stock options (in Shares) | 1,209,302 | |||||||||||||||||||
Issuance of common stock upon release of restricted stock units (in Shares) | 2,259,223 | |||||||||||||||||||
Issuance of shares | 24,942 | $ 28,360 | $ 24,942 | $ 28,358 | $ 2 | |||||||||||||||
Issuance of shares (in shares) | 835,011 | 10,948,552 | ||||||||||||||||||
Stock-based compensation | 8,249 | 8,249 | ||||||||||||||||||
Net loss | (26,369) | (26,369) | ||||||||||||||||||
Balance at the end at Mar. 31, 2023 | $ 2,382 | $ 24,942 | $ 505,889 | $ (528,471) | $ 18 | $ 4 | ||||||||||||||
Balance at the end (in shares) at Mar. 31, 2023 | 835,011 | 835,011 | ||||||||||||||||||
Balance at the end (in shares) at Mar. 31, 2023 | 174,714,741 | 174,714,741 | 39,735,408 | 39,735,408 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net loss | $ (26,369) | $ (25,103) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 708 | 1,292 |
Stock-based compensation | 8,249 | 2,464 |
Change in fair value of derivative and warrant liability | 0 | 592 |
Amortization of debt issuance cost | 16 | 1,742 |
Non-cash lease amortization | 894 | 846 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 754 | 728 |
Prepaid expenses | 863 | (543) |
Other current assets | (210) | 60 |
Contract assets | 126 | 0 |
Other non-current assets | 19 | (1,942) |
Accounts payable | (256) | 3,178 |
Accrued liabilities | 4,306 | 4,398 |
Operating lease liabilities | (963) | (1,080) |
Deferred revenue | (2,603) | (1,623) |
Other non-current liabilities | (1) | 2 |
Net cash used in operating activities | (14,467) | (14,989) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (15) | (611) |
Net cash used in investing activities | (15) | (611) |
Cash flows from financing activities: | ||
Proceeds from the issuance of Series A Preferred Stock, net of issuance costs | 24,942 | 0 |
Proceeds from sales of common stock under the ELOC program, net of issuance costs | 28,360 | 0 |
Proceeds from the issuance of common stock upon exercise of options | 2,425 | 2,474 |
Payments on notes payable | (4,120) | 0 |
Payments on finance leases | (39) | (519) |
Net cash provided by financing activities | 51,568 | 1,955 |
Net change in cash, cash equivalents, and restricted cash equivalents | 37,086 | (13,645) |
Cash, cash equivalents, and restricted cash equivalents, beginning of period | 9,475 | 22,822 |
Cash, cash equivalents, and restricted cash equivalents, end of period | 46,561 | 9,177 |
Reconciliation to amounts on the condensed consolidated balance sheets: | ||
Cash and cash equivalents | 46,331 | 8,211 |
Current portion of restricted cash equivalents | 0 | 230 |
Non-current portion of restricted cash equivalents | 230 | 736 |
Total cash, cash equivalents, and restricted cash equivalents shown in the condensed consolidated statements of cash flows | 46,561 | 9,177 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 1,074 | 1,013 |
Cash paid for income taxes | 550 | 32 |
Noncash investing and financing activities: | ||
Unpaid issuance costs in connection with the ELOC program | 437 | 0 |
Deferred offering costs reclassified to additional paid-in capital | 323 | 0 |
Operating lease liabilities arising from obtaining right-of-use assets | $ 0 | $ 650 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
ORGANIZATION | ORGANIZATION Nature of Operations SoundHound AI, Inc. (“we," "us," "our," "SoundHound” or the “Company”) turns sound into understanding and actionable meaning. SoundHound’s technology applications enable humans to interact with the things around them in the same way they interact with each other: by speaking naturally to mobile phones, cars, televisions, music speakers, coffee machines, and every other part of the emerging “connected” world. SoundHound's voice AI platform enables product creators to develop their own voice interfaces with their customers. The SoundHound Chat AI voice assistant allows businesses and brands to provide a next-generation voice experience for their users, seamlessly integrating Generative AI and a mix of real-time information domains. Houndify is an open-access platform that allows developers to leverage SoundHound’s Voice AI technology. We have developed a range of proprietary technologies on our voice AI platform, including Speech-to-Meaning, Deep Meaning Understanding, Collective AI, Dynamic Interaction and SoundHound Chat AI. The SoundHound music app allows customers to identify and play songs by singing or humming into the smartphone’s microphone, or by identifying the sound playing in the background from external sources. We also provide Edge+Cloud connectivity solutions that allow brands to optimize their voice-enabled products and devices with options ranging from fully-embedded to exclusively cloud-connected On April 26, 2022 (the “Closing Date”), pursuant to a merger agreement dated as of November 15, 2021 by and among Archimedes Tech SPAC Partners Co. (“ATSP”), ATSPC Merger Sub, Inc. and SoundHound, Inc. (“Legacy SoundHound”), the parties consummated the merger of ATSPC Merger Sub, Inc. with and into Legacy SoundHound, with Legacy SoundHound continuing as the surviving corporation (the “Merger”), as well as the other transactions contemplated by the Merger Agreement (the Merger and such other transactions, the “Business Combination”). In connection with the closing (the “Closing”) of the Business Combination, Legacy SoundHound became a wholly owned subsidiary of ATSP and ATSP changed its name to SoundHound AI, Inc., and all of Legacy SoundHound common stock (“Legacy SoundHound Common Stock”) and Legacy SoundHound redeemable convertible preferred stock (“Legacy SoundHound Preferred Stock”) automatically converted into shares of the Company’s Class A common stock, par value of $0.0001 per share (the “Class A Common Stock”), and the Company’s Class B common stock, par value of $0.0001 per share (the “Class B Common Stock”, and collectively with the Class A Common Stock, the “common stock”). The Company’s Class A Common Stock and certain of the Company's warrants commenced trading on the Nasdaq Global Market (“Nasdaq”) under the symbols “SOUN” and “SOUNW,” respectively, on April 28, 2022. Refer to Note 3 to these condensed consolidated financial statements for more information on the Business Combination. Legacy SoundHound determined that it was the accounting acquirer in the Business Combination based on an analysis of the 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’s board of directors immediately after the closing of the Business Combination was comprised of five board members, primarily from the board of directors of Legacy SoundHound; and • Legacy SoundHound’s management continues to hold executive management roles for the Company following the Business Combination and are responsible for the day-to-day operations. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy SoundHound issuing stock for the net assets of ATSP, accompanied by a reverse recapitalization. The primary asset acquired from ATSP was related to the cash amounts that were assumed. Separately, the Company also assumed certain warrants that were deemed to be equity upon Closing of the Business Combination. No goodwill or other intangible assets were recorded as a result of the Business Combination. While ATSP was the legal acquirer in the Business Combination, because Legacy SoundHound was deemed the accounting acquirer, the historical financial statements of Legacy SoundHound became the historical financial statements of the combined company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy SoundHound prior to the Business Combination; (ii) the combined results of the Company and Legacy SoundHound following the Closing of the Business Combination; (iii) the assets and liabilities of Legacy SoundHound at their historical cost; and (iv) the Company’s equity structure for all periods presented. In accordance with guidance applicable to 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 Common Stockholders and Legacy SoundHound Preferred Stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy SoundHound Preferred Stock and Legacy SoundHound Common Stock prior to the Business Combination have been retroactively restated as shares reflecting the conversion ratio established in the Business Combination. Going Concern Since inception, the Company has generated recurring losses as well as negative operating cash flows and reported a net loss of $26.4 million for the three months ended March 31, 2023. As of March 31, 2023, the Company had an accumulated deficit of $528.5 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 March 31, 2023 was $46.3 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 funding through additional debt or equity financing arrangements, implement incremental expense reduction measures or a combination thereof to continue financing its operations. 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. Other Risk and Uncertainties The COVID-19 outbreak in the United States 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 duration and extent to which the COVID-19 pandemic will impact our future results remains uncertain. 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 |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Significant Accounting Policies The (a) condensed consolidated balance sheet as of December 31, 2022, which has been derived from audited financial statements as filed in the Company’s Form 10-K, which was originally filed with the Securities and Exchange Commission ("SEC") on March 28, 2023 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 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 months ended March 31, 2023 are not necessarily indicative of the results for the fiscal year ending December 31, 2023 or any future interim period. Certain information and note disclosures normally included in annual financial statements 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 significant to the VIE. 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 accumulated deficit in the previously reported consolidated financial statements for the year ended December 31, 2022. 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 months ended March 31, 2023 and 2022, the Company recognized net losses related to foreign currency transactions and remeasurements of $0.1 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 amounts reported and disclosures in the condensed consolidated financial statements and accompanying notes. Such estimates include revenue recognition, allowance for doubtful accounts, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense. The Company bases its estimates on historical experience, the current economic environment and on assumptions it believes are reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from changes in the economic environment will be reflected in the financial statements in future periods. Actual results could differ materially from those estimates. 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 evaluating financial performance. Accordingly, the Company has determined that it operates as a single reportable segment. Emerging Growth Company Status The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company has the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards unless the Company otherwise early adopts select standards. Concentrations of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company regularly monitors its credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss. As of March 31, 2023, accounts receivable balances due from four customers collectively totaled 71% of the Company’s condensed consolidated accounts receivable balance. As of December 31, 2022, accounts receivable balances due from two customers collectively totaled 75% of the Company’s condensed consolidated accounts receivable balance. For the three months ended March 31, 2023, the Company had four customers that accounted for 77% of revenue, and for the three months ended March 31, 2022, the Company had four customers that accounted for 59% of revenue. Equity Issuance Costs The Company capitalizes certain legal, professional, accounting and 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 financing, these costs are recorded as a reduction of the proceeds received from the equity financing. If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) Identification of the contract(s) with a customer; (ii) Identification of the performance obligations in the contract; (iii) Determination of the transaction price, including the constraint on variable consideration; (iv) Allocation of the transaction price to the performance obligations in the contract; and (v) Recognition of revenue when, or as, performance obligations are satisfied. Contracts are accounted for when both parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is probable. Any payments received from customers that do not meet criteria for having a contract are recorded as deposit liabilities on the condensed consolidated balance sheet. Under ASC 606, assuming all other revenue recognition criteria have been met, the Company recognizes revenue for arrangements upon the transfer of control of the Company’s performance obligations to its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in ASC 606. Revenues are recognized when control of the promised goods or services are transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company 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 personnel related expenses, contractor fees, facility costs, supplies and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. Warrants The Company determines whether to classify contracts, such as warrants, that may be settled in its own stock as equity of the entity or as a liability. An equity-linked financial instrument must be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value of the warrants is recognized as other income (expense), net in the condensed consolidated statements of operations. Income Taxes The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when, in management’s estimate, it is more-likely-than-not that the deferred tax asset will not be realized. The Company adopted a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax return. The Company classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. There has been no interest expense or penalties related to unrecognized tax benefits recorded through March 31, 2023. 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 and employee stock purchase plan ("ESPP") shares. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of the awards, including the expected term of the award and the price volatility of the underlying stock. The Company calculates the fair value of the awards granted by using the Black-Scholes option-pricing model with the following assumptions: Expected Volatility — The Company estimates volatility for the awards by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the award grant for a term that is approximately equal to the awards’ expected term. Expected Term — The expected term of the Company’s awards represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint between the stock options’ vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For the valuation of ESPP shares, the Company, uses the period of time from the valuation date to the purchase date. Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the awards’ expected term at the grant date. Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero. Restricted Stock Units The Company issues 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. Preferred Stock Legacy SoundHound Preferred Stock did not have a mandatory redemption date and were assessed at issuance for classification and redemption features requiring bifurcation. The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. 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. 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. On or around January 20, 2023, the Company entered into Preferred Stock Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”) pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) for an aggregate issue price of approximately $25.0 million. The Series A Preferred Stock were assessed at issuance for classification and redemption features requiring bifurcation. The Series A Preferred Stock do not contain any of the three conditions described above to be classified as temporary equity and thus have been classified as permanent equity. See Note 10 for additional 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 qualified 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 were subject to remeasurement at each balance sheet date until exercised, and any change in fair value was recognized as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The fair value of the conversion features was 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. 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 potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, Series A Preferred Stock, stock options, ESPP shares, RSUs and warrants are considered to be potentially dilutive securities. See Note 13 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. |
BUSINESS COMBINATION
BUSINESS COMBINATION | 3 Months Ended |
Mar. 31, 2023 | |
Reverse Recapitalization [Abstract] | |
BUSINESS COMBINATION | BUSINESS COMBINATION As discussed in Note 1, on April 26, 2022, the Business Combination was consummated. Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation (the "certificate of incorporation"), the Company is authorized to issue 500,000,000 shares of capital stock consisting of 455,000,000 shares of Class A Common Stock, 44,000,000 shares of Class B Common Stock, and 1,000,000 shares of preferred stock. All stock has a par value of $0.0001 per share. The holders of Class A Common Stock are entitled to one vote for each share of Class A Common Stock held and the holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval. The holders of Class A Common Stock and Class B Common Stock vote together as one class, other than on certain specific matters described in the Company’s certificate of incorporation. The Business Combination was approved by ATSP’s stockholders at a special meeting thereof (the “Special Meeting”), held in lieu of the 2022 annual meeting of the Company’s stockholders. The Business Combination fulfilled the definition of an “initial business combination” as required by the ATSP’s Amended and Restated Certificate of Incorporation. This fulfillment resulted in ATSP ceasing to be a shell company upon the Closing. An aggregate of 12,767,950 shares of Class A Common Stock sold in ATSP’s initial public offering (the “public shares”) exercised their rights to redemption. The redemption right provided holders the right to have their public shares redeemed for a pro rata portion of the trust account holding the proceeds from ATSP’s initial public offering. The value of the shares is calculated as of two (2) business days prior to the date of the Special Meeting, which was $10.00 per share, or $127.7 million in the aggregate. As a result of the Business Combination, among other things (1) all outstanding shares of Legacy SoundHound Common Stock as of immediately prior to the Closing (including Legacy SoundHound Common Stock resulting from the Legacy SoundHound Preferred Stock Conversion), were exchanged at an conversion ratio of 5.5562 (the “Conversion Ratio”) for an aggregate of 140,114,060 shares of Class A Common Stock and 40,396,600 Class B Common Stock; (2) each outstanding warrant to purchase shares of Legacy SoundHound Common Stock automatically converted into a warrant to purchase, subject to substantially the same terms and conditions as were applicable under these warrants prior to the Effective Time, shares of Class A Common Stock, proportionately adjusted for the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Conversion Ratio and were net exercised upon the Closing; (3) each outstanding option to purchase shares of Legacy SoundHound Common Stock converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under these options prior to the Effective Time, shares of Class A Common Stock equal to the number of shares subject to such option prior to the Effective Time multiplied by the Conversion Ratio, with the per share exercise price equal to the exercise price prior to the Effective Time divided by the Conversion Ratio; (4) each Legacy SoundHound RSU converted into a restricted stock unit of SoundHound, subject to substantially the same terms and conditions as were applicable under the SoundHound RSU prior to the Closing. SoundHound RSU holders received the same consideration holders would have received if the SoundHound RSU was converted into Legacy SoundHound Common Stock immediately prior to the Effective Time. In connection with the Merger Agreement, ATSP entered into subscription agreements (collectively, the “Subscription Agreements”) with certain accredited investors (the “Subscribers”). Pursuant to the Subscription Agreements, the Subscribers agreed to purchase, and ATSP agreed to sell to the Subscribers, an aggregate of 11,300,000 shares of Class A Common Stock (“PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $113.0 million (the “PIPE Investment”). The PIPE shares are identical to the shares of Class A Common Stock that were held by the ATSP’s public stockholders at the time of the Closing, except that the PIPE Shares were not entitled to any redemption rights. The sale of PIPE Shares was consummated concurrently with the Closing. The Business Combination is accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, ATSP was treated as the “acquired” company for financial reporting purposes. The net assets of Legacy SoundHound were stated at historical cost, with no goodwill or other intangible assets recorded. In accounting for the Business Combination and after redemptions, net proceeds received by the Company totaled $90.7 million. The table below shows the total net proceeds from the Business Combination and the PIPE Investment (in thousands): Cash - ATSP trust and cash (net of redemption) $ 5,357 Cash - PIPE Investment 113,000 Less: transaction costs (27,668) Net proceeds from Business Combination and PIPE Investment $ 90,689 Relating to the consummation of the Business Combination, the Company incurred $27.7 million in total transaction costs consisting of direct legal, accounting and other fees. $4.1 million of Legacy SoundHound transaction costs specific and directly attributable to the Business Combination were initially capitalized as deferred offering costs and included in other non-current assets on the 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. 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 |
REVENUE RECOGNITION
REVENUE RECOGNITION | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | 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. 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 March 31, 2023, $0.7 million of professional service revenue was recognized over time, with the remaining $0.9 million recognized at a point in time when the performance obligation was fulfilled and control of the service was transferred to the customer. During the three months ended March 31, 2022, all $0.6 million of professional service revenue was recognized over time. 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, 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 months ended March 31, 2023 and 2022, revenue under each performance obligation was as follows (in thousands): Three Months Ended 2023 2022 Hosted services $ 4,745 $ 3,344 Professional services 1,643 567 Monetization 140 208 Licensing 179 171 Total $ 6,707 $ 4,290 For the three months ended March 31, 2023 and 2022, the disaggregated revenue by geographic location was as follows (in thousands): Three Months Ended 2023 2022 United States $ 786 $ 852 Japan 937 927 Germany 1,788 683 France 730 459 Korea 2,259 949 Other 207 420 Total $ 6,707 $ 4,290 For the three months ended March 31, 2023 and 2022, the disaggregated revenue by recognition pattern was as follows (in thousands): Three Months Ended 2023 2022 Over time revenue $ 5,505 $ 3,911 Point-in-time 1,202 379 Total $ 6,707 $ 4,290 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 months ended March 31, 2023 and 2022, the disaggregated revenue by service type was as follows (in thousands): Three Months Ended 2023 2022 Product royalties $ 6,176 $ 3,709 Service subscriptions 391 373 Monetization 140 208 Total $ 6,707 $ 4,290 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. 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 was $1.8 million for the three months ended March 31, 2023 as compared to $2.2 million for the three months ended March 31, 2022. As of March 31, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that were unsatisfied or partially unsatisfied was $18.4 million. Given the applicable contract terms, $7.3 million is expected to be recognized as revenue within one year, $7.9 million is expected to be recognized between two 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. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended |
Mar. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
ACCRUED LIABILITIES | ACCRUED LIABILITIES Accrued liabilities consisted of the following (in thousands): March 31, December 31, Accrued compensation expenses $ 11,046 $ 6,134 Accrued interest 210 236 Accrued vendor payables 535 1,002 Accrued professional services 386 89 Other accrued liabilities 129 1 $ 12,306 $ 7,462 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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 March 31, 2023 (in thousands): Remainder of 2023 $ 5,250 2024 11,000 2025 14,000 2026 16,000 2027 24,000 Thereafter 24,000 Total $ 94,250 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 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 March 31, 2023 and December 31, 2022. |
WARRANTS
WARRANTS | 3 Months Ended |
Mar. 31, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
WARRANTS | WARRANTS As a result of the Business Combination, the Company has retroactively adjusted the Legacy SoundHound warrants outstanding and corresponding strike price prior to April 26, 2022 to give effect to the Conversion Ratio used to determine the number of shares of common stock into which they were converted. Warrants Related to Convertible Notes and Note Payable In connection with the issuance of the Company’s 2021 note payable (“SVB March 2021 Note”) and 2021 convertible note (“SCI June 2021 Note”), the Company issued detachable warrants to purchase 708,808 and 354,404 shares of Legacy SoundHound common stock, respectively, with an exercise price of $3.67 per share to the lenders, which were immediately exercisable. The Company recorded the warrants initially at fair value as paid-in-capital on the condensed consolidated balance sheets based on the allocation of its relative fair value of the debt proceeds. 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 Warrants Prior to the Business Combination, ATSP issued public warrants ("Public Warrants"). Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares were issued upon exercise of the Public Warrants. The Company may redeem the outstanding warrants, for $0.01 per warrant, upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable, if the reported last sale price of the common stock equals or exceeds $18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the warrants become exercisable and ending on the third trading day before the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders may, at any time after the redemption notice, exercise the Public Warrants for cash, or on a cashless basis. Subsequent to the closing of the Business Combination, the Company’s Public Warrants continue to be classified as equity instruments, as they are indexed to the Company’s stock. As of March 31, 2023, there were 3,457,996 Public Warrants issued and outstanding. Private Warrants Prior to the Business Combination, ATSP issued private warrants ("Private Warrants"). The Private Warrants were initially issued in the same form as the Public Warrants with the exception that the Private Warrants: (i) would not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchasers or any of their permitted transferees. If the Private Warrants are held by holders other than the initial purchasers or any of their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the Public Warrants. Pursuant to ASC 815, the Private Warrants were initially considered a liability instrument as they met the definition of a derivative. Upon the Closing of the Business Combination, the Company modified its Private Warrants to be identical to its |
CONVERTIBLE NOTES AND NOTES PAY
CONVERTIBLE NOTES AND NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTE AND NOTES PAYABLE | CONVERTIBLE NOTES AND NOTES PAYABLE SNAP June 2020 Note In June 2020, the Company issued a promissory note (the "SNAP June 2020 Note"), to a Lender in exchange for $15.0 million in cash proceeds. The note had an annual interest rate of 5% and a maturity date of June 26, 2022, if not converted earlier pursuant to applicable conversion terms and change in control events. As a result of the Business Combination, on the Closing Date, the SNAP June 2020 Note conversion feature was triggered. As a result, on the Closing Date, all outstanding principal of $15.0 million and accrued interest of $1.4 million were converted into 2,046,827 shares of Class A Common Stock. In addition, the remaining debt discount of $0.2 million and related derivative liability with fair value of $4.1 million as of the Closing Date were extinguished. SVB March 2021 Note In March 2021, the Company entered into a loan and security agreement with a commercial bank to borrow $30.0 million along with the issuance of warrants to purchase shares of Legacy SoundHound’s common stock. The SVB March 2021 Note also contains a final payment provision of $1.1 million. The Company recorded the final payment as an increase to the principal balance and debt discount for 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 9.00% or 5.75% above the Prime Rate (as defined in the SVB March 2021 Note). As of March 31, 2023, the interest rate was 13.50%. Payments were interest-only for the 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 three months ended March 31, 2023 of $0.6 million, of which $0.2 million remained unpaid as accrued interest at March 31, 2023. During the three months ended March 31, 2022, the Company recorded interest expense of $0.7 million, of which $0.2 million remained unpaid as accrued interest at March 31, 2022. The total amount of debt discount at issuance was $3.5 million. During the three months ended March 31, 2023, the Company recorded a nominal amount in interest expense related to the debt discounts. During the three months ended March 31, 2022, the Company recorded $1.0 million in interest expense related to the debt discounts. 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. SCI June 2021 Note In June 2021, the Company entered into a loan and security agreement with a lender to obtain credit extensions to the Company. Extensions were available in $5.0 million increments up to a total commitment amount of $15.0 million. The Company drew an initial $5.0 million on June 14, 2021 and the remaining $10.0 million on December 1, 2021. The 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 with 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 entire payment amount upon each draw. The loan bears interest at an annual rate equal to the greater of 9% or 5.75% above the Prime Rate (as defined in the SCI June 2021 Note). As of March 31, 2023, the interest rate was 13.5%. 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 $0.3 million in stated interest in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022, respectively. 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 the issuance date through the maturity date of May 31, 2025. The Company recorded a nominal amount and $0.6 million in interest expense related to the debt discounts during the three months ended March 31, 2023 and 2022, respectively. The loan amortization date was June 1, 2022, with an opportunity for a six-month extension if certain performance milestones are met. As a result of the Business Combination and the conversion of the SNAP June 2020 Note into the Company’s securities on the Closing Date, the maturity date of the SCI June 2021 Note was extended to May 31, 2025. The following tables summarize the Company’s debt balances as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 SVB SCI June 2021 Note Total Notes payable $ 12,000 $ 4,869 $ 16,869 Notes payable, net of current portion 7,050 6,990 14,040 Unamortized loan discount (46) — (46) Total $ 19,004 $ 11,859 $ 30,863 Unamortized debt issuance cost recorded as an asset $ — $ 265 $ 265 December 31, 2022 SVB March 2021 SCI June 2021 Note Total Notes payable, current portion $ 12,000 $ 4,718 $ 16,718 Notes payable, net of current portion 10,050 8,261 18,311 Unamortized loan discount (62) — (62) Total $ 21,988 $ 12,979 $ 34,967 Unamortized debt issuance costs recorded as an asset $ — $ 295 $ 295 |
RESTRUCTURING
RESTRUCTURING | 3 Months Ended |
Mar. 31, 2023 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING | RESTRUCTURING In January 2023, the Company announced a restructuring plan (the “Restructuring Plan”) intended to reduce operating costs, improve operating margins, improve cash flows and accelerate the Company’s path to profitability. The Restructuring Plan included a reduction of the Company’s then-current workforce by approximately 40% or 180 positions globally. Costs associated with the Restructuring Plan consist of employee severance payments, employee benefits and share-based compensation. The total estimated restructuring costs associated with the Restructuring Plan are approximately $3.8 million and are being recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred. We recorded $3.6 million of restructuring expenses in connection with the Restructuring Plan during the three months ended March 31, 2023, of which $1.3 million were cash payments. We expect to incur the estimated |
PREFERRED STOCK
PREFERRED STOCK | 3 Months Ended |
Mar. 31, 2023 | |
Equity [Abstract] | |
PREFERRED STOCK | PREFERRED STOCK Legacy SoundHound Preferred Stock A summary of the Legacy SoundHound Preferred Stock authorized, issued and outstanding as of the date of the Business Combination is as follows: Shares Shares Liquidation Carrying Series A 19,106,048 19,106,048 $ 28,239 $ 4,967 Series B 33,702,134 33,702,134 66,360 11,038 Series C 5,687,525 5,687,525 38,163 11,837 Series C-1 4,436,090 4,436,090 89,298 16,061 Series D 20,258,299 20,258,299 527,992 85,648 Series D-1 8,418,535 8,418,535 277,812 49,957 Series D-2 8,418,530 8,418,530 277,811 49,949 Series D-3 6,922,165 6,922,165 276,887 50,046 Series D-3A 20,835,869 — — — 127,785,195 106,949,326 $ 1,582,562 $ 279,503 Upon the closing of the Business Combination, the outstanding shares of Series A, B, C, C-1, D, D-1, D-2, and D-3 preferred stock were converted into 106,949,326 shares of SoundHound AI Class A Common Stock at the exchange ratio of 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 reclassified the amount of redeemable convertible preferred stock to additional paid in capital. Upon the consummation of the Business Combination, the Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. The number of authorized shares of preferred stock may also be increased or decreased by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the Company entitled to vote thereon, without a separate vote of the holders of preferred stock. Any new series of preferred stock may be designated, fixed and determined as provided by the Board without approval of the holders of common stock or preferred stock and the preferred stock holders may be granted such rights, powers (including voting powers) and preferences as determined by the Board in its sole discretion, including the right to elect one or more directors. Series A Preferred Stock On or around January 20, 2023, the Company entered into the Purchase Agreements with the Investors, pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock for an aggregate issue price of approximately $25.0 million. On January 20, 2023, the Company filed a Certificate of Designations of Preferences, Rights and Limitations of the Series A Preferred Stock with the Secretary of State of the State of Delaware (the "Certificate of Designations"), designating 1,000,000 shares of Series A Preferred Stock with an original issue price of $30.00 per share, which became effective with the Secretary of State of the State of Delaware upon filing. Pursuant to the Certificate of Designations, the Series A Preferred Stock is entitled to dividends payable as an increase in the Liquidation Preference (as defined in the Certificate of Designations) for such share at the rate of 14% per annum, accreting semi-annually to Liquidation Preference on January 1 and July 1 of each year, beginning on July 1, 2023. The Liquidation Preference per share of Preferred Stock is initially equal to $30.00, the original issue price per share. Each share of Series A Preferred Stock is convertible, at the option of the holder, at any time on or after May 2, 2023 into such number of shares of Class A Common Stock equal to the Liquidation Preference per share at the time of conversion divided by $1.00 (the “Conversion Price”). In addition, each share of Series A Preferred Stock will automatically convert into shares of Class A Common Stock at the Conversion Price on or after January 20, 2024 if and when the daily volume-weighted average closing price per share of Class A Common Stock is at least 2.5 times the Conversion Price for each of any 90 trading days during any 120 consecutive trading day period, which 120-trading day period may commence (but may not end) prior to January 20, 2024. The Conversion Price is not subject to any anti-dilution adjustments. The Company may also elect to pay any dividend in cash in lieu of accretion to Liquidation Preference if permitted under the agreements and instruments governing its outstanding indebtedness at such time. The Series A Preferred Stock is not entitled to any preemptive rights or registration rights. The Purchase Agreements contain customary representations, warranties and covenants. The shares of Series A Preferred Stock were issued and sold in a private placement exempt from the registration requirements of the Securities Act. The Company does not intend to register the shares of Series A Preferred Stock or the underlying common stock for resale under the Securities Act. |
COMMON STOCK
COMMON STOCK | 3 Months Ended |
Mar. 31, 2023 | |
Equity [Abstract] | |
COMMON STOCK | COMMON STOCK The Company had 250,030,433 shares of Legacy SoundHound common stock authorized for issuance prior to the closing of the Business Combination. On April 26, 2022, following the Business Combination and pursuant to the Company’s second amended and restated certificate of incorporation, the Company is authorized to issue 500,000,000 shares of capital stock, consisting of (a) 455,000,000 shares of Class A Common Stock with a par value of $0.0001 per share, (b) 44,000,000 shares of Class B Common Stock with a par value of $0.0001 per share, and (c) 1,000,000 shares of preferred stock with a par value of $0.0001 per share. The outstanding shares of the Company’s common stock are fully paid and non-assessable. As a result of the Business Combination, 73,561,334 shares of Legacy SoundHound common stock, along with 106,949,326 shares of Legacy SoundHound preferred stock, were converted into 180,510,660 shares of the Company’s common stock, consisting of 140,114,060 shares of Class A Common Stock and 40,396,600 shares of the Company’s Class B Common Stock. On all matters to be voted upon, subject to the rights of any holders of any series of preferred stock, holders of shares of Class A Common Stock and Class B Common Stock will vote together as a single class on all matters submitted to the stockholders for their vote or approval. Holders of Class A Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval. Holders of Class B Common Stock are entitled to ten votes per share on all matters submitted to stockholders for their vote or approval. Each share of Class B Common Stock shall 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. Equity Line of Credit ("ELOC") 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 (the "ELOC Shares"). On February 14, 2023, the Company’s Registration Statement on Form S-1 registering the resale of the ELOC Shares (the "ELOC Registration Statement") was declared effective. On March 31, 2023, a post-effective amendment to the ELOC Registration Statement was declared effective. The Company has utilized and expects to continue to utilize proceeds from the ELOC for working capital and other general corporate purposes. Through March 31, 2023, the Company had sold approximately 10.7 million shares under the ELOC program for aggregate proceeds of approximately $28.7 million. 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 Class A 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 Class A Common Stock so sold. |
OTHER INCOME (EXPENSE), NET
OTHER INCOME (EXPENSE), NET | 3 Months Ended |
Mar. 31, 2023 | |
Other Income and Expenses [Abstract] | |
OTHER INCOME (EXPENSE), NET | 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 months ended March 31, 2023 and 2022 (in thousands): Three Months Ended 2023 2022 Other income (expense), net Interest income $ 157 $ 2 Change in fair value of derivative liability — (592) Other expense, net (63) (467) Total other income (expense), net $ 94 $ (1,057) |
NET LOSS PER SHARE
NET LOSS PER SHARE | 3 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | 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 months ended March 31, 2023 and 2022: Three Months Ended 2023 2022 Numerator: Net loss (in thousands) $ (26,369) $ (25,103) Denominator: Weighted average shares outstanding – basic and dilutive 205,082,328 69,604,188 Basic and diluted net loss per share $ (0.13) $ (0.36) For the three months ended March 31, 2023 and 2022, the diluted earnings per share is equal to the basic earnings per share as the effect of potentially dilutive securities would have been antidilutive. The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive for the three months ended March 31, 2023 and 2022: As of March 31, 2023 2022 Stock options 21,669,941 28,000,691 Restricted stock units 12,589,404 2,014,979 Issuance of common stock upon conversion of Series A Preferred Stock 25,050,330 — Common stock warrants 3,665,996 1,063,213 Estimated ESPP stock units 476,636 — Redeemable convertible preferred stock — 106,949,326 Total 63,452,307 138,028,209 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The tax expense and the effective tax rate were as follows (in thousands): Three Months Ended 2023 2022 Loss before income taxes $ (26,040) $ (24,751) Income tax expense 329 352 Effective tax rate (1.26) % (1.42) % 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. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 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 Company’s Class A Common Stock. As a result of the Business Combination during the second quarter of 2022, each company's ownership interest in the Company was reduced to less than 5%. Consequently, considering all aspects of our relationships with the companies, as of June 30, 2022, the Company no longer considers the companies related parties. During the three months ended March 31, 2022, the Company recognized revenue from the companies of $2.2 million. On January 20, 2023, our Chief Financial Officer and one of our directors each entered into Purchase Agreements, purchasing 3,334 shares of Series A Preferred Stock each for a total purchase price of $100,000 each. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 3 Months Ended |
Mar. 31, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | SUBSEQUENT EVENT Term Loan On April 14, 2023 (the “Term Loan Closing Date”), the Company entered into a Senior Secured Term Loan Credit Agreement (the “Credit Agreement”) with ACP Post Oak Credit II LLC, as Administrative Agent and Collateral Agent for the Lenders (the “Agent”), and the lenders from time to time party thereto (the “Lenders”). The Credit Agreement provides for a term loan facility in an aggregate principal amount of up to $100.0 million (the “Term Loan”), the entirety of which was funded on the Term Loan Closing Date. The Credit Agreement also permits the Company to request additional commitments of up to $25.0 million in the aggregate, with funding of such commitments in the sole discretion of the Lenders, under certain circumstances and under the same terms as the Term Loan. On the Term Loan Closing Date, the Company also entered into that certain Guarantee and Collateral Agreement, dated as of April 14, 2023, by and among the Company, the other grantors named therein and the Agent (the “Guarantee and Collateral Agreement”). In addition, on the Term Loan Closing Date, a collateral protection insurance policy was issued to the Lenders and a cash premium was paid on the Term Loan Closing Date to the insurance provider thereunder (the “Cash Premium”). Pursuant to the Credit Agreement, the Company is required to make certain additional specified cash premium payments, based on single-digit percentages of the loans then outstanding, over a period of three years from the Term Loan Closing Date. The Company used the proceeds from the Term Loan to (i) repay outstanding amounts equal to approximately $30.0 million under the Company’s existing loan facilities, (ii) fund an escrow account on the Term Loan Closing Date in the name of the Agent for an amount equal to the first four interest payments, (iii) pay certain fees and expenses incurred in connection with entering into the Credit Agreement, and (iv) fund the Cash Premium, together with related taxes, with the remaining proceeds to be used to fund growth investments and for general corporate purposes as permitted under the Credit Agreement. The outstanding principal balance of the Term Loan bears interest at the applicable margin plus, at the Company’s election, either (i) the secured overnight financing rate (“SOFR”) plus 0.15% or (ii) the alternate base rate (“ABR”), which is a per annum rate equal to the greatest of (a) the Prime Rate (as defined in the Credit Agreement), (b) the NYFRB Rate (as defined in the Credit Agreement) plus 0.50% and (c) the Adjustable Rate (as defined in the Credit Agreement) plus 1.00%. The applicable margin under the Credit Agreement is 8.50% per annum with respect to SOFR loans, and 7.50% per annum with respect to ABR loans. Subject to certain exceptions as set forth in the Credit Agreement, interest on the Term Loan is payable quarterly in arrears on the last business day of each fiscal quarter. The Term Loan is set to mature on April 14, 2027 (the “Maturity Date”). The Credit Agreement provides for no scheduled principal amortization prior to the Maturity Date. The Term Loan is secured by substantially all of the assets of the Company and its subsidiaries other than the assets of Excluded Subsidiaries (as defined in the Credit Agreement) and is guaranteed by the Company’s subsidiaries other than Excluded Subsidiaries. As set forth in more detail in the Credit Agreement, the Company is required to make mandatory prepayments on the Term Loan in the event of certain specified events, including in the event of certain capital raises by the Company and its subsidiaries. The Company may also prepay amounts under the Term Loan, subject to certain costs and conditions specified in the Credit Agreement. The Credit Agreement also contains customary representations and warranties for a facility of this nature and affirmative and negative covenants. In particular, the Credit Agreement requires the Company to have liquidity at least equal to the Interest Escrow Required Amount (as defined in the Credit Agreement) as of the last day of each fiscal quarter. In addition, the Credit Agreement limits the Company’s and its subsidiaries’ ability to incur indebtedness, make restricted payments, including cash dividends on its common stock, make certain investments, loans and advances, enter into mergers and acquisitions, sell, assign transfer or otherwise dispose of its assets, enter into transactions with its affiliates and engage in sale and leaseback transactions, among other restrictions. The Credit Agreement includes customary events of default, including, but not limited to, nonpayment of principal or interest, breaches of representations and warranties, failure to perform or observe covenants, cross-defaults with certain other indebtedness, final judgments or orders, certain change of control events, and certain bankruptcy-related events or proceedings. Upon the occurrence of an event of default (subject to notice and grace periods), obligations under the Credit Agreement could be accelerated. In connection with the Credit Agreement, on the Term Loan Closing Date the Company also issued a warrant to purchase up to 3,301,536 shares of the Company’s Class A common stock to the Agent (the “Term Loan Warrant”). The Term Loan Warrant has a per share exercise price of $2.59 and may be exercised, including on a cashless basis, by the holder at any time prior to the 10-year anniversary of the issue date. The Term Loan Warrant will be automatically cashless exercised immediately prior to a change in control of the Company. Concurrently with the Company’s entry into the Credit Agreement, the Company used a portion of the proceeds to prepay in full all outstanding obligations under, and terminated, the SCI June 2021 Note and the SVB March 2021 Note. In connection with the SCI June 2021 Note prepayment, the Company paid a total of approximately $11.7 million, which consisted of (i) the remaining principal amount outstanding of approximately $11.0 million, (ii) a prepayment premium of approximately $0.2 million, (iii) a final payment fee of approximately $0.5 million, and (iv) the remainder for transaction expenses. In connection with the SVB March 2021 Note prepayment, the Company paid a total of approximately $18.5 million, which consisted of (i) the remaining principal amount outstanding of $17.0 million, (ii) a prepayment premium of $0.3 million, (iii) a final payment fee of approximately $1.1 million, (iv) approximately $0.1 million of accrued and unpaid interest, and (v) the remainder for transaction expenses. Equity Line of Credit (ELOC) Through April 30, 2023, the Company had sold approximately 12.7 million shares under the ELOC program for aggregate proceeds of approximately $34.4 million. |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies The (a) condensed consolidated balance sheet as of December 31, 2022, which has been derived from audited financial statements as filed in the Company’s Form 10-K, which was originally filed with the Securities and Exchange Commission ("SEC") on March 28, 2023 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 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 months ended March 31, 2023 are not necessarily indicative of the results for the fiscal year ending December 31, 2023 or any future interim period. Certain information and note disclosures normally included in annual financial statements 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 | 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 significant to the VIE. |
Reclassification | 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 accumulated deficit in the previously reported consolidated financial statements for the year ended December 31, 2022. |
Foreign Currency | Foreign CurrencyThe 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. |
Use of Estimates | 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 amounts reported and disclosures in the condensed consolidated financial statements and accompanying notes. Such estimates include revenue recognition, allowance for doubtful accounts, accrued liabilities, derivative and warrant liabilities, calculation of the incremental borrowing rate, financial instruments recorded at fair value on a recurring basis, valuation of deferred tax assets and uncertain tax positions and the fair value of common stock and other assumptions used to measure stock-based compensation expense. The Company bases its estimates on historical experience, the current economic environment and on assumptions it believes are reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from changes in the economic environment will be reflected in the financial statements in future periods. Actual results could differ materially from those estimates. |
Segment Information | 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 evaluating financial performance. Accordingly, the Company has determined that it operates as a single reportable segment. |
Emerging Growth Company Status | Emerging Growth Company Status The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company has the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards unless the Company otherwise early adopts select standards. |
Concentrations of Credit Risk and Other Risks and Uncertainties | Concentrations of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company regularly monitors its credit risk exposure and takes steps to mitigate the likelihood of these exposures resulting in actual loss. |
Equity Issuance Costs | Equity Issuance Costs The Company capitalizes certain legal, professional, accounting and 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 financing, these costs are recorded as a reduction of the proceeds received from the equity financing. If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) Identification of the contract(s) with a customer; (ii) Identification of the performance obligations in the contract; (iii) Determination of the transaction price, including the constraint on variable consideration; (iv) Allocation of the transaction price to the performance obligations in the contract; and (v) Recognition of revenue when, or as, performance obligations are satisfied. Contracts are accounted for when both parties have approved and committed to the contract, the rights of the parties and payment terms are identifiable, the contract has commercial substance and collectability of consideration is probable. Any payments received from customers that do not meet criteria for having a contract are recorded as deposit liabilities on the condensed consolidated balance sheet. Under ASC 606, assuming all other revenue recognition criteria have been met, the Company recognizes revenue for arrangements upon the transfer of control of the Company’s performance obligations to its customers. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in ASC 606. Revenues are recognized when control of the promised goods or services are transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company currently generates its revenues through the following performance obligations: (1) hosted services, (2) professional services, (3) monetization and (4) licensing. |
Research and Development | Research and Development The Company’s research and development costs are expensed as incurred. These costs include salaries and other personnel related expenses, contractor fees, facility costs, supplies and depreciation of equipment associated with the design and development of new products prior to the establishment of their technological feasibility. |
Warrants/ Restricted Stock/ Preferred Stock | Warrants The Company determines whether to classify contracts, such as warrants, that may be settled in its own stock as equity of the entity or as a liability. An equity-linked financial instrument must be considered indexed to the Company’s own stock to qualify for equity classification. The Company classifies warrants as liabilities for any contracts that may require a transfer of assets. Warrants classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration or modification that results in equity classification. Any change in the fair value of the warrants is recognized as other income (expense), net in the condensed consolidated statements of operations. 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. Preferred Stock Legacy SoundHound Preferred Stock did not have a mandatory redemption date and were assessed at issuance for classification and redemption features requiring bifurcation. The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. 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. 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. On or around January 20, 2023, the Company entered into Preferred Stock Purchase Agreements (the “Purchase Agreements”) with certain investors (the “Investors”) pursuant to which the Company issued and sold to the Investors an aggregate of 835,011 shares of its newly designated Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) for an aggregate issue price of approximately $25.0 million. The Series A Preferred Stock were assessed at issuance for classification and redemption features requiring bifurcation. The Series A Preferred Stock do not contain any of the three conditions described above to be classified as temporary equity and thus have been classified as permanent equity. See Note 10 for additional information. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when, in management’s estimate, it is more-likely-than-not that the deferred tax asset will not be realized. The Company adopted a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on the Company’s tax return. The Company classifies interest and penalties related to uncertain tax positions in income tax expense, if applicable. There has been no interest expense or penalties related to unrecognized tax benefits recorded through March 31, 2023. |
Stock-Based Compensation | 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 and employee stock purchase plan ("ESPP") shares. The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions to determine the fair value of the awards, including the expected term of the award and the price volatility of the underlying stock. The Company calculates the fair value of the awards granted by using the Black-Scholes option-pricing model with the following assumptions: Expected Volatility — The Company estimates volatility for the awards by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the award grant for a term that is approximately equal to the awards’ expected term. Expected Term — The expected term of the Company’s awards represents the period that the stock-based awards are expected to be outstanding. The Company has elected to use the midpoint between the stock options’ vesting term and contractual expiration period to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. For the valuation of ESPP shares, the Company, uses the period of time from the valuation date to the purchase date. Risk-Free Interest Rate — The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the awards’ expected term at the grant date. Expected Dividend Yield — The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, expected dividend yield is zero. |
Fair Value Measurements | 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. |
Convertible Notes and Derivative Liabilities | 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 qualified 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 were subject to remeasurement at each balance sheet date until exercised, and any change in fair value was recognized as a component of other income (expense), net in the condensed consolidated statements of operations and comprehensive loss. The fair value of the conversion features was 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. 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 | Net Loss Per Share Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, Series A Preferred Stock, stock options, ESPP shares, RSUs and warrants are considered to be potentially dilutive securities. See Note 13 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. |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Reverse Recapitalization [Abstract] | |
Schedule Of Reverse Recapitalization | 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 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 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregate Revenue | For the three months ended March 31, 2023 and 2022, revenue under each performance obligation was as follows (in thousands): Three Months Ended 2023 2022 Hosted services $ 4,745 $ 3,344 Professional services 1,643 567 Monetization 140 208 Licensing 179 171 Total $ 6,707 $ 4,290 For the three months ended March 31, 2023 and 2022, the disaggregated revenue by geographic location was as follows (in thousands): Three Months Ended 2023 2022 United States $ 786 $ 852 Japan 937 927 Germany 1,788 683 France 730 459 Korea 2,259 949 Other 207 420 Total $ 6,707 $ 4,290 For the three months ended March 31, 2023 and 2022, the disaggregated revenue by recognition pattern was as follows (in thousands): Three Months Ended 2023 2022 Over time revenue $ 5,505 $ 3,911 Point-in-time 1,202 379 Total $ 6,707 $ 4,290 Three Months Ended 2023 2022 Product royalties $ 6,176 $ 3,709 Service subscriptions 391 373 Monetization 140 208 Total $ 6,707 $ 4,290 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Accrued Liabilities | Accrued liabilities consisted of the following (in thousands): March 31, December 31, Accrued compensation expenses $ 11,046 $ 6,134 Accrued interest 210 236 Accrued vendor payables 535 1,002 Accrued professional services 386 89 Other accrued liabilities 129 1 $ 12,306 $ 7,462 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Aggregate Noncancelable Future Minimum Payments | Aggregate non-cancelable future minimum payments were as follows as of March 31, 2023 (in thousands): Remainder of 2023 $ 5,250 2024 11,000 2025 14,000 2026 16,000 2027 24,000 Thereafter 24,000 Total $ 94,250 |
CONVERTIBLE NOTES AND NOTES P_2
CONVERTIBLE NOTES AND NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Notes, Debt Balances | The following tables summarize the Company’s debt balances as of March 31, 2023 and December 31, 2022 (in thousands): March 31, 2023 SVB SCI June 2021 Note Total Notes payable $ 12,000 $ 4,869 $ 16,869 Notes payable, net of current portion 7,050 6,990 14,040 Unamortized loan discount (46) — (46) Total $ 19,004 $ 11,859 $ 30,863 Unamortized debt issuance cost recorded as an asset $ — $ 265 $ 265 December 31, 2022 SVB March 2021 SCI June 2021 Note Total Notes payable, current portion $ 12,000 $ 4,718 $ 16,718 Notes payable, net of current portion 10,050 8,261 18,311 Unamortized loan discount (62) — (62) Total $ 21,988 $ 12,979 $ 34,967 Unamortized debt issuance costs recorded as an asset $ — $ 295 $ 295 |
PREFERRED STOCK (Tables)
PREFERRED STOCK (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Equity [Abstract] | |
Schedule of Preferred Stock Authorized, Issued and Outstanding | A summary of the Legacy SoundHound Preferred Stock authorized, issued and outstanding as of the date of the Business Combination is as follows: Shares Shares Liquidation Carrying 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 |
OtOTHER INCOME (EXPENSE), NET (
OtOTHER INCOME (EXPENSE), NET (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Other Income and Expenses [Abstract] | |
Schedule of 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 months ended March 31, 2023 and 2022 (in thousands): Three Months Ended 2023 2022 Other income (expense), net Interest income $ 157 $ 2 Change in fair value of derivative liability — (592) Other expense, net (63) (467) Total other income (expense), net $ 94 $ (1,057) |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Calculation of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders | The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2023 and 2022: Three Months Ended 2023 2022 Numerator: Net loss (in thousands) $ (26,369) $ (25,103) Denominator: Weighted average shares outstanding – basic and dilutive 205,082,328 69,604,188 Basic and diluted net loss per share $ (0.13) $ (0.36) |
Schedule of Outstanding Shares of Potentially Dilutive Securities | 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 months ended March 31, 2023 and 2022: As of March 31, 2023 2022 Stock options 21,669,941 28,000,691 Restricted stock units 12,589,404 2,014,979 Issuance of common stock upon conversion of Series A Preferred Stock 25,050,330 — Common stock warrants 3,665,996 1,063,213 Estimated ESPP stock units 476,636 — Redeemable convertible preferred stock — 106,949,326 Total 63,452,307 138,028,209 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Tax Expense and the Effective Tax Rate | The tax expense and the effective tax rate were as follows (in thousands): Three Months Ended 2023 2022 Loss before income taxes $ (26,040) $ (24,751) Income tax expense 329 352 Effective tax rate (1.26) % (1.42) % |
ORGANIZATION -Narratives (Detai
ORGANIZATION -Narratives (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | Apr. 26, 2022 | |
Organization (Details) [Line Items] | ||||
Net loss | $ 26,369 | $ 25,103 | ||
Accumulated deficit | 528,471 | $ 502,102 | ||
Total cash and cash equivalents on hand | $ 46,331 | $ 8,211 | $ 9,245 | |
Class A Common Stock | ||||
Organization (Details) [Line Items] | ||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Class B Common Stock | ||||
Organization (Details) [Line Items] | ||||
Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narratives (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||
Jan. 20, 2023 | Apr. 26, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Summary of Significant Accounting Policies (Details) | |||||
Loss related to foreign currency | $ 0.1 | $ 0.5 | |||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Series A | |||||
Summary of Significant Accounting Policies (Details) | |||||
Aggregate shares (in shares) | 835,011 | ||||
Preferred stock, par value (in Dollars per share) | $ 0.0001 | ||||
Proceeds from the sales of share | $ 25 | ||||
Legacy SoundHound | |||||
Summary of Significant Accounting Policies (Details) | |||||
Converted shares (in shares) | 106,949,326 | ||||
Four Customers | Accounts Receivable | Customer Concentration Risk | |||||
Summary of Significant Accounting Policies (Details) | |||||
Concentration risk, percentage | 71% | ||||
Four Customers | Revenue | Customer Concentration Risk | |||||
Summary of Significant Accounting Policies (Details) | |||||
Concentration risk, percentage | 77% | 59% | |||
Two Customers | Accounts Receivable | Customer Concentration Risk | |||||
Summary of Significant Accounting Policies (Details) | |||||
Concentration risk, percentage | 75% |
BUSINESS COMBINATION - Narrativ
BUSINESS COMBINATION - Narratives (Details) $ / shares in Units, $ in Thousands | Apr. 26, 2022 USD ($) votePerShare $ / shares shares | Mar. 31, 2023 $ / shares shares | Jan. 20, 2023 shares | Dec. 31, 2022 $ / shares shares | Apr. 25, 2022 shares |
Reverse Recapitalization | |||||
Common stock and preferred stock, shares authorized (shares) | 500,000,000 | ||||
Common stock, shares authorized (in shares) | 250,030,433 | ||||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 127,785,195 |
Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Share conversion rate (shares) | 5.5562 | ||||
Proceeds from reverse recapitalization transaction | $ | $ 90,689 | ||||
Transaction cost | $ | 27,668 | ||||
Stock issued in acquisitions | $ | 86,600 | ||||
Shares issued as compensation | $ | 4,100 | ||||
Legacy SoundHound | |||||
Reverse Recapitalization | |||||
Transaction cost | $ | $ 4,100 | ||||
Class A Common Stock | |||||
Reverse Recapitalization | |||||
Common stock, shares authorized (in shares) | 455,000,000 | 455,000,000 | 455,000,000 | ||
Common stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Number of votes per share | votePerShare | 1 | ||||
Aggregate shares (in shares) | 11,300,000 | ||||
Proceeds from the sales of share | $ | $ 113,000 | ||||
Converted into shares of common stock (in Shares) | 140,114,060 | ||||
Class A Common Stock | Initial Public Offering | ATSP | |||||
Reverse Recapitalization | |||||
Aggregate shares (in shares) | 12,767,950 | ||||
Stock price per share (in Dollars per share) | $ / shares | $ 10 | ||||
Proceeds from the sales of share | $ | $ 127,700 | ||||
Class A Common Stock | PIPE | |||||
Reverse Recapitalization | |||||
Stock price per share (in Dollars per share) | $ / shares | $ 10 | ||||
Class B Common Stock | |||||
Reverse Recapitalization | |||||
Common stock, shares authorized (in shares) | 44,000,000 | 44,000,000 | 44,000,000 | ||
Common stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Number of votes per share | votePerShare | 10 | ||||
Converted into shares of common stock (in Shares) | 40,396,600 |
BUSINESS COMBINATION (Details)
BUSINESS COMBINATION (Details) - Schedule of total net proceeds from the Business Combination and the PIPE Investment $ in Thousands | Apr. 26, 2022 USD ($) |
Reverse Recapitalization [Abstract] | |
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 |
BUSINESS COMBINATION (Details_2
BUSINESS COMBINATION (Details) - Schedule of common stock issued for the consummation of the business combination - shares | Apr. 26, 2022 | Mar. 31, 2023 | Dec. 31, 2022 |
Reverse Recapitalization | |||
Common stock, shares outstanding (in shares) | 196,503,710 | ||
Class A Common Stock | |||
Reverse Recapitalization | |||
PIPE financing (in Shares) | 11,300,000 | ||
Common stock, shares outstanding (in shares) | 174,714,741 | 160,297,664 | |
Class A Common Stock | Legacy SoundHound | |||
Reverse Recapitalization | |||
Shares, outstanding (in shares) | 140,114,060 | ||
Class A Common Stock | ATSP | |||
Reverse Recapitalization | |||
Issuance of Class A common shares pursuant to the Business Combination (in Shares) | 532,050 | ||
Class A Common Stock | Legacy Soundhound Founders | |||
Reverse Recapitalization | |||
Issuance of Class A common shares pursuant to the Business Combination (in Shares) | 4,161,000 | ||
Class B Common Stock | |||
Reverse Recapitalization | |||
Common stock, shares outstanding (in shares) | 39,735,408 | ||
Class B Common Stock | Legacy SoundHound | |||
Reverse Recapitalization | |||
Shares, outstanding (in shares) | 40,396,600 |
REVENUE RECOGNITION - Narrative
REVENUE RECOGNITION - Narratives (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue | ||
Contract terms of hosted services range | 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. | |
Deferred revenue recognized | $ 1.8 | $ 2.2 |
Revenue, remaining performance obligation, amount | $ 18.4 | |
Long term contract, term | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue | ||
Revenue, remaining performance obligation, amount | $ 7.3 | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue | ||
Revenue, remaining performance obligation, amount | $ 7.9 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue | ||
Revenue, remaining performance obligation, amount | $ 3.2 | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | ||
Over time revenue | ||
Disaggregation of Revenue | ||
Deferred revenue recognized | $ 0.7 | $ 0.6 |
Point-in-time | ||
Disaggregation of Revenue | ||
Deferred revenue recognized | $ 0.9 | |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue | ||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 2 years | |
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue | ||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 5 years |
REVENUE RECOGNITION - Schedule
REVENUE RECOGNITION - Schedule of revenues under each performance (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue | ||
Revenues | $ 6,707 | $ 4,290 |
Hosted services | ||
Disaggregation of Revenue | ||
Revenues | 4,745 | 3,344 |
Professional services | ||
Disaggregation of Revenue | ||
Revenues | 1,643 | 567 |
Monetization | ||
Disaggregation of Revenue | ||
Revenues | 140 | 208 |
Licensing | ||
Disaggregation of Revenue | ||
Revenues | $ 179 | $ 171 |
REVENUE RECOGNITION - Schedul_2
REVENUE RECOGNITION - Schedule of disaggregates revenue by geographic location (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue | ||
Revenues | $ 6,707 | $ 4,290 |
United States | ||
Disaggregation of Revenue | ||
Revenues | 786 | 852 |
Japan | ||
Disaggregation of Revenue | ||
Revenues | 937 | 927 |
Germany | ||
Disaggregation of Revenue | ||
Revenues | 1,788 | 683 |
France | ||
Disaggregation of Revenue | ||
Revenues | 730 | 459 |
Korea | ||
Disaggregation of Revenue | ||
Revenues | 2,259 | 949 |
Other | ||
Disaggregation of Revenue | ||
Revenues | $ 207 | $ 420 |
REVENUE RECOGNITION - Schedul_3
REVENUE RECOGNITION - Schedule of revenue recognition pattern (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue | ||
Total | $ 6,707 | $ 4,290 |
Over time revenue | ||
Disaggregation of Revenue | ||
Total | 5,505 | 3,911 |
Point-in-time | ||
Disaggregation of Revenue | ||
Total | $ 1,202 | $ 379 |
REVENUE RECOGNITION - Schedul_4
REVENUE RECOGNITION - Schedule of Service (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation of Revenue | ||
Total | $ 6,707 | $ 4,290 |
Product royalties | ||
Disaggregation of Revenue | ||
Total | 6,176 | 3,709 |
Service subscriptions | ||
Disaggregation of Revenue | ||
Total | 391 | 373 |
Monetization | ||
Disaggregation of Revenue | ||
Total | $ 140 | $ 208 |
ACCRUED LIABILITIES - Schedule
ACCRUED LIABILITIES - Schedule of accrued liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Other Liabilities Disclosure [Abstract] | ||
Accrued compensation expenses | $ 11,046 | $ 6,134 |
Accrued interest | 210 | 236 |
Accrued vendor payables | 535 | 1,002 |
Accrued professional services | 386 | 89 |
Other accrued liabilities | 129 | 1 |
Accrued liabilities | $ 12,306 | $ 7,462 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narratives (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Aug. 31, 2021 | Mar. 31, 2023 | Dec. 31, 2022 | |
Loss Contingencies [Line Items] | |||
Committed to pay a minimum cost | $ 98 | ||
Commitment period | 7 years | ||
Possible Sales Tax Liability | |||
Loss Contingencies [Line Items] | |||
Estimated and recorded liability | $ 1.1 | $ 1.1 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Schedule of aggregate noncancelable future minimum payments (Details) $ in Thousands | Mar. 31, 2023 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2023 | $ 5,250 |
2024 | 11,000 |
2025 | 14,000 |
2026 | 16,000 |
2027 | 24,000 |
Thereafter | 24,000 |
Total | $ 94,250 |
WARRANTS- Narratives (Details)
WARRANTS- Narratives (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 25, 2022 | Mar. 31, 2023 | Apr. 26, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Jun. 14, 2021 |
Public Warrants | ||||||
Warrants (Details) | ||||||
Warrants outstanding (in shares) | 3,457,996 | |||||
Warrants issued (in shares) | 3,457,996 | |||||
Public Warrants | ATSP | ||||||
Warrants (Details) | ||||||
Exercise price per share (in Dollars per share) | $ 11.50 | |||||
Public Warrants | ATSP | Share Price Equal Or Exceeds Eighteen Rupees Per Dollar | ||||||
Warrants (Details) | ||||||
Redemption price (in Dollars per share) | $ 0.01 | |||||
Redemption notice period | 30 days | |||||
Warrant trigger price (in Dollars per share) | 18 | |||||
Public Warrants | ATSP | Share Price Equal Or Exceeds Eighteen Rupees Per Dollar | Minimum | ||||||
Warrants (Details) | ||||||
Number of consecutive trading days for determining share price | 20 days | |||||
Public Warrants | ATSP | Share Price Equal Or Exceeds Eighteen Rupees Per Dollar | Maximum | ||||||
Warrants (Details) | ||||||
Number of consecutive trading days for determining share price | 30 days | |||||
Private Warrants | ||||||
Warrants (Details) | ||||||
Warrants outstanding (in shares) | 208,000 | |||||
Warrants issued (in shares) | 208,000 | |||||
Class A Common Stock | ||||||
Warrants (Details) | ||||||
Net issuance of shares (in shares) | 673,416 | |||||
SVB March 2021 Note | ||||||
Warrants (Details) | ||||||
Number of common stock purchase by warrants (in shares) | 708,808 | |||||
Exercise price per share (in Dollars per share) | $ 3.67 | |||||
Fair value of warrants | $ 2.3 | |||||
Warrants term, years | 10 years | |||||
SCI June 2021 Note | ||||||
Warrants (Details) | ||||||
Number of common stock purchase by warrants (in shares) | 354,404 | |||||
Exercise price per share (in Dollars per share) | $ 3.67 | |||||
Fair value of warrants | $ 1.5 | $ 1.5 | ||||
Warrants term, years | 10 years |
CONVERTIBLE NOTES AND NOTES P_3
CONVERTIBLE NOTES AND NOTES PAYABLE - Narratives (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |||||||
Apr. 26, 2022 | Dec. 01, 2021 | Jun. 14, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Jun. 30, 2020 | Mar. 31, 2023 | Mar. 31, 2022 | Sep. 30, 2021 | |
Debt Instrument [Line Items] | |||||||||
Interest expense | $ 1,096 | $ 2,977 | |||||||
Legacy SoundHound Common Stock | |||||||||
Debt Instrument [Line Items] | |||||||||
Conversion of convertible note (in Shares) | 2,046,827 | ||||||||
SNAP June 2020 Note | |||||||||
Debt Instrument [Line Items] | |||||||||
Proceeds from note payable, net of issuance costs | $ 15,000 | ||||||||
Stated interest rate (percent) | 5% | ||||||||
Converted instrument, amount | $ 15,000 | ||||||||
Interest amount converted | 1,400 | ||||||||
Debt discount | 200 | ||||||||
Writeoff of derivative liability | $ 4,100 | ||||||||
SVB March 2021 Note | |||||||||
Debt Instrument [Line Items] | |||||||||
Borrowings | $ 30,000 | ||||||||
Final payment provision | $ 1,100 | ||||||||
Loan bears interest rate | 9% | ||||||||
Effective interest rate (percent) | 13.50% | ||||||||
Comprehensive loss | $ 600 | ||||||||
Accrued interest | $ 200 | 200 | |||||||
Total interest expense | 700 | ||||||||
Unamortized loan discount | $ 3,500 | ||||||||
Interest expense | 1,000 | ||||||||
Fair value of warrants | $ 2,300 | ||||||||
SVB March 2021 Note | Prime Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Prime interest rate (percent) | 5.75% | ||||||||
SCI June 2021 Note | |||||||||
Debt Instrument [Line Items] | |||||||||
Loan bears interest rate | 9% | ||||||||
Effective interest rate (percent) | 13.50% | ||||||||
Interest expense | $ 400 | 300 | |||||||
Incremental extension amount | $ 5,000 | ||||||||
Maximum borrowing capacity | $ 15,000 | 15,000 | |||||||
Proceeds from lines of credit | $ 10,000 | $ 5,000 | |||||||
Provision percentage (percent) | 3.50% | ||||||||
Final payment provision | $ 500 | ||||||||
Convertible warrants (in shares) | 63,785 | ||||||||
Fair value of warrants | $ 1,500 | $ 1,500 | |||||||
Debt issuance costs | 2,200 | ||||||||
Amortization of the debt discount | $ 600 | $ 600 | |||||||
SCI June 2021 Note | Prime Rate | |||||||||
Debt Instrument [Line Items] | |||||||||
Prime interest rate (percent) | 5.75% |
CONVERTIBLE NOTES AND NOTES P_4
CONVERTIBLE NOTES AND NOTES PAYABLE - Schedule of convertible notes, debt balances (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 | Sep. 30, 2021 |
Notes Payable | |||
Debt Instrument [Line Items] | |||
Notes payable | $ 16,869 | $ 16,718 | |
Notes payable, net of current portion | 14,040 | 18,311 | |
Unamortized loan discount | (46) | (62) | |
Total | 30,863 | 34,967 | |
Unamortized debt issuance cost recorded as an asset | 265 | 295 | |
SVB March 2021 Note | |||
Debt Instrument [Line Items] | |||
Unamortized loan discount | $ (3,500) | ||
SVB March 2021 Note | Notes Payable | |||
Debt Instrument [Line Items] | |||
Notes payable | 12,000 | 12,000 | |
Notes payable, net of current portion | 7,050 | 10,050 | |
Unamortized loan discount | (46) | (62) | |
Total | 19,004 | 21,988 | |
Unamortized debt issuance cost recorded as an asset | 0 | 0 | |
SCI June 2021 Note | Notes Payable | |||
Debt Instrument [Line Items] | |||
Notes payable | 4,869 | 4,718 | |
Notes payable, net of current portion | 6,990 | 8,261 | |
Unamortized loan discount | 0 | 0 | |
Total | 11,859 | 12,979 | |
Unamortized debt issuance cost recorded as an asset | $ 265 | $ 295 |
RESTRUCTURING - Narratives (Det
RESTRUCTURING - Narratives (Details) $ in Millions | 1 Months Ended | 3 Months Ended |
Jan. 31, 2023 employee | Mar. 31, 2023 USD ($) | |
Restructuring and Related Activities [Abstract] | ||
Number of positions eliminated (percent) | 40% | |
Number of positions eliminated (in employees) | employee | 180 | |
Estimated cost | $ 3.8 | |
Restructuring costs | 3.6 | |
Payments for restructuring | 1.3 | |
Restructuring, expected cost remaining | $ 0.2 |
PREFERRED STOCK - Schedule of p
PREFERRED STOCK - Schedule of preferred stock authorized, issued and outstanding (Details) - USD ($) | Mar. 31, 2023 | Jan. 20, 2023 | Dec. 31, 2022 | Apr. 26, 2022 | Apr. 25, 2022 |
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 127,785,195 |
Preferred stock shares issued (in shares) | 835,011 | 0 | 106,949,326 | ||
Liquidation Preference | $ 25,050,000 | $ 0 | $ 1,582,562,000 | ||
Carrying Value | $ 279,503,000 | ||||
Series A | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 19,106,048 | ||||
Preferred stock shares issued (in shares) | 19,106,048 | ||||
Liquidation Preference | $ 28,239,000 | ||||
Carrying Value | $ 4,967,000 | ||||
Series B | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 33,702,134 | ||||
Preferred stock shares issued (in shares) | 33,702,134 | ||||
Liquidation Preference | $ 66,360,000 | ||||
Carrying Value | $ 11,038,000 | ||||
Series C | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 5,687,525 | ||||
Preferred stock shares issued (in shares) | 5,687,525 | ||||
Liquidation Preference | $ 38,163,000 | ||||
Carrying Value | $ 11,837,000 | ||||
Series C-1 | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 4,436,090 | ||||
Preferred stock shares issued (in shares) | 4,436,090 | ||||
Liquidation Preference | $ 89,298,000 | ||||
Carrying Value | $ 16,061,000 | ||||
Series D | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 20,258,299 | ||||
Preferred stock shares issued (in shares) | 20,258,299 | ||||
Liquidation Preference | $ 527,992,000 | ||||
Carrying Value | $ 85,648,000 | ||||
Series D-1 | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 8,418,535 | ||||
Preferred stock shares issued (in shares) | 8,418,535 | ||||
Liquidation Preference | $ 277,812,000 | ||||
Carrying Value | $ 49,957,000 | ||||
Series D-2 | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 8,418,530 | ||||
Preferred stock shares issued (in shares) | 8,418,530 | ||||
Liquidation Preference | $ 277,811,000 | ||||
Carrying Value | $ 49,949,000 | ||||
Series D-3 | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 6,922,165 | ||||
Preferred stock shares issued (in shares) | 6,922,165 | ||||
Liquidation Preference | $ 276,887,000 | ||||
Carrying Value | $ 50,046,000 | ||||
Series D-3A | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | 20,835,869 | ||||
Preferred stock shares issued (in shares) | 0 | ||||
Liquidation Preference | $ 0 | ||||
Carrying Value | $ 0 |
PREFERRED STOCK - Narratives (D
PREFERRED STOCK - Narratives (Details) $ / shares in Units, $ in Millions | Jan. 20, 2023 USD ($) $ / shares shares | Apr. 26, 2022 USD ($) $ / shares shares | Mar. 31, 2023 $ / shares shares | Dec. 31, 2022 $ / shares shares | Apr. 25, 2022 shares |
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | shares | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 127,785,195 |
Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||
Class A Common Stock | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Converted Preferred stock (in shares) | shares | 106,949,326 | ||||
Preferred stock conversion ratio (per share) | 5.5562 | ||||
Aggregate shares (in shares) | shares | 11,300,000 | ||||
Proceeds from the sales of share | $ | $ 113 | ||||
Series A | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Preferred stock, shares authorized (in shares) | shares | 19,106,048 | ||||
Preferred stock, par value (in Dollars per share) | $ / shares | $ 0.0001 | ||||
Aggregate shares (in shares) | shares | 835,011 | ||||
Proceeds from the sales of share | $ | $ 25 | ||||
Preferred stock, liquidation preference annual increase (percent) | 14% | ||||
Liquidation preference(in USD per share) | $ / shares | $ 30 | ||||
Conversion price (in USD per share) | $ / shares | $ 1 | ||||
Conversion price ratio | 250% | ||||
Preferred Stock | |||||
Preferred Stock (Details) - Schedule of preferred stock authorized, issued and outstanding | |||||
Stock price per share (in Dollars per share) | $ / shares | $ 30 |
COMMON STOCK - Narratives (Deta
COMMON STOCK - Narratives (Details) $ / shares in Units, $ in Millions | 2 Months Ended | |||||
Aug. 16, 2022 USD ($) shares | Apr. 26, 2022 USD ($) votePerShare $ / shares shares | Mar. 31, 2023 USD ($) $ / shares shares | Jan. 20, 2023 shares | Dec. 31, 2022 $ / shares shares | Apr. 25, 2022 shares | |
Class of Stock | ||||||
Common stock, shares authorized (in shares) | 250,030,433 | |||||
Common stock and preferred stock, shares authorized (shares) | 500,000,000 | |||||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | 127,785,195 | |
Preferred stock par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Legacy SoundHound | ||||||
Class of Stock | ||||||
Converted shares (in shares) | 106,949,326 | |||||
Class A Common Stock | ||||||
Class of Stock | ||||||
Common stock, shares authorized (in shares) | 455,000,000 | 455,000,000 | 455,000,000 | |||
Common stock par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Converted into shares of common stock (in Shares) | 140,114,060 | |||||
Number of votes per share | votePerShare | 1 | |||||
Aggregate shares (in shares) | 11,300,000 | |||||
Consideration received on transaction | $ | $ 113 | |||||
Class A Common Stock | Equity Line Of Credit Program | ||||||
Class of Stock | ||||||
Aggregate shares (in shares) | 10,700,000 | |||||
Consideration received on transaction | $ | $ 28.7 | |||||
Class A Common Stock | CFPI | ||||||
Class of Stock | ||||||
Common stock, shares authorized (in shares) | 25,000,000 | |||||
Weighted average redemption rate as a based on weighted average share price (percent) | 97% | |||||
Shares issued as consideration (in shares) | 250,000 | |||||
Debt issuance costs | $ | $ 0.8 | |||||
Class B Common Stock | ||||||
Class of Stock | ||||||
Common stock, shares authorized (in shares) | 44,000,000 | 44,000,000 | 44,000,000 | |||
Common stock par value (in Dollars per share) | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Converted into shares of common stock (in Shares) | 40,396,600 | |||||
Number of votes per share | votePerShare | 10 | |||||
Common Stock | ||||||
Class of Stock | ||||||
Converted shares (in shares) | 180,510,660 | |||||
Common Stock | Legacy SoundHound | ||||||
Class of Stock | ||||||
Converted shares (in shares) | 73,561,334 | |||||
Preferred Stock | Legacy SoundHound | ||||||
Class of Stock | ||||||
Converted shares (in shares) | 106,949,326 |
OTHER INCOME (EXPENSE), NET - S
OTHER INCOME (EXPENSE), NET - Schedule of other income (expense), net (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Other Income and Expenses [Abstract] | ||
Interest income | $ 157 | $ 2 |
Change in fair value of derivative liability | 0 | (592) |
Other expense, net | (63) | (467) |
Total other income (expense), net | $ 94 | $ (1,057) |
NET LOSS PER SHARE - Schedule o
NET LOSS PER SHARE - Schedule of calculation of basic and diluted net loss per share attributable to common stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Numerator: | ||
Net loss | $ (26,369) | $ (25,103) |
Weighted Average Number of Shares | ||
Basic (in shares) | 205,082,328 | 69,604,188 |
Diluted (in shares) | 205,082,328 | 69,604,188 |
Net loss per share: | ||
Basic net loss per share (in Dollars per share) | $ (0.13) | $ (0.36) |
Diluted net loss per share (in Dollars per share) | $ (0.13) | $ (0.36) |
NET LOSS PER SHARE - Schedule_2
NET LOSS PER SHARE - Schedule of outstanding shares of potentially dilutive securities (Details) - shares | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 63,452,307 | 138,028,209 |
Redeemable convertible preferred stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 0 | 106,949,326 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 21,669,941 | 28,000,691 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 12,589,404 | 2,014,979 |
Series A | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 25,050,330 | 0 |
Warrant | Common Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 3,665,996 | 1,063,213 |
Estimated ESPP stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Total | 476,636 | 0 |
INCOME TAXES - Schedule of tax
INCOME TAXES - Schedule of tax expense and the effective tax rate (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Loss before income taxes | $ (26,040) | $ (24,751) |
Income tax expense | $ 329 | $ 352 |
Effective tax rate (in percent) | (1.26%) | (1.42%) |
RELATED PARTY TRANSACTIONS - Na
RELATED PARTY TRANSACTIONS - Narratives (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Jan. 20, 2023 | Mar. 31, 2022 | |
Related Party Transaction [Line Items] | ||
Revenue from related parties | $ 2.2 | |
Chief Executive Officer and Director | ||
Related Party Transaction [Line Items] | ||
Aggregate shares (in shares) | 3,334 | |
Stock price per share (in Dollars per share) | $ 100,000 |
SUBSEQUENT EVENT - Narratives (
SUBSEQUENT EVENT - Narratives (Details) - USD ($) | 1 Months Ended | ||||
Apr. 14, 2023 | Apr. 30, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | Jun. 30, 2021 | |
Subsequent Event | |||||
Subsequent Events | |||||
Repayments of debt | $ 30,000,000 | ||||
Subsequent Event | Term Loan Warrants | |||||
Subsequent Events | |||||
Convertible warrants (in shares) | 3,301,536 | ||||
Exercise price per share (in Dollars per share) | $ 2.59 | ||||
Subsequent Event | Equity Line Of Credit Program | |||||
Subsequent Events | |||||
Aggregate shares (in shares) | 12,700,000 | ||||
Proceeds from the sales of share | $ 34,400,000 | ||||
SCI June 2021 Note | |||||
Subsequent Events | |||||
Maximum borrowing capacity | $ 15,000,000 | $ 15,000,000 | |||
Effective interest rate (percent) | 13.50% | ||||
Convertible warrants (in shares) | 63,785 | ||||
Exercise price per share (in Dollars per share) | $ 3.67 | ||||
SCI June 2021 Note | Subsequent Event | |||||
Subsequent Events | |||||
Repayments of debt | $ 11,000,000 | ||||
Extinguishment of debt | 11,700,000 | ||||
Prepayment premium | 200,000 | ||||
Debt prepayment fee | 500,000 | ||||
SVB March 2021 Note | |||||
Subsequent Events | |||||
Effective interest rate (percent) | 13.50% | ||||
Exercise price per share (in Dollars per share) | $ 3.67 | ||||
Accrued interest | $ 200,000 | $ 200,000 | |||
SVB March 2021 Note | Subsequent Event | |||||
Subsequent Events | |||||
Repayments of debt | 17,000,000 | ||||
Extinguishment of debt | 18,500,000 | ||||
Prepayment premium | 300,000 | ||||
Debt prepayment fee | 1,100,000 | ||||
Accrued interest | 100,000 | ||||
Secured Debt | Subsequent Event | |||||
Subsequent Events | |||||
Maximum borrowing capacity | 100,000,000 | ||||
Secured Debt | Term Loan | Subsequent Event | |||||
Subsequent Events | |||||
Additional borrowing capacity | $ 25,000,000 | ||||
Long term debt term | 3 years | ||||
Secured Debt | Term Loan | Subsequent Event | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | |||||
Subsequent Events | |||||
Prime interest rate (percent) | 0.15% | ||||
Effective interest rate (percent) | 8.50% | ||||
Secured Debt | Term Loan | Subsequent Event | Fed Funds Effective Rate Overnight Index Swap Rate | |||||
Subsequent Events | |||||
Prime interest rate (percent) | 0.50% | ||||
Secured Debt | Term Loan | Subsequent Event | Adjustable Rate | |||||
Subsequent Events | |||||
Prime interest rate (percent) | 1% | ||||
Secured Debt | Term Loan | Subsequent Event | Alternate Base Rate | |||||
Subsequent Events | |||||
Effective interest rate (percent) | 7.50% |