Business Context and Reporting Period
SoundHound AI, Inc. filed a Current Report on Form 8-K dated June 2, 2022, reporting executive compensation arrangements and adoption of a non-employee director compensation policy. The filing was signed on June 8, 2022. The company’s Class A common stock and warrants traded on Nasdaq under SOUN and SOUNW, respectively.
Key Financial and Operating Metrics
This filing does not provide current-period revenue, profit, cash flow, margin, debt, liquidity, or balance-sheet metrics.
Material Changes
- The Compensation Committee and Board approved compensation adjustments for the named executive officers.
- New employment agreements were entered into with Chief Executive Officer Keyvan Mohajer, Chief Financial Officer Nitesh Sharan, and Chief Technology Officer Timothy Stonehocker.
- The Board adopted a non-employee director compensation policy.
Compensation, Outlook, and Contingencies
Named Executive Officers
| Executive | Base Salary | Target Annual Bonus | Time-Based RSUs | Performance-Based PSUs |
|---|---|---|---|---|
| Keyvan Mohajer, CEO | $450,000 | 100% of salary; maximum 150% of target | 720,000 | 480,000 |
| Nitesh Sharan, CFO | $350,000 | 60% of salary; maximum 150% of target | 300,000 | 200,000 |
| Timothy Stonehocker, CTO | $335,000 | 50% of salary; maximum 150% of target | 210,000 | 140,000 |
All three salary adjustments were effective retroactively as of May 1, 2022. The RSUs generally vest quarterly over four years, subject to continued employment. The PSU awards have four-year performance periods and are tied equally to four milestones: $100 million of trailing-twelve-month GAAP revenue, positive trailing-twelve-month cash flow, a 90-day average stock price of $15, and a 90-day average stock price of $20.
The employment agreements provide at-will employment. Subject to a release of claims, qualifying terminations may result in three months of base salary and three months of COBRA premiums. For qualifying terminations within three months before or one year after a change in control, the severance period increases to 12 months, with accelerated vesting of time-based options and RSUs. The company may accelerate PSU vesting in connection with negotiating a change-in-control transaction.
Director Compensation
- Annual non-employee director retainer of $32,000, paid quarterly.
- Additional annual committee retainers ranging from $3,800 to $20,000, depending on committee role.
- Initial equity grant with a grant-date value of $380,000, generally vesting over three years; directors may elect to receive half as nonqualified stock options.
- Annual equity grant with a grant-date value of $165,000, vesting over four quarters.
- Travel expense reimbursement and full vesting of then-unvested initial and annual equity awards upon a qualifying change in control, subject to continued service through the transaction.
The equity awards described in the filing were to be granted only after the company filed a Form S-8 registering shares under its 2022 Incentive Award Plan.
Important Facts to Verify
- Confirm the final grants, grant dates, vesting terms, and accounting expense for the executive RSUs, PSUs, and director awards after the Form S-8 filing.
- Review the full employment agreements and director compensation policy filed as Exhibits 10.1 through 10.4 for definitions of Cause, Good Reason, and Change in Control.
- Assess potential dilution from the aggregate 1.23 million executive RSUs and 820,000 executive PSUs, in addition to director equity awards.
- Verify whether the specified revenue, cash-flow, and stock-price PSU milestones are consistent with subsequent company guidance and performance.
- Evaluate the potential cost of ordinary and change-in-control severance obligations.