SOUNDHOUND AI, INC. quarterly report, Q1 FY2021

Filing summary

Entity and period: The supplied filing is Archimedes Tech SPAC Partners Co.’s Form 10-Q for the quarter ended March 31, 2021, signed July 26, 2021. This does not match the request metadata identifying SoundHound AI, Inc.; the filing describes a blank-check SPAC, not SoundHound.

Business context and financial results

Archimedes was formed to pursue a business combination, with a stated focus on artificial intelligence, cloud services, and automotive technology. It had not begun revenue-generating operations. The quarter’s activities related to formation, its March 2021 IPO, and the search for a target.

  • Revenue: None reported; the company said it would not expect operating revenue before a business combination.
  • Profit: Net loss was $84,033, comprising $81,441 of operating costs, $525 of trust interest income, and a $3,117 unrealized warrant fair-value loss. Basic and diluted loss per nonredeemable share was $0.02.
  • Cash flow: Operating cash outflow was $185,958; investing outflow was $133.0 million, reflecting trust funding; financing inflow was $134.15 million. Ending cash outside the trust was $963,695.
  • Assets and liquidity: Total assets were $134.13 million, including $133.00 million in the trust account and $963,695 of available cash. Trust assets were generally restricted for a business combination or redemptions.
  • Liabilities and equity: Total liabilities were $385,336, including a $273,424 warrant liability; no debt was reported outstanding. Common stock subject to possible redemption was $128.74 million, classified as temporary equity. Stockholders’ equity was $5.00 million.
  • Margins: Not meaningful because the company had no operating revenue.

Changes, outlook, and risks

  • The March IPO raised $120.0 million, followed by a partial over-allotment raising another $13.0 million. Private placements raised $4.16 million. A total of $133.0 million was deposited in the trust account.
  • Following SEC staff guidance on SPAC warrants, the company revised its accounting: private warrants were classified as derivative liabilities and remeasured at fair value, with changes recorded in earnings. It reported a $273,424 warrant liability at quarter-end and a $3,117 quarterly fair-value loss.
  • Management stated that available working capital and borrowing capacity should meet needs through the earlier of a business combination or one year from the filing. The SPAC had 18 months from the IPO closing to complete a combination; otherwise it would wind up and redeem public subunits.
  • The company reported ineffective disclosure controls and a material weakness in accounting for private warrants. Management described plans to enhance accounting review processes but gave no assurance of successful remediation.
  • Risk disclosures include uncertainty from COVID-19 and the possibility that the company may not complete a business combination. The sponsor’s trust-protection indemnity may be difficult to collect; the company said it believed the sponsor was unlikely to be able to satisfy it.
  • The cover page marks “No” for having filed all required reports during the preceding 12 months or applicable shorter period; investors should verify the filing-status context.

Important facts to verify

  1. Confirm the filing is the intended issuer: this document is for Archimedes Tech SPAC Partners Co., not SoundHound AI, Inc.
  2. Review the warrant-liability correction and related restatement disclosures, including the effects on previously reported figures.
  3. Assess remediation of the disclosed material weakness and the effectiveness of controls in subsequent filings.
  4. Verify the SPAC’s remaining unrestricted cash, trust restrictions, business-combination deadline, and any subsequent financing or transaction developments.
  5. Check the filing-status indication and subsequent SEC filings for any reporting delinquency or correction.