PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Auddia Inc.'s unaudited Q1 2025 financial statements, covering Balance Sheets, Operations, Equity, Cash Flows, and notes [Condensed Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Balance%20Sheets%20(Unaudited)) The company's financial position as of March 31, 2025, showing assets, liabilities, and shareholders' equity Condensed Balance Sheets (Unaudited) | ASSETS (March 31, 2025) | Amount ($) | | :---------------------- | :--------- | | Cash and cash equivalents | 1,689,913 | | Total current assets | 1,784,436 | | Total non-current assets| 2,289,189 | | **Total assets** | **4,073,625**| | LIABILITIES (March 31, 2025)| Amount ($) | | Total current liabilities| 391,762 | | Total liabilities | 436,723 | | SHAREHOLDERS' EQUITY (March 31, 2025)| Amount ($) | | Total shareholders' equity| 3,636,902 | | **Total liabilities and shareholders' equity**| **4,073,625**| - Total assets decreased from **$5,298,328** as of December 31, 2024, to **$4,073,625** as of March 31, 2025, a decrease of approximately **23.2%**[19](index=19&type=chunk) - Total liabilities decreased from **$604,008** as of December 31, 2024, to **$436,723** as of March 31, 2025, a decrease of approximately **27.7%**[19](index=19&type=chunk) - Total shareholders' equity decreased from **$4,694,320** as of December 31, 2024, to **$3,636,902** as of March 31, 2025, a decrease of approximately **22.5%**[19](index=19&type=chunk) [Condensed Statements of Operations (Unaudited)](index=5&type=section&id=Condensed%20Statements%20of%20Operations%20(Unaudited)) Analysis of Auddia Inc.'s financial performance for the three months ended March 31, 2025, compared to 2024 Condensed Statements of Operations (Unaudited) | Metric (Three Months Ended March 31) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------------------------- | :------- | :------- | :--------- | :--------- | | Revenue | – | – | – | – | | Total operating expenses | 1,751,013| 2,054,620| (303,607) | (14.8%) | | Loss from operations | (1,751,013)| (2,054,620)| 303,607 | (14.8%) | | Interest expense | (1,552) | (152,708)| 151,156 | (99.0%) | | Net loss | (1,752,565)| (2,207,328)| 454,763 | (20.6%) | | Net loss per share (Basic and diluted)| (3.86) | (33.69) | 29.83 | (88.5%) | | Weighted average common shares outstanding| 454,582 | 65,526 | 389,056 | 593.7% | - Net loss decreased by **20.6%** from **$(2,207,328)** in Q1 2024 to **$(1,752,565)** in Q1 2025[21](index=21&type=chunk) - Interest expense significantly decreased by **99.0%** due to the repayment of notes payable to a related party in April 2024[21](index=21&type=chunk)[118](index=118&type=chunk) [Condensed Statements of Changes in Shareholders' Equity (Unaudited)](index=6&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(Unaudited)) Summary of changes in Auddia Inc.'s shareholders' equity for the three months ended March 31, 2025 - Shareholders' equity decreased from **$4,694,320** at December 31, 2024, to **$3,636,902** at March 31, 2025, primarily due to the net loss incurred during the period[24](index=24&type=chunk) - Issuance of common shares, net of costs, contributed **$672,795** to additional paid-in capital in Q1 2025[24](index=24&type=chunk) - Series B preferred stock converted to common stock resulted in a decrease of **$139,027** in additional paid-in capital and an increase in common stock par value[24](index=24&type=chunk) [Condensed Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20(Unaudited)) Analysis of Auddia Inc.'s cash inflows and outflows from operating, investing, and financing activities for Q1 2025 Condensed Statements of Cash Flows (Unaudited) | Cash Flow Activity (Three Months Ended March 31) | 2025 ($) | 2024 ($) | | :----------------------------------------------- | :---------- | :---------- | | Net cash used in operating activities | (1,443,166) | (1,405,138) | | Net cash used in investing activities | (246,601) | (273,388) | | Net cash provided by financing activities | 673,361 | 3,606,508 | | Net increase (decrease) in cash | (1,016,406) | 1,927,982 | | Cash, beginning of year | 2,706,319 | 804,556 | | Cash and restricted cash, end of period | 1,689,913 | 2,732,538 | - Net cash used in operating activities increased slightly from **$(1,405,138)** in Q1 2024 to **$(1,443,166)** in Q1 2025[26](index=26&type=chunk) - Cash provided by financing activities significantly decreased from **$3,606,508** in Q1 2024 to **$673,361** in Q1 2025[26](index=26&type=chunk) - The company experienced a net decrease in cash of **$(1,016,406)** in Q1 2025, compared to a net increase of **$1,927,982** in Q1 2024[26](index=26&type=chunk) [Notes to Condensed Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(Unaudited)) Detailed explanations of Auddia Inc.'s accounting policies, financial instruments, and recent transactions [Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies](index=8&type=section&id=Note%201%20%E2%80%93%20Description%20of%20Business,%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Overview of Auddia Inc.'s business, financial statement presentation, and key accounting principles - Auddia Inc. is a technology company focused on reinventing audio engagement through a proprietary AI platform for audio and innovative podcast technologies[28](index=28&type=chunk) - The company effectuated a **1-for-25** reverse stock split on February 27, 2024, and a **1-for-17** reverse stock split on March 28, 2025, retrospectively adjusting all share and per-share data[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Auddia Inc. is an emerging growth company and has elected to use the extended transition period for complying with new or revised accounting standards[38](index=38&type=chunk) - The company's current cash of **$1,689,913** as of March 31, 2025, is only sufficient into **Q3 2025**, raising substantial doubt about its ability to continue as a going concern without additional funding[39](index=39&type=chunk)[40](index=40&type=chunk) [Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs](index=11&type=section&id=Note%202%20%E2%80%93%20Property%20%26%20Equipment,%20Intangible%20Assets,%20and%20Software%20Development%20Costs) Details on Auddia Inc.'s property, equipment, intangible assets, and capitalized software development costs Property & Equipment, Intangible Assets, and Software Development Costs | Asset Category (Net) | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------- | :----------------- | :-------------------- | | Property and equipment | 10,932 | 12,281 | | Intangible assets | 13,021 | 3,416 | | Software development costs| 2,114,166 | 2,308,230 | - Software development costs, net, decreased by approximately **8.4%** from **$2,308,230** at December 31, 2024, to **$2,114,166** at March 31, 2025[53](index=53&type=chunk) - Intangible assets, net, significantly increased from **$3,416** to **$13,021**, primarily due to new patent capitalization[53](index=53&type=chunk) - Amortization of capitalized software development costs was **$431,037** for Q1 2025, down from **$476,918** in Q1 2024[53](index=53&type=chunk) [Note 3 – Accounts Payable and Accrued Liabilities](index=12&type=section&id=Note%203%20%E2%80%93%20Accounts%20Payable%20and%20Accrued%20Liabilities) Breakdown of Auddia Inc.'s accounts payable and accrued liabilities as of March 31, 2025 Accounts Payable and Accrued Liabilities | Category | March 31, 2025 ($) | December 31, 2024 ($) | | :------- | :----------------- | :-------------------- | | Accounts payable and accrued liabilities | 330,143 | 495,312 | | Credit cards payable | 15,892 | 12,351 | | **Total**| **346,035** | **507,663** | - Total accounts payable and accrued liabilities decreased by **31.8%** from **$507,663** at December 31, 2024, to **$346,035** at March 31, 2025[54](index=54&type=chunk) [Note 4 – Notes Payable to Related Party, net of debt issuance costs](index=12&type=section&id=Note%204%20%E2%80%93%20Notes%20Payable%20to%20Related%20Party,%20net%20of%20debt%20issuance%20costs) Information on Auddia Inc.'s notes payable to a related party, including repayment and conversion events - The company repaid **$2.75 million** of principal on its outstanding Secured Bridge Notes on April 26, 2024[57](index=57&type=chunk) - Unpaid accrued interest and original issue discount on Bridge Notes totaling **$911,384** were converted into equity securities (Prefunded Warrants and Non-Prefunded Warrants) effective April 9, 2024[57](index=57&type=chunk)[58](index=58&type=chunk) - The Non-Prefunded Warrants and Fee Warrants have a price adjustment provision and were not exercisable for **six months** post-issue to comply with Nasdaq rules[59](index=59&type=chunk)[60](index=60&type=chunk) [Note 5 – Commitments and Contingencies](index=13&type=section&id=Note%205%20%E2%80%93%20Commitments%20and%20Contingencies) Details on Auddia Inc.'s contractual obligations and potential legal liabilities - The company entered into a **37-month** operating lease for office space commencing April 1, 2024, with monthly base rent increasing over the term[62](index=62&type=chunk) - Rent expense for Q1 2025 was **$8,960**, a decrease from **$22,480** in Q1 2024, which included a temporary month-to-month lease[62](index=62&type=chunk) - A pre-IPO investor is claiming damages of less than **$300,000**, but no complaint has been filed, and the outcome is neither probable nor estimable as of the financial statement issuance date[63](index=63&type=chunk) [Note 6 – Share-based Issuances](index=13&type=section&id=Note%206%20%E2%80%93%20Share-based%20Issuances) Information on Auddia Inc.'s stock options and restricted stock units outstanding Stock Options (March 31, 2025) | Stock Options (March 31, 2025) | Number | Weighted Average Exercise Price ($) | | :----------------------------- | :------- | :---------------------------------- | | Outstanding | 34,341 | 123.88 | | Exercisable | 33,166 | 123.88 | Restricted Stock Units (March 31, 2025) | Restricted Stock Units (March 31, 2025) | Number | | :------------------------------------ | :----- | | Outstanding | – | - All **309** restricted stock units outstanding as of December 31, 2024, were vested/issued by March 31, 2025, resulting in **zero** outstanding RSUs[68](index=68&type=chunk) - Share-based compensation expense decreased from **$173,289** in Q1 2024 to **$76,906** in Q1 2025[68](index=68&type=chunk) [Note 7 – Equity Financings](index=15&type=section&id=Note%207%20%E2%80%93%20Equity%20Financings) Details on Auddia Inc.'s equity financing activities, including stock purchase agreements and convertible preferred stock - The company has an equity line Common Stock Purchase Agreement with White Lion, allowing it to sell up to **$10,000,000** in common stock[69](index=69&type=chunk) - During Q1 2025, Auddia issued **78,947 shares** for approximately **$0.7 million** through an At-the-Market Issuance Sales Agreement[70](index=70&type=chunk) - In April 2024, the company completed a **$2.3 million** convertible preferred stock and warrants financing, issuing Series B Preferred Stock and Warrants convertible into Common Stock[72](index=72&type=chunk)[73](index=73&type=chunk) - As of March 31, 2025, the company elected to capitalize all declared dividends on Series B Preferred Stock. **140 shares** of Series B Preferred stock and capitalized dividends were converted to **16,654 shares** of Common Stock on February 19, 2025[74](index=74&type=chunk)[75](index=75&type=chunk) [Note 8 – Leases under ASC 842](index=16&type=section&id=Note%208%20%E2%80%93%20Leases%20under%20ASC%20842) Information on Auddia Inc.'s operating lease accounting under ASC 842 - The company recognizes operating lease expense on a straight-line basis over the lease term[77](index=77&type=chunk) - Operating lease expense for Q1 2025 was **$8,960**, compared to **$0** in Q1 2024 (due to lease commencement in April 2024)[77](index=77&type=chunk) Lease Metric (March 31, 2025) | Lease Metric (March 31, 2025) | Value | | :---------------------------- | :---------- | | Weighted-average remaining lease term | 1.78 years | | Weighted-average discount rate| 8.6% | [Note 9 – Segment Reporting](index=16&type=section&id=Note%209%20%E2%80%93%20Segment%20Reporting) Disclosure of Auddia Inc.'s operating segments and how its business is managed - Auddia Inc. operates and manages its business as a single operating segment focused on AI audio technology and podcast innovation[79](index=79&type=chunk) - The Chief Financial Officer (CFO) serves as the Chief Operating Decision Maker (CODM) and reviews entity-wide financial and operational performance as a single unit[79](index=79&type=chunk) [Note 10 – Subsequent Events](index=16&type=section&id=Note%2010%20%E2%80%93%20Subsequent%20Events) Significant events occurring after the balance sheet date, up to the financial statement issuance - In April 2025, **447 shares** of Series B Preferred stock and capitalized dividends were converted to **85,225 shares** of Common stock[82](index=82&type=chunk) - Also in April 2025, the company issued **25,000 shares** of Common stock under the Equity Line Common Stock Purchase Agreement for total proceeds of **$0.1 million**[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion of Auddia Inc.'s Q1 2025 financial condition, operations, liquidity, and funding needs [Overview](index=17&type=section&id=Overview) A summary of Auddia Inc.'s business, product offerings, and financial position - Auddia is an AI technology company based in Boulder, CO, focused on its faidr app, which uses proprietary AI to personalize radio and podcast listening by removing ads and offering exclusive content[84](index=84&type=chunk)[85](index=85&type=chunk) - The faidr app launched fully on February 15, 2022, and expanded to include faidrRadio (exclusive content) in February 2023 and podcasts for iOS/Android in Q1/Q2 2023[89](index=89&type=chunk) - In Q1 2025, the company implemented new paywalls and is testing various price points and marketing strategies to optimize subscription conversions[90](index=90&type=chunk) - Auddia has an accumulated deficit of **$91,239,759** as of March 31, 2025, and requires substantial additional funding to complete product development and scale operations[92](index=92&type=chunk)[93](index=93&type=chunk) [Recent Developments](index=18&type=section&id=Recent%20Developments) Key events and strategic initiatives undertaken by Auddia Inc. in the recent period [Mergers and Acquisitions Strategy](index=18&type=section&id=Mergers%20and%20Acquisitions%20Strategy) Auddia Inc.'s strategic approach to mergers and acquisitions for business growth and market expansion - Auddia is exploring M&A options to rapidly scale the business, accelerate user adoption, enter international markets, and open new capital pathways[96](index=96&type=chunk) - The strategy focuses on acquiring radio-streaming app users, offering proprietary ad-free products to generate subscription revenue, and integrating differentiated features into a larger audio Superapp platform[96](index=96&type=chunk) [Nasdaq Deficiency Notices](index=19&type=section&id=Nasdaq%20Deficiency%20Notices) Information regarding Auddia Inc.'s compliance with Nasdaq listing requirements - Auddia received Nasdaq notices in 2022, 2023, and 2024 for non-compliance with minimum stockholders' equity and **$1.00** bid price requirements[98](index=98&type=chunk) - The company regained compliance with the equity requirement on **May 24, 2024**, and with the **$1.00** minimum bid price requirement on **April 14, 2025**[99](index=99&type=chunk)[101](index=101&type=chunk) [Reverse Stock Splits](index=19&type=section&id=Reverse%20Stock%20Splits) Details on Auddia Inc.'s reverse stock splits and their impact on outstanding shares - A **1-for-25** reverse stock split was effectuated on February 27, 2024, and a **1-for-17** reverse stock split on March 28, 2025[102](index=102&type=chunk)[103](index=103&type=chunk) - These splits adjusted outstanding warrants, stock options, and restricted stock units proportionately, without changing the authorized number of common shares[104](index=104&type=chunk) [Impact of Inflation](index=19&type=section&id=Impact%20of%20Inflation) Assessment of how inflationary pressures affect Auddia Inc.'s business operations and costs - The company has experienced higher costs due to inflation, particularly in employee compensation and outside services[105](index=105&type=chunk) - Inflation is expected to continue negatively impacting the business throughout 2025, with uncertainty about offsetting these pressures[105](index=105&type=chunk) [Components of our results of operations](index=19&type=section&id=Components%20of%20our%20results%20of%20operations) Explanation of the key financial components contributing to Auddia Inc.'s operating results [Direct costs of services](index=19&type=section&id=Direct%20costs%20of%20services) Analysis of expenses directly attributable to providing Auddia Inc.'s services - Direct costs primarily include hosting and technology-related expenses for app development[106](index=106&type=chunk) - These costs are expected to increase with continued development and enhancement of the faidr and podcasting apps[106](index=106&type=chunk) [Sales and marketing](index=20&type=section&id=Sales%20and%20marketing) Overview of Auddia Inc.'s expenses related to promoting and selling its products and services - Sales and marketing expenses consist of salaries, direct-to-consumer promotional spend, and consulting services[107](index=107&type=chunk) - These expenses are expected to fluctuate based on new app upgrades, enhancements, and efforts to drive customer acquisition, retention, and subscription conversion[107](index=107&type=chunk) [Research and development](index=20&type=section&id=Research%20and%20development) Details on Auddia Inc.'s investments in research and development for new technologies and product enhancements - Significant resources are allocated to R&D for software development, with costs capitalized once the preliminary project stage is complete and funding is committed[108](index=108&type=chunk) - Capitalized software development costs are amortized over an estimated useful life of three years[108](index=108&type=chunk) [General and administrative](index=20&type=section&id=General%20and%20administrative) Analysis of Auddia Inc.'s overhead expenses supporting overall business operations - G&A expenses include salaries, payroll taxes, benefits, stock-based compensation, and professional fees for auditing, tax, legal, and consulting services[109](index=109&type=chunk) - These expenses are expected to increase as the company prepares for commercialization and supports its operations as a public company[109](index=109&type=chunk) [Other income and expense](index=20&type=section&id=Other%20income%20and%20expense) Summary of non-operating income and expenses affecting Auddia Inc.'s financial results - This category primarily consists of interest expense related to debt and conversion features of notes payable to a related party[110](index=110&type=chunk) [Results of operations](index=21&type=section&id=Results%20of%20operations) Detailed comparison of Auddia Inc.'s financial performance for the three months ended March 31, 2025 and 2024 [Comparison of the Three Months Ended March 31, 2025 and 2024](index=21&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202025%20and%202024) A comparative analysis of Auddia Inc.'s financial results for the first quarter of 2025 versus 2024 Comparison of the Three Months Ended March 31, 2025 and 2024 | Metric (Three Months Ended March 31) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------------------------- | :------- | :------- | :--------- | :--------- | | Revenue | – | – | – | – | | Direct cost of services | 55,571 | 48,173 | 7,398 | 15.4% | | Sales and marketing | 235,441 | 146,395 | 89,046 | 60.8% | | Research and development | 396,703 | 165,507 | 231,196 | 139.7% | | General and administrative | 630,891 | 1,210,799| (579,908) | (47.9%) | | Depreciation and amortization | 432,407 | 483,746 | (51,339) | (10.6%) | | Total operating expenses | 1,751,013| 2,054,620| (303,607) | (14.8%) | | Loss from operations | (1,751,013)| (2,054,620)| 303,607 | (14.8%) | | Interest expense | (1,552) | (152,708)| 151,156 | (99.0%) | | Net loss | (1,752,565)| (2,207,328)| 454,763 | (20.6%) | [Revenue](index=21&type=section&id=Revenue) Analysis of Auddia Inc.'s revenue generation for the reported periods - Total revenues for both Q1 2025 and Q1 2024 were **$0**, as the company continues to develop and enhance its apps to establish new revenue streams[112](index=112&type=chunk) [Direct cost of services](index=21&type=section&id=Direct%20cost%20of%20services) Examination of direct costs incurred by Auddia Inc. in delivering its services - Direct Cost of Services increased by **$7,398 (15.4%)** to **$55,571** in Q1 2025, remaining relatively flat due to ongoing maintenance costs for the faidr app[113](index=113&type=chunk) [Sales and marketing](index=21&type=section&id=Sales%20and%20marketing) Review of Auddia Inc.'s sales and marketing expenditures and their impact - Sales and marketing expenses increased by **$89,046 (60.8%)** to **$235,441** in Q1 2025, primarily due to increased marketing promotion costs[114](index=114&type=chunk) [Research and development](index=21&type=section&id=Research%20and%20development) Assessment of Auddia Inc.'s research and development expenses and their changes - Research and development expenses increased by **$231,196 (139.7%)** to **$396,703** in Q1 2025, mainly due to higher R&D consulting fees[115](index=115&type=chunk) [General and administrative](index=21&type=section&id=General%20and%20administrative) Analysis of Auddia Inc.'s general and administrative expenses and their fluctuations - General and administrative expenses decreased by **$579,908 (47.9%)** to **$630,891** in Q1 2025, driven by lower stock compensation expense and professional fees related to potential acquisition efforts in 2024[116](index=116&type=chunk) [Depreciation and amortization](index=22&type=section&id=Depreciation%20and%20amortization) Review of Auddia Inc.'s depreciation and amortization expenses - Depreciation and amortization expenses decreased by **$51,339 (10.6%)** to **$432,407** in Q1 2025, reflecting a decrease in capitalized software costs and their ongoing amortization[117](index=117&type=chunk) [Other expense, net](index=22&type=section&id=Other%20expense,%20net) Summary of Auddia Inc.'s other non-operating expenses - Total other expenses decreased by **$151,156 (99.0%)** to **$1,552** in Q1 2025, primarily due to the repayment of notes payable to a related party in April 2024[118](index=118&type=chunk) [Liquidity and capital resources](index=22&type=section&id=Liquidity%20and%20capital%20resources) Discussion of Auddia Inc.'s ability to meet its short-term and long-term financial obligations [Sources of liquidity](index=22&type=section&id=Sources%20of%20liquidity) Overview of Auddia Inc.'s available cash and working capital to fund operations - As of March 31, 2025, Auddia had cash and cash equivalents of **$1,689,913** and working capital of approximately **$1.4 million**[119](index=119&type=chunk) - The **$0.7 million** in additional financing secured in Q1 2025 is only sufficient to fund current operating plans into **Q3 2025**, indicating a need for further funding[119](index=119&type=chunk) [Equity Line Common Stock Purchase Agreement](index=22&type=section&id=Equity%20Line%20Common%20Stock%20Purchase%20Agreement) Details on Auddia Inc.'s agreement to sell common stock through an equity line - The company has an agreement with White Lion Capital, LLC, allowing it to sell up to **$10,000,000** in common stock, at its discretion[120](index=120&type=chunk) [At-the-Market Sales Agreement](index=22&type=section&id=At-the-Market%20Sales%20Agreement) Information on Auddia Inc.'s at-the-market equity offering program - Auddia issued **78,947 shares** for approximately **$0.7 million** in Q1 2025 through an At-the-Market Issuance Sales Agreement with Ascendiant Capital Markets, LLC[121](index=121&type=chunk) - The agreement allows for the sale of up to **$10,000,000** in common stock through an ATM offering[121](index=121&type=chunk) [Cash Flow Analysis](index=22&type=section&id=Cash%20Flow%20Analysis) Detailed breakdown of Auddia Inc.'s cash flows from operating, investing, and financing activities Cash Flow Analysis | Cash Flow Activity (Three Months Ended March 31) | 2025 ($) | 2024 ($) | | :----------------------------------------------- | :---------- | :---------- | | Operating activities | (1,443,166) | (1,405,138) | | Investing activities | (246,601) | (273,388) | | Financing activities | 673,361 | 3,606,508 | | Change in cash | (1,016,406) | 1,927,982 | [Operating activities](index=23&type=section&id=Operating%20activities) Analysis of cash flows generated from or used in Auddia Inc.'s primary business operations - Cash used in operating activities was **$(1,443,166)** in Q1 2025, primarily due to a net loss of **$(1,752,565)** and a decrease in working capital[124](index=124&type=chunk) - Non-cash charges, including depreciation, amortization, and share-based compensation, partially offset the net loss[124](index=124&type=chunk) [Investing activities](index=23&type=section&id=Investing%20activities) Review of cash flows related to Auddia Inc.'s investments in assets - Cash used in investing activities was **$(246,601)** in Q1 2025, consisting of capitalization of software development and patent expenses[126](index=126&type=chunk) - This represents a decrease from **$(273,388)** in Q1 2024, which was entirely for software development capitalization[126](index=126&type=chunk) [Financing activities](index=23&type=section&id=Financing%20activities) Examination of cash flows from Auddia Inc.'s debt and equity transactions - Cash generated from financing activities was **$673,361** in Q1 2025, primarily from the issuance of common shares[127](index=127&type=chunk) - This is a significant decrease from **$3,606,508** generated in Q1 2024, which also came entirely from common share issuance[127](index=127&type=chunk) [Funding Requirements](index=23&type=section&id=Funding%20Requirements) Assessment of Auddia Inc.'s future capital needs and ability to secure additional financing - Auddia has an accumulated deficit of **$91,239,759** as of March 31, 2025, and requires additional funding beyond the **$0.7 million** secured in Q1 2025, which is only sufficient until **Q3 2025**[128](index=128&type=chunk) - Future funding needs depend on market acceptance of products, ability to attract content creators and retain listeners, technology development costs, and managing competitive and intellectual property challenges[129](index=129&type=chunk)[130](index=130&type=chunk) [Off-balance sheet arrangements](index=23&type=section&id=Off-balance%20sheet%20arrangements) Disclosure of Auddia Inc.'s off-balance sheet transactions and obligations - The company did not have any off-balance sheet arrangements during the periods presented or currently[129](index=129&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) Key accounting policies and estimates that require significant judgment and impact financial reporting - Key accounting estimates include the valuation of capital stock, warrants, and options, and the recoverability and amortization period for capitalized software development costs[36](index=36&type=chunk)[131](index=131&type=chunk) - Software development costs are capitalized once the preliminary project stage is complete and amortized over **three years**, subject to ongoing recoverability assessment[133](index=133&type=chunk) - Equity-based compensation awards are equity-classified and valued using the Black-Scholes option-pricing model[134](index=134&type=chunk)[135](index=135&type=chunk) - As an emerging growth company and smaller reporting company, Auddia has elected to use extended transition periods for new accounting standards and reduced disclosure obligations[136](index=136&type=chunk)[137](index=137&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Auddia Inc. is not required to provide quantitative and qualitative disclosures about market risk - Auddia Inc. is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management's evaluation of Auddia Inc.'s disclosure controls and procedures as of March 31, 2025 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of **March 31, 2025**[139](index=139&type=chunk) - Disclosure controls are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[139](index=139&type=chunk) - There were no changes in internal control over financial reporting during the **three months** ended **March 31, 2025**[140](index=140&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) Auddia Inc. faces legal disputes, not expected to materially affect financial condition; no active litigations reported - The company is involved in various legal disputes but believes their resolution will not have a material adverse effect on its business or financial condition[143](index=143&type=chunk) - There are no active litigations as of the date the financial statements were issued[63](index=63&type=chunk) - A pre-IPO investor has claimed damages of less than **$300,000**, but no complaint has been filed, and the outcome is not probable or estimable, so no accrual has been made[63](index=63&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes to Auddia Inc.'s risk factors since the Annual Report on Form 10-K for December 31, 2024 - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2024[144](index=144&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to Auddia Inc. for the reported period, and no equity securities were repurchased - This item is not applicable[145](index=145&type=chunk) - The company did not repurchase any equity securities during the quarter ended March 31, 2025[146](index=146&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Auddia Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[147](index=147&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Auddia Inc. has no mine safety disclosures to report - There are no mine safety disclosures[148](index=148&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No director or officer of Auddia Inc. adopted or terminated any Rule 10b5-1 trading arrangements in Q1 2025 - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025[149](index=149&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists all required exhibits, including agreements, certificates, policies, and XBRL taxonomy documents, incorporated by reference - The section lists exhibits required by SEC regulations, including the At-The-Market Issuance Sales Agreement, Certificate of Incorporation, Bylaws, Equity Incentive Plans, and various other agreements[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - It also includes Section 302 and 906 Certifications by the CEO and CFO, and XBRL instance and taxonomy documents[153](index=153&type=chunk)[154](index=154&type=chunk) [Signatures](index=30&type=section&id=Signatures) Report signed by Michael Lawless (CEO) and John Mahoney (CFO) on behalf of Auddia Inc. on May 8, 2025 - The report is signed by Michael Lawless, President, CEO, and Director, and John Mahoney, CFO, on **May 8, 2025**[157](index=157&type=chunk)

Core Insights - Auddia Inc. has introduced a new proprietary AI audio model that allows users to transform any FM music station into an ad-free and DJ talk-free experience, enhancing user control over their listening preferences [1][2][3] Group 1: New Features and Innovations - The new "binary AI model" enables subscribers to turn off ads and DJ talk, providing uninterrupted music listening [2] - This feature is available exclusively to subscribers of the faidr platform and can be adjusted at any time through new radio preference controls [2][3] - The new model is currently live on iOS and will be available on Android shortly, with positive feedback received during prototyping [3] Group 2: Company Vision and Market Position - Auddia aims to innovate within the radio space by transitioning radio listening from a passive to a more active experience for users [3] - The company seeks to balance preserving traditional radio elements while offering customization options to cater to diverse listener preferences [4] - Auddia's flagship audio superapp, faidr, is designed to reinvent consumer engagement with AM/FM radio and other audio content [5]

Core Insights - Auddia Inc. has updated its corporate overview to emphasize its superapp strategy, which leverages AI to enhance audio content engagement and retention metrics [1][4] - The company aims to consolidate various audio components into a single streaming platform, enhancing user experience through innovative AI features [2][4] Company Strategy - Auddia is executing a superapp strategy that integrates all major audio components into one platform, starting with AI-driven features like content skipping and ad-free listening [2][4] - Future enhancements to the faidr superapp will include a music player, audiobooks, and text-to-speech capabilities, allowing for a comprehensive audio experience [3] AI and Data Utilization - The company believes that the data generated from user interactions across its audio superapp will provide a competitive edge in developing advanced AI models [4] - Auddia's focus on leveraging user engagement data aims to improve content delivery and provide valuable insights to content creators [3][4] Performance Metrics - The updated corporate overview reflects significant improvements in user retention, with durable increases in 30-day retention metrics and the introduction of customer acquisition cost (CAC) targets for paid subscribers [4] - This marks the first time the company has set specific CAC targets, indicating a strategic shift towards more data-driven performance metrics [4]

Financial Performance - The company incurred net losses of $8,722,039 and $8,807,496 for the years ended December 31, 2024 and 2023, respectively[91]. - The company expects to continue incurring significant operating losses and expenses in the near term as it invests in technology and marketing[91]. - The company has a limited operating history and may struggle to generate meaningful revenue from future software products[96]. Cash and Financing - As of December 31, 2024, the company had cash and cash equivalents of $2,706,319, which is only sufficient to fund current operating plans into the second quarter of 2025[90]. - The company secured approximately $10.9 million in additional financing in 2024 and $0.6 million year-to-date through March 5, 2025[90]. - The company may need to raise additional capital, which could lead to dilution of existing stockholders' interests[95]. Growth Strategy - The company anticipates significant expenses related to the development and commercialization of the faidr product, which has substantial market potential[92]. - The company plans to pursue acquisitions as part of its growth strategy, but faces challenges due to capital market volatility[106]. - The company anticipates significant growth in operations, requiring expansion of managerial, operational, and financial systems to support product rollout and user projections[110]. Regulatory and Compliance Risks - The company faces challenges in complying with evolving privacy and data protection regulations, which may increase operational costs and affect data handling practices[115]. - New laws such as the GDPR and CCPA impose burdensome obligations that could impact the company's ability to collect and use personal information, potentially leading to increased costs[117]. - The company may incur significant costs related to compliance with privacy regulations, which could affect customer relationships and overall demand for its platform[118]. - The company operates in a highly regulated industry, and changes in laws or judicial decisions could negatively impact its financial condition and operations[123]. - The company may face litigation and regulatory inquiries that could adversely affect its results of operations and reputation[124]. Operational Risks - Cybersecurity threats pose a risk to the company, with potential unauthorized access to sensitive information leading to regulatory actions and reputational damage[111]. - The company is highly dependent on key personnel, and the loss of any key employees could adversely affect its objectives[108]. - The company relies on third-party vendors and developers, and any violations of laws or regulations by these parties could adversely affect its business[119]. Stock and Market Risks - The company has 8,594,308 shares of common stock issued and outstanding as of March 4, 2025, with substantial shares eligible for sale into the public market, potentially impacting stock price[144]. - The price of the company's common stock may be volatile and fluctuate substantially, influenced by various market factors[149]. - If quarterly operating results fall below investor expectations, the stock price could decline substantially[150]. - The company may face substantial costs and management distraction from potential securities class-action litigation following periods of stock price volatility[151]. - Lack of research coverage by analysts could lead to a decrease in the trading price of the company's stock[152]. - The company may not satisfy the requirements for continued listing on the Nasdaq Capital Market, which could limit stock liquidity and increase volatility[153]. - The company regained compliance with Nasdaq's equity requirement of $2,500,000 as of May 24, 2024[155]. - The company received a notice on October 16, 2024, indicating non-compliance with the $1.00 minimum bid price requirement, with a 180-day period to regain compliance[156]. Internal Control and Governance - The company has identified material weaknesses in its internal control over financial reporting, which may not be remediated in time for compliance with Section 404 of the Sarbanes-Oxley Act[166]. - The company is classified as an "emerging growth company" and intends to rely on reduced disclosure requirements until certain revenue or debt thresholds are met[161]. - The company is subject to anti-takeover provisions under Delaware law, which may discourage beneficial acquisitions[169]. - The company has taken advantage of exemptions from certain disclosure requirements, which may affect the attractiveness of its common stock to investors[162]. Dividend Policy - The company does not anticipate paying cash dividends in the foreseeable future, with capital appreciation being the sole source of gain for shareholders[173].

Core Insights - Auddia Inc. will present at the SXSW Conference, focusing on the podcast industry's financial landscape and strategies for improvement [2][3] - The presentation is titled "Podcast Apps Need to Step It Up" and aims to foster dialogue between podcast creators and app stakeholders [3] Company Overview - Auddia is a technology company that has developed a proprietary AI platform for audio identification and classification, aiming to transform consumer engagement with audio content [2][4] - The company's flagship product, faidr, offers unique features such as ad-free listening, content skipping across AM/FM stations, and exclusive playlists [4][7] Industry Engagement - Auddia has been actively engaging with podcast community stakeholders to discuss improvements in the economics of the podcast industry [3] - The company emphasizes the need for podcast apps to enhance their offerings in response to creator demands [3]

Core Insights - Auddia Inc. has reported a significant increase in 30-day user retention metrics for its audio platform, faidr, with retention rates exceeding 20% in Q4 2024 and approaching 25% in January 2025, with expectations to surpass 25% in February 2025 [2][3][4] Group 1: User Retention Metrics - The 30-day retention rate for faidr accelerated to over 20% in October 2024, maintaining this level through Q4 2024, and reaching just below 25% in January 2025 [3][4] - February 2025 is anticipated to be the first month where retention rates exceed 25% [3] Group 2: Subscription Conversion Optimization - Auddia has integrated an advanced subscription conversion platform into faidr to enhance subscription conversion and revenue optimization strategies [3][4] - The company expects subscription conversion metrics to follow a positive trajectory similar to the retention metrics as product and marketing optimizations continue [4] Group 3: Future Guidance - Auddia plans to provide further guidance on subscription revenue growth at the end of Q1 2025, as ongoing product, marketing, and subscription conversion optimizations are expected to drive results [4]

Core Insights - Auddia Inc. has achieved a 30-day user retention rate of 21% in October, significantly surpassing its internal goal of 10% [1] - The company is implementing subscription conversion optimization strategies starting this quarter, with updated metrics and new revenue expected to be reported in Q1 2025 [1][2] User Retention and Product Enhancements - The company has focused on improving user retention through a series of product enhancements, resulting in a retention increase from 5% to over 20% over the past year [2] - Key enhancements include ad-free podcast listening, integrations with Apple CarPlay and Android Auto, and various user experience improvements under the faidr 3.1 initiative [2] Future Revenue Expectations - Auddia anticipates that continued improvements in the faidr app will support user retention and facilitate conversions to paid subscriptions as it transitions to driving subscription revenue in 2025 [2] - The company plans to report new subscription revenue metrics in the first quarter of 2025 [1][2]

Financial Performance - As of September 30, 2024, the company had an accumulated deficit of $87,003,511, indicating significant operating losses since inception[117] - Total revenues for the three months ended September 30, 2024, were $0, as the company continues to develop its faidr and podcasting Apps to establish new revenue streams[138] - Total revenues for the nine months ended September 30, 2024, were $0, as the company continues to focus on developing its faidr and podcasting Apps[146] - Net loss for the three months ended September 30, 2024, was $(1,949,428), a decrease of $167,054 or 7.9% from $(2,116,482) for the same period in 2023[138] - Cash used in operating activities for the nine months ended September 30, 2024 was ($3,803,324), primarily due to a net loss of ($6,460,181)[173] Funding and Financing - The company secured approximately $10.4 million in additional financing during 2024, but will need further funding to complete product development and scale operations[120] - The company has secured $10.4 million of additional financing in 2024, which will fund operations into the first quarter of 2025[179] - Cash provided by financing activities for the nine months ended September 30, 2024 was $7,572,130, primarily from the issuance of common shares totaling $8,176,048[176] - The company entered into a Secured Bridge Note financing, receiving $750,000 in gross proceeds with a principal amount of $825,000 and a 10% interest rate, maturing on July 31, 2023[156] - The interest rate on the New Note increased to 20% upon extension of the maturity date to November 30, 2023, with 26,000 common stock warrants issued at a fixed exercise price of $15.25 per share[157] - The company has sold 4,815,263 shares to White Lion for total proceeds of $8,176,048 through September 30, 2024[169] Expenses and Costs - Total operating expenses for the three months ended September 30, 2024, were $1,947,850, an increase of $118,288 or 6.5% from $1,829,562 for the same period in 2023[137] - Direct costs of services increased by $11,446 or 26.3% from $43,470 for the three months ended September 30, 2023, to $54,916 for the same period in 2024, primarily due to higher hosting and music service costs[139] - Sales and marketing expenses decreased by $33,847 or 10.7% from $316,297 for the three months ended September 30, 2023, to $282,450 for the same period in 2024, attributed to reduced marketing promotion costs[140] - Research and development expenses increased by $5,952 or 2.6% from $227,133 for the three months ended September 30, 2023, to $233,085 for the same period in 2024, mainly due to increased capitalized R&D expenses[141] - General and administrative expenses increased by $103,943 or 13.4% from $777,496 for the three months ended September 30, 2023, to $881,439 for the same period in 2024, driven by higher consulting and legal fees[142] - Direct costs of services increased by $22,507 or 17.2% from $130,809 for the nine months ended September 30, 2023, to $153,316 for the same period in 2024, primarily due to higher hosting costs[148] Product Development and Strategy - The company is exploring various merger and acquisition options to accelerate user adoption and subscriber growth, with a focus on acquiring users of radio-streaming apps[122] - The company launched the faidr app on February 15, 2022, which allows users to listen to AM/FM radio stations and podcasts with commercial interruptions removed[107] - The faidr app includes exclusive content offerings, branded as faidrRadio, which was added in February 2023[107] - The company plans to introduce a "Flex Revenue" model in 2025, allowing podcasters to maximize revenue through various monetization channels[114] - The company sunsetted the Vodacast app in July 2024, integrating its podcasting capabilities into the faidr app[110] Compliance and Reporting - The company reported stockholders' equity of $2,415,012 as of September 30, 2023, which did not meet Nasdaq's minimum requirement of $2,500,000[125] - The company is classified as a "smaller reporting company" with a market value of stock held by non-affiliates less than $700 million and annual revenue below $100 million for the most recently completed fiscal year[192] - The company has opted to take advantage of the extended transition period for compliance with new accounting standards as an "emerging growth company" until it either opts out or no longer qualifies[190] - A reverse share split was executed on February 26, 2024, combining every twenty-five shares into one share of common stock[128] Cash Position - The company had cash and cash equivalents of $3,773,827 as of September 30, 2024, compared to $804,556 as of December 31, 2023, with working capital of approximately $3.4 million[154] - The company expects expenses to increase due to ongoing development and marketing of its product, faidr[180] - The company issued 50,000 Fee Warrants with a five-year term as a loan extension fee, with an exercise price of $1.967[165] Valuation of Stock Options - The fair value of stock options is determined using the Black-Scholes model, considering stock price, expected life, estimated volatility, and risk-free interest rate[188]

Core Insights - Auddia Inc. has achieved a 30-day user retention rate of 12%, surpassing its target of 10% and showing significant growth from 5% over the past year [1][2] - The company is now shifting its focus to optimizing subscription conversion metrics to drive high-margin revenue, with a goal of reaching a 12% subscription conversion rate in the coming months [2][3] User Retention and Product Development - The increase in user retention is attributed to product enhancements, including ad-free podcast listening experiences and user experience improvements under the faidr 3.1 initiative [2] - Auddia has maintained a subscription conversion rate of 5% throughout 2024 but has prioritized improving this metric only after achieving a minimum of 10% in 30-day retention [3] Future Initiatives and Revenue Generation - The company plans to remove friction from the paywall process and engage in tests to optimize the timing and frequency of paywall views to enhance subscription conversion [3] - With a cost per install at or below $1.80 and a focus on revenue generation, Auddia is transitioning from product development to revenue generation strategies [3] Market Position and Strategy - Auddia aims to attract a large audience of US consumers and eventually international users by offering a differentiated and user-friendly product in the audio streaming market [4] - The company's flagship product, faidr, offers subscription-based, ad-free listening on AM/FM radio stations and interactive podcasts, addressing a rapidly growing audience with strong purchase intent [5]

Core Insights - Auddia Inc. has expanded its faidr app to over 13,000 AM/FM stations, significantly increasing from approximately 5,200 stations [1] - The app now offers more than 9,000 ad-free AM/FM stations for subscribers [1] Group 1: Company Developments - Auddia's CEO, Michael Lawless, emphasized the goal of providing a full inventory of US and Canadian stations, with plans to expand internationally next year [2] - The company has introduced two innovative podcast features: Forward+ for skipping segments and Chapter Visualization for intuitive navigation [2] - Auddia plans to release a new music-only AI model in Q4, allowing users to listen exclusively to music on selected AM/FM stations [3] Group 2: Product Features - The faidr app is described as an audio superapp that offers subscription-based, ad-free listening and interactive digital feeds for podcasts [4] - The app also provides exclusive content, playlists, and showcases new artists curated by DJs [4]