Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File No. 001-40071 AUDDIA INC. (Exact Name of Registrant as Specified in Its Charter) | --- | --- | |---- ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File No. 001-40071 AUDDIA INC. (Exact Name of Registrant as Specified in Its Charter) | --- | --- | --- | |--- ...

Financial Performance - Total revenues for the three months ended March 31, 2023, were $0 as the company continues to develop and enhance its faidr and podcasting Apps to establish new revenue streams [98]. - The company incurred a net loss of $2,155,312 for the three months ended March 31, 2023, compared to a net loss of $1,753,258 for the same period in 2022, representing an increase in loss of $402,054 [96]. - As of March 31, 2023, the company had an accumulated deficit of $73.9 million, indicating significant operating losses since inception [85]. - Operating expenses for the three months ended March 31, 2023, totaled $1,847,406, an increase of $95,158 compared to $1,752,248 for the same period in 2022 [96]. - Cash used in operating activities for Q1 2023 was $1,073,241, a decrease of 12.7% compared to $1,229,996 in Q1 2022 [114]. - As of March 31, 2023, the company had cash of $239,040, down from $1,661,434 as of December 31, 2022, with a working capital deficiency of approximately $2.2 million [106]. - The company has an accumulated deficit of $73.9 million as of March 31, 2023, indicating ongoing financial challenges [119]. Expenses Breakdown - Research and development expenses increased by $61,363 to $210,126 for the three months ended March 31, 2023, compared to $148,763 in 2022, reflecting ongoing investment in technology [96]. - Direct Cost of Services decreased by $10,261 or 19.5%, from $52,562 in Q1 2022 to $42,301 in Q1 2023, primarily due to reduced platform hosting costs [99]. - Sales and marketing expenses decreased by $131,948 or 37%, from $357,066 in Q1 2022 to $225,118 in Q1 2023, attributed to reduced staffing and marketing spending [100]. - General and administrative expenses decreased by $90,904 or 8.9%, from $1,017,730 in Q1 2022 to $926,826 in Q1 2023, due to reduced stock compensation expenses [102]. - Depreciation and amortization expenses increased by $266,908 or 151.5%, from $176,127 in Q1 2022 to $443,035 in Q1 2023, related to the amortization of faidr and podcasting Apps [103]. - Total other expense increased by $306,896, from $1,010 in Q1 2022 to $307,906 in Q1 2023, primarily due to interest expense related to debt [104]. Funding and Growth Strategy - The company had cash of $239,040 as of March 31, 2023, and raised $1.87 million in April 2023, which is expected to fund operations into the third quarter of fiscal 2023 [88]. - The company raised $750,000 from a new Secured Bridge Note financing and $1.12 million from common stock sales, which are expected to fund operations into Q3 2023 [112]. - The company is pursuing an acquisition strategy to accelerate user acquisition and growth of revenue and cash flow, currently in advanced discussions with three potential acquisition targets [89]. - The company expects significant increases in expenses and capital requirements as it continues to develop and commercialize its products, particularly the faidr App [85]. - The company plans to secure additional funding to support its growth strategy and operations, indicating reliance on equity or debt financing [86]. Company Classification - The company qualifies as an "emerging growth company" and will adopt new accounting standards when private companies do so, unless it opts out or no longer qualifies [127]. - The company is classified as a "smaller reporting company" with a market value of stock held by non-affiliates below $700 million and annual revenue under $100 million in the last fiscal year [128]. - The company may continue to be a smaller reporting company if its market value remains below $250 million or if it meets specific revenue criteria [128]. - As a smaller reporting company, the company can present only the two most recent fiscal years of audited financial statements in its Annual Report on Form 10-K [128]. - The company has reduced disclosure obligations regarding executive compensation due to its status as a smaller reporting company [128]. - The company is not required to provide quantitative and qualitative disclosures about market risk as it is classified as a smaller reporting company [129]. Product Development - The faidr App was fully launched on February 15, 2022, and includes features such as commercial-free AM/FM radio, podcasts, and exclusive content offerings [80].

Financial Position - As of December 31, 2022, the company reported cash and equivalents of $1.66 million, which is only sufficient to fund current operating plans into the second quarter of 2023[84]. - The company had stockholders equity of $3.85 million as of December 31, 2022, exceeding the Nasdaq minimum requirement of $2.5 million[158]. - As of March 10, 2023, executive officers, directors, and principal stockholders beneficially own approximately 37% of the outstanding common stock, allowing them to control most matters submitted to stockholders[149]. - The company has not declared or paid cash dividends on its capital stock and intends to retain future earnings for business growth[174]. - As of December 31, 2022, the company had cash and cash equivalents totaling $1,661,434[250]. - The company primarily invests in demand deposit accounts and money market funds, focusing on capital preservation and liquidity needs[250]. Operating Losses and Expenses - The company incurred net losses of $6,897,446 and $13,478,069 for the years ended December 31, 2022, and 2021, respectively[86]. - Cash used in operations for the year ended December 31, 2022, was $4,752,750[86]. - The company anticipates significant expenses related to the national launch of the faidr App, recruiting content creators, and technology development, which will increase operating losses[86]. - The company expects to continue incurring significant expenses and operating losses for the foreseeable future, with no assurance of achieving profitability[87]. Revenue and Growth - Future revenue growth is heavily dependent on the successful development and commercialization of new software services[94]. - The company has made significant investments in brand promotion, but these may not generate proportional revenue increases[125]. Internal Controls and Compliance - The company has identified material weaknesses in internal control over financial reporting, which could adversely affect financial statement accuracy[95]. - The company has identified material weaknesses in its internal control over financial reporting, which may affect compliance with Section 404 of the Sarbanes-Oxley Act[167]. - Compliance with evolving privacy and data protection regulations, such as GDPR and CCPA, may incur substantial costs and affect business practices[120]. Capital and Stockholder Concerns - The company may seek additional capital through public and private equity offerings, which could dilute existing stockholders' interests[92]. - The company issued 4,590,590 Series A Warrants in the IPO, which could lead to dilution for existing stockholders if exercised[151]. - In July 2021, holders exercised 3,498,898 Series A Warrants, leaving 1,091,692 outstanding as of March 10, 2023[151]. - The company may face delisting from Nasdaq, which could adversely affect liquidity, increase volatility, and hinder capital raising efforts[160]. - The company is classified as an "emerging growth company" and intends to rely on reduced disclosure requirements, which may affect stock attractiveness[162]. - The company’s charter includes anti-takeover provisions that may discourage beneficial acquisitions and limit stockholder influence[171]. - The company’s stock may be subject to penny stock regulations if delisted, affecting market liquidity and trading[159]. - The company’s exclusive forum provisions may limit stockholders' ability to bring claims in favorable jurisdictions, potentially discouraging lawsuits[178]. Personnel and Management - The company is highly dependent on its executive team, and the loss of key personnel could adversely impact its objectives[111]. - Recruiting and retaining qualified personnel is critical, with intense competition leading to high turnover rates[112]. - The company must effectively manage expected growth in operations, requiring expansion of managerial and operational systems[113]. Cybersecurity and Legal Risks - Cybersecurity-related attacks or data breaches could significantly harm the company's reputation and business operations[114]. - The company faces potential liabilities from cybersecurity incidents that may exceed available insurance coverage[116]. - The company may incur substantial liability related to indemnification obligations with customers regarding data security and confidentiality breaches[147]. - The company may face claims from third parties regarding open source software, which could lead to litigation and additional costs[143]. - The company may face litigation or regulatory inquiries that could adversely affect its operations and reputation[128]. Market and Competitive Risks - The company relies on the established music licensing framework, and any changes could impact operational costs and content access[102]. - The patent prosecution process is expensive and time-consuming, and failure to secure patents could adversely affect the company's competitive position[106]. - The company faces risks related to intellectual property, including potential claims of infringement that could be costly and time-consuming to defend[139]. - The company has applied for patent protection in the U.S. but cannot assure that any applications will result in issued patents[134]. - The company relies on unpatented proprietary technology and confidentiality agreements to protect its trade secrets, but these measures may not be sufficient[135]. - The company's common stock price is likely to be volatile, influenced by factors such as competitive products, regulatory developments, and financial results[153]. Investment Risks - Future investment income may fall short of expectations due to changes in interest rates, potentially leading to losses in principal[251]. - The market value of fixed rate securities may be adversely affected by rising interest rates, while floating rate securities may yield less income if rates fall[251].

Financial Performance - The company incurred significant net losses of $13,478,069 and $4,051,221 for the years ended December 31, 2021 and 2020, respectively[84]. - Cash used in operations for the year ended December 31, 2021 was $5,428,094, with cash and equivalents on hand of $6,345,291 at the same date[84]. - The company anticipates continued significant expenses and operating losses as it invests in the national launch of the Faidr App and recruitment of podcasters for the Vodacast App[84]. - Future revenue growth is heavily dependent on the successful development and commercialization of new software products[89]. - The company may need additional funding to complete the development of its full product line and scale products with demonstrated market fit[86]. Internal Controls and Compliance - The company has identified material weaknesses in its internal control over financial reporting, which could adversely affect its financial statements[91]. - The company expects to expend significant resources to develop necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act[97]. - The company may face increased costs and compliance challenges as it transitions to a public company, particularly regarding internal controls and financial reporting[160]. - The company has identified material weaknesses in its internal control over financial reporting, which may impact compliance with Section 404 of the Sarbanes-Oxley Act[163]. Intellectual Property and Legal Risks - The company seeks to protect its proprietary position by filing patent applications, but there is no guarantee that additional patents will be issued[100]. - The patent prosecution process is expensive and time-consuming, which may hinder the company's ability to obtain necessary patent protections[103]. - The company relies on its intellectual property for competitive advantage, but risks exist regarding the adequacy of protection[130]. - The company has applied for patent protection in the U.S. but cannot guarantee that any applications will result in issued patents[131]. - Claims of intellectual property infringement could lead to costly litigation and negatively impact operating profits[139]. - Indemnity provisions in agreements may expose the company to substantial liability for intellectual property infringement[145]. - The company may face increased litigation risks as its business expands, potentially affecting revenue and financial condition[127]. Operational Risks - The Faidr platform's operational costs may be impacted by changes in music licensing costs and rights to play music content[98]. - The company faces risks related to errors, failures, or bugs in its platform, which could adversely affect operating results and growth prospects[104]. - Retaining key employees and attracting qualified personnel is critical for the company's success, as competition for skilled personnel is intense[105][106]. - The company must effectively manage expected growth in operations, requiring expansion of managerial and operational systems to support product rollout and user projections[107]. - Cybersecurity-related attacks or significant data breaches could negatively impact the company's business, leading to unauthorized access and potential liabilities[109][110]. - Compliance with changing regulations regarding privacy and data protection may increase costs and affect how the company collects and uses personal information[114][116]. - The company may face challenges in addressing new laws and regulations, which could result in significant costs and affect its ability to process user data[117]. Market and Stock Information - The common stock price is expected to be volatile, influenced by factors such as competitive products, regulatory developments, and financial results[151]. - The company had cash and cash equivalents totaling $6,345,291 as of December 31, 2021, primarily invested in demand deposit accounts and money market funds[243]. - The company is classified as an "emerging growth company" and will remain so until total annual gross revenues exceed $1.07 billion or other specified conditions are met[158]. - The company does not anticipate paying cash dividends in the foreseeable future, with capital appreciation being the sole source of gain for investors[170]. - The company may not sustain an active trading market for its common stock and Series A Warrants, which could affect liquidity[154]. - The company issued 4,590,590 Series A Warrants in the IPO, which are exercisable for an equal number of shares of common stock[150]. - As of February 17, 2022, 1,091,692 Series A Warrants have been exercised, leaving 3,498,898 outstanding[150]. - The company’s corporate governance provisions may discourage or delay potential acquisitions, impacting stockholder interests[166]. Financial Statements and Reporting - Auddia Inc. reported its annual financial statements for the years ended December 31, 2021, and 2020, including balance sheets and statements of operations[246]. - The company has independent registered public accounting firm reports included in its annual financial statements[246]. - Statements of changes in stockholders' equity and cash flows for the years ended December 31, 2021, and 2020 are also part of the financial documentation[246].