Vocodia Holdings(VHAI) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Vocodia Holdings Corp as of September 30, 2024, reveal a significant net loss and a working capital deficit, raising substantial doubt about the company's ability to continue as a going concern - The company reported a net loss of approximately $9,835,044 for the nine months ended September 30, 2024, and had an accumulated deficit of approximately $100,300,000, raising substantial doubt about its ability to continue as a going concern[26] - In February 2024, the company completed an Initial Public Offering (IPO), raising $5,950,000 in gross proceeds, which were used in part to settle outstanding convertible notes[26][68] Condensed Consolidated Balance Sheets As of September 30, 2024, the company's total assets significantly decreased to $492,452 from $4,459,346 at year-end 2023, primarily due to the reclassification of deferred offering costs, while total liabilities also saw a substantial reduction to $2,443,947 from $8,126,916, mainly from the settlement of convertible notes and derivative liabilities post-IPO, and shareholders' deficit improved from ($3,667,570) to ($1,951,495) Condensed Consolidated Balance Sheet Highlights (as of Sep 30, 2024 vs. Dec 31, 2023) | Balance Sheet Item | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $492,452 | $4,459,346 | | Total Current Assets | $209,583 | $12,770 | | Deferred offering costs | $0 | $4,085,726 | | Total Liabilities | $2,443,947 | $8,126,916 | | Convertible notes payable, net | $84,881 | $3,688,566 | | Derivative liability | $0 | $1,922,879 | | Total shareholders' equity (deficit) | ($1,951,495) | ($3,667,570) | Condensed Consolidated Statements of Operations For the nine months ended September 30, 2024, net sales plummeted to $50,231 from $252,820 in the prior year period, resulting in a gross loss of $80,090 compared to a gross profit of $52,531 in 2023, with operating expenses increasing to a higher operating loss of $5,786,645, and the net loss widening to $9,835,044 from $7,148,940 year-over-year, significantly impacted by a $3.82 million loss on debt settlement Statement of Operations Summary (Nine Months Ended Sep 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Sales, net | $50,231 | $252,820 | | Gross Profit (Loss) | ($80,090) | $52,531 | | Operating Loss | ($5,786,645) | ($4,623,865) | | Net Loss | ($9,835,044) | ($7,148,940) | | Basic and diluted loss per share | ($0.02) | ($1.77) | Statement of Operations Summary (Three Months Ended Sep 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Sales, net | $50,156 | $9,620 | | Gross Profit (Loss) | ($23,906) | ($7,300) | | Operating Loss | ($1,331,008) | ($971,301) | | Net Loss | ($1,330,682) | ($1,808,120) | Condensed Consolidated Statements of Stockholders' Deficit Shareholders' deficit improved from ($3,667,570) at the start of 2024 to ($1,951,495) by September 30, 2024, driven by capital raising activities, including the issuance of common stock units for $5,370,000 in cash from the IPO and the conversion of debt and preferred stock, offset by a net loss of $9,835,044 for the nine-month period - The company issued 1,400,000 common stock units for $5,370,000 in cash and converted debt into 1,801,880 shares of common stock valued at $7,660,000[16] - The accumulated deficit increased from $90,500,000 to $100,300,000 during the first nine months of 2024 due to ongoing net losses[16] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, cash used in operating activities was $5,289,085, a significant increase from $2,271,260 in the prior year period, driven by a larger net loss, while cash provided by financing activities was $5,292,432, primarily from IPO proceeds, which was used to fund operations and repay debt, resulting in a minimal ending cash balance of $1,216 Cash Flow Summary (Nine Months Ended Sep 30) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash used in operating activities | ($5,289,085) | ($2,271,260) | | Cash used in investing activities | ($2,131) | $0 | | Cash provided by financing activities | $5,292,432 | $1,605,167 | | Change in cash and cash equivalents | $1,216 | ($666,093) | | Cash and cash equivalents, ending balance | $1,216 | $31,533 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide critical details on accounting policies and specific financial items, including a going concern warning due to significant losses and low cash, the settlement of all convertible notes and derivative liabilities following its February 2024 IPO, recognizing a $3.8 million loss on debt settlement, and terms of preferred stock, stock-based compensation, related-party transactions, and ongoing legal contingencies - The company has substantial doubt about its ability to continue as a going concern due to a net loss of $9,835,044 and cash used in operations of $5,289,085 for the nine months ended September 30, 2024[26] - Upon completion of the IPO in February 2024, all outstanding convertible notes were settled, with the company paying $894,072 in cash and issuing 1,801,880 shares of common stock, resulting in a recognized loss on debt settlement of $2,660,000[68] - In August 2024, the company entered into a Securities Purchase Agreement (SPA) for Series C and D Preferred Stock, but this agreement was terminated in September 2024[89][90] - The company is involved in several legal proceedings, including a putative class action lawsuit alleging violations of the TCPA and a dispute with a former employee alleging wrongful termination[111][113] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant decline in revenue for the first nine months of 2024, attributing it to the suspension of its DISA product sales for upgrades, with a relaunch anticipated in Q1 2025, while operating expenses rose due to costs associated with being a public company and R&D investments, highlighting critical liquidity issues with a working capital deficiency of over $2 million and minimal cash on hand, raising substantial doubt about its ability to continue as a going concern without raising additional capital, and disclosing its IPO in February 2024 and subsequent delisting from the Cboe BZX Exchange in September 2024, with trading moving to the OTC Pink Market - Revenue for the nine months ended Sep 30, 2024, decreased by 80% year-over-year because the company suspended sales of its DISA product in January 2024 for functionality updates, with an improved version expected to launch in Q1 2025[134] - Operating expenses for the nine months increased by 22% YoY, driven by a 176% rise in G&A costs related to being a public company, despite a 49% reduction in salaries and wages[138][139][140] - The company completed its IPO on February 26, 2024, but was delisted from the Cboe BZX Exchange on September 10, 2024, for failing to meet minimum bid price and other listing requirements, with the stock now trading on the OTC Pink Market[128][131][132] - Management states that the company will not have sufficient cash to support operations for the next 12 months and will need to raise additional capital, acknowledging substantial doubt about its ability to continue as a going concern[154][155] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Vocodia Holdings Corp is not required to provide the information for this item - The company is a "smaller reporting company" as defined by Item 10 of Regulation S-K and is not required to provide information regarding market risk[182] Item 4. Controls and Procedures Management acknowledges that the company does not yet have effective disclosure controls and procedures or internal controls over financial reporting, with material weaknesses and significant deficiencies identified, including an insufficient number of staff for proper segregation of duties and reliance on a third-party accounting firm for GAAP compliance, and while the company is working to develop and refine its controls, it cannot guarantee that future material weaknesses will be avoided - The company has identified material weaknesses and significant deficiencies in its internal controls, including a lack of staff for segregation of duties[185] - The company is not yet required to comply with Section 404 of the Sarbanes-Oxley Act for a formal assessment of internal control effectiveness[187] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings, including a former employee's EEOC charge for discrimination and wrongful termination, which was dismissed but grants the former employee a 90-day right to sue, and an arbitration initiated by ProofPositive LLC against the company and its CEO over alleged unpaid sums due under a loan and consulting agreement, with the company denying liability in both matters and intending to defend itself vigorously - A former employee's EEOC charge for discrimination was dismissed, but the individual has 90 days to file a lawsuit[190] - ProofPositive LLC has commenced arbitration against the company and its CEO regarding alleged unpaid dues from a loan and consulting agreement[191] Item 1A. Risk Factors As a smaller reporting company, Vocodia is not required to provide this information and refers to the risk factors discussed in its Annual Report on Form 10-K - The company is a smaller reporting company and is not required to provide risk factor information in the 10-Q[193] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None[195] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None[197] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[198] Item 5. Other Information This section notes subsequent events, which are detailed in Note 13 of the financial statements, including the issuance of a $40,000 Note Payable and a $60,000 Convertible Note in December 2024 - Refers to subsequent events, which include the issuance of new debt in December 2024 as detailed in Note 13[116][199] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files - Lists filed exhibits, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[201]