Auddia(AUUD) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Auddia Inc.'s unaudited Q1 2025 financial statements, covering Balance Sheets, Operations, Equity, Cash Flows, and notes Condensed Balance Sheets (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] - 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] - Total shareholders' equity decreased from $4,694,320 as of December 31, 2024, to $3,636,902 as of March 31, 2025, a decrease of approximately 22.5%[19] Condensed Statements of Operations (Unaudited) Analysis of Auddia Inc.'s financial performance for the three months ended March 31, 2025, compared to 2024 Condensed Statements of Operations (Unaudited) | Metric (Three Months Ended March 31) | 2025 ($) | 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] - Interest expense significantly decreased by 99.0% due to the repayment of notes payable to a related party in April 2024[21][118] Condensed Statements of Changes in Shareholders' Equity (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] - Issuance of common shares, net of costs, contributed $672,795 to additional paid-in capital in Q1 2025[24] - Series B preferred stock converted to common stock resulted in a decrease of $139,027 in additional paid-in capital and an increase in common stock par value[24] Condensed Statements of Cash Flows (Unaudited) Analysis of Auddia Inc.'s cash inflows and outflows from operating, investing, and financing activities for Q1 2025 Condensed Statements of Cash Flows (Unaudited) | Cash Flow Activity (Three Months Ended March 31) | 2025 ($) | 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] - Cash provided by financing activities significantly decreased from $3,606,508 in Q1 2024 to $673,361 in Q1 2025[26] - 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] Notes to Condensed Financial Statements (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 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] - 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][32][34] - 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] - The company's current cash of $1,689,913 as of March 31, 2025, is only sufficient into Q3 2025, raising substantial doubt about its ability to continue as a going concern without additional funding[39][40] Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs Details on Auddia Inc.'s property, equipment, intangible assets, and capitalized software development costs Property & Equipment, Intangible Assets, and Software Development Costs | Asset Category (Net) | March 31, 2025 ($) | 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] - Intangible assets, net, significantly increased from $3,416 to $13,021, primarily due to new patent capitalization[53] - Amortization of capitalized software development costs was $431,037 for Q1 2025, down from $476,918 in Q1 2024[53] Note 3 – Accounts Payable and Accrued Liabilities Breakdown of Auddia Inc.'s accounts payable and accrued liabilities as of March 31, 2025 Accounts Payable and Accrued Liabilities | Category | March 31, 2025 ($) | 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] Note 4 – Notes Payable to Related Party, net of debt issuance costs 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] - 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][58] - 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][60] Note 5 – Commitments and Contingencies 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] - 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] - A pre-IPO investor is claiming damages of less than $300,000, but no complaint has been filed, and the outcome is neither probable nor estimable as of the financial statement issuance date[63] Note 6 – Share-based Issuances Information on Auddia Inc.'s stock options and restricted stock units outstanding Stock Options (March 31, 2025) | Stock Options (March 31, 2025) | Number | Weighted Average Exercise Price ($) | | :----------------------------- | :------- | :---------------------------------- | | 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] - Share-based compensation expense decreased from $173,289 in Q1 2024 to $76,906 in Q1 2025[68] Note 7 – Equity Financings 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] - During Q1 2025, Auddia issued 78,947 shares for approximately $0.7 million through an At-the-Market Issuance Sales Agreement[70] - 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][73] - 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][75] Note 8 – Leases under ASC 842 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] - Operating lease expense for Q1 2025 was $8,960, compared to $0 in Q1 2024 (due to lease commencement in April 2024)[77] 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 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] - 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] Note 10 – Subsequent Events 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of Auddia Inc.'s Q1 2025 financial condition, operations, liquidity, and funding needs 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][85] - 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] - In Q1 2025, the company implemented new paywalls and is testing various price points and marketing strategies to optimize subscription conversions[90] - 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][93] Recent Developments Key events and strategic initiatives undertaken by Auddia Inc. in the recent period Mergers and Acquisitions Strategy 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] - 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] Nasdaq Deficiency Notices 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] - 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][101] Reverse Stock Splits 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][103] - These splits adjusted outstanding warrants, stock options, and restricted stock units proportionately, without changing the authorized number of common shares[104] Impact of Inflation 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] - Inflation is expected to continue negatively impacting the business throughout 2025, with uncertainty about offsetting these pressures[105] Components of our results of operations Explanation of the key financial components contributing to Auddia Inc.'s operating results Direct costs of services Analysis of expenses directly attributable to providing Auddia Inc.'s services - Direct costs primarily include hosting and technology-related expenses for app development[106] - These costs are expected to increase with continued development and enhancement of the faidr and podcasting apps[106] Sales and marketing 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] - These expenses are expected to fluctuate based on new app upgrades, enhancements, and efforts to drive customer acquisition, retention, and subscription conversion[107] Research and development 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] - Capitalized software development costs are amortized over an estimated useful life of three years[108] General and administrative 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] - These expenses are expected to increase as the company prepares for commercialization and supports its operations as a public company[109] Other income and expense 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] Results of operations 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 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 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] Direct cost of services 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] Sales and marketing 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] Research and development 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] General and administrative 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] Depreciation and amortization 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] Other expense, net 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] Liquidity and capital resources Discussion of Auddia Inc.'s ability to meet its short-term and long-term financial obligations Sources of liquidity 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] - 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] Equity Line Common Stock Purchase Agreement 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] At-the-Market Sales Agreement 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] - The agreement allows for the sale of up to $10,000,000 in common stock through an ATM offering[121] Cash Flow Analysis Detailed breakdown of Auddia Inc.'s cash flows from operating, investing, and financing activities Cash Flow Analysis | Cash Flow Activity (Three Months Ended March 31) | 2025 ($) | 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 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] - Non-cash charges, including depreciation, amortization, and share-based compensation, partially offset the net loss[124] Investing activities 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] - This represents a decrease from $(273,388) in Q1 2024, which was entirely for software development capitalization[126] Financing activities 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] - This is a significant decrease from $3,606,508 generated in Q1 2024, which also came entirely from common share issuance[127] Funding Requirements 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] - 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][130] Off-balance sheet arrangements 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] Critical Accounting Estimates 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][131] - Software development costs are capitalized once the preliminary project stage is complete and amortized over three years, subject to ongoing recoverability assessment[133] - Equity-based compensation awards are equity-classified and valued using the Black-Scholes option-pricing model[134][135] - 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][137] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - Disclosure controls are designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[139] - There were no changes in internal control over financial reporting during the three months ended March 31, 2025[140] PART II – OTHER INFORMATION Item 1. Legal Proceedings 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] - There are no active litigations as of the date the financial statements were issued[63] - 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to Auddia Inc. for the reported period, and no equity securities were repurchased - This item is not applicable[145] - The company did not repurchase any equity securities during the quarter ended March 31, 2025[146] Item 3. Defaults Upon Senior Securities Auddia Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[147] Item 4. Mine Safety Disclosures Auddia Inc. has no mine safety disclosures to report - There are no mine safety disclosures[148] Item 5. Other Information 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] Item 6. Exhibits 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][151][152] - It also includes Section 302 and 906 Certifications by the CEO and CFO, and XBRL instance and taxonomy documents[153][154] 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]