Vocodia Holdings(VHAI) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with comprehensive notes detailing the company's financial position, performance, and significant accounting policies Condensed Consolidated Balance Sheets The company's balance sheet shows a significant decrease in total assets and an increase in total liabilities from December 31, 2024, to March 31, 2025, resulting in a larger shareholders' deficit Total Assets, Liabilities, and Shareholders' Deficit | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total Assets | $61,317 | $147,982 | | Total Current Liabilities | $3,281,696 | $2,363,345 | | Total Shareholders' Deficit | $(3,220,379) | $(2,215,363) | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported no sales, a gross loss, and a net loss of $1.17 million, a significant improvement from the $6.95 million net loss in the same period of 2024, primarily due to reduced operating expenses and other expenses Net Loss Comparison | Period | Net Loss | | :--------------------------------- | :------------- | | Three Months Ended March 31, 2025 | $(1,172,814) | | Three Months Ended March 31, 2024 | $(6,945,370) | | Change | $5,772,556 (83% decrease in loss) | Basic and Diluted Loss Per Common Share | Period | Loss Per Share | | :--------------------------------- | :------------- | | Three Months Ended March 31, 2025 | $(0.00) | | Three Months Ended March 31, 2024 | $(0.37) | Operating Loss Comparison | Period | Operating Loss | | :--------------------------------- | :------------- | | Three Months Ended March 31, 2025 | $(310,923) | | Three Months Ended March 31, 2024 | $(2,822,460) | Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) The company's total shareholders' deficit increased from $(2,215,363) at December 31, 2024, to $(3,220,379) at March 31, 2025, primarily due to the net loss incurred during the period, partially offset by common stock issuances for debt settlement Total Shareholders' Deficit | Date | Amount | | :---------------- | :------------- | | December 31, 2024 | $(2,215,363) | | March 31, 2025 | $(3,220,379) | - For the three months ended March 31, 2025, the company issued 101,855,000 shares of common stock for settlement of debt, valued at $167,798[12] - The net loss for the three months ended March 31, 2025, was $(1,172,814)[12] Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2025, the company used $188,550 in operating activities, a significant reduction from $2,428,570 used in the prior year period. Financing activities provided $189,608, leading to a net increase in cash of $1,058, bringing the ending cash balance to $1,339 Cash Flow from Operating Activities | Period | Cash Flow | | :--------------------------------- | :------------- | | Three Months Ended March 31, 2025 | $(188,550) | | Three Months Ended March 31, 2024 | $(2,428,570) | | Change | $2,240,020 (reduced cash usage) | Cash Flow from Financing Activities | Period | Cash Flow | | :--------------------------------- | :------------- | | Three Months Ended March 31, 2025 | $189,608 | | Three Months Ended March 31, 2024 | $5,125,428 | | Change | $(4,935,820) (decreased cash provided) | Ending Cash Balance | Date | Cash | | :---------------- | :----- | | March 31, 2025 | $1,339 | | March 31, 2024 | $2,696,858 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed information on the company's organization, significant accounting policies, financial instruments, equity structure, related party transactions, legal proceedings, and subsequent events, highlighting the company's going concern risk due to recurring losses and negative working capital NOTE 1 – ORGANIZATION AND GOING CONCERN Vocodia Holdings Corp, incorporated in Wyoming in 2021, is an AI technology provider. The company's ability to continue as a going concern is in substantial doubt due to a net loss of $1.2 million, an accumulated deficit of $101.8 million, and negative working capital of $3.2 million for the three months ended March 31, 2025. Management plans to raise additional funds and/or refinance indebtedness - Vocodia Holdings Corp is a conversational artificial intelligence (AI) technology provider[18][124] - Net Loss (3 months ended March 31, 2025): Approximately $1.2 million[21] - Accumulated Deficit (3 months ended March 31, 2025): $101.8 million[21] - Cash Used in Operations (3 months ended March 31, 2025): Approximately $0.2 million[21] - Negative Working Capital (3 months ended March 31, 2025): $3.2 million[21] - In May 2025, the company closed on a private offering for a Senior Secured Convertible Note in the original principal amount of $3.3 million[21][115] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the company's accounting policies, including basis of presentation, consolidation, use of estimates, cash and cash equivalents, property and equipment, accounts receivable, revenue recognition, fair value measurements, advertising, share-based compensation, convertible notes, derivative financial instruments, warrants, net income (loss) per share, leases, and recent accounting pronouncements - The unaudited consolidated financial statements are prepared in accordance with GAAP for interim financial information[23] - Significant estimates include valuation of derivatives, valuation allowance on deferred tax assets, share-based compensation, useful lives for long-lived assets, and incremental borrowing rate for right-of-use assets[26] - Revenue is derived from implementation fees, recurring monthly software-as-a-service, and lead generation/verification, following a five-step recognition process[32] - Derivative liabilities are classified as Level 3 fair value measurements, determined using pricing models, discounted cash flow methodologies, or similar techniques requiring significant judgment[35][36] NOTE 3 – PROPERTY AND EQUIPMENT Net property and equipment decreased from $18,912 at December 31, 2024, to $17,326 at March 31, 2025, primarily due to accumulated depreciation Property and Equipment, Net | Date | Amount | | :---------------- | :----- | | March 31, 2025 | $17,326 | | December 31, 2024 | $18,912 | Depreciation and Amortization Expenses | Period | Amount | | :--------------------------------- | :----- | | Three Months Ended March 31, 2025 | $1,586 | | Three Months Ended March 31, 2024 | $1,480 | NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses increased from $1,945,207 at December 31, 2024, to $2,090,276 at March 31, 2025, driven mainly by an increase in accounts payable and accrued interest Accounts Payable and Accrued Expenses | Date | Amount | | :---------------- | :------------- | | March 31, 2025 | $2,090,276 | | December 31, 2024 | $1,945,207 | - Accrued interest increased from $11,612 at December 31, 2024, to $60,696 at March 31, 2025[56] NOTE 5 – OPERATING LEASES The company's lease liabilities were nil as of March 31, 2025, and December 31, 2024, as it moved out of its corporate office premises in December 2024 - Lease liabilities were $0 as of March 31, 2025, and December 31, 2024[57] - Total lease cost for the three months ended March 31, 2024, was $46,545[58] NOTE 6 – NOTE PAYABLE AND CONVERTIBLE NOTES PAYABLE The company had a $40,000 note payable at March 31, 2025, with accrued interest. Convertible notes payable significantly increased from $157,871 at December 31, 2024, to $364,455 at March 31, 2025, due to new issuances in January and March 2025, and a modification of a December 2024 note - Note payable balance was $40,000 as of March 31, 2025, and December 31, 2024[61] Convertible Notes Payable, Net | Date | Amount | | :---------------- | :------------- | | March 31, 2025 | $364,455 | | December 31, 2024 | $157,871 | - New convertible notes issued in January and March 2025 had a total face value of $461,714[61][65][69] - Interest expense for convertible notes was $68,900 for Q1 2025, down from $89,133 for Q1 2024[61][65][69] NOTE 7 – DERIVATIVE LIABILITITES Derivative liabilities related to convertible notes were valued at $106,521 as of March 31, 2025, using a Level 3 fair value measurement (Black-Scholes model). The company recognized a day-one loss of $91,456 on new derivatives and a gain of $140,272 from changes in fair value during Q1 2025 Derivative Liability Balance | Date | Amount | | :---------------- | :------------- | | March 31, 2025 | $106,521 | | December 31, 2024 | $105,337 | - Derivative liabilities are classified as Level 3 fair value measurements and valued using the Black-Scholes pricing model[71][72] - The aggregate loss on derivatives for the three months ended March 31, 2025, was $(48,816), including a day-one loss of $91,456 and a gain on change in fair value of $(140,272)[75] NOTE 8 – STOCKHOLDERS' EQUITY The company increased its authorized common shares to 15 billion and amended Series A Preferred Stock to restore voting rights. As of March 31, 2025, 584,065,699 common shares and 4,000,000 Series A Preferred shares were outstanding, while Series B, C, and D Preferred Stock had no outstanding shares - Authorized common shares increased to 15,000,000,000, and Series A Preferred Stock had voting rights restored, effective February 28, 2025[76][78] Common Stock Outstanding | Date | Shares Outstanding | | :---------------- | :----------------- | | March 31, 2025 | 584,065,699 | | December 31, 2024 | 300,213,026 | - As of March 31, 2025, 4,000,000 shares of Series A Preferred Stock were outstanding, while Series B, C, and D Preferred Stock had no shares issued and outstanding[80][83][87][90] NOTE 9 – STOCK-BASED COMPENSATION Stock-based compensation was $0 for the three months ended March 31, 2025, a decrease from $153,000 in the prior year period. The number of outstanding warrants decreased slightly to 1,810,052 as of March 31, 2025, with an average exercise price of $5.42 Stock-Based Compensation Expense | Period | Amount | | :--------------------------------- | :----- | | Three Months Ended March 31, 2025 | $0 | | Three Months Ended March 31, 2024 | $153,000 | Warrants Outstanding | Date | Number of Warrants | Weighted Average Exercise Price | | :---------------- | :----------------- | :------------------------------ | | December 31, 2024 | 1,846,352 | $5.48 | | March 31, 2025 | 1,810,052 | $5.42 | NOTE 10 – RELATED PARTY TRANSACTIONS Related party transactions for Q1 2025 included $33,277 in management fees billed by an entity owned by the CEO, and a repayment of $21,729 to related parties. The related party note payable balance remained at $77,251 - Related party payable balance was $77,251 as of March 31, 2025, and December 31, 2024[98] - Management fees of $33,277 were billed by SGT Teams, an entity wholly owned by the Company's CEO, during the three months ended March 31, 2025[101] - The company repaid $21,729 due to related parties during the three months ended March 31, 2025[104] NOTE 11 – LEGAL PROCEEDINGS The company is involved in several legal disputes, including a class action lawsuit under the TCPA, an arbitration claim, and lawsuits for unpaid professional fees. One lawsuit with Carstens, Allen & Gourley, LLP was settled in April 2025 for $160,000 - TCPA class action lawsuit alleging prerecorded calls to Do-Not-Call Registry numbers; mediation scheduled for October 15, 2024[106][107][108][109][184][185][186][187][188] - Arbitration claim by ProofPositive LLC under the Arizona Securities Act[106][107][108][109][184][185][186][187][188] - Lawsuits for unpaid professional fees from Carstens, Allen & Gourley, LLP (settled for $160,000 in April 2025), MAI Voice GCO, LLC ($32,090), and Berkowitz Pollack & Brant Advisors ($48,057)[106][107][108][109][184][185][186][187][188] NOTE 12 – COMMITMENTS AND CONTINGENCIES The company recognized liquidated damages payable of $587,243 as of March 31, 2025, stemming from settlement agreements with investors for default in issuing common stock related to warrants - Liquidated damages payable amounted to $587,243 as of March 31, 2025[113] - Settlement of $500,000 liquidated damages with an investor, partially settled by 78,855,000 common shares valued at $133,297[111] - Settlement of $210,375 liquidated damages with an investor, partially settled by 23,000,000 common shares valued at $34,500[112] NOTE 13 – PREPAID EXPENSE Prepaid expenses decreased from $77,076 at December 31, 2024, to $41,652 at March 31, 2025, primarily due to a reduction in prepaid insurance Prepaid Expenses | Date | Amount | | :---------------- | :----- | | March 31, 2025 | $41,652 | | December 31, 2024 | $77,076 | NOTE 14 – SUBSEQUENT EVENTS Subsequent to March 31, 2025, the company entered into a Senior Secured Convertible Note for $3.3 million, issued common stock for liquidated damages settlements and warrant exercises, and settled a lawsuit for $160,000 - On May 13, 2025, the company entered into a Senior Secured Convertible Note for $3,333,333 (including OID) with a 10% interest rate and issued warrants for 611,111,111 shares[115] - Issued 116,400,000 common shares in April/May 2025 for partial settlement of $500,000 liquidated damages[116] - Issued 92,000,000 common shares in June 2025 for partial settlement of $210,375 liquidated damages[117] - Issued 178,775,882 common shares in April/May 2025 for cashless exercise of Series B warrants[116][117] - Issued 215,872,894 common shares in May 2025 for conversion of $91,365 note payable principal and accrued interest[116][117] - In April 2025, the company settled a lawsuit with Carstens Allen and Gourley for $160,000[118] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting a significant reduction in net loss and operating expenses for Q1 2025 compared to Q1 2024, but also emphasizing ongoing liquidity challenges and substantial doubt about its ability to continue as a going concern CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This section advises readers that the report contains forward-looking statements subject to known and unknown risks and uncertainties, and that actual results may differ materially from projections. The company assumes no obligation to update these statements unless required by law - Forward-looking statements are identified by words such as 'may,' 'will,' 'should,' 'expect,' 'anticipate,' 'continue,' 'estimate,' 'believe,' 'intend,' or 'project'[120] - Actual results may differ materially from forward-looking statements due to various known and unknown risks and uncertainties[121][122] - The company assumes no obligation to update forward-looking statements unless required by applicable law or regulation[122] Overview and Business Summary Vocodia Holdings Corp is a conversational AI technology provider focused on scalable cloud-based solutions to increase sales and customer service efficiency for businesses. Its wholly-owned subsidiary, Click Fish Media, Inc., provides IT services. The company completed its IPO in February 2024 but was delisted from Cboe in September 2024 and now trades on the OTC Pink Market - Vocodia Holdings Corp is a conversational AI technology provider aiming to offer scalable enterprise AI sales and customer service solutions[124][125][129] - The company's wholly-owned subsidiary, Click Fish Media, Inc. (CFM), provides IT services[126] - Completed IPO on February 26, 2024, on the BZX Exchange[131] - Delisted from Cboe on September 10, 2024, due to non-compliance with minimum bid price and stockholders' equity requirements[133][134] - Common stock began trading on the OTC Pink Market on September 11, 2024[135] Results of Operations For the three months ended March 31, 2025, the company reported no revenue, a gross loss of $47,130, and a net loss of $1,172,814. This represents an 83% reduction in net loss compared to the prior year, primarily driven by a 91% decrease in total operating expenses due to reduced IPO-related costs, staff, and software development - No revenue was earned for the three months ended March 31, 2025 or 2024; sales of the DISA product were suspended for functionality updates, with relaunch anticipated in Q3 2025[136] Key Financial Results (Three Months Ended March 31) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :----------- | :--------- | | Revenues | $0 | $0 | $0 | 0% | | Cost of Revenue | $47,130 | $0 | $47,130 | 100% | | Gross Profit (Loss) | $(47,130) | $0 | $(47,130) | 100% | | Total Operating Expenses | $263,793 | $2,822,460 | $(2,558,667) | -91% | | Other Income (Expenses) | $(861,891) | $(4,122,910) | $3,261,019 | -79% | | Net Loss | $(1,172,814) | $(6,945,370) | $5,772,556 | -83% | - General and administrative expenses decreased by 88% ($1,444,012) due to reduced IPO-related costs[140] - Salaries and wages decreased by 91% ($349,106) due to staff reduction and lower stock-based compensation[141] - Research and development expenses decreased by 97% ($765,549) due to reduced DISA product development costs[142] Liquidity and Capital Resources The company faces significant liquidity challenges, with a working capital deficiency of $3,237,705 and only $1,339 in cash as of March 31, 2025. Current assets decreased by 66% while current liabilities increased by 39% since December 31, 2024, raising substantial doubt about its ability to continue as a going concern. Management plans to rely on cash from operations, equity, and debt offerings, and may implement cost controls or explore strategic options if capital is not available Liquidity and Capital Resources Summary | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :---------------------- | :------------- | :---------------- | :----------- | :--------- | | Current Assets | $43,991 | $128,357 | $(84,366) | -66% | | Current Liabilities | $3,281,696 | $2,363,345 | $918,351 | 39% | | Working Capital (Deficiency) | $(3,237,705) | $(2,234,988) | $(1,002,717) | 45% | - As of March 31, 2025, the company had total cash of $1,339 and a working capital deficiency of $3,237,705, raising substantial doubt about its ability to continue as a going concern[147] - The company intends to rely on cash from operations, equity, and debt offerings, and may implement cost control measures or explore strategic options if additional capital is not available[148] Cash Flow For Q1 2025, cash used in operating activities significantly decreased to $188,550 from $2,428,570 in Q1 2024. Cash provided by financing activities was $189,608, a substantial decrease from $5,125,428 in Q1 2024, primarily due to lower proceeds from stock and preferred stock issuances Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 | 2024 | Change | | :--------------------------------- | :----------- | :----------- | :----------- | | Cash provided by / (used in) operating activities | $(188,550) | $(2,428,570) | $2,240,020 | | Cash provided by / (used in) financing activities | $189,608 | $5,125,428 | $(4,935,820) | | Cash on hand (ending balance) | $1,339 | $2,696,858 | $(2,695,519) | - Cash provided by financing activities in Q1 2025 included $260,000 from convertible notes payable, offset by repayments to related parties and convertible notes[154] Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships - The company has no off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships[155] Going Concern The company's financial statements are prepared under the going concern assumption, but management has identified conditions (net loss, accumulated deficit, negative working capital) that raise substantial doubt about its ability to continue as a going concern within one year - Management evaluates conditions that raise substantial doubt about the company's ability to continue as a going concern within one year[157] Critical Accounting Policies The company's critical accounting policies involve significant judgments and estimates, particularly for fair value measurements of financial instruments (Level 3 for derivative liabilities), derivative liabilities, beneficial conversion features, debt discount, research and development, and stock-based compensation - Critical accounting policies include Fair Value of Financial Instruments, Derivative Liabilities, Beneficial Conversion Features, Debt Discount, Research and Development, and Stock-based Compensation[160][161][162][163][164][165] - Fair value measurements use a three-tier hierarchy, with Level 3 valuations involving significant judgment and complexity due to unobservable inputs[167][168] - Derivative liabilities are adjusted to fair value at each reporting period using a binomial pricing model, with changes recorded in the statements of operations[163] Recent Accounting Standards The company evaluated recent accounting pronouncements, including ASU 2020-06 (Convertible Instruments), and does not expect it to have a material effect on its financial statements - The company does not expect ASU 2020-06, 'Accounting for Convertible Instruments and Contracts in an Entity; Own Equity,' to have a material effect on its financial statements[171][172] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Vocodia Holdings Corp is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk as a 'smaller reporting company'[174] Item 4. Controls and Procedures The company acknowledges that it does not yet have effective disclosure controls and procedures or internal controls over all aspects of financial reporting. Material weaknesses include insufficient staff for segregation of duties and reliance on a third-party accounting firm for GAAP compliance. The company is working to improve controls but cannot assure future effectiveness - The company does not yet have effective disclosure controls and procedures or internal controls over all aspects of its financial reporting[177] - Material weaknesses include insufficient staff for optimal segregation of duties and reliance on a third-party accounting firm for GAAP compliance[175][177] - The company expects increased legal, accounting, and financial compliance costs due to public company requirements[175][177] - The company will be required to provide an annual management report on the effectiveness of its internal control over financial reporting commencing with its second annual report on Form 10-K[179] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal disputes, including a customer claim for unprocessed leads, a former employee's sexual harassment and wrongful termination allegations (dismissed by EEOC), a TCPA class action lawsuit, an arbitration claim, and several lawsuits for unpaid professional fees. One lawsuit was settled in April 2025 - Customer claim regarding unprocessed leads, with $15,950 accrued as unearned revenue[182] - Former employee's allegations of sexual harassment and wrongful termination, dismissed by the EEOC in December 2024[183] - Putative class action lawsuit under the Telephone Consumer Protection Act (TCPA) for prerecorded calls, with mediation scheduled for October 15, 2024[184] - Arbitration by ProofPositive LLC asserting claims under the Arizona Securities Act[185] - Lawsuits for unpaid professional fees from Carstens, Allen & Gourley, LLP (settled for $160,000 in April 2025), MAI Voice GCO, LLC ($32,090), and Berkowitz Pollack & Brant Advisors ($48,057)[186][187][188] Item 1A. Risk Factors As a smaller reporting company, the company is not required to provide detailed risk factors in this quarterly report but refers readers to its Annual Report on Form 10-K for a comprehensive discussion of risks that could materially affect its business - The company is a 'smaller reporting company' and is not required to provide detailed risk factor information in this quarterly report[189] - Readers are directed to the Annual Report on Form 10-K for a comprehensive discussion of risk factors[190] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for this period - No unregistered sales of equity securities or use of proceeds were reported[191] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for this period - No defaults upon senior securities were reported[192] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[192] Item 5. Other Information This section refers to subsequent events, which are detailed in the notes to the financial statements - This section refers to subsequent events, which are detailed in the notes to the financial statements[193] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications of principal executive and financial officers, and Inline XBRL documents - Exhibit 31.1: Certification of Principal Executive Officer[195] - Exhibit 31.2: Certification of Principal Financial Officer[195] - Exhibit 32.1: Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350[195] - Exhibit 32.2: Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350[195] - Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE: Inline XBRL Taxonomy Extension Documents[195] - Exhibit 104: Cover Page Interactive Data File[195] Signatures The report is signed by Brian Podolak, Chief Executive Officer (Principal Executive Officer, Principal Financial and Accounting Officer) on July 8, 2025 - The report was signed by Brian Podolak, Chief Executive Officer (Principal Executive Officer, Principal Financial and Accounting Officer) on July 8, 2025[200]