Auddia(AUUD) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information This section details Auddia Inc.'s Form 10-Q filing, its Nasdaq listings, and company classifications Filing Details Auddia Inc.'s Form 10-Q details its Nasdaq listings and classifications as a Non-accelerated Filer, Smaller Reporting Company, and Emerging Growth Company - Auddia Inc. is a Delaware corporation, with its common stock (AUUD) and warrants (AUUDW) listed on The Nasdaq Stock Market[2][3][4] - The company is classified as a Non-accelerated Filer, a Smaller Reporting Company, and an Emerging Growth Company[4][5] - As of August 7, 2025, there were 1,147,683 shares of the registrant's common stock outstanding[5] Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements, highlighting inherent risks and uncertainties Forward-Looking Statements Disclaimer The report contains forward-looking statements, subject to risks and uncertainties, with actual results potentially differing due to factors like capital needs and revenue generation - The report contains forward-looking statements, subject to inherent uncertainties, risks, and changes in circumstances, and are not guarantees of future performance[14][15] - Key factors that could cause actual results to differ include the sufficiency of existing cash, ability to generate revenue from new software services, limited operating history, and the need to raise additional capital[15][17] - The company does not undertake to update or revise forward-looking statements unless required by law[16] PART I – FINANCIAL INFORMATION This part presents Auddia Inc.'s unaudited condensed financial statements and management's discussion and analysis Item 1. Financial Statements This section presents Auddia Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, equity changes, and cash flows, with accompanying notes Condensed Balance Sheets (Unaudited) This section provides a snapshot of Auddia Inc.'s financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Cash and cash equivalents | $1,067,756 | $2,706,319 | | Total current assets | $1,173,804 | $2,762,378 | | Total assets | $3,435,748 | $5,298,328 | | Total current liabilities | $528,415 | $550,920 | | Total liabilities | $563,841 | $604,008 | | Total shareholders' equity | $2,871,907 | $4,694,320 | | Accumulated deficit | $(92,852,762) | $(89,428,436) | - The company's common stock outstanding as of December 31, 2024, has been retroactively restated for the effect of the 1-for-17 reverse stock split effective March 28, 2025[21] Condensed Statements of Operations (Unaudited) This section presents Auddia Inc.'s unaudited financial performance, detailing revenues, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 | Metric (Unaudited) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $– | $– | $– | $– | | Total operating expenses | $1,567,208 | $1,654,390 | $3,318,220 | $3,709,010 | | Loss from operations | $(1,567,208) | $(1,654,390) | $(3,318,220) | $(3,709,010) | | Net loss | $(1,568,653) | $(2,303,425) | $(3,321,218) | $(4,510,753) | | Net loss per share (Basic & Diluted) | $(2.95) | $(14.62) | $(6.73) | $(40.54) | | Weighted average common shares outstanding (Basic & Diluted) | 532,314 | 157,512 | 493,448 | 111,268 | - The company reported no revenue for both the three and six months ended June 30, 2025 and 2024[23] - Net loss decreased for both the three-month period (from $(2,303,425) to $(1,568,653)) and the six-month period (from $(4,510,753) to $(3,321,218)) year-over-year[23] Condensed Statements of Changes in Shareholders' Equity (Unaudited) This section outlines the changes in Auddia Inc.'s shareholders' equity, including preferred and common stock activity, for the period ended June 30, 2025 | Metric | Balance, Dec 31, 2024 | Balance, June 30, 2025 | | :--------------------------------- | :-------------------- | :--------------------- | | Series B Preferred Stock (Shares) | 2,314 | 1,535 | | Series C Preferred Stock (Shares) | – | 750 | | Common Stock (Shares) | 397,731 | 654,959 | | Additional Paid-In Capital | $94,122,356 | $95,724,012 | | Accumulated Deficit | $(89,428,436) | $(92,852,762) | | Total Shareholders' Equity | $4,694,320 | $2,871,907 | - Issuance of common shares, net of costs, contributed $672,795 and $82,500 during the first and second quarters of 2025, respectively[26] - Series B preferred stock conversions to common stock and issuance of Series C preferred stock significantly impacted equity composition[26] Condensed Statements of Cash Flows (Unaudited) This section details Auddia Inc.'s cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(2,508,649) | $(2,633,821) | | Net cash used in investing activities | $(490,650) | $(537,120) | | Net cash provided by financing activities | $1,360,736 | $4,248,590 | | Net (decrease) increase in cash | $(1,638,563) | $1,077,649 | | Cash, beginning of year | $2,706,319 | $804,556 | | Cash and restricted cash, end of period | $1,067,756 | $1,882,205 | - Cash used in operating activities decreased slightly in 2025 compared to 2024, primarily due to a lower net loss[28] - Net cash provided by financing activities significantly decreased from $4,248,590 in 2024 to $1,360,736 in 2025[28] Notes to Condensed Financial Statements (Unaudited) This section provides detailed explanations and additional information supporting the unaudited condensed financial statements Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies This note describes Auddia Inc.'s business, accounting policies, impact of reverse stock splits, and going concern considerations - Auddia Inc. is a technology company developing a proprietary AI platform for audio and innovative podcast technologies[30] - 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, retroactively adjusting all share and per-share data[33][34][36] - There is substantial doubt about the company's ability to continue as a going concern, as cash and cash equivalents of $1,067,756 as of June 30, 2025, along with recent funding, are only sufficient into the fourth quarter of 2025[41][42][43] Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs This note details the company's property, equipment, intangible assets, and software development costs, including changes and amortization expenses | Asset Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Total property and equipment, net | $9,584 | $12,281 | | Total intangible assets, net | $17,406 | $3,416 | | Total software development costs, net | $1,997,550 | $2,308,230 | - Amortization of capitalized software development costs decreased to $356,227 for the three months ended June 30, 2025, from $486,764 in the prior year, and to $787,286 for the six months ended June 30, 2025, from $963,682 in the prior year[56] - Patents increased significantly from $0 to $14,174, contributing to the rise in intangible assets[55] Note 3 – Accounts Payable and Accrued Liabilities This note provides a breakdown of Auddia Inc.'s accounts payable and accrued liabilities as of June 30, 2025, and December 31, 2024 | Category | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Accounts payable and accrued liabilities | $474,398 | $495,312 | | Credit cards payable | $5,765 | $12,351 | | Total | $480,163 | $507,663 | Note 4 – Notes Payable to Related Party, net of debt issuance costs This note details the repayment of related party notes and the conversion of accrued interest and discount into equity securities - The company repaid $2.75 million of principal on its outstanding Secured Bridge Notes on April 26, 2024[59] - Unpaid accrued interest and original issue discount totaling $911,384 were converted into 27,256 prefunded common stock warrants and 27,256 non-prefunded warrants[60][61] - The non-prefunded warrants and fee warrants had a total valuation of $811,402, and prefunded warrants had a valuation of $732,370[64] Note 5 – Commitments and Contingencies This note outlines the company's operating lease obligations and a pre-IPO investor claim for damages - The company entered into a 37-month operating lease for office space commencing April 1, 2024, with monthly base rent escalating over the term[65] - Rent expense was $8,960 for the three months ended June 30, 2025 and 2024, and $17,920 and $25,385 for the six months ended June 30, 2025 and 2024, respectively[65] - A pre-IPO investor has claimed damages of less than $300,000, but no complaint has been filed, and the outcome is neither probable nor estimable[66] Note 6 – Share-based Issuances This note details the activity and expense related to stock options and restricted stock units Stock Options Activity | Stock Options Activity | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :------------ | | Outstanding (Number) | 34,341 | 34,341 | | Weighted Average Exercise Price | $123.88 | $123.88 | Restricted Stock Units Activity | Restricted Stock Units Activity | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :---------------- | :------------ | | Outstanding (Number) | 309 | – | - Share-based compensation expense decreased from $132,488 for the three months ended June 30, 2024, to $21,158 for the same period in 2025, and from $305,777 to $98,064 for the six-month periods[69] Note 7 – Equity Financings This note describes the company's equity financing activities, including agreements with White Lion and At-the-Market sales - The company has an Equity Line Common Stock Purchase Agreement with White Lion for up to $10,000,000, under which $0.1 million was raised in April 2025[70][71] - An At-the-Market Issuance Sales Agreement allowed the company to issue 78,901 shares for approximately $0.7 million during the six months ended June 30, 2025[72] - On June 30, 2025, the company closed a Series C Preferred Stock and Warrants Financing, receiving $750,000 in gross proceeds and issuing 750 shares of Series C preferred stock and warrants for 314,466 common shares[80][81] Note 8 – Leases under ASC 842 This note outlines the accounting treatment for the company's operating lease under ASC 842, including lease term and discount rate - The company recognizes operating lease expense on a straight-line basis over the lease term[84] | Metric | June 30, 2025 | | :--------------------------------- | :-------------- | | Weighted-average remaining lease term | 1.57 years | | Weighted-average discount rate | 8.6% | Undiscounted Cash Flows | Years Ended December 31, | Undiscounted Cash Flows | | :----------------------- | :---------------------- | | 2025 | $18,419 | | 2026 | $41,749 | | 2027 | $14,735 | | Less imputed interest | $(6,078) | | Total | $68,825 | Note 9 – Segment Reporting This note states that Auddia Inc. operates as a single operating segment, with the CFO as the Chief Operating Decision Maker - The company operates as a single operating segment, focused on technology for consumer engagement with audio through its proprietary AI platform and podcast innovations[87] - The Chief Financial Officer (CFO) is identified as the Chief Operating Decision Maker (CODM), reviewing entity-wide financial and operational performance[87] Note 10 – Subsequent Events This note discloses significant events after June 30, 2025, including a proposed business combination and additional equity issuances - On August 5, 2025, the company announced a non-binding letter of intent for a proposed business combination with Thramann Holdings, LLC, where Holdings' equity holders would receive an 80% ownership interest in the combined company[90][107][108] - Subsequent to June 30, 2025, the company issued an additional 360,000 shares of common stock under its Equity Line Common Stock Purchase Agreement for total proceeds of $1.9 million[90] - On August 5, 2025, the company entered into exchange agreements to convert 569 outstanding shares of Series B preferred stock (including accrued dividends) into 132,724 shares of common stock[91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Auddia Inc.'s financial condition and results, including its AI platform, recent developments, and liquidity challenges Overview This section provides an overview of Auddia Inc.'s AI-driven faidr app, its commercialization efforts, and significant accumulated deficit - Auddia's faidr app uses proprietary AI to personalize radio and podcast listening by replacing ad breaks with streaming music and offering commercial-free content[94][95][98] - The company is implementing new paywalls and testing various price points and marketing strategies to optimize subscription conversions[100] - As of June 30, 2025, Auddia had an accumulated deficit of $92,851,762 and requires substantial additional funding to support operations and growth[102][103][105] Recent Developments This section highlights recent events, including a proposed business combination, Nasdaq compliance, and reverse stock splits - Auddia entered a non-binding LOI for a business combination with Thramann Holdings, LLC, where Holdings' equity holders would receive an 80% ownership interest in the combined company[107][108] - The company regained compliance with Nasdaq's minimum stockholders' equity requirement on May 24, 2024, and the $1.00 minimum bid price requirement on April 14, 2025[112][114] - A 1-for-25 reverse stock split was effective on February 27, 2024, and a 1-for-17 reverse stock split was effective on March 28, 2025[115] Components of our results of operations This section outlines the primary components of Auddia's operating expenses and other income/expense - Direct cost of services primarily consists of technology and development costs, expected to increase with app enhancements[118] - Research and development expenses include capitalized software development costs, amortized over three years, and are expected to continue as apps are enhanced[120] - General and administrative expenses are expected to increase due to public company operating costs and preparations for product commercialization[121] Results of operations This section analyzes Auddia Inc.'s financial performance, detailing revenue, operating expenses, and net loss for recent periods Three Months Ended June 30, 2025 vs 2024 | Metric | June 30, 2025 | June 30, 2024 | Change $ | Change % | | :--------------------------------- | :-------------- | :-------------- | :------- | :------- | | Revenue | $– | $– | $– | 0.0% | | Direct cost of services | $58,566 | $50,227 | $8,339 | 16.6% | | Sales and marketing | $185,157 | $216,868 | $(31,711)| -14.6% | | Research and development | $236,415 | $159,588 | $76,827 | 48.1% | | General and administrative | $729,442 | $734,325 | $(4,883) | -0.7% | | Depreciation and amortization | $357,628 | $493,382 | $(135,754)| -27.5% | | Total operating expenses | $1,567,208 | $1,654,390 | $(87,182)| -5.3% | | Net loss | $(1,568,653) | $(2,303,425) | $734,772 | -31.9% | Six Months Ended June 30, 2025 vs 2024 | Metric | June 30, 2025 | June 30, 2024 | Change $ | Change % | | :--------------------------------- | :-------------- | :-------------- | :------- | :------- | | Revenue | $– | $– | $– | 0.0% | | Direct cost of services | $114,136 | $98,400 | $15,736 | 16.0% | | Sales and marketing | $420,598 | $363,263 | $57,335 | 15.8% | | Research and development | $633,118 | $325,095 | $308,023 | 94.7% | | General and administrative | $1,360,333 | $1,945,124 | $(584,791)| -30.1% | | Depreciation and amortization | $790,035 | $977,128 | $(187,093)| -19.1% | | Total operating expenses | $3,318,220 | $3,709,010 | $(390,790)| -10.5% | | Net loss | $(3,321,218) | $(4,510,753) | $1,189,535| -26.4% | - The significant decrease in 'Other expense, net' for both periods (99.8% for three months, 99.6% for six months) was entirely due to the repayment of notes payable to a related party in April 2024[129][137] Liquidity and Capital Resources This section discusses Auddia Inc.'s cash position, financing activities, and ongoing need for additional funding to support operations - As of June 30, 2025, cash and cash equivalents were $1,067,756, and the company had working capital of approximately $0.6 million[138] - Additional financing of $1.5 million (H1 2025) and $1.9 million (post-June 30, 2025) is only sufficient to fund current operating plans into the fourth quarter of 2025, necessitating further funding[138][152] Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :------------ | :------------ | | Operating activities | $(2,508,649) | $(2,633,821) | | Investing activities | $(490,650) | $(537,120) | | Financing activities | $1,360,736 | $4,248,590 | | Change in cash | $(1,638,563) | $1,077,649 | Critical Accounting Estimates This section highlights key accounting estimates, including software development costs and equity-based compensation, and the company's reporting status - Software development costs are capitalized after the preliminary project stage and amortized over an estimated three-year useful life[156] - Equity-based compensation awards are valued using the Black-Scholes option-pricing model, considering factors like stock price, expected life, volatility, and risk-free interest rate[159] - As an emerging growth company and smaller reporting company, Auddia has elected to use extended transition periods for new accounting standards and benefits from reduced disclosure obligations[160][161] 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 not required to provide quantitative and qualitative disclosures about market risk[162] Item 4. Controls and Procedures Management concluded that Auddia Inc.'s disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - The company's disclosure controls and procedures were evaluated as effective as of June 30, 2025[163] - No changes in internal control over financial reporting occurred during the six months ended June 30, 2025[164] PART II – OTHER INFORMATION This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings Auddia Inc. is involved in various legal disputes, but believes their resolution will not materially affect its financial condition - The company is party to litigation from time to time but believes current pending legal matters will not have a material adverse effect[166] - Further details on commitments and contingencies are provided in Note 4 to the financial statements[166] Item 1A. Risk Factors This section refers readers to the Annual Report on Form 10-K for risk factors, noting no material changes since the last filing - Readers should refer to the risk factors in the Annual Report on Form 10-K for the year ended December 31, 2024[167] - There have been no material changes to the company's risk factors since the last Annual Report[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, with subsequent sales detailed in Item 5 - No unregistered sales of equity securities occurred during the quarter ended June 30, 2025, that were not previously reported[168] - Information on unregistered sales of equity securities during July and August 2025 is detailed in Item 5[169] Item 3. Defaults Upon Senior Securities Auddia Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[171] Item 4. Mine Safety Disclosures Auddia Inc. reported no mine safety disclosures - There were no mine safety disclosures[172] Item 5. Other Information This section discloses no Rule 10b5-1 trading arrangements and details subsequent equity issuances and conversions - No director or officer adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[173] - In July and August 2025, 360,000 shares of common stock were issued under the Equity Line Common Stock Purchase Agreement for total proceeds of $1.9 million[173] - On August 5, 2025, exchange agreements were entered into to convert 569 shares of Series B preferred stock into 132,724 shares of common stock at an exchange price of $4.486 per share[174] Item 6. Exhibits This section lists all required exhibits, including various agreements, certificates, and certifications, incorporated by reference - The exhibit index lists documents incorporated by reference, including the At-The-Market Issuance Sales Agreement, Certificates of Incorporation and Designations for preferred stock, and various equity agreements[176][177][178] - Key exhibits filed herewith include the Form of Exchange Agreement dated August 5, 2025, and Section 302 and 906 Certifications by the CEO and CFO[178] Signatures The report is duly signed by Auddia Inc.'s President, CEO, and CFO on August 8, 2025 - The report was signed by Jeffrey Thramann, President, CEO, and Director, and John Mahoney, CFO, on August 8, 2025[181][182]