AUDDIA INC

Previous wording

The Company is leveraging this technology platform within its premium AM/FM radio listening experience through the faidr App. The faidr App is intended to be downloaded by consumers who will pay a subscription fee in order to listen to any streaming AM/FM radio station and podcasts, all with commercial interruptions removed from the listening experience, in addition to the faidrRadio exclusive content offerings. Advanced features will allow consumers to skip any content heard on the station and request request audio content on-demand. We believe the faidr App represents a significant differentiated audio streaming product, or Superapp, that will be the first to come to market since the emergence of popular streaming music apps such as Pandora, Spotify, Apple Music, Amazon Music, etc. We believe that the most significant point of differentiation is that in addition to ad-free AM/FM streaming and ad-free podcasts, the faidr App is intended to deliver non-music content that includes local sports, news, weather, traffic and the discovery of new music alongside exclusive programming. No other radio streaming app available today, including category leaders like TuneIn, iHeart, and Audacy, can compete with faidr’s full product offerings.

Current wording

The Company is leveraging this technology platform within its premium AM/FM radio listening experience through the faidr App. The faidr App is intended to be downloaded by consumers who will pay a subscription fee in order to listen to any streaming AM/FM radio station and podcasts, all with commercial interruptions removed from the listening experience, in addition to the faidrRadio exclusive content offerings. Advanced features will allow consumers to skip any content heard on the station and request audio content on-demand. We believe the faidr App represents a significant differentiated audio streaming product, or Superapp, that will be the first to come to market since the emergence of popular streaming music apps such as Pandora, Spotify, Apple Music, Amazon Music, etc. We believe that the most significant point of differentiation is that in addition to ad-free AM/FM streaming and ad-reduced podcasts, the faidr App is intended to deliver non-music content that includes local sports, news, weather, traffic and the discovery of new music alongside exclusive programming. No other audio streaming app available today, including category leaders like TuneIn, iHeart, and Audacy, can compete with faidr’s full product offerings.

Previous wording

We have funded our operations with proceeds from the February 2021 IPO, Series A warrants exercised in July 2021 and common share issuance during June of 2023. We also obtained debt financing through a related party during November 2022 and April 2023. In addition, we sold common shares during April 2023, June 2023, and the first quarter of 2024 pursuant to our equity line facility. Since our inception, we have incurred significant operating losses. As of March 31, 2024, we had an accumulated deficit of $82,750,658. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our Apps. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

Current wording

We have funded our operations with proceeds from the February 2021 IPO, Series A warrants exercised in July 2021 and common share issuance during June of 2023. We obtained debt financing through a related party during November 2022 and April 2023. We sold common shares during April 2023, June 2023, and during the first and second quarters of 2024 pursuant to our equity line facility. Lastly, we entered into a securities purchase agreement with accredited investors for convertible preferred stock and warrants financing. Since our inception, we have incurred significant operating losses. As of June 30, 2024, we had an accumulated deficit of $85,054,083. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our Apps. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $2,732,538. The Company secured approximately $3.6 million in additional financing in February and March 2024. We will need additional funding to fund our debt, complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. However, if we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $1,882,205. The Company secured approximately $7.1 million in additional financing during 2024. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. However, if we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Previous wording

To accelerate user acquisition, revenue, and cash flow, the Company has explored numerous potential acquisition targets of AM/FM streaming aggregators over the past year and a half and continues to explore new opportunities. At present, the Company is in advanced active discussions with two potential targets and seeking to execute one or more agreements in the near term. These business development transactions would require additional funding.

Current wording

To accelerate user acquisition, revenue, and cash flow, the Company has explored numerous potential acquisition targets of AM/FM streaming aggregators over the past year and a half and continues to explore new opportunities.

Previous wording

The Company incurred $301,097 in costs related to evaluating potential acquisitions during the three months ended March 31, 2024..

Current wording

We incurred $370,228 in costs related to evaluating potential acquisitions during the six months ended June 30, 2024.

Previous wording

Comparison of the three months ended March 31, 2024

Current wording

Comparison of the three months ended June 30, 2024 and 2023

Previous wording

Direct Cost of Services increased $5,872 or 13.9% from $42,301 for the three months ended March 31, 2023, compared to $48,173 for the three months ended March 31, 2024. This increase was primarily the result of an increase in music service costs.

Current wording

Direct cost of services increased $5,189 or 11.5% from $45,038 for the three months ended June 30, 2023 compared to $50,227 for the three months ended June 30, 2024. This increase was primarily the result of an increase in hosting costs and music service costs.

Previous wording

Sales and marketing expenses decreased by $78,723 or 35.0% from $225,118 for the three months ended March 31, 2023 to $146,395 for the three months ended March 31, 2024, which was primarily attributed to reduced marketing promotion costs associated with the national launch of the faidr app. We expect our sales and marketing expenses to fluctuate period by period as we release new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition, retention, and subscription conversion.

Current wording

Sales and marketing expenses decreased by $6,892 or (3.1%) from $223,760 for the three months ended June 30, 2023 to $216,868 for the three months ended June 30, 2024, which was primarily attributed to reduced marketing promotion costs associated with the national launch of the faidr app. We expect our sales and marketing expenses to fluctuate period by period as we release new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition, retention, and subscription conversion.

Previous wording

Depreciation and amortization expenses increased by $40,711 or 9.2%, from $443,035 for the three months ended March 31, 2023, compared to $483,746 for the three months ended March 31, 2024. The increase is entirely related to the increased amortization of our faidr and podcasting Apps.

Current wording

Depreciation and amortization expenses increased by $50,764 or 11.5% from $442,618 for the three months ended June 30, 2023 compared to $493,382 for the three months ended June 30, 2024. The increase is entirely related to the increased amortization of our faidr and podcasting Apps.

Previous wording

Research and development expenses decreased by $44,619 or 21.2% from $210,126 for the three months ended March 31, 2023, to $165,507 for the three months ended March 31, 2024, which was primarily due to lower consulting fees.

Current wording

Research and development expenses decreased by $65,394 or (16.7%) from $390,489 for the six months ended June 30, 2023 to $325,095 for the three months ended June 30, 2024, which was primarily due to lower consulting fees.

Previous wording

We have incurred operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our faidr and podcasting Apps. As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $2,732,538 and $804,556, respectively. We have a deficit in working capital in the amount of approximately $1.4 million as of March 31, 2024. We anticipate that operating losses and net cash used in operating activities will increase over the next 12 months as we continue to develop and market our products. The Company secured $3.56 million of additional financing in April 2024, which enabled us to pay down $2.75 million in connection with the Secured Bridge Notes and will only be sufficient to fund our current operating plans into the third quarter of 2024. The Company has based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Current wording

We have incurred operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our faidr and podcasting Apps. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $1,882,205 and $804,556, respectively. We have working capital in the amount of approximately $1.7 million as of June 30, 2024. We anticipate that operating losses and net cash used in operating activities will increase over the next 12 months as we continue to develop and market our products. We secured $7.1 million of additional financing in 2024, which enabled us to pay down $2.75 million in connection with the Secured Bridge Notes and will only be sufficient to fund our current operating plans into the fourth quarter of 2024. The Company has based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Previous wording

On April 9, 2024, the Company and the investor entered into an Amendment and Waiver Agreement relating to the Bridge Notes (refer to Note 8 of the condensed unaudited financial statements for additional information regarding the amendment to the secured bridge notes).

Current wording

On April 9, 2024, we entered into an Amendment and Waiver Agreement with the Investor relating to the Bridge Notes.

Previous wording

On April 26, 2024, the Companay repaid $2.75 million of principal in connection with the Secured Bridge Notes.

Current wording

On April 26, 2024, we repaid $2.75 million of principal on our Secured Bridge Notes.

Previous wording

Through March 31, 2024, we sold 1,340,000 shares to White Lion for total proceeds of $3,606,508. Through the date of this report, we have sold 1,940,000 shares to White Lion for total proceeds of $4,852,508. We currently have effective registration statements that registers for resale by White Lion up to 5,165,263 shares of common stock that we may issue to White Lion under the Equity Line Purchase Agreement. After White Lion has acquired shares under the Equity Line Purchase Agreement, it may sell all, some or none of those shares. Sales to White Lion by us pursuant to the Equity Line Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock.

Current wording

Through June 30, 2024, we have sold 1,940,000 shares to White Lion for total net proceeds of $4,852,508. We currently have effective registration statements that registers for resale by White Lion up to 5,165,263 shares of common stock that we may issue to White Lion under the Equity Line Purchase Agreement. After White Lion has acquired shares under the Equity Line Purchase Agreement, it may sell all, some or none of those shares. Sales to White Lion by us pursuant to the Equity Line Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock.

Previous wording

The following table summarizes the statements of cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes the statements of cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was ($1,405,138), primarily resulting from our net loss of ($2,207,328) and change in working capital of $145,155 primarily related to an increase in accounts payable and accrued liabilities, offset by non-cash charges of $657,035 related to depreciation and amortization and share based compensation expense. Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing and promotion costs, and public company administrative support costs such as legal and other professional support services.

Current wording

Cash used in operating activities for the six months ended June 30, 2024 was ($2,633,821), primarily resulting from our net loss of ($4,510,753) and change in working capital of $45,275, offset by non-cash charges of $1,922,207 related to depreciation and amortization, share based compensation expense, and the change in fair value of warrants. Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing and promotion costs, and public company administrative support costs such as legal and other professional support services.

Previous wording

Cash used in operating activities for the three months ended March 31, 2023, was $1,073,241, primarily resulting from our net loss of $2,155,312 and change in working capital of $30,415 related to an increase in accounts payable and accrued liabilities, offset by non-cash charges of $1,051,656 related to depreciation and amortization, share based compensation expense, and finance charges associated with the debt issuance costs of the Secured Bridge Note (aka the Prior Note). Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing and promotion costs, and public company administrative support costs such as legal and other professional support services.

Current wording

Cash used in operating activities for the six months ended June 30, 2023, was ($2,214,729), primarily resulting from our net loss of ($4,478,174) and change in working capital of $99,309 related to an increase in accounts payable and accrued liabilities, offset by non-cash charges of $2,164,136 related to depreciation and amortization, share based compensation expense, and finance charges associated with the debt issuance costs of the Secured Bridge Notes. Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing and promotion costs, and public company administrative support costs such as legal and other professional support services.

Previous wording

Cash flows used in investing activities for the three months ended March 31, 2023 was $270,574, consisting entirely of capitalization of software development expenses.

Current wording

Cash flows used in investing activities for the six months ended June 30, 2024 were ($537,120), consisting of the capitalization of software development expenses and purchase of computer equipment.

Previous wording

Cash flows used in investing activities for the three months ended March 31, 2024 was $273,388, consisting entirely of capitalization of software development expenses.

Current wording

Cash flows used in investing activities for the six months ended June 30, 2023 were ($529,503), consisting entirely of capitalization of software development expenses.

Previous wording

Cash flows generated in financing activities for the three months ended March 31, 2024 was $3,606,508 and related entirely to cash proceeds from the issuance of common shares of $3,606,508.

Current wording

Cash flows generated in financing activities for the six months ended June 30, 2023, were $4,687,941 and related primarily to cash proceeds from the issuance of common shares of $4,016,521 and proceeds from related party debt of $750,000.

Previous wording

We historically have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $82,750,658 and $80,543,330 as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $2,732,538 and $804,556, respectively. Our cash is comprised primarily of demand deposit accounts and money market funds. We secured $3.56 million of additional financing in April 2024, which enabled us to pay down $2.75 million in connection with the Secured Bridge Notes and will only be sufficient to fund our current operating plans into the third quarter of 2024. We have based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Current wording

We historically have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $85,054,083 and $80,543,330 as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $1,882,205 and $804,556, respectively. Our cash is comprised primarily of demand deposit accounts and money market funds. We secured $7.1 million of additional financing in 2024, which enabled us to pay down $2.75 million in connection with the Secured Bridge Notes and will only be sufficient to fund our current operating plans into the fourth quarter of 2024. We have based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

Previous wording

The following table summarizes our contractual obligations not on our Balance Sheet as of March 31, 2024, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

Current wording

The following table summarizes our contractual obligations as of June 30, 2024, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods: