Auddia Inc 10-Q for FY2025 Q2
Auddia Inc. (AUUD)
About this 10-Q
Auddia Inc filed this 10-Q on August 8, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net loss
- $1.57M
- compared with a net loss of $2.3M a year earlier
- Diluted EPS
- -$2.95
- compared with -$14.62 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| Quarterly REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the quarterly period ended | |
| Or | |
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
| For the transition period from _____________ to _____________ | |
Commission File No.
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
|
||
| Address of Principal Executive Offices | Zip Code |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Stock Market | ||||
| The Stock Market |
Indicate by check mark whether the registrant: (1)
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller Reporting Company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes ☐ No
As of August 7, 2025, there were shares of the registrant’s common stock, $0.001 par value per share, outstanding.
AUDDIA INC.
2025 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| 2 |
Unless we state otherwise or the context otherwise requires, the terms “Auddia,” “we,” “us,” “our” and the “Company” refer to Auddia Inc., a Delaware corporation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology.
Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
| · | the sufficiency of our existing cash to meet our working capital and capital expenditure needs over the next 12 months and our need to raise additional capital; | |
| · | our ability to generate revenue from new software services; | |
| · | our limited operating history; | |
| · | our ability to maintain proper and effective internal financial controls; | |
| · | our ability to continue to operate as a going concern; | |
| · | changes in laws, government regulations and policies and interpretations thereof; | |
| · | our ability to obtain and maintain protection for our intellectual property; | |
| · | the risk of errors, failures or bugs in our platform or products; | |
| · | our ability to attract and retain qualified employees and key personnel; | |
| · | our ability to manage our rapid growth and organizational change effectively; | |
| · | the possibility of security vulnerabilities, cyberattacks and network disruptions, including breaches of data security and privacy leaks, data loss, and business interruptions; | |
| · | our compliance with data privacy laws and regulations; | |
| · | our ability to develop and maintain our brand cost-effectively; | |
| · | our ability to maintain the listing of our common stock on the Nasdaq Stock Market; and | |
| · | the other factors set forth elsewhere in this Quarterly Report and in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024. |
These forward-looking statements speak only as of the date of this Form 10-Q and are subject to business and economic risks. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date on which such statements were made, except to the extent required by law.
| 3 |
PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements |
Auddia Inc.
Condensed Balance Sheets
| June 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid assets | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Software development costs, net of accumulated amortization | ||||||||
| Operating lease right of use asset | ||||||||
| Deferred offering costs | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Stock awards liability | ||||||||
| Total current liabilities | ||||||||
| Non-current operating lease liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 5) | ||||||||
| Shareholders' equity: | ||||||||
| Series B Preferred stock - $ par value, and shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | ||||||||
| Series C Preferred stock - $ par value, and shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively | ||||||||
| Common stock - $ par value, authorized and and shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively (1) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| (1) | 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. |
| 4 |
Auddia Inc.
Condensed Statements of Operations
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense: | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of warrants | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share attributable to common stockholders | ||||||||||||||||
| Basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding (1) | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| (1) | The Company’s common stock outstanding for the three and six months ended June 30, 2024 has been retroactively restated for the effect of the 1-for-17 reverse stock split effective March 28, 2025. |
| 5 |
Auddia Inc.
Condensed Statements of Changes in Stockholders’ Equity
for the Three and Six Months Ended June 30, 2025 and 2024
(Unaudited)
Series B Preferred Stock | Series C Preferred Stock | Common Stock | ||||||||||||||||||||||||||||||||||
| Number
of Shares | Par Value | Number
of Shares | Par Value | Number
of Shares | Par Value | Additional Paid-In-Capital | Accumulated
Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common shares, net of costs | – | – | ||||||||||||||||||||||||||||||||||
| Series B preferred stock converted to common stock | ( | ) | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Offering costs | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Issuance of restricted stock units | – | – | ||||||||||||||||||||||||||||||||||
| Capitalized dividends converted to common stock | – | – | ||||||||||||||||||||||||||||||||||
| Capitalized dividends | – | – | – | ( | ) | |||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common shares, net of costs | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of Series C preferred stock and warrants, net of issuance costs | – | – | ||||||||||||||||||||||||||||||||||
| Series B preferred stock converted to common stock | ( | ) | ( | ) | – | ( | ) | |||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Capitalized dividends | – | – | – | ( | ) | |||||||||||||||||||||||||||||||
| RSS adjustment | – | – | – | – | – | – | – | – | ||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
Series B Preferred Stock | Series C Preferred Stock | Common Stock (1) | ||||||||||||||||||||||||||||||||||
| Number
of Shares | Par Value | Number
of Shares | Par Value | Number
of Shares | Par Value | Additional Paid-In-Capital | Accumulated
Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common shares, net of costs | – | – | ||||||||||||||||||||||||||||||||||
| Offering costs | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common shares, net of costs | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of Series B preferred stock and warrants | – | – | ||||||||||||||||||||||||||||||||||
| Conversion of debt to equity | – | – | – | |||||||||||||||||||||||||||||||||
| Offering costs | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Share-based compensation | – | – | – | |||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| (1) | The Company’s changes in stockholders’ equity for the three and six months ended June 30, 2024 has been retroactively restated for the effect of the 1-for-17 reverse stock split effective March 28, 2025. |
| 6 |
Auddia Inc.
Condensed Statements of Cash Flows
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation expense | ||||||||
| Change in fair value of warrants | ||||||||
| Amortization of ROU asset | ||||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid assets | ( | ) | ( | ) | ||||
| Other current assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Software capitalization | ( | ) | ( | ) | ||||
| Intangibles capitalization | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Offering costs | ( | ) | ( | ) | ||||
| Net settlement of share-based compensation liability | ( | ) | ||||||
| Repayments of related party debt | ( | ) | ||||||
| Proceeds from issuance of preferred shares, net of issuance costs | ||||||||
| Proceeds from issuance of common shares, net of issuance costs | ||||||||
| Dividends and Series B preferred stock converted to common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash, beginning of year | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Supplemental disclosures of non-cash activity: | ||||||||
| Reclassification of deferred offering costs | $ | $ | ||||||
| Issuance of warrants in connection with related party debt | $ | $ | ||||||
| Capitalized dividends | $ | $ | ||||||
| Right of use asset and assumption of operating lease liability | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 7 |
Auddia Inc.
Notes to Condensed Financial Statements (Unaudited)
Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Auddia Inc., (the “Company”, “Auddia”, “we”, “our”) is a technology company that is reinventing how consumers engage with audio through the development of a proprietary AI platform for audio and innovative technologies for podcasts. The Company is incorporated in Delaware and headquartered in Colorado.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Interim Financial Information
The condensed financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations. The condensed balance sheet as of December 31, 2024 has been derived from the financial statements included in the Company’s annual report on Form 10-K. Accordingly, these condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results for any interim period are not necessarily indicative of results for any future period. The Company recorded all adjustments necessary for a fair statement of the results for the interim period and all such adjustments are of a normal recurring nature.
Reverse Stock Splits
On February 27, 2024, the Company effectuated a
On March 28, 2025, the Company effectuated a
The reverse stock splits did not change the authorized number of shares of the Company’s common stock. No fractional shares were issued and any fractional shares resulting from the reverse stock splits were rounded up to the nearest whole share.
The reverse stock splits applied to the Company’s outstanding warrants, stock options and restricted stock units. The number of shares of common stock into which these outstanding securities are convertible or exercisable were adjusted proportionately as a result of the reverse stock splits. The exercise prices of any outstanding warrants or stock options were also proportionately adjusted in accordance with the terms of those securities and the Company’s equity incentive plans.
As a result of the reverse stock splits, unless described otherwise, all references to common stock, share data, per share data and related information contained in these financial statements have been retroactively adjusted to reflect the effect of the reverse stock splits for all periods presented. In addition, any fractional shares that would otherwise be issued as a result of the reverse stock splits were rounded up to the nearest whole share. Further, the number of shares issuable and exercise prices of stock options and warrants have been retrospectively adjusted in these financial statements for all periods presented to reflect the reverse stock splits.
| 8 |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The condensed financial statements include some amounts that are based on management’s best estimates and judgments. The most significant estimates relate to valuation of capital stock, warrants and options to purchase shares of the Company’s common stock, and the estimated recoverability and amortization period for capitalized software development costs. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.
Risks and Uncertainties
The Company is subject to various risks and uncertainties frequently encountered by companies in the early stages of development. Such risks and uncertainties include, but are not limited to, its limited operating history, competition from other companies, limited access to additional funds, dependence on key personnel, and management of potential rapid growth. To address these risks, the Company must, among other things, develop its customer base; implement and successfully execute its business and marketing strategy; develop follow-on products; provide superior customer service; and attract, retain, and motivate qualified personnel. There can be no guarantee that the Company will be successful in addressing these or other such risks.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period to comply with certain new or revised accounting standards that have different effective dates for public and private companies.
Going Concern
The Company had cash and cash equivalents of
$
As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management has plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, such as the White Lion equity line of credit (refer to Note 7) and additional future financing agreements. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s current level of cash is not sufficient to execute the business plan. For the foreseeable future, the Company will incur significant operating expenses, capital expenditures and working capital funding that will deplete cash on hand during the fourth quarter of 2025.
| 9 |
Cash and Cash Equivalents
The Company had cash on hand of $
The Company considers all highly liquid instruments
purchased with an original maturity of three months or less to be cash equivalents. The Company had cash equivalents of $
The Company maintains cash deposits at several financial
institutions, which are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance may at times
exceed these limits. As of June 30, 2025, the Company had approximately $
Software Development Costs
The Company accounts for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose is probable.
The Company ceases capitalization of development costs once the software has been substantially completed and is available for its intended use. Software development costs are amortized over a useful life estimated by the Company’s management of three years. Costs associated with significant upgrades and enhancements that result in additional functionality are capitalized. Capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies.
Unamortized capitalized software development costs
determined to be in excess of anticipated future net revenues are considered impaired and expensed during the period of such determination.
The Company determined that no such impairments were required during the three and six months ended June 30, 2025 and 2024. Software development
costs of $
Revenue Recognition
Revenue will be measured according to Accounting Standards Codification (“ASC”) 606, Revenue – Revenue from Contracts with Customers, and will be recognized based on consideration specified in a contract with a customer and will exclude any sales incentives and amounts collected on behalf of third parties. The Company will recognize revenue when it satisfies a performance obligation by transferring control over a service or product to a customer. To achieve this core principle, the Company applies the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation. The Company will report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a customer in the accompanying statements of operations. Collected taxes, if applicable, will be recorded within other current liabilities until remitted to the relevant taxing authority.
Subscriber revenue will consist primarily of subscription fees and other ancillary subscription-based revenues. Revenue will be recognized on a straight-line basis when the performance obligations to provide each service for the period have been satisfied, which is over time as our subscription services are continuously available and can be consumed by customers at any time. There is no revenue recognized for unpaid trial subscriptions.
Customers may pay for the services in advance of the performance obligation and therefore these prepayments will be recorded as deferred revenue. The deferred revenue will be recognized as revenue in the accompanying statements of operations as the services are provided.
| 10 |
The Company accounts for share-based compensation arrangements with employees, directors, and consultants and recognizes the compensation expense for share-based awards based on the estimated fair value of the awards on the date of grant in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”).
Compensation expense for all share-based awards is based on the estimated grant-date fair value and recognized in earnings over the requisite service period (generally the vesting period). The Company records share-based compensation expense related to non-employees over the related service periods.
Certain share-based compensation awards include a net-share settlement feature that provides the grantee an option to withhold shares to satisfy tax withholding requirements and are classified as a share-based compensation liability. Cash paid to satisfy tax withholdings is classified as financing activities in the condensed statements of cash flows.
Warrants
The Company account for warrants as equity-classified instruments, based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs
Property and equipment and software development costs consisted of the following as of:
| Schedule of property and equipment and software development costs | ||||||||
June 30, 2025 | December 31, 2024 | |||||||
| Computers and equipment | $ | $ | ||||||
| Furniture | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
| Domain name | $ | $ | ||||||
| Patents | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
| Software development costs | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Total software development costs, net | $ | $ | ||||||
| 11 |
The Company recognized depreciation expense of $
Note 3 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
| Schedule of accounts payable and accrued liabilities | ||||||||
June 30, 2025 | December 31, 2024 | |||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Credit cards payable | ||||||||
| Total accounts payable and accrued liabilities | $ | $ | ||||||
Note 4 – Notes Payable to Related Party, net of debt issuance costs
On April 9, 2024, the Company and the investor entered into an Amendment and Waiver Agreement relating to the Company’s outstanding Bridge Notes. Refer to the Company’s Form 10-K for the year ended December 31, 2024 for additional information regarding the Bridge Notes.
The Company agreed to pay $2.75 million in cash to the holder in repayment of the principal of the Bridge Notes (exclusive of the $275,000 of original issue discount on the Bridge Notes) shortly after the closing by the Company of one or more equity financings with total gross proceeds to the Company of not less than $6,000,000.
On April 26, 2024, the Company
repaid $
Effective April 9, 2024,
the holder converted $
The Rollover Securities consist of (i) prefunded common stock warrants with a per share exercise price of $0.017 per share (the “Prefunded Warrants”) and (ii) non-prefunded warrants (the “Non-Prefunded Warrants”) with a per share exercise price equal to $6.2934.
The number of Non-Prefunded Warrants was determined by dividing the Rollover Amount by $33.44 (the original exercise price). The number of Non-Prefunded Warrants is equal to the number of Prefunded Warrants (i.e. 100% warrant coverage). The Non-Prefunded Warrants have a price adjustment provision which will adjust the exercise price downward in the event that the Company issues equity securities in the future at an effective per share price below the then current exercise price. The original exercise price of $33.44 has been subsequently adjusted to $6.2934. In order to assure compliance with applicable Nasdaq rules, the Non-Prefunded Warrants shall not be exercisable for six months following the date of issue.
| 12 |
The Company issued to the holder new common stock warrants with a five-year term as a loan extension fee (“Fee Warrants”). The Fee Warrants have a price adjustment provision which will adjust the exercise price downward in the event that the Company issues equity securities in the future at an effective per share price below the then current exercise price. The original exercise price of $33.44 has been subsequently adjusted to $6.2934. In order to assure compliance with applicable Nasdaq rules, the Fee Warrants shall not be exercisable for six months following the date of issue.
The Non-Prefunded Warrants
and Fee Warrants had a total valuation of $
Note 5 – Commitments and Contingencies
Operating Lease
On March 25, 2024, the Company entered into a 37-month
operating lease commencing on April 1, 2024 with two separate two year renewal options. The monthly base rent for months two through 14
is $2,456, increasing to $3,070 for months 15 through 26, and ending at $3,684 for months 27 through 37. Rent expense, as part of general
and administrative expenses in the statements of operations, was $
Litigation
In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company. There are no active litigations as of the date the financial statements were issued. However, a pre-IPO investor has contacted the Company claiming damages caused by alleged acts and omissions arising from a private financing by the Company. No complaint has been filed by the investor. The alleged damages asserted by the investor are less than approximately $300,000. The outcome of the complaint was neither probable or estimable as of the date the financial statements were issued, therefore, no accrual has been made.
Stock Options
The fair value of each option award is estimated on the date of grant using a Black Scholes option valuation model that uses the assumptions noted in the following table. Because Black Scholes option valuation models incorporate ranges of assumptions for inputs, these ranges are disclosed. Expected volatilities and based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The expected term of options granted is derived from the output of the valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
| 13 |
The following table presents the activity for stock options outstanding:
| Schedule of stock option activity | ||||||||
| Options | Weighted Average Exercise Price | |||||||
| Outstanding - December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ||||||||
| Exercised | ||||||||
| Outstanding – June 30, 2025 | $ | |||||||
| Options | Weighted Average Exercise Price | |||||||
| Outstanding - December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Exercised | ||||||||
| Outstanding – June 30, 2024 | $ | |||||||
The following table presents the composition of options outstanding and exercisable:
| Schedule of options outstanding and exercisable | ||||||||||||||||||||
| Options Outstanding** | Options Exercisable** | |||||||||||||||||||
| Exercise Prices | Number | Price | Life* | Number | Price* | |||||||||||||||
| $8.67 | $ | $ | ||||||||||||||||||
| $1,230.63 | $ | $ | ||||||||||||||||||
| $1,808.79 | $ | $ | ||||||||||||||||||
| $1,185.75 | $ | $ | ||||||||||||||||||
| $760.75 | $ | $ | ||||||||||||||||||
| $514.25 | $ | $ | ||||||||||||||||||
| $168.30 | $ | $ | ||||||||||||||||||
| $106.25 | $ | $ | ||||||||||||||||||
| Total – June 30, 2025 | ||||||||||||||||||||
| * | |
| ** |
| 14 |
Restricted Stock Units
The following table presents the activity for restricted stock units outstanding:
| Schedule of restricted stock units outstanding | ||||||||
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||
| Outstanding - December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ( | ) | ||||||
| Vested/issued | ( | ) | ||||||
| Outstanding – June 30, 2025 | $ | |||||||
Restricted Stock Units | Weighted Average Grant Date Fair Value | |||||||
| Outstanding - December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Forfeited/canceled | ||||||||
| Vested/issued | ||||||||
| Outstanding – June 30, 2024 | $ | |||||||
The Company recognized share-based compensation expense related to stock options and restricted stock units of $ and $ for the three months ended June 30, 2025 and 2024, respectively and $ and $ for the six months ended June 30, 2025 and 2024. The remaining unvested share-based compensation expense of $ is expected to be recognized over the next 30 months.
Note 7 – Equity Financings
Equity Line Common Stock Purchase Agreement
On November 25, 2024, the Company entered into a new equity line Common Stock Purchase Agreement and a related registration rights agreement with White Lion. Pursuant to the Common Stock Purchase Agreement, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, up to $10,000,000 in aggregate gross purchase price of newly issued shares of the Company’s common stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement.
In April 2025, the Company
issued shares of Common stock under the Equity Line Common Stock Purchase Agreement for total proceeds of $
| 15 |
At-the-Market Sales Agreement
During the six months ended
June 30, 2025, the Company issued shares for aggregate proceeds of approximately $
Under the Sales Agreement, the Company may sell shares of its common stock having an aggregate offering price of up to $10,000,000 from time to time, through an “at the market offering” (the “ATM Offering”). The aggregate market value of shares that the Company can sell under the Sales Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction.
As of June 30, 2025, the Company has utilized all available capacity under our existing shelf registration statement for our ATM program.
$2.3 Million Convertible Series B Preferred Stock and Warrants Financing
On April 23, 2024, the Company
entered into a securities purchase agreement with accredited investors for a convertible preferred stock and warrants financing. The Company
received $
At the closing, the Company
issued shares of Series B convertible preferred stock (“Series B Preferred Stock”) at a purchase price of $1,000 per
share of Series B Preferred Stock. The Series B Preferred Stock is convertible into Common Stock at an initial conversion price (“Conversion
Price”) of $31.47 per share of Common Stock. The Company also issued warrants (“Warrants”) exercisable for
Holders of the Series B Preferred Stock will be entitled to dividends in the amount of 10% per annum, payable quarterly. The Company has the option to pay dividends on the Series B Preferred Stock in additional shares of Common Stock. The Company also has the option to cumulate or “capitalize” the dividends, in which case the accrued dividend amount shall be added to the stated value of each share of Series B Preferred Stock. As of June 30, 2025, the Company has elected to capitalize all dividends declared.
On February 19, 2025, shares of Series B Preferred stock and capitalized dividends were converted to shares of Common Stock.
In April 2025, shares of Series B Preferred stock and capitalized dividends were converted to shares of Common stock.
On June 26, 2025, shares of Series B Preferred stock and capitalized dividends were converted to shares of Common Stock.
$750,000 Series C Preferred Stock and Warrants Financing
On June 30, 2025, the Company entered into a Securities
Purchase Agreement with accredited investors for a convertible preferred stock and warrants financing. The Company received $
At the closing, the Company issued shares of Series
C convertible preferred stock (“Series C Preferred Stock”) at a purchase price of $1,000 per share of Series C Preferred Stock.
The Series C Preferred Stock is convertible into Common Stock at an initial conversion price (“Series C Conversion Price”)
of $4.77 per share of Common Stock. The Company also issued warrants exercisable for
The proceeds of this financing, together with other available cash resources, will be used for general corporate purposes.
| 16 |
Warrants
The following table presents the activity for warrants outstanding:
| Schedule of activity for warrants outstanding | ||||||||
| Warrants | Weighted Average Exercise Price | |||||||
| Outstanding - December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Forfeited/cancelled/restored | ||||||||
| Exercised | ||||||||
| Outstanding – June 30, 2025 | $ | |||||||
Note 8 – Leases under ASC 842
The Company leases certain office space under operating
leases for use in operations. The Company recognizes operating lease expense on a straight-line basis over the lease term. Management
determines if an arrangement is a lease at contract inception. Lease and non-lease components are accounted for as a single component
for all leases. Operating lease right to use (“ROU”) assets and liabilities are recognized at the lease commencement date
based on the present value of the future lease payments over the expected lease term, which includes optional renewal periods if the Company
determines it is reasonably certain that the option will be exercised. As the operating lease does not provide an implicit rate, the discount
rate used in the present value calculation represents the incremental borrowing rate determined using information available at the commencement
date. Rent expense, as part of general and administrative expenses in the statements of operations, was $
| Schedule of weighted-average remaining lease term and discount rate | ||||
| June 30, 2025 | ||||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | ||||
The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of June 30, 2025:
| Schedule of annual undiscounted cash flows of leases | ||||
| Years Ended December 31, | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Less imputed interest | ( | ) | ||
| Total | $ | |||
| 17 |
Note 9 – Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the Chief Operating Decision Maker (“CODM”) in making decisions regarding resource allocation and assessing performance.
The Company views its operations and manages its business in one operating segment engaged in the technology of how customers engage with audio through the development of a proprietary AI platform for audio and innovative technologies for podcasts. The Company’s Chief Financial Officer (“CFO”), as the CODM, regularly reviews the entity-wide financial and operational performance as a single unit. No financial information is disaggregated into separate lines of businesses. The CEO makes resource allocation and business process decisions regarding the overall level of resources available and how to best deploy these resources.
The single segment’s principal measure of segment profit and loss is consolidated research and development expenses and administrative expenses. The CFO considers actual and forecasted expenses when evaluating performance.
Note 10 – Subsequent Events
Management evaluated subsequent events and transactions that occurred after the balance sheet date, up to the date that the financial statements were issued. Based upon this review, other than as set forth below, management did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On August 5, 2025, the Company issued a press release announcing that it had entered into a non-binding letter of intent (“LOI”) for a proposed business combination between the Company and Thramann Holdings, LLC (“Holdings”).
Through the date of issuance of this report, the Company issued an additional 360,000 shares of Common stock subsequent to June 30, 2025 under the Company’s existing Equity Line Common Stock Purchase Agreement for total proceeds of $1.9 million.
On August 5, 2025, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with certain accredited investors to exchange 569 outstanding shares of the Company’s Series B preferred stock (including accrued dividends thereon) for 132,724 shares of common stock at an exchange price of $4.486 per common share. The issuance of the exchange common shares is intended to be exempt from registration pursuant to the exemptions under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).
The foregoing description of the Exchange Agreements is a summary only, does not purport to be complete and is qualified in its entirety by the full text of the form of Exchange Agreement, a copy of which is attached as Exhibit 10.35 and incorporated herein by reference.
| 18 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis should be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report and our audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 5, 2025. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. You should carefully read the “Risk Factors” section of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2024, to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
Overview
Auddia (the “Company”) is an AI technology company headquartered in Boulder, CO that is reinventing how consumers engage with audio through the development of its faidr app, an industry-first audio platform, which utilizes proprietary AI technology to personalize and customize both radio and podcast listening experiences.
faidr allows users to listen to AM/FM radio stations without unwanted commercial breaks. The app replaces these ad breaks in real time with streaming music similar in format and genre to the radio station being played. The faidr app represents the first-time consumers can combine the local content uniquely provided by AM/FM radio with commercial-free and personalized listening many consumers demand from digital-media consumption. In addition to commercial-free AM/FM, faidr includes podcasts – also with ads removed or easily skipped by listeners – as well as exclusive content, which includes new artist discovery, curated music stations, and exclusive music podcasts that allow hosts to play full tracks within the episode.
The combination of AM/FM streaming and podcasting, with Auddia’s unique, AI technology-driven differentiators, addresses large (radio streamers) and rapidly growing (podcast listeners) audiences.
We have developed our AI platform on top of Google’s TensorFlow open-source library that is being “taught” to know the difference between all types of audio content on the radio. For instance, the platform recognizes the difference between a commercial and a song and DJ conversation. Not only does the technology learn the differences between the various types of audio segments, but it also identifies the beginning and end of each piece of content.
The faidr app is intended to be downloaded by consumers who are willing to pay for a customizable, commercial-free listening experience. Our advanced features allow subscribers 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, the first to give audio streamers a more personalized middle ground between passive content like broadcast radio and fully on-demand content like Spotify. No other audio streaming app available today, including category leaders like TuneIn, iHeart, and Audacy, can compete with faidr’s full product offerings.
We launched an MVP version of faidr through several consumer trials in 2021 to measure consumer interest and engagement with the App. The full app launched on February 15, 2022, and included all major U.S. radio stations in the US. In February 2023, we added faidrRadio, our exclusive content offerings, to the app. Podcasts were added to the app for the iOS version before the end of Q1 2023 and added to the Android app in May of 2023.
| 19 |
In the first half of 2025, we implemented new paywalls and are now testing various price points and marketing strategies aimed at optimizing subscription conversions. The Company continues to look for opportunities to improve the value faidr delivers to consumers through content enhancements, improvements in app functionality, and the development of new features. Through these ongoing improvements to the faidr app and the continuous optimization of the marketing message and strategy to reach the right audiences, the Company continues to pursue the product market fit required to support a significant increase in marketing spend to drive users and revenue.
The faidr mobile App is available today through the iOS and Android App stores.
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, which was subsequently repaid in April 2024. In addition, we sold common shares during 2025 and 2024 pursuant to our equity line facility. Since our inception, we have incurred significant operating losses. As of June 30, 2025, we had an accumulated deficit of $92,851,762. 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:
| · | nationally launch our faidr App and as we continue training our proprietary AI technology and make product enhancements; | |
| · | continue to develop and expand our technology and functionality to advance the faidr app; | |
| · | rollout our product on a national basis, which will include increasing our sales and marketing costs related to the promotion of our products. faidr promotion will include a combination of a) purchasing ads directly from broadcasters or b) participating broadcasters to promote without purchasing ads, but sharing a portion of subscription proceeds based on listening activity on those stations; | |
| · | continue to pursue and complete potential acquisitions of other companies; | |
| · | hire additional business development, product management, operational and marketing personnel; | |
| · | continue market studies of our products; and | |
| · | add operational and general administrative personnel which will support our product development programs, commercialization efforts and our transition to operating as a public company. |
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of June 30, 2025, we had cash and cash equivalents of $1,067,756. Through the date of this report, we have secured approximately $3.4 million in additional financing in 2025. 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.
| 20 |
Recent Developments
Proposed Business Combination
On August 5, 2025, the Company issued a press release announcing that it had entered into a non-binding letter of intent (“LOI”) for a proposed business combination between the Company and Thramann Holdings, LLC (“Holdings”). Holdings is a privately held holding company that controls LT350, Influence Healthcare, and Voyex, three early stage AI-native companies founded by Jeff Thramann, Auddia’s founder, CEO and Executive Chairman.
The LOI contemplates a business combination between Auddia and Holdings with Auddia becoming a public holding company trading under a new name and ticker symbol. The transaction would result in the portfolio companies of Holding and Auddia becoming subsidiaries of the public holding company. Under the proposed terms, Holdings’ equity holders are expected to receive an 80% ownership interest in the combined company, with Auddia equity holders owning a 20% interest.
The proposed business combination is subject to a number of known and unknown risk and uncertainties. There can be no assurances that the parties will enter into a definitive business combination on the terms contemplated hereby or at all. Further, there can be no assurances that such business combination will be approved by stockholders or will ultimately be consummated.
Mergers and Acquisitions Strategy
We are exploring various merger and acquisition options as part of a broader strategy which aims to scale the business more rapidly; accelerate user adoption and subscriber growth; enter new markets (international); and open new pathways toward raising capital. The overall strategy focuses on three areas: (1) acquiring retained users of a radio-streaming app, (2) bringing our proprietary ad-free products to that userbase to generate significant subscription revenue, and (3) bringing together other differentiated features into the larger audio Superapp platform.
Nasdaq Deficiency Notices
During 2022, 2023 and 2024, the Company received notices from Nasdaq indicating that the Company was not in compliance with (i) Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Stock Market to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing or (ii) Nasdaq Listing Rule 5550(a)(2) which requires companies listed on The Nasdaq Stock Market to maintain a minimum of a $1.00 bid price for continued listing.
On May 24, 2024, we received a letter from Nasdaq indicating that we had regained compliance with the equity requirement in Listing rule 5550(b) (1). We will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with application of Listing Rule 5815(d)(4)(B).
On October 16, 2024, we received a written notice from Nasdaq indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing. The bid price notice does not result in the immediate delisting of our common stock from the Nasdaq Capital Market. The bid price notice indicated that we have 180 calendar days (or until April 14, 2025) in which to regain compliance. If at any time during this 180 calendar day period the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, the Nasdaq staff will provide us with a written confirmation of compliance and the matter will be closed.
On April 14, 2025, Nasdaq notified us that we were in compliance with the $1.00 minimum bid price requirement.
Reverse Stock Splits
On February 27, 2024, the Company effectuated a 1-for-25 reverse stock split.
On March 28, 2025, the Company effectuated a 1-for-17 reverse stock split.
The reverse stock splits did not change the authorized number of shares of the Company’s common stock. No fractional shares were issued and any fractional shares resulting from the reverse stock splits were rounded up to the nearest whole share.
| 21 |
The reverse stock splits applied to the Company’s outstanding warrants, stock options and restricted stock units. The number of shares of common stock into which these outstanding securities are convertible or exercisable were adjusted proportionately as a result of the reverse stock splits. The exercise prices of any outstanding warrants or stock options were also proportionately adjusted in accordance with the terms of those securities and the Company’s equity incentive plans.
Impact of Inflation
We have recently experienced higher costs across our business as a result of inflation, including higher costs related to employee compensation and outside services. We expect inflation to continue to have a negative impact throughout 2025, and it is uncertain whether we will be able to offset the impact of inflationary pressures in the near term.
Components of our results of operations
Operating expenses
Direct costs of services
Direct cost of services consists primarily of costs incurred related to our technology and development of our Apps, including hosting and other technology related expenses. We expect our direct costs of services to increase in the future as we continue to develop and enhance our technology related to the faidr and podcasting Apps.
Sales and marketing
Our sales and marketing expenses consist primarily of salaries, direct to consumer promotional spend and consulting services, all of which are related to the sales and promotion performed during the period. 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.
Research and development
Since our inception, we have focused significant resources on our research and development activities related to the software development of our technology. We account for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose is probable. We cease capitalization of development costs once the software has been substantially completed and is available for its intended use. Software development costs are amortized over a useful life estimated by our management of three years. Costs associated with significant upgrades and enhancements that result in additional functionality are capitalized. Capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies. Unamortized capitalized software development costs determined to be in excess of anticipated future net revenues are impaired and expensed during the period of such determination. We expect to continue to incur research and development expenses and capitalization in the future as we continue to develop and enhance our faidr and podcasting Apps.
General and administrative
Our general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and professional fees related to auditing, tax, general legal services, and consulting services. We expect our general and administrative expenses to continue to increase in the future as we right-size our operating activities and prepare for commercialization of our products and support our operations as a public company, including increased expenses related to legal, accounting, insurance, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements, directors and officers liability insurance premiums and investor relations activities.
Other income and expense
The other income and expense category primarily consists of interest expense attributed to the debt and conversion features of the Notes payable to related party.
| 22 |
Results of operations
Comparison of the Three Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations:
| Three Months Ended | ||||||||||||||||
| June 30, 2025 | June 30, 2024 | Change $ | Change % | |||||||||||||
| Revenue | $ | – | $ | – | – | 0.0% | ||||||||||
| Operating expenses: | ||||||||||||||||
| 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% | |||||||||||
| Loss from operations | (1,567,208 | ) | (1,654,390 | ) | 87,182 | -5.3% | ||||||||||
| Other expense: | ||||||||||||||||
| Interest expense | (1,445 | ) | (16,647 | ) | 15,202 | -91.3% | ||||||||||
| Change in fair value of warrants | – | (632,388 | ) | 632,388 | -100.0% | |||||||||||
| Total other expense | (1,445 | ) | (649,035 | ) | 647,590 | -99.8% | ||||||||||
| Loss before income taxes | (1,568,653 | ) | (2,303,425 | ) | 734,772 | -31.9% | ||||||||||
| Provision for income taxes | – | – | – | 0.0% | ||||||||||||
| Net loss | $ | (1,568,653 | ) | $ | (2,303,425 | ) | 734,772 | -31.9% | ||||||||
Revenue
Total revenues for the three months ended June 30, 2025 and 2024 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish new revenue streams.
Direct cost of services
Direct Cost of Services increased by $8,339 or 16.6% to $58,566 for the three months ended June 30, 2025 compared to $50,227 for the three months ended June 30, 2024 due to increased music licensing costs.
Sales and marketing
Sales and marketing expenses decreased by $31,711 or (14.6%) to $185,157 for the three months ended June 30, 2025 compared to $216,868 for the three months ended June 30, 2024. The decrease in sales and marketing expenses was primarily attributed to a slight decrease in marketing promotion costs. 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.
| 23 |
Research and development
Research and development expenses increased by $76,827 or 48.1% to $236,415 for the three months ended June 30, 2025 from $159,588 for the three months ended June 30, 2024 primarily due to an increase in research and development consulting fees incurred. We are continually developing enhancements to both our faidr and podcasting Apps and will continue capitalize software costs to the extent that such development qualifies for capitalization.
General and administrative
General and administrative expenses decreased by $4,883
or (0.7%) to $729,442 for the three months ended June 30, 2025 compared to $734,325 for the three months ended June 30, 2024. Our expenses
remained relatively flat due to ongoing professional fees that we incur from being a public company.
Depreciation and amortization
Depreciation and amortization expenses decreased by $135,754 or (27.5%) to $357,628 for the three months ended June 30, 2025 compared to $493,382 for the three months ended June 30, 2024. Capitalized software costs have decreased, in which the ongoing amortization of our faidr and podcasting Apps has also decreased.
Other expense, net
Total other expenses decreased by $647,590 or (99.8%) to $1,445 for the three months ended June 30, 2025 compared to $649,035 for the three months ended June 30, 2024, which was entirely due to the repayment of notes payable to related party in April 2024.
Comparison of the Six Months Ended June 30, 2025 and 2024
The following table summarizes our results of operations:
| Six Months Ended | ||||||||||||||||
| June 30, 2025 | June 30, 2024 | Change $ | Change % | |||||||||||||
| Revenue | $ | – | $ | – | – | 0.0% | ||||||||||
| Operating expenses: | ||||||||||||||||
| 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% | |||||||||||
| Loss from operations | (3,318,220 | ) | (3,709,010 | ) | 390,790 | -10.5% | ||||||||||
| Other expense: | ||||||||||||||||
| Interest expense | (2,998 | ) | (169,355 | ) | 166,357 | -98.2% | ||||||||||
Change in fair value of warrants | – | (632,388 | ) | 632,388 | -100.0% | |||||||||||
| Total other expense | (2,998 | ) | (801,743 | ) | 798,745 | -99.6% | ||||||||||
| Loss before income taxes | (3,321,218 | ) | (4,510,753 | ) | 1,189,535 | -26.4% | ||||||||||
| Provision for income taxes | – | – | – | 0.0% | ||||||||||||
| Net loss | $ | (3,321,218 | ) | $ | (4,510,753 | ) | 1,189,535 | -26.4% | ||||||||
| 24 |
Revenue
Total revenues for the six months ended June 30, 2025 and 2024 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish new revenue streams.
Direct cost of services
Direct Cost of Services increased by $15,736 or 16.0% to $114,136 for the six months ended June 30, 2025 compared to $98,400 for the six months ended June 30, 2024 due to increased music licensing costs.
Sales and marketing
Sales and marketing expenses increased by $57,335 or 15.8% to $420,598 for the six months ended June 30, 2025 compared to $363,263 for the six months ended June 30, 2024. The increase in sales and marketing expenses was primarily attributed to increased marketing promotion costs. 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.
Research and development
Research and development expenses increased by $308,023 or 94.7% to $633,118 for the six months ended June 30, 2025 from $325,095 for the six months ended June 30, 2024 primarily due to an increase in research and development consulting fees incurred. We are continually developing enhancements to both our faidr and podcasting Apps and will continue capitalize software costs to the extent that such development qualifies for capitalization.
General and administrative
General and administrative expenses decreased by $584,791 or (30.1%) to $1,360,333 for the six months ended June 30, 2025 compared to $1,945,124 for the six months ended June 30, 2024. The decrease resulted primarily from a decrease in stock compensation expense and professional fees, such as, accounting and legal expenses due to potential acquisition efforts that occurred during the six months ended June 30, 2024 and were not present in 2025.
Depreciation and amortization
Depreciation and amortization expenses decreased by $187,093 or (19.1%) to $790,035 for the six months ended June 30, 2025 compared to $977,128 for the six months ended June 30, 2024. Capitalized software costs have decreased, in which the ongoing amortization of our faidr and podcasting Apps has also decreased.
Other expense, net
Total other expenses decreased by $798,745 or (99.6%) to $2,998 for the six months ended June 30, 2025 compared to $801,743 for the six months ended June 30, 2024, which was entirely due to the repayment of notes payable to related party in April 2024.
| 25 |
Liquidity and capital resources
Sources of liquidity
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, 2025, we had cash and cash equivalents of $1,067,756. We have working capital in the amount of approximately $0.6 million as of June 30, 2025. 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 $1.5 million of financing during the six months ended June 30, 2025, and an additional $1.9 million subsequent to June 30, 2025, which will only be sufficient to fund our current operating plans into the fourth quarter of 2025. 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.
Equity Line Common Stock Purchase Agreement
On November 25, 2024, we entered into a new equity line Common Stock Purchase Agreement and a related registration rights agreement with White Lion. Pursuant to the Common Stock Purchase Agreement, we have the right, but not the obligation to require White Lion to purchase, from time to time, up to $10,000,000 in aggregate gross purchase price of newly issued shares of our common stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement.
In April 2025, we issued 25,000 shares of Common stock under the Equity Line Common Stock Purchase Agreement for total proceeds of $0.1 million.
In July and August 2025, we issued 360,000 shares of Common stock under the Equity Line Common Stock Purchase Agreement for total proceeds of $1.9 million.
At-the-Market Sales Agreement
During the six months ended June 30, 2025, we issued 78,901 shares for aggregate proceeds of approximately $0.7 million pursuant to an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, as sales agent (the “Agent”).
Under the Sales Agreement, we may sell shares of our common stock having an aggregate offering price of up to $10,000,000 from time to time, through an “at the market offering” (the “ATM Offering”).
Series C Preferred Stock and Warrants Financing
On June 30, 2025, we entered into a Securities Purchase Agreement with accredited investors for a convertible preferred stock and warrants financing. We received $750,000 of gross proceeds in connection with the closing of this financing.
At the closing, we issued 750 shares of Series C convertible preferred stock (“Series C Preferred Stock”) at a purchase price of $1,000 per share of Series C Preferred Stock. The Series C Preferred Stock is convertible into Common Stock at an initial conversion price (“Series C Conversion Price”) of $4.77 per share of Common Stock. We also issued warrants exercisable for 314,466 shares of Common Stock with a five year term and an initial exercise price of $4.77 per share.
The proceeds of this financing, together with other available cash resources, will be used for general corporate purposes.
| 26 |
Cash Flow Analysis
Our cash flows from operating activities have historically been significantly impacted by our investment in sales and marketing to drive growth, and research and development expenses. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.
The following table summarizes the statements of cash flows for the six months ended June 30, 2025 and 2024:
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash provided by (used in): | ||||||||
| 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 | |||
Operating activities
Cash used in operating activities for the six months ended June 30, 2025 was ($2,508,649), primarily resulting from our net loss of ($3,321,218) and change in working capital of $(90,723) primarily related to a decrease in accounts payable and accrued liabilities, offset by non-cash charges of $902,723 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.
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.
Investing activities
Cash flows used in investing activities for the six months ended June 30, 2025 was $(490,650), consisting of capitalization of software development expenses and patent expenses.
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.
Financing activities
Cash flows generated in financing activities for the six months ended June 30, 2025 was $1,360,736 and primarily related to cash proceeds from the issuance of common shares of $755,295 and cash proceeds (net of issuance costs) from the issuance of Series C preferred stock of $700,000, partially offset by offering costs of $95,125.
Cash flows generated in financing activities for the six months ended June 30, 2024 were $4,248,590, which consisted of cash proceeds from the issuance of common shares of $4,852,508 and cash proceeds from the issuance of preferred shares of $2,238,575. This was partially offset by the repayment of the note payable to related party of $2,750,000, payment of offering costs of $72,807 and net settlement of share-based compensation liability of $19,686.
| 27 |
Funding Requirements
We historically have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $92,851,762 and $89,428,436 as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, we had cash and cash equivalents of $1,067,756 and $2,706,319, respectively. Our cash is comprised primarily of demand deposit accounts and money market funds. We secured $1.5 million of financing during the six months ended June 30, 2025, and an additional $1.9 million subsequent to June 30, 2025, which will only be sufficient to fund our current operating plans into the fourth quarter of 2025. 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.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development, and marketing and promotion of faidr. In addition, we expect to continue to incur additional costs associated with operating as a public company, including legal, accounting, investor relations and other expenses. Our future funding requirements will depend on many factors, including, but not limited to:
| · | the scope, progress, results, and costs related to the market acceptance of our products; | |
| · | the ability to attract podcasters and content creators to faidr and retain listeners on the platform; | |
| · | the costs, timing, and ability to continue to develop our technology; | |
| · | effectively addressing any competing technological and market developments; and | |
| · | avoiding and defending against intellectual property infringement, misappropriation and other claims. |
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we continually evaluate our estimates and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results may materially differ from these estimates made by management under different assumptions and conditions.
Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position, are described below. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Software Development Costs
The Company accounts for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose is probable. The Company ceases capitalization of development costs once the software has been substantially completed and is available for its intended use. Software development costs are amortized over a useful life estimated by the Company’s management of three years. Costs associated with significant upgrades and enhancements that result in additional functionality are capitalized. Capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies. Unamortized capitalized software development costs determined to be in excess of anticipated future net revenues are impaired and expensed during the period of such determination.
| 28 |
Equity-based compensation
Certain of our employees and consultants have received grants of common shares in our company. These awards are accounted for in accordance with guidance prescribed for accounting for equity-based compensation. Based on this guidance and the terms of the awards, the awards are equity classified. The common shares receive distributions if any in an order of priority in accordance with our limited liability company agreement.
The fair value of each award is determined using the Black-Scholes option-pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, and the risk-free interest rate over the expected life of the option. The expected volatility was determined considering comparable companies historical stock prices as a peer group for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option. The risk-free interest rate was the rate available with a term equal to the expected life of the option. The expected life of the option was estimated based on a mid-point method calculation.
Emerging growth company and smaller reporting company status
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the six months ended June 30, 2025.
| 29 |
PART II – OTHER INFORMATION
| Item 1. | Legal Proceedings |
From time to time, we are involved in various disputes, claims, suits, investigations, and legal proceedings arising in the ordinary course of business. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows. Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows. For additional information, see “Note 4. Commitments and Contingencies” to our financial statements included in this Form 10-Q.
| Item 1A. | Risk Factors |
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to our risk factors from those included in our Annual Report on Form 10-K for the year ended December 31, 2024.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
There were no unregistered sales of equity securities of the Company during the period covered by this quarterly report which were not previously reported in a (i) Current Report on Form 8-K or (ii) Quarterly Report on Form 10-Q.
See Item 5 below for information regarding unregistered sales of equity securities during July and August 2025.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended June 30, 2025.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
None.
| Item 5. | Other Information |
During the quarter
ended June 30, 2025, no director or officer of the Company
In July and August 2025, we issued 360,000 shares of Common stock under our existing Equity Line Common Stock Purchase Agreement for total proceeds of $1.9 million.
On August 5, 2025, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with certain accredited investors to exchange 569 outstanding shares of the Company’s Series B preferred stock (including accrued dividends thereon) for 132,724 shares of common stock at an exchange price of $4.486 per common share. The issuance of the exchange common shares is intended to be exempt from registration pursuant to the exemptions under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).
The foregoing description of the Exchange Agreements is a summary only, does not purport to be complete and is qualified in its entirety by the full text of the form of Exchange Agreement, a copy of which is attached as Exhibit 10.35 and incorporated herein by reference.
| 30 |
| Item 6. | Exhibits |
The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Quarterly Report are listed in the Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated by reference herein.
| 31 |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
___________________________
| # | Indicates management contract or compensatory plan. |
| ** | Certain information contained in this Exhibit has been redacted and appears as “XXXXX” as the disclosure of same would be a disadvantage to the Registrant in the marketplace. |
| 32 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AUDDIA INC. | ||
| By: | /s/ Jeffrey Thramann | |
| Jeffrey Thramann President, Chief Executive Officer, Director | ||
| By: | /s/ John Mahoney | |
| John Mahoney Chief Financial Officer |
Date: August 8, 2025
| 33 |
Exhibit 10.35
EXCHANGE AGREEMENT
This Exchange Agreement (the “Agreement”) is entered into as of the date set forth on the signature pages below, by and among Auddia Inc., a Delaware corporation (the “Company”) and the investor signatory hereto (the “Holder”), with reference to the following facts:
A. Prior to the date hereof, (i) the Company and the Holder and/or certain other investors (the “Other Holders”, and together with the Holder, the “Holders”) entered into one or more other Securities Purchase Agreements (as may be amended, modified, restated, restructured or supplemented from time to time, each a “Securities Purchase Agreement”), pursuant to which the Holder purchased, among other things, certain shares of Series B Preferred Stock (“Series B Shares”).
B. As of the date hereof, the Holder desires to exchange such portion of the amounts of Series B Shares as set forth on the signature page of the Holder attached hereto (the “Exchange Preferred”) into (i) such aggregate number of shares of Common Stock as set forth on the signature page of the Holder attached hereto (the “Exchange Shares”) and/or (ii) rights to receive, subject to the terms and conditions set forth herein, from time to time (the “Rights”, and together with the Exchange Shares, the “Exchange Primary Securities”), such aggregate number of additional shares of Common Stock as set forth on the signature page of the Holder attached hereto (the “Rights Shares”, and together with the Exchange Shares, the “Underlying Shares”, and together with the Rights, the “Securities”), at such exchange price as set forth on the signature page of the Holder attached hereto (the “Exchange Price”), in each case, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).
C. The Company has duly authorized the issuance to the Holder of the Exchange Shares and/or the Rights, as applicable, for the Exchange Preferred;
D. Each of the Company and the Holder desire to effectuate such exchange on the basis and subject to the terms and conditions set forth in this Agreement;
E. The Company may from time to time implement the exchange of other shares of Series B Preferred of the Company (the “Other Preferred”) that are currently outstanding and held by other investors (the “Other Holders”), in whole or in part, into shares of Common Stock (the “Other Exchange Shares”) and/or rights to acquire Other Exchange Shares, as applicable, by entering into agreements (the “Other Agreements”) in the same form as this Agreement (other than proportional changes based upon the difference in aggregate number of shares of Common Stock issuable upon conversion of Other Preferred outstanding and the payment of legal expenses with respect hereto).
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. Exchange
(a)Exchange of Securities. On the Effective Date (as defined below), pursuant to Section 3(a)(9) of the Securities Act, the Holder hereby agrees to convey, assign and transfer the Exchange Preferred to the Company in exchange for which the Company agrees to issue (x) the Exchange Shares to the Holder by deposit/withdrawal at custodian in accordance with the DWAC instructions on the signature page of the Holder, which Exchange Shares shall be issued without restricted legend and shall be freely tradable by the Holder and (y) the Rights shall be issued on the books and records of the Company (the “Exchange”). As soon as commercially practicable following the Effective Date, the Holder shall deliver or cause to be delivered to the Company (or its assignee) the Exchange Preferred (or affidavit of lost note, in form provided upon request by the Company and reasonably acceptable to the Holder). Immediately following the delivery of the Exchange Shares to the Holder (or its assignee) and issuance of the Rights on the books and records of the Company, the Holder hereby relinquishes all rights, title and interest in the Exchange Preferred (including any claims the Holder may have against the Company related thereto) and assigns the same to the Company and the Exchange Preferred shall be cancelled. Notwithstanding the foregoing, if the Exchange Preferred does not represent the entire amount Series B Shares owned by the Holder, the Company shall promptly issue to the Holder new Series B Shares representing the portion of the Series B Shares that remains outstanding after giving effect to the Exchange.
| 1 |
(b)Other Documents. The Company and the Holder shall execute and/or deliver such other documents and agreements as are customary and reasonably necessary to effectuate the Exchange.
2. Amendments
(a) Ratifications. Except as otherwise expressly provided herein, the Securities Purchase Agreement and each other Transaction Document (as defined in the Securities Purchase Agreement), is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Effective Date: (i) all references in the Securities Purchase Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this Agreement, and (ii) all references in the other Transaction Documents, to the “Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this Agreement.
(b) Amendments to Transaction Documents. On and after the Effective Date, each of the Transaction Documents (as defined in the Securities Purchase Agreement) are hereby amended as follows:
(i)[Intentionally omitted].
(ii) [Intentionally omitted].
(iii)The defined term “Transaction Documents” is hereby amended to include this Agreement and each Other Agreement.
3. Representations and Warranties of the Company.
(a) Organization and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably be expected to have a Material Adverse Effect.
(b) Authorization and Binding Obligation. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement, the Rights and each of the other agreements and certificates entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and to issue the Exchange Primary Securities in accordance with the terms hereof (and upon exercise of the Rights, the Rights Shares) and the reservation for issuance and issuance of the Rights Shares issuable upon exercise of the Rights. The execution and delivery of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Exchange Primary Securities (and upon exercise of the Rights, the Rights Shares) and the reservation for issuance and issuance of the Rights Shares issuable upon exercise of the Rights, have been duly authorized by the Board of Directors of the Company and, other than (i) notification filings with the Principal Market, and (ii) such filings required under applicable securities or “Blue Sky” laws of the states of the United States (the “Required Approvals”) and no further filing, consent, or authorization is required by the Company or of its Board of Directors or its shareholders. This Agreement and the other Exchange Documents have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
| 2 |
(c) No Conflict; Required Filings and Consents.
(i) The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Certificate of Incorporation (as defined below) (including, without limitation, any certificate of designation contained therein), Bylaws (as defined below), certificate of formation, memorandum of association, articles of association, bylaws or other organizational documents of the Company or any of its Subsidiaries, or any capital stock or other securities of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations and the rules and regulations of the Principal Market and including all applicable foreign, federal and state laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected..
(ii) Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other than the Required Approvals), any Governmental Entity or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been or will be obtained or effected on or prior to the date hereof, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents.
(d) No Integration. None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of Securities under the Securities Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. None of the Company, its Subsidiaries, their affiliates or any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of Securities under the Securities Act or cause the offering of the Securities to be integrated with other offerings.
(e) Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act, pursuant to the exemption provided by Section 3(a)(9) thereof, and applicable state securities laws.
(f) Issuance of Exchange Shares. The issuance of the Rights by the Company is duly authorized and, and upon issuance in exchange for the Exchange Preferred in accordance with the terms of the Exchange Documents, the Rights shall be validly issued, fully paid and non-assessable and free from all free and clear of any mortgage, lien, pledge, charge, security interest, encumbrance, title retention agreement, option, rights, proxies, equity or other adverse claim thereto (collectively, “Liens”). Upon issuance in accordance herewith or pursuant to the Rights, as applicable, the Rights Shares, when issued, will be validly issued, fully paid and nonassessable and free from all Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock, shall be freely tradeable by the Holder and shall be issued without any restricted legend. The issuance of the Exchange Shares is duly authorized and upon issuance in exchange for the Exchange Preferred in accordance with the terms of the Exchange Documents shall be validly issued, fully paid and nonassessable and free from all Liens with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock, shall be freely tradeable by the Holder and shall be issued without any restricted legend.
| 3 |
(g) No Consideration Paid. No commission or other remuneration has been paid by Company for soliciting the exchange of the Exchange Preferred for the Exchange Primary Securities as contemplated hereby.
(h) Disclosure. The Company confirms that neither it nor any other Person acting on its behalf has provided the Holder or its agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic information. The Company understands and confirms that the Holder will rely on the foregoing representations in effecting transactions in the Securities. All disclosure provided to the Holder regarding the Company and its Subsidiaries, their business and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.
4. Representations and Warranties of Holders. The Holder represents and warrants to the Company, as of the date hereof, as follows:
(a) Organization and Authority. The Holder has the requisite power and authority to enter into and perform its obligations under this Agreement. The execution and delivery of this Agreement by the Holder and the consummation by Holder of the transactions contemplated hereby has been duly authorized by Holder’s board of directors or other governing body. This Agreement has been duly executed and delivered by Holder and constitutes the legal, valid and binding obligation of Holder, enforceable against Holder in accordance with its terms.
(b) Ownership of Existing Note. The Holder owns the Existing Note free and clear of any Liens (other than the obligations pursuant to this Agreement, the Transaction Documents and applicable securities laws).
(c) Reliance on Exemptions. The Holder understands that the Securities are being offered and exchanged in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein and in the Exchange Documents in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.
(d) Validity; Enforcement. This Agreement and the Exchange Documents to which the Holder is a party have been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(e) No Conflicts. The execution, delivery and performance by the Holder of this Agreement and the Exchange Documents to which the Holder is a party, and the consummation by the Holder of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Holder or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its obligations hereunder.
(f) No Consideration Paid. No commission or other remuneration has been paid by the Holder for soliciting the exchange of the Exchange Preferred for the Exchange Primary Securities as contemplated hereby.
| 4 |
5. No Material Non Public Information. Neither the Exchange nor anything else contain in (or contemplated by) this Agreement, as applicable, constitutes material non-public information and the Company has publicly disclosed all material, non-public information (if any) provided on or prior to the date hereof to the Holder by the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents. The Company acknowledges and agrees that no confidentiality or similar obligations under any agreement with respect to the transactions contemplated by the Exchange Documents, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and any of the Holder or any of their affiliates, exists as of the date hereof. Neither the Company, its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make a press release or other public disclosure with respect to such transactions as is required by applicable law and regulations. Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise.
6. No Integration. None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their behalf shall, directly or indirectly, make any offers or sales of any security (as defined in the Securities Act) or solicit any offers to buy any security or take any other actions, under circumstances that would require registration of the Securities under the Securities Act or cause this offering of the Securities to be integrated with such offering or any prior offerings by the Company for purposes of Regulation D under the Securities Act.
7. Listing. The Company shall promptly secure the listing or designation for quotation (as applicable) of all of the Underlying Shares upon the Nasdaq Capital Market (the “Principal Market”) (subject to official notice of issuance). The Company shall maintain the Common Stock’s authorization for quotation on the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 7.
8. Fees. The Company shall reimburse Kelley Drye & Warren LLP, on demand, for all reasonable costs and expenses incurred by it in connection with preparing and delivering this Agreement (including, without limitation, all legal fees and disbursements in connection therewith, and due diligence in connection with the transactions contemplated thereby).
9. Blue Sky. The Company shall make all filings and reports relating to the Exchange as required under applicable securities or “Blue Sky” laws of the states of the United States following the date hereof, if any.
10. Effective Date. Except as otherwise provided herein, this Agreement shall be deemed effective as of such date that Company and the Holder shall have duly executed and delivered this Agreement (the “Effective Date”).
11. No Commissions. Neither the Company nor the Holder has paid or given, or will pay or give, to any person, any commission, fee or other remuneration, directly or indirectly, in connection with the transactions contemplated by this Agreement.
12. Termination. Notwithstanding anything contained in this Agreement to the contrary, if the Effective Date has not occurred and the Company does not deliver the Exchange Shares to the Holder (and/or issue the Rights on the books and records of the Company, as applicable), in accordance with Section 1 hereof, then, at the election of the Holder delivered in writing to the Company at any time after the fifth (5th) Business Day immediately following the date of this Agreement, this Agreement shall be terminated and be null and void ab initio and the Exchange Preferred shall not be cancelled hereunder and shall remain outstanding as if this Agreement never existed.
| 5 |
13. Independent Nature of Holder’s Obligations and Rights. The obligations of the Holder under this Agreement are several and not joint with the obligations of any Other Holder, and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holder under any Other Agreement. Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto, shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holder and Other Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement and the Company acknowledges that, to the best of its knowledge, the Holder and the Other Holders are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement. The Company and the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose.
14. Rights to Issue Shares.
14.1 General. In the Exchange, the Company shall issue the Holder the Exchange Shares and, if applicable, the Rights to receive the Rights Shares, which Rights shall have such terms and conditions as set forth in this Section 15. The Company and the Holder hereby agree that no additional consideration is payable in connection with the issuance of the Rights or the exercise of the Rights.
14.2 Exercise of Right of Issuance of Shares. Subject to the terms hereof, the exercise of the Rights may be made, in whole or in part, at any time or times on or after the date hereof by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed PDF copy of the Notice of Issuance Form annexed hereto as Exhibit A (each, a “Notice of Issuance”, and the corresponding date thereof, the “Exercise Date”). Partial exercises of the Rights resulting in issuances of a portion of the total number of Rights Shares available thereunder shall have the effect of lowering the outstanding number of Rights Shares purchasable thereunder in an amount equal to the applicable number of Rights Shares issued. The Holder and the Company shall maintain records showing the number of Rights Shares issued and the date of such issuances. The Company shall deliver any objection to any Notice of Issuance Form within one (1) Trading Day of receipt of such notice. The Holder acknowledges and agrees that, by reason of the provisions of this paragraph, following each exercise of the Rights issued hereunder and the issuance of a portion of the Rights Shares pursuant thereto, the number of Rights Shares available for issuance pursuant to the Rights issued hereunder at any given time may be less than the amount stated in the recitals hereof.
14.3 Delivery of Rights Shares. The Rights Shares issued hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit/Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system (unless requested by the Holder to be delivered by physical delivery to the address specified by the Holder in the Notice of Issuance) by the date that is one (1) Trading Day after the delivery to the Company of the Notice of Issuance (such date, the “Share Delivery Deadline”). The Rights Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become the holder of record of such shares for all purposes, as of the date the Rights have been exercised.
14.4 Charges, Taxes and Expenses. Issuance of Rights Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Issuance.
14.5 Authorized Shares. The Company covenants that, from and after the date hereof, as long as any Rights remain outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of all of the Rights Shares issuable hereunder upon the exercise of the Rights (without regard to any limitations on exercise set forth in Section 15.8 below). The Company further covenants that its issuance of the Rights shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Rights Shares upon the due exercise of the Rights. The Company will take all such reasonable action as may be necessary to assure that such Rights Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. The Company covenants that all Rights Shares which may be issued upon the exercise of the Rights represented by this Agreement, the Rights, will, upon exercise of the Rights be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, Liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
| 6 |
14.6 Impairment. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Agreement against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Rights Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Rights Shares upon the exercise of the Rights and (iii) use reasonable best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Agreement.
14.7 Authorizations. Before taking any action which would result in an adjustment in the number of Rights Shares for which the Rights provides for, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
14.8 Limitations on Exercise. The Company shall not effect the exercise of any Rights, and the Holder shall not have the right to exercise any portion of any Rights pursuant to the terms and conditions of this Agreement and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties (as defined below) collectively would beneficially own in excess of 4.99% (the “Beneficial Ownership Limitation”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of the Rights issued hereunder with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of the Rights beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 15.8. For purposes of this Section 15.8 beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”). For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of the Rights without exceeding the Beneficial Ownership Limitation, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives a Notice of Issuance from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Notice of Issuance would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 15.8, to exceed the Beneficial Ownership Limitation, the Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Notice of Issuance. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Rights, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of the Rights results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Beneficial Ownership Limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Beneficial Ownership Limitation to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Beneficial Ownership Limitation will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of Rights that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of the Rights hereunder in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise any Rights pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 15.8 to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 15.8 or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of Rights. For the purpose of this Agreement: (x) “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the date hereof, directly or indirectly managed or advised by the Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Beneficial Ownership Limitation, (y) “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder and (z) “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
| 7 |
14.9 Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of the Rights, pursuant to the terms hereof.
14.10 Stock Dividends and Splits. If the Company, at any time while the Rights exist: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the number of Rights Shares issuable upon exercise of the Rights shall be proportionately adjusted. Any adjustment made pursuant to this Section 15.10 shall become effective immediately upon the record date for the determination of stockholders entitled to receive such dividend or distribution (provided that if the declaration of such dividend or distribution is rescinded or otherwise cancelled, then such adjustment shall be reversed upon notice to the Holder of the termination of such proposed declaration or distribution as to any unexercised portion of the Rights at the time of such rescission or cancellation) and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
14.11 Compensation for Buy-In on Failure to Timely Deliver Rights Shares. If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (x) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, to issue and deliver to the Holder (or its designee) a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or, (y) if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program, to credit the balance account of the Holder or the Holder’s designee with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of a Right (a “Delivery Failure”), then, in addition to all other remedies available to such Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on or prior to the Share Delivery Deadline and to which the Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and ending on the applicable Share Delivery Deadline, and (Y) the Holder, upon written notice to the Company, may void its Notice of Issuance with respect to, and retain or have returned, as the case may be, all, or any portion, of such Rights that has not been exercised pursuant to such Notice of Issuance; provided that the voiding of a Notice of Issuance shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 15.11 or otherwise. In addition to the foregoing, if a Delivery Failure occurs and if on or after such Share Delivery Deadline the Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such exercise that the Holder is entitled to receive from the Company and has not received from the Company in connection with such Delivery Failure (a “Buy-In”), then, in addition to all other remedies available to the Holder, the Company shall, within one (1) Business Day after receipt of the Holder’s request and in the Holder’s discretion, either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of Rights hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of Rights hereunder (as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price (as defined below) of the Common Stock on any Trading Day during the period commencing on the date of the applicable Notice of Issuance and ending on the date of such issuance and payment under this clause (II). Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the exercise of the Rights as required pursuant to the terms hereof. “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last bid price or last trade price, respectively, of such security prior to 6:00:00 p.m., New York time, as reported by Bloomberg, L.P., or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, L.P., or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, L.P., or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, L.P., the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.
| 8 |
14.12 Subsequent Rights Offerings. Except with respect to any adjustments pursuant to Section 15.10 above, if at any time the Company grants, issues or sells any Convertible Securities, Options or rights to purchase stock, warrants, securities or other property pro rata to the record Holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of the Rights (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record Holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
14.13 Fundamental Transaction. If, at any time while the Rights remain outstanding, a Fundamental Transaction occurs, then, upon any subsequent exercise of the Rights, the Holder shall have the right to receive, for each Rights Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 15.8 on the exercise of the Rights), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such Fundamental Transaction by a Holder of one share of Common Stock. Upon the occurrence of any such Fundamental Transaction, the any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Agreement referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Agreement with the same effect as if such Successor Entity had been named as the Company herein.
14.14 No Rights as Stockholder Until Exercise. Each Right does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof.
14.15 Transferability. Subject to compliance with any applicable securities laws, the Rights and all rights hereunder are transferable to any affiliate of the Holder or any other Person under common control with the Holder, as applicable, in whole or in part, upon written assignment substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer of this Agreement delivered to the principal office of the Company or its designated agent. Upon such assignment and, if required, such payment, the Company shall enter into a new agreement with the assignee or assignees, as applicable, and this Agreement shall promptly be cancelled. Any Rights, if properly assigned in accordance herewith, may be exercised by a new holder for the issue of Rights Shares without having a new agreement executed.
15. Holding Period. For the purposes of Rule 144, the Company acknowledges that (i) the holding period of the Exchange Shares may be tacked onto both the holding period of the Exchange Preferred and (ii) the holding period of the Rights (and upon exercise thereof, the Right Shares) may be tacked onto both the holding period of the Exchange Preferred, and the Company agrees not to take a position contrary to this Section 16. The Company acknowledges and agrees that, subject to the Holder’s representations and warranties contained in Section 3 of this Agreement, the Exchange Shares and the Rights (and upon exercise thereof, the Right Shares) shall not be required to bear any restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance with Rule 144, provided, for the avoidance of doubt, that the Holder shall not be an affiliate of the Company and shall not have been an affiliate during the 90 days preceding the date of any transfer.
16. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
| 9 |
17. Miscellaneous. Section 9 of the Securities Purchase Agreement is hereby incorporated by reference herein, mutatis mutandis.
[The remainder of the page is intentionally left blank]
| 10 |
IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of the date set forth on the signature page of the Holder below.
COMPANY:
AUDDIA INC. |
||
| By: | ||
| Name: Title: |
||
| 11 |
IN WITNESS WHEREOF, Holders and the Company have executed this Agreement as of August 5, 2025.
HOLDER: |
||
| By: | ||
| Name: Title: |
||
|
Date of Securities Purchase
Agreement pursuant to which the Series B Shares was issued:
Outstanding Amount of Exchange Preferred:
(including dividends)
_____________________________________
Exchange Price
$4.486
Aggregate Number of Exchange Shares:
_____________________________________
Aggregate Number of Rights Shares issuable upon exercise of the Rights (if any):
_____________________________________
DWAC Instructions:
_____________________________________
_____________________________________ |
| 12 |
EXHIBIT A
NOTICE OF ISSUANCE
The undersigned holder hereby exercises the rights (the “Rights”) to receive _________________ of the shares of Common Stock (the “Rights Shares”) of Auddia Inc., a Delaware corporation (the “Company”), established pursuant to that certain Amendment and Exchange Agreement, dated [_______], 2025, by and between the Company and the investors signatory thereto (the “Exchange Agreement”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Exchange Agreement.
The Company shall deliver to Holder, or its designee or agent as specified below, [__________] Rights Shares in accordance with the terms of the Rights. Delivery shall be made to Holder, or for its benefit, as follows:
| ☐ | Check here if requesting delivery as a certificate to the following name and to the following address: |
| Issue to: | |
| ☐ | Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows: |
| DTC Participant: | ||
| DTC Number: | ||
| Account Number: | ||
|
Date: ___________________,
________________________
|
|
By: __________________________________
Tax ID:____________________________
Facsimile:__________________________
E-mail Address:_____________________ |
| 13 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) OR 15D-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Jeffrey Thramann, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2025, of Auddia Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 8, 2025
/s/ Jeffrey Thramann
Jeffrey Thramann
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) OR 15D-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, John Mahoney, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2025, of Auddia Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
August 8, 2025
/s/ John Mahoney
John Mahoney
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Auddia Inc. (the “Company”) on Form 10-Q, for the period ended June 30, 2025, as filed with the Securities and Exchange Commission, I, Jeffrey Thramann, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
August 8, 2025
/s/ Jeffrey Thramann
Jeffrey Thramann
Chief Executive Officer
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Auddia Inc. (the “Company”) on Form 10-Q, for the period ended June 30, 2025, as filed with the Securities and Exchange Commission, I, John Mahoney, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
August 8, 2025
/s/ John Mahoney
John Mahoney
Chief Financial Officer
(Principal Financial and Accounting Officer)