AUDDIA INC. 10-K

Item 9A. 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 not effective at a reasonable assurance level due to the material weaknesses in internal control over financial reporting described below. 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. Internal Control Over Financial Reporting In preparation of our financial statements to meet the requirements of our IPO, we determined that material weaknesses in our internal control over financial reporting existed during fiscal 2018 and remained unremediated as of December 31, 2020. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis. The material weaknesses we identified are related to the design and maintenance of an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately and we did not design and maintain controls to ensure adequate segregation of duties within our financial reporting function including the preparation and review of journal entries. In response to the material weaknesses, we took a number of actions to improve our internal control over financial reporting and determined that as of December 31, 2020, that the controls that were designed have not been operating effectively for a sufficient period of time to conclude that the material weaknesses have been remediated. Remediation Activities Management has been actively engaged in remediating the above described material weaknesses. The following remedial actions have been taken. We added additional accounting resources with appropriate levels of experience, including a new Chief Financial Officer, and reallocated responsibilities across the accounting organization to ensure that the appropriate level of knowledge and experience is applied based on risk and complexity of transactions and tasks under review; and strengthened our internal policies, processes and reviews, including drafting of related documentation thereof. The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above. While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively. 49 Management’s Report on Internal Control Over Financial Reporting This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Control Over Financial Reporting Other than the applicable remediation efforts described in “Remediation of Previously Reported Material Weaknesses” above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None 50 PART III Item 10. Directors, Executive Officers, and Corporate Governance Executive officers and directors Set forth below are the names, ages and positions of our executive officers and directors as of March 31, 2021. Name Age Position(s) held Served as a Director and/or Officer Since Executive Officers Jeffrey Thramann, M.D. 55 Executive Chairman and Director 2012 Michael Lawless 57 Chief Executive Officer, Secretary & Director 2012 Peter Shoebridge 57 Chief Technology Officer 2013 Richard Liebman 65 Chief Financial Officer 2019 Non-Employee Directors Stephen Deitsch 49 Director 2021 Timothy J. Hanlon 52 Director 2021 Thomas Birch 68 Director 2021 Executive officers Jeffrey Thramann, Executive Chairman. Dr. Thramann founded the Company in 2012 and oversees strategic initiatives, capitalization and governance at the Company. This includes day-to-day involvement in working with senior management to establish the strategic vision of the Company, prioritizing product launches, working with the CEO and CFO on the financial plans of the Company, and assisting the CEO in recruitment and hiring of senior executives and the pursuit of business development activities. It also includes leading efforts to secure capital for the Company, building the board of directors and leading board meetings. In 2002, Dr. Thramann was the founder and became the chairman of Lanx, LLC. Lanx was an innovative medical device company focused on the spinal implant market and created the interspinous process fusion space with the introduction of its patented Aspen product. Lanx was sold to Biomet, Inc., an international orthopedic conglomerate, in 2013. Concurrent with Lanx, in 2006 Dr. Thramann was also the founder and chairman of ProNerve, LLC. ProNerve was a healthcare services company that provided monitoring of nerve function during high risk surgical procedures affecting the brain and spinal cord. ProNerve was sold to Waud Capital Partners, a private equity firm, in 2012. Prior to ProNerve and concurrent with Lanx, Dr. Thramann was the founder and chairman of U.S. Radiosurgery (USR). USR is a healthcare services company that provides advanced radiosurgical treatments for tumors throughout the body. USR became the largest provider of robotic guided CyberKnife treatments of such tumors in the U.S. and was sold to Alliance Healthcare Services (Nasdaq; AIQ) in 2011. From 2001 through 2008, Thramann was the founder and senior partner of Boulder Neurosurgical Associates, a neurosurgical practice serving Boulder County, Colorado. Dr. Thramann is the named inventor on over 50 U.S. and international issued and pending patents. He completed his neurosurgical residency and complex spinal reconstruction fellowship at the Barrow Neurological Institute in Phoenix, AZ, in 2001. He is a graduate of Cornell University Medical College in New York City and earned a BS in electrical engineering management at the U. S. Military Academy in West Point, NY. Michael Lawless, Chief Executive Officer: Mr. Lawless is a technology startup veteran having held key leadership positions in research and development, engineering, product development and operations. Prior to joining the Company in 2012, from 2009 to 2011 he was one of the founding executives and Chief Operating Officer of Trada, Inc., a company engaged in the business of crowdsourced digital ad campaign creation and management. In addition to establishing the business operations and processes for Trada, he was responsible for building and managing the product team and operating their internet advertising marketplace SaaS product. He earned a BS in Human Factors Engineering from the U.S. Air Force Academy and his master’s degree in Experimental Psychology with an emphasis on Human-Computer Interaction from The University of Dayton. 51 Peter Shoebridge, Chief Technology Officer: Mr. Shoebridge joined the Company in 2013 and has over 35 years of professional experience in the software development industry. He has been involved with internet related technologies since 1996. From 2008 to 2012, he was the CEO and co-founder of Blue Yonder Gaming, Corp., a casino gaming systems and gaming company. Prior to Blue Yonder he was Vice President of engineering at Sona Mobile, Inc and led the team that built the first wireless gaming system to receive federal regulatory approval. He also led the team that built the Sona Gaming System, a server-based gaming platform. Mr. Shoebridge has worked in many different technology sectors including the real-time financial industry, casino gaming including bingo systems, accounting and automotive. He was educated in London, England. Richard Liebman, Chief Financial Officer: Mr. Liebman has over 25 years of financial management experience. He has been the Chief Financial Officer of two public companies, ServiceWare Technologies and Migo Software. Since 2011, he has been an independent financial and accounting consultant, in which role he has served as CFO for numerous private technology companies. He has previously served on the Board of Directors of two public companies, Vital Signs, Inc. and Psicor. Earlier in his career, he was an Investment Banker in the Corporate Finance groups of Oppenheimer & Co., and L.F. Rothschild, Unterberg Towbin. He received his M.B.A. at Columbia Business School and his undergraduate degree from Brown University. Non-employee directors Stephen M. Deitsch Director: Mr. Deitsch has extensive strategic, operational, and financial leadership experience at both publicly traded and privately held companies. Mr. Deitsch currently serves as Chief Financial Officer of Paragon 28, Inc., a leading privately held global orthopedics company. From April 2017 to August 2019, Mr. Deitsch served as Senior Vice President and Chief Financial Officer of BioScrip, Inc. (formerly Nasdaq: BIOS) which is now part of Option Care Health, Inc. (Nasdaq: OPCH). From August 2015 to April 2017, Mr. Deitsch served as Executive Vice President, Chief Financial Officer and Corporate Secretary of Coalfire, Inc., a leading cyber-security firm. Mr. Deitsch served as the Chief Financial Officer of Biomet Spine, Bone Healing, and Microfixation from July 2014 to July 2015 and as Vice President Finance, Corporate Controller of Biomet, Inc. from February 2014 to July 2014. Mr. Deitsch was the Chief Financial Officer of Lanx, Inc. from September 2009 until it was acquired by Biomet in October 2013. From 2002 to 2009, Mr. Deitsch served in various senior financial leadership roles at Zimmer Holdings, Inc. (formerly NYSE: ZMH and now part of Zimmer Biomet, Inc NYSE: ZBH). Mr. Deitsch has been a director of Green Sun Medical, a privately held medical device company, since October 2017. Timothy J. Hanlon Director: Mr. Hanlon is the founder and has been Chief Executive Officer of The Vertere Group LLC since 2012, a boutique media industry strategic advisory and consulting firm specializing in helping innovation-seeking clients navigate the complex intersections among media, marketing, advertising, and technology. Prior to 2012, he was founder and Managing Director of Mediabrands Velocite (Interpublic Group), the innovation-centric partnership and strategic investment arm of Interpublic Group’s corporate media agency division Mediabrands, where he was chiefly responsible for entrepreneurial innovation through proprietary relationships with more than a dozen innovative venture-backed media/marketing startups. Mr. Hanlon has over 20 years of, digital and “emerging” media and marketing experience, including senior management positions at marketing promotions agency Frankel (Chicago, IL), regional advertising agency Creative Alliance (Louisville, KY), digital content pioneer Starwave (Bellevue, WA), and credit card issuer MBNA America (Wilmington, DE). Mr. Hanlon holds an MBA from the University of Chicago, Booth Graduate School of Business, and a BA from Georgetown University. Thomas Birch, Director : Mr. Birch brings over 50 years of on-air, online, media, media research and media brokerage experience. Since 2005, Mr. Birch has been the owner and CEO of Lakes Media LLC, a six station radio group operating in southern Virginia and northern North Carolina. In addition, since 2018 Mr. Birch has also been a Director of Media Services Group, one of the nation’s largest brokers of radio stations, television stations, broadcast towers and other broadcast-related entities. Mr. Birch was the founder and CEO of Birch Research Corporation, a syndicated radio ratings and market research company. In 1987, Birch Research was acquired by Dutch publishing conglomerate VNU (now known as Nielsen). Following the sale, the company merged with VNU subsidiary Scarborough Research and was renamed Birch/Scarborough Research. Mr. Birch served as Chairman and CEO of the merged Birch/Scarborough entity until his departure in 1990. At its peak, Birch/Scarborough employed more than 1,200 people nationwide and maintained sales offices in New York, Chicago, Los Angeles, Atlanta, and Dallas and through its Canadian subsidiary Birch Radio/Canada, had offices in Toronto and Montreal. Mr. Birch was a Partner and Chief Financial Officer of Simmons Market Research Bureau from 2001 to 2003, where he significantly reduced operating expenses, increased operating profits and refinanced company debt which enabled the company to avoid bankruptcy and be positioned for acquisition in 2004 by Experian. From 1990 through 1999, Mr. Birch was owner and CEO of Opus Media Group, a radio group owner with stations operating in Florida, Georgia, Louisiana and Mississippi. Mr. Birch is a member of the National Association of Broadcasters Committee on Local Radio Audience Measurement (COLRAM), and continues to have a voice in the improvement of audience measurement metrics from Nielsen Audio and other research providers. Mr. Birch is a native of Binghamton, NY and holds a BS from the School of Industrial and Labor Relations at Cornell University. 52 Section 16(a) Beneficial Ownership Reporting Compliance Following our IPO, Section 16(a) of the Exchange Act requires our directors, executive officers, and persons holding more than 10% of our common stock to report their initial ownership of the common stock and other equity securities and any changes in that ownership in reports that must be filed with the SEC. The SEC has designated specific deadlines for these reports, and we must identify in our Annual Report on Form 10-K those persons who did not file these reports when due. Based solely on a review of reports furnished to us, or written representations from reporting persons, we believe all directors, executive officers, and 10% owners timely filed all reports regarding transactions in our securities required to be filed to date in 2021 by Section 16(a) under the Exchange Act, except that (i) each of Messrs. Deitsch, Hanlon, Thramann, Lawless, Shoebridge, Liebman and Minicozzi filed a late Form 3, and (ii) Dr. Thramann filed one late Form 4. Election of Officers Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers. Composition of the Board of Directors Our board of directors currently consists of five members. Three of our directors are independent within the meaning of the independent director guidelines of the Nasdaq Stock Market. Each director’s term continues until the election and qualification of his successor, or his earlier death, resignation or removal. Our restated certificate of incorporation and restated bylaws authorize only our board of directors to fill vacancies on our board of directors. Director Independence Under the rules of Nasdaq, independent directors must comprise a majority of a listed company’s board of directors within a specified period following the completion of its IPO. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his capacity as a member of the audit committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. We currently satisfy the audit committee independence requirements of Rule 10A-3. Additionally, compensation committee members must not have a relationship with us that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member. Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our board of directors determined that all of our directors, except for Jeffrey Thramann and Michael Lawless, are “independent directors” as defined under the applicable rules and regulations of the Securities and Exchange Commission, or SEC, and the listing requirements and rules of Nasdaq. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management. 53 Committees of the Board of Directors Our board of directors has an audit committee, a compensation committee and a nominating and governance committee, each of which have the composition and responsibilities described below following the completion of our IPO. Each of the below committees has a written charter approved by our board of directors. Following completion of our IPO, copies of each charter were posted on the investor relations section of our website. Members will serve on these committees until their resignation or until otherwise determined by our board of directors. Audit Committee Our audit committee is comprised of Stephen Deitsch, Thomas Birch, and Timothy J. Hanlon, with Stephen Deitsch as the chairman of our audit committee. The composition of our audit committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations. Each member of our audit committee is financially literate. In addition, our board of directors has determined that Stephen Deitsch is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose on Mr. Deitsch any duties, obligations or liabilities that are greater than are generally imposed on members of our audit committee and our board of directors. Our audit committee is directly responsible for, among other things: · selecting and hiring our independent registered public accounting firm; · the qualifications, independence and performance of our registered public accounting firm; · the preparation of the audit committee report to be included in our annual proxy statement; · our compliance with legal and regulatory requirements; · our accounting and financial reporting processes, including our financial statement audits and the integrity of our financial statements; and · reviewing and approving related-person transactions. Compensation Committee Our compensation committee is comprised of Timothy J. Hanlon, Thomas Birch, and Stephen Deitsch, with Timothy J. Hanlon as the chairman of our compensation committee. Each member of our compensation committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act and meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. Our compensation committee is responsible for, among other things: · evaluating, recommending, approving and reviewing executive officer compensation arrangements, plans, policies and programs; · evaluating and recommending non-employee director compensation arrangements for determination by our board of directors; · administering our cash-based and equity-based compensation plans; and · overseeing our compliance with regulatory requirements associated with the compensation of directors, officers and employees. 54 Nominating and Governance Committee Our nominating and governance committee is comprised of Thomas Birch, Stephen Deitsch, and Timothy J. Hanlon, with Thomas Birch as the chairman of our nominating and governance committee. Each member of our nominating and governance committee meets the requirements for independence under the current Nasdaq listing standards. Our nominating and governance committee is responsible for, among other things: · identifying, considering and recommending candidates for membership on our board of directors; · overseeing the process of evaluating the performance of our board of directors; and · advising our board of directors on other corporate governance matters. Compensation Committee Interlocks and Insider Participation None of the current members of our compensation committee has at any time been one of our officers or employees. None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during the year ended December 31, 2020. Code of Business Conduct and Ethics Following our IPO, our board of directors adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer and other executive and senior officers. The full text of our code of business conduct and ethics is posted on the investor relations section of our website. The reference to our website address in this Annual Report on Form 10-K does not include or incorporate by reference the information on our website into this Annual Report on Form 10-K. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our website or in public filings to the extent required by the applicable rules. Non-Employee Director Compensation Our non-employee directors began serving on our board following our February 2021 IPO. Accordingly, our current non-employee directors did not receive any cash or equity compensation from the Company for the year ended December 31, 2020. Our Executive Chairman, Dr. Thramann, and our President and Chief Executive Officer, Mr. Lawless, do not receive compensation for their services as a director. Following our February 2021 IPO, our board of directors approved compensation for our non-employee directors. Our non-employee directors will receive annual cash compensation of $25,000 for service on the board, and additional cash compensation for the chairperson members as set forth below. All cash payments will be made quarterly in arrears, and pro-rated for any partial quarters of service. · Audit Committee Chair: $20,000 · Compensation Committee Chair: $10,000 · Nominating and Governance Committee Chair: $10,000 We expect that our non-employee directors will also receive equity grants under our 2021 Equity Incentive Plan as compensation for their board service. The board has not yet determined the amount or timing for any initial equity grants to our non-employee directors. 55 Item 11. Executive Compensation Executive Compensation Overview As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the compensation awarded to, earned by, or paid to each individual who served as our principal executive officer during our fiscal year 2020, and our next two most highly compensated executive officers in respect of their service to our company for fiscal year 2020. Our named executive officers, or the Named Executive Officers, for the year ended December 31, 2020, are: · Jeffrey Thramann, our Executive Chairman; · Michael Lawless, our Chief Executive Officer; and · Peter Shoebridge, our Chief Technical Officer Summary Compensation Table Year Ended December 31, 2020 The following table contains information about the compensation paid to or earned by each of our Named Executive Officers during the two most recently completed fiscal years. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) All Other Compensation ($) (2) *** Total ($) Jeffrey Thramann - Executive Chairman (1) 2020 200,000 -0- -0- 17,738 217,738 2019 200,000 -0- -0- 25,065 225,065 Michael Lawless - Chief Executive Officer 2020 210,833 -0- -0- 20,287 231,121 2019 215,916 -0- -0- 25,065 240,981 Peter Shoebridge - Chief Technology Officer 2020 162,916 -0- -0- 10,399 173,315 2019 170,000 -0- -0- 14,353 184,353 ________________________ (1) Dr. Thramann earns an annual salary of $200,000. Due to liquidity constraints, most of Dr. Thramman’s salary payments were deferred during the past several years. He was only paid cash compensation of $19,760 in 2020, and $24,000 in 2019. The total deferred amount owed to Dr. Thramann was approximately $631,000, and is included in our financial statements as a portion of “Accrued fees to a related party”. The Company paid this deferred compensation in early 2021. (2) Represents healthcare insurance premiums paid by the Company on behalf of the Named Executive Officers 56 Outstanding Equity Awards at December 31, 2020 The following table sets forth information regarding outstanding equity awards held by our Named Executive Officers as of December 31, 2020. Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Vesting Options Options Exercise Option Commencement (#) (#) Price Expiration Name Date Exercisable(1) Unexercisable(1) ($) Date Dr. Jeffrey Thramann – – – – – Michael Lawless 2/1/2018 47,147 – 2.70 9/8/2029 8/15/2019 80,506 25,997 4.26 12/4/2029 Peter Shoebridge 2/1/2018 16,191 – 2.73 9/8/2029 8/15/2019 27,406 8,850 4.26 12/4/2029 (1) Each equity award is subject to the terms of our 2013 Plan. Employment Arrangement with Dr. Thramann Dr. Thramann earns an annual salary of $200,000 for his service as our Executive Chairman. Employment Agreement with Mr. Lawless On February 6, 2012, we entered into an employment agreement with Mr. Lawless. The employment agreement provided for an initial annual base salary of $180,000 as well as an entitlement to an annual incentive bonus, upon certain conditions, in an amount determined by our board of directors. Employment Agreement with Mr. Shoebridge On April 1, 2014, we entered into an employment agreement with Mr. Shoebridge. The employment agreement provided for an initial annual base salary of $170,000 as well as an entitlement, upon certain conditions to an annual incentive bonus in an amount determined by our board of directors. The employment agreement is terminable by either part at will. In connection with the employment agreement, Mr. Shoebridge was issued options to purchase 75,068 shares of common stock. 57 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information regarding the beneficial ownership of our common stock as of March 26, 2021 by (i) each person who beneficially owned more than 5% of our outstanding shares of common stock, (ii) each director, (iii) each Named Executive Officer and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, the address of each executive officer and director is c/o Auddia, 5755 Central Ave., Suite C, Boulder, CO 80301. The number of shares of common stock “beneficially owned” by each stockholder is determined under rules issued by the SEC regarding the beneficial ownership of securities. This information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership of shares of our common stock includes (1) any shares as to which the person or entity has sole or shared voting power or investment power, and (2) any shares as to which the person or entity has the right to acquire beneficial ownership within 60 days after March 26, 2021. The calculations set forth below are based upon 11,291,829 shares of common stock outstanding at March 26, 2021. Unless otherwise indicated below, and subject to community property laws where applicable, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock. Name of Beneficial Owner Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned 5% Stockholders: Jeffrey Thramann (1) 2,784,788 22.47% Richard Minicozzi (2) 1,812,945 15.97% Executive Officers and Directors: Michael Lawless (3) 146,154 1.3% Peter Shoebridge (4) 43,597 0.4% Stephen Deitsch – 0% Timothy J. Hanlon – 0% Thomas Birch – 0% All directors and executive officers as a group (8 persons) 2,974,539 23.67% ___________________________ (1) Dr. Thramann is also a director of the Company. Includes (i) 712,652 shares of common stock owned immediately following the corporate conversion, (ii) 969,000 shares of common stock purchased in the IPO, (iii) 134,136 shares of common stock underlying warrants exercisable within 60 days of March 26, 2021, and (iv) 969,000 shares of common stock underlying Series A warrants purchased in the IPO and exercisable within 60 days of March 26, 2021. (2) Includes (i) 1,750,450 shares of common stock owned immediately following the corporate conversion, and (ii) 62,495 shares of common stock underlying warrants exercisable within 60 days of March 26, 2021. (3) Includes (i) 18,501 shares of common stock owned immediately following the corporate conversion, and (ii) 127,653 shares of common stock underlying stock options exercisable within 60 days of March 26, 2021. (4) Includes 43,597 shares of common stock underlying stock options exercisable within 60 days of March 26, 2021. 58 Item 13. Certain Relationships and Related Party Transactions and Director Independence The following is a description of transactions or series of transactions since January 1, 2019, to which we were or will be a party, in which: • the amount involved in the transaction exceeds, or will exceed, $120,000; and • in which any of our executive officers, directors or holder of five percent or more of any class of our capital stock, including their immediate family members or affiliated entities, had or will have a direct or indirect material interest. Compensation arrangements for our named executive officers and our directors are described elsewhere in this Annual Report under “Director Compensation” and “Executive Compensation.” The Company has a line-of-credit with a bank. Prior to the Company’s IPO, the available principal balance under the line-of-credit was $6,000,000. The line-of-credit was collateralized by all assets of the Company as well as certain cash assets of two shareholders in control accounts at the lender, Richard Minicozzi, who beneficially owns approximately 16% of our outstanding common stock, and Jeffrey Thramann, our Executive Chairman. Mr. Minicozzi’s control account had a balance of $2,000,000 and Dr. Thramann’s control account had a balance of $4,000,000. Dr. Thramann also personally guaranteed the full amount of the loan. The outstanding balance on the line-of-credit at December 31, 2020 was $6,000,000. Following the closing of our IPO, the Company used $4,000,000 of the proceeds to repay $4,000,000 to the bank. The maximum outstanding amount of the line-of-credit was then reduced to $2,000,000. The bank has released the control accounts of Mr. Minicozzi and Dr. Thramann. Dr. Thramann no longer personally guarantees the line-of-credit. The fees paid by the Company to Mr. Minicozzi on the $2,000,000 collateral arrangement were 33% percent of the collateral amount annually, plus there is an annual renewal fee of $50,000 and a $15,000 delayed payment fee for the first year in addition to warrants to purchase 300,000 shares of LLC common units due annually with $867,398 and $843,817 being recorded as interest expense for the years ended December 31, 2019 and 2018, respectively. During 2018 a partial payment was made on the accruing collateral fees due of $364,944. Subsequently in 2018, the shareholder subscribed to purchase 4,530,861 LLC common units for $0.023 per share for a total of $104,210 which was offset against the interest due on the collateral arrangement. The balance outstanding on the collateral at December 31, 2019 and 2018 was $1,017,938 and $875,540, respectively. In connection with our IPO, all unpaid amounts owed to Mr. Minicozzi were converted at a discount to the per share IPO price into shares of common stock. Following the closing of our IPO, the collateral arrangement with Mr. Minicozzi was terminated. During 2017 and 2018, the Company entered into notes payable (the "Notes") with Dr. Thramann for $330,000 and $100,000, respectively, $60,000 of the $100,000 was repaid in 2018. The Notes did not accrue interest and did not have a stated maturity date. The Notes were expected to be repaid as cash flow permitted. During 2018, the Notes, with an outstanding balance of $370,000, were converted into 3,217,065 Series C LLC preferred units at $0.115 per unit in connection with the Series C unit exchange. (See Notes 8 and 9 in the Financial Statements). In October 2019, Dr. Thramann obtained $400,000 of short term financing from an unrelated lender. Dr. Thramann then agreed to make the proceeds of that short term financing available to the Company. In exchange, the Company assumed responsibility for all payments and charges (including principal, interest and fees) required under such short term financing. Under the agreement, the Company was advanced $200,000 net of $12,000 in closing fees and the remaining $200,000 was put into an escrow account. A $100,000 loan financing fee is also due at maturity. On December 2019, the Company made a principal payment of $57,000. The remaining $243,000 of principal and loan financing fees was paid on January 30, 2020. In February 2020, Dr. Thramann obtained a new $500,000 short term financing from the same unrelated lender. Dr. Thramann then agreed to make the proceeds of that short term financing available to the Company. In exchange, the Company assumed responsibility for all payments and charges (including principal, interest and fees) required under such short term financing. Under the agreement, the Company was advanced $485,000 net of $15,000 in closing fees and immediately put $140,741 into an escrow account. Repayment of the principal and loan financing fee occurs through weekly payments of $17,593 until the loan and financing fee is paid in full. The loan financing fee increases with the length of the payback period and is maximized at $165,000 after month five. The loan was repaid in full following the IPO. 59 Dr. Thramann purchased 969,000 IPO units in our IPO at the per unit public offering price of $4.125. Dr. Thramann earns an annual salary of $200,000. Due to liquidity constraints, most of Dr. Thramman’s salary payments were deferred during the past several years. He was only paid cash compensation of $19,760 in 2020, and $24,000 in 2019. The total deferred amount owed to Dr. Thramann was approximately $631,000, and is included in our financial statements as “Accrued fees to a related party”. The Company paid this deferred compensation to Dr. Thramann in early 2021 Dr. Thramann has participated as an investor in multiple private placements of the Company’s securities. The terms of Dr. Thramann’s participation in these private placements were the same as were made available to other investors participating in these transactions. During 2020, Dr. Thramann purchased an aggregate of $36,149 of our convertible notes. As described in Note 11 to our financial statements, these convertible notes converted into shares of common stock in connection with our February 2021 IPO. Stock option grants to executive officers We have granted stock options to our Named Executive Officers as more fully described in the section entitled “Executive Compensation.” Item 14. Principal Accountant Fees and Services The firm of Daszkal Bolton LLP, independent registered public accounting firm, has been selected by the audit committee as auditors for Auddia for the fiscal years ending December 31, 2020 and December 31, 2019. Daszkal Bolton LLP has served as the independent registered public accounting firm for Auddia since 2019. The audit committee is solely responsible for selecting Auddia’s independent registered public accounting firm and has appointed Daszkal Bolton LLP as auditors for Auddia for the fiscal year ending December 31, 2020. Stockholder approval is not required to appoint Daszkal Bolton LLP as Auddia’s independent registered public accounting firm. Independent Registered Public Accounting Firm Fees The following is a summary and description of fees incurred by Daszkal Bolton LLP for the fiscal year ended December 31, 2020 and fees incurred by Plante & Moran PLLC and paid during the fiscal year ended December 31, 2019. 2020 2019 Audit fees (1) $ 102,391 $ 64,342 Tax fees – – All other fees (2) 22,000 – Total fees $ 124,391 $ 64,342 ________________________ (1) Audit fees consist of fees for the audit of our annual financial statements, the review of our interim financial statements, (2) Consists of services provided in connection with the registration statement for the IPO of our common stock, which was completed in February 2021. Audit Committee Pre-approval Policy and Procedures Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by our audit committee or the engagement is entered into pursuant to the pre-approval procedure described below. From time to time, our audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval details the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. 60 Part IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements For a list of the financial statements included herein, see Index to the Financial Statements on page 32 of this Annual Report, incorporated into this Item by reference. 2. Financial Statement Schedules Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the financial statements or the notes thereto. 61 3. Exhibits The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report are listed in the Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated by reference herein. Exhibit Number Description of Document Incorporated by reference from Form Filing Date Exhibit Number Filed Herewith 2.2 Form of Plan of Conversion 8-K 02-22-2021 2.1 3.1 Certificate of Incorporation of the Company 8-K 02-22-2021 3.1 3.2 Bylaws of the Company 8-K 02-22-2021 3.2 3.3 Form of Warrant after Conversion from an LLC to a Corporation S-1/A 01-28-2020 3.5 3.4 Form of Series A Warrant S-1/A 02-05-2021 3.6 4.1 Form of Common Stock Certificate S-1/A 10-08-2020 4.1 4.2 Form of Representative’s Common Stock Purchase Warrant 8-K 02-22-2021 4.1 4.3 Description of Securities X 10.1 # Employment Agreement of Michael T. Lawless S-1 01-10-2020 10.1 10.2 # Employment Agreement of Peter Shoebridge S-1 01-10-2020 10.2 10.3 # Form of Auddia Inc. 2021 Equity Incentive Plan S-1/A 10-22-2020 10.3 10.4 Collateral and Security Agreement with Related Party (Minnicozzi) S-1/A 01-28-2020 10.4 10.5 Form of Amendment to Collateral and Security Agreement with Related Party S-1/A 10-08-2020 10.5 10.6 Form of Convertible Promissory Note S-1/A 01-28-2020 10.6 10.7 Business Loan Agreement and Guaranty of Related Party with Bank of the West S-1/A 01-28-2020 10.7 10.8 ** Agreement with Major United States Broadcast Company S-1/A 01-28-2020 10.8 10.9 Form of Bridge Note S-1/A 10-22-2020 10.9 10.10 Form of Warrant Agent Agreement S-1/A 02-05-2021 10.10 10.11 Amendment to Bridge Note S-1/A 10-22-2020 10.14 10.15 Amended Business Loan Agreement with Bank of the West X 23.1 Consent of Daszkal Bolton LLP, Independent Registered Public Accounting Firm X 24.1 Power of Attorney (included on signature page) 31.1 Section 302 Certification by the Corporation’s Chief Executive Officer X 31.2 Section 302 Certification by the Corporation’s Chief Financial Officer X 32.1 Section 906 Certification by the Corporation’s Chief Executive Officer X 32.2 Section 906 Certification by the Corporation’s Chief Financial Officer X 101.INS XBRL Instance Document 101.SCH XBRL Schema Document 101.CAL XBRL Calculation Linkbase Document 101.DEF XBRL Definition Linkbase Document 101.LAB XBRL Label Linkbase Document 101.PRE XBRL Presentation Linkbase Document ____________________________ # 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 62 Item 16. Form 10-K Summary The Company has elected not to include summary information. 63 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/ Michael Lawless Michael Lawless President, Chief Executive Officer and Director By: /s/ Richard Liebman Richard Liebman Chief Financial Officer Date: March 31, 2021 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose individual signature appears below hereby authorizes and appoints each of Michael Lawless and Richard Liebman, with full power of substitution and re-substitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 31st day of March, 2021. /s/ Jeffery Thamann, M.D. Executive Chairman and Director Jeffrey Thramann, M.D. /s/ Michael Lawless President, Chief Executive Officer and Director (Principal Executive Officer) Michael Lawless /s/ Richard Liebman Chief Financial Officer (Principal Financial and Accounting Officer) Richard Liebman /s/ Stephen Deitsch Director Stephen Deitsch /s/ Timothy Hanlon Director Timothy Hanlon /s/ Thomas Birch Director Thomas Birch 64