What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-17 compared with 2021-03-31 · 54 added, 279 removed, 26 unchanged (93% of the section changed)

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock

has been traded on the Nasdaq Stock Market under the symbol “AUUD”

since our IPO on February 17, 2021.

A Warrants have been traded on the Nasdaq Stock Market under the symbol “AUUDW”

since our IPO on February 17, 2021.

As of March 15, 2021, there were approximately 130 holders of record of our common stock and 130 holders of record of our Series

These numbers are based on the actual number of holders registered at such date and does not include holders whose

shares are held in “street name”

by brokers and other nominees.

We have never

paid any cash dividends on our common stock.

We currently intend to retain all available funds and any future earnings for use

in the operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial

condition, operating results, capital requirements, general business conditions and other factors that our board of directors may

deem relevant.

Securities Authorized for Issuance under Equity Compensation

Our common stock has

been traded on the Nasdaq Stock Market under the symbol “AUUD” since our IPO on February 17, 2021.

Our Series A Warrants

have been traded on the Nasdaq Stock Market under the symbol “AUUDW” since our IPO on February 17, 2021.

As of February 17,

2022, there were approximately 134 holders of record of our common stock and 1 holder of record of our Series A warrants.

These numbers

are based on the actual number of holders registered at such date and does not include holders whose shares are held in “street

name” by brokers and other nominees.

We have never paid any

cash dividends on our common stock.

We currently intend to retain all available funds and any future earnings for use in the operation

of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Any future determination

to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results,

capital requirements, general business conditions and other factors that our board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides certain information

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Equity Compensation Plans Not Approved by Stockholders

(1) Consists of stock options granted under the Clip Interactive, LLC 2013 Equity Incentive Plan, as amended.

We ceased granting

awards under the 2013 Plan upon the implementation of the 2021 Plan described below.

The Company’s 2021 Equity Incentive Plan, which became

effective upon the completion of the IPO in February 2021, serves as the successor equity incentive plan to the 2013 Plan.

2021 Plan and has 1,500,000 shares of common stock available for issuance.

The 2021 Equity Incentive Plan contains an “evergreen”

provision, pursuant to which the number of shares of common stock reserved for issuance pursuant to awards under such plan shall

be increased on the first day of each year beginning in 2022 and ending in 2030 equal to the lesser of (a) five percent (5%) of

the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such

smaller number of shares of stock as determined by our board of directors.

Consists of stock options granted under the Clip Interactive, LLC 2013 Equity Incentive Plan, as amended and Auddia Inc.

2021 Equity Incentive Plan, as amended.

We ceased granting awards under the 2013 Plan upon the implementation of the 2021 Plan described below.

The Company’s 2021 Equity Incentive Plan,

which became effective upon the completion of the IPO in February 2021, serves as the successor equity incentive plan to the 2013 Plan.

The 2021 Equity Incentive Plan contains an “evergreen”

provision, pursuant to which the number of shares of common stock reserved for issuance pursuant to awards under such plan shall be increased

on the first day of each year beginning in 2022 and ending in 2030 equal to the lesser of (a) five percent (5%) of the shares of stock

outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such smaller number of shares

of stock as determined by our board of directors.

On January 1, 2022, the Company had an additional 620,820 shares added to the 2021 Equity

Incentive Plan pursuant to the evergreen provision.

Recent Sales of Unregistered Securities

During the year ended December 31, 2020, the Company sold to

investors $404,601 of our convertible notes.

As described in Note 11 to our financial statements, all of these convertible notes

converted into shares of common stock in connection with our February 2021 IPO.

During the year ended December 31, 2020, the Company

sold to investors $404,601 of our convertible notes.

All of these convertible notes converted into shares of common stock in connection

with our February 2021 IPO.

Use of Proceeds

On February 16, 2021, the U.S.

and Exchange Commission declared effective our registration statement on Form S-1 (File No.

333-235891), as amended, filed in connection

with our IPO.

There has been no material change in the planned use of proceeds from our IPO from that described in the related

prospectus dated February 16, 2021, filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act.

As described in such

IPO prospectus, we have used IPO proceeds to reduce our bank debt by $4.0 million, to fund a $2.0 million cash reserve to serve

as collateral for our remaining $2.0 million of bank debt that replaces collateral previously provided by a related party, to pay

down a significant percentage of our accounts payable as of December 31, 2020, and to pay deferred compensation owed to a related

Securities and

Exchange Commission declared effective our registration statement on Form S-1 (File No.

333-235891), as amended, filed in connection with

There has been no material change in the planned use of proceeds from our IPO from that described in the related prospectus dated

February 16, 2021, filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act.

As described in such IPO prospectus, we have

used IPO proceeds to reduce our bank debt by $4.0 million, to fund a $2.0 million cash reserve to serve as collateral for our remaining

$2.0 million of bank debt that replaced collateral previously provided by a related party, to pay down a significant percentage of our

accounts payable as of December 31, 2020, and to pay deferred compensation owed to a related party.

In July 2021, certain holders of our publicly

traded Series A Warrants exercised approximately 1.1 million warrants for approximately 1.1 million shares of common stock at the cash

exercise price of $4.5375 per share and as a result, we received additional cash proceeds of approximately $5.0 million.

we paid the remaining $2.0 million, out of our restricted cash, to pay off and terminate our line of credit.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the

period covered by this Annual Report.

We did not repurchase any of our equity securities during the period

covered by this Annual Report.

Selected Financial Data

Our selected financial

data set forth below should be read together with Part II, Item 7, “Management’s Discussion and Analysis of Financial

Condition and Results of Operations”

and our financial statements and the related notes thereto, which are included elsewhere

in this Form 10-K (dollars in thousands, except per share data).

data set forth below should be read together with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” and our financial statements and the related notes thereto, which are included elsewhere in this Form

Year Ended December 31,

1 unchanged sentence

Total revenues

Operating income

Operating loss

$ (5,569,435 )

2 unchanged sentences

$ (4,051,221 )

Earnings per share, basic

Earnings per share, diluted

Loss per share, basic

Loss per share, diluted

As of December 31,

2 unchanged sentences

Total liabilities

Total deficiency in shareholders' equity

$ (13,103,250 )

$ (9,228,877 )

Management’s Discussion and Analysis of Financial Condition and Results of Operations

read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited

and unaudited financial statements (prepared in accordance with accounting principles generally accepted in the United States

GAAP”)) and related notes included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”).

The following discussion contains forward-looking statements that are subject to risks and uncertainties.

See “Special Note

Regarding Forward-Looking Statements”

for a discussion of the uncertainties, risks, and assumptions associated with those

Actual results could differ materially from those discussed in or implied by forward-looking statements as a result

of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “Risk

Factors.”

Unless we state otherwise or the context otherwise requires, the terms “we,”

“us,”

“our”

and the “Company”

refer Auddia Inc.

and its subsidiaries.

All amounts presented in tables, other than per share amounts,

are in thousands unless otherwise noted.

Results of operations

Years ended December 31, 2020 and

Operating activities:

The following table summarizes our

results of operations:

Increase/ (Decrease)

Operating expenses:

Direct Costs of Service

Research and development

General and administrative

Sales & Marketing

Total operating expense

Loss from operations

Other income (expense), net:

December 31, 2020 and 2019

Total revenues.

revenues for the twelve months ended December 31, 2020 were $110,924 which was a decline of $347,902 or 75.8%, from $458,826 from

the twelve months ended December 31, 2019.

The decrease in revenues can be attributed to (i) the July 1, 2020 termination of our

Legacy Platform which caused yearly Platform Fees to decrease to $85,800 for the year ended December 31, 2020 from $249,775 for

the year ended December 31, 2019 and (ii) a similar large decrease in advertising revenue, which declined to $25,124 for the

year ended December 31, 2020 compared to $209,051 for the year ended December 31, 2019.

Direct Cost of Services decreased $365,828 or 36.2%, from $1,011,401 for the year ended December 31, 2019 compared

to $645,573 for the twelve months ended December 31, 2020.

This decrease primarily resulted from the termination of our legacy

services and the decreased need for hosting, staff reductions to the team working on the current platform, and other related direct

Research and development expenses decreased by $207,215 or 66.3%, from $312,614 for the twelve months ended

December 31, 2019 compared to $105,399 for the twelve months ended December 31, 2020.

During 2020, the majority of the research

and development efforts were spent on our new apps, Vodacast and Auddia, which had not been commercially released, therefore $867,578

of research and development expenses were capitalized in the year ended December 31, 2020 compared to $704,167 capitalized in the

year ended December 31, 2019.

Sales and marketing.

and marketing expenses decreased by $53,649 or 40.5%, from $132,460 for the twelve months ended December 31, 2019 compared to $78,811

for the twelve months ended December 31, 2020 as the Company reduced marketing expenses tied to the legacy software platform.

administrative .

General and administrative expenses decreased by $1,140,825 or 40.7%, from $2,804,815 for the twelve months

ended December 31, 2019 compared to $1,663,990 for the year ended December 31, 2020.

The decrease resulted primarily from decreased

consulting and financial advisory fees and decreased amortization of stock option compensation expense.

Interest expense/Other

expense, net.

Total Interest expense/other expense increased by $240,590, or 16.8%, from $1,427,781 for the twelve months

ended December 31, 2019 compared to $1,668,371 for the twelve months ended December 31, 2020.

The increase was due almost entirely

to an increased debt levels, specifically the convertible debt as well as Notes Payable, debt to related parties, as well as interest

payments on the Company’s collateral agreement.

We had a net loss of $4,051,221 for the twelve months ended December 31,2020 compared to a net loss of $5,230,245

for the twelve months ended December 31, 2019.

The decreased loss resulted from the combination of the decrease in revenues and

the decreased operating expenses as discussed above.

Since our inception

in 2012, until the corporate conversion in February 2021, we were organized as a Colorado limited liability company for federal

and state income tax purposes and treated as a partnership for U.S.

income tax purposes.

As such, we were not viewed as a taxpaying

entity in any jurisdiction and do not require a provision for income taxes.

Each member of our company was responsible for the

tax liability, if any, related to its proportionate share of our taxable income.

Effective on February

16, 2021, we became treated as a corporation for U.S.

income tax purposes and thus became subject to U.S.

federal, state and local

income taxes and are be taxed at the prevailing corporate tax rates.

Among other things, we may begin to generate net operating

losses at the corporate level.

We will account for income taxes using an asset and liability approach, which requires recognition

of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial

statements but have not been reflected in taxable income.

A valuation allowance is established to reduce deferred tax assets to

their estimated realizable value which based on our operating history

Going Concern, and Capital Resources

We believe that

the net proceeds from our February 2021 IPO, will be sufficient to fund our current operating plans through at least the next 12 months.

We have based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources

much faster than we currently expect and need to raise additional funds sooner than we anticipate.

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

Our cash and cash

equivalents are comprised primarily of demand deposit accounts, money market funds and certificates of deposit.

We believe our

existing cash and cash equivalents and cash generated from operations will be sufficient to meet our working capital and capital

expenditure needs over at least the next 12 months.

Prior to our IPO,

we funded our operations from cash flows generated from operations and cash from the sale of equity securities and debt financing.

Following the Company’s IPO in February

2021, the Company paid down the outstanding principal balance on its bank line-of-credit from $6 million to $2 million.

and the bank agreed to reduce the maximum available balance for the line-of-credit to $2 million.

The outstanding balance under

the line of credit accrues interest at a variable rate based on the bank’s prime rate plus 1% (3.75% at December 31, 2020)

but at no time less than 4.0%.

Monthly interest payments are required, with any outstanding principal due on July 10, 2021.

line of credit is collateralized by all assets of the Company.

As described in our IPO prospectus, we have reduced our bank debt

by $4.0 million, used $2.0 million of our cash to serve as collateral for our remaining $2.0 million of bank debt that replaces collateral

provided by a related party, paid down a significant percentage of our accounts payable as of December 31, 2020, and eliminated

all deferred compensation owed to a related party.

Cash Flow Analysis

Our cash flows

from operating activities have historically been significantly impacted by revenues received, 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 years ended December 31, 2020 and 2019:

Year Ended December 31,

Net cash provided by (used in):

Operating activities

$ (1,992,381 )

$ (2,945,688 )

Investing activities

Financing activities

Change in cash, cash equivalents, restricted cash and restricted cash equivalents

Operating Activities

Cash provided

by operating activities for the year ended December 31, 2020 primarily consisted of payments received from our clients.

in operating activities primarily consisted of personnel-related expenditures, payments included costs of operations, and other

sales efforts, research and development and administrative costs.

Investing Activities

Cash flows used

in investing activities for the year ended December 31, 2020 consisted primarily of capitalization of software development expenses

Financing Activities

Cash flows from

financing activities for the year ended December 31, 2020 decreased from the prior year period primarily due to reduced fund raising

from the issuance of common and preferred stock and related third party debt.

Contractual Obligations

The following

table summarizes our contractual obligations not on our Balance Sheet as of December 31, 2020 and the effects that such obligations

are expected to have on our liquidity and cash flows in future periods:

Payments due by period

Operating lease commitments (1)

Represents minimum payments due for the lease of office space

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

Critical Accounting Policies and

Our financial

statements and accompanying notes have been prepared in accordance with U.S.

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.

Revenue Recognition

The Company derives its revenues from two

(1) Platform fee revenues, which are comprised of subscription fees from customers accessing the Company’s cloud-based

computing services and occasionally from customers paying a Development Fee;

and (2) Advertising revenues based on impressions

delivered via the Company’s Platform.

Revenues are recognized when a contract

with a customer exists, and the control of the promised services are transferred to our customers, in an amount that reflects the

consideration we expect to receive in exchange for those services.

Substantially all of our revenues are generated from contracts

with customers in the United States.

We adopted ASC

Topic 606, effective January 1, 2019, utilizing the modified retrospective method.

This approach was applied to contracts that

were not completed as of January 1, 2019, and the corresponding incremental costs of obtaining those contracts, which resulted

an immaterial cumulative effect adjustment to the opening balance of accumulated deficit at date of adoption.

The adoption of this

ASU primarily impacted our disclosures pertaining to revenue from our contracts with customers.

Reported results for fiscal year

2019 and the period ended December 31, 2020 reflect the application of ASC Topic 606, while the reported results for the fiscal

year ended December 31, 2018 was not adjusted and continue to be reported under ASC Topic 605.

Software Development

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.

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 five years.

Costs associated with significant upgrades and enhancements that result in additional functionality are 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.

Software development costs of $867,578 and $704,167 were capitalized in 2020

and 2019, respectively.

Amortization of expense of capitalized software development costs were $368,332 and $684,044 for the years

ended December 31, 2020 and 2019, respectively and are included in depreciation and amortization expense.

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.

common shares receive distributions if any in an order of priority in accordance with our limited liability company agreement.

Prior to our IPO in February

2021, we were a private company with no active public market for our common equity.

Therefore, we have periodically determined the overall

value of our company and the estimated per share fair value of our common equity at their various dates using contemporaneous valuations

performed in accordance with the guidance outlined in the American Institute of CPA’s Practice Aid.

With the completion of our IPO,

it will no longer be necessary for us to estimate the fair value of our common stock in connection with our accounting for equity awards

we may grant, as the fair value of our common stock will be its public market trading price.

For financial reporting

purposes, we performed common stock valuations with the assistance of a third-party specialist, for the years ended December 31,

2019 and 2018.

Our common stock valuations

were prepared using a market approach based on the most recent round of equity financing using the Option Pricing Model.

Total stockholders’ equity (deficit)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity