What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-23 compared with 2022-02-17 · 327 added, 248 removed, 166 unchanged (78% of the section changed)

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

You should read the

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

(prepared in accordance with accounting principles generally accepted in the United States (“U.S.

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 statements.

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.

You should read the following

discussion and analysis of our financial condition and results of operations in conjunction with the audited financial statements (prepared

in accordance with accounting principles generally accepted in the United States (“U.S.

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 statements.

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.

amounts presented in tables, other than per share amounts, are in thousands unless otherwise noted.

We are 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.

We are leveraging these technologies to bring to market two industry first Apps, Faidr and Vodacast.

The Faidr app gives consumers

the opportunity to listen to any AM/FM radio station with no commercials while personalizing the listening experience through skips, the

insertion of on-demand content and the programming of audio routines to customize listening sessions such as a daily commute.

App represents the first-time consumers can access the local content uniquely provided by radio in the commercial free and personalized

manner many consumers have come to demand for media consumption.

We are leveraging our

legacy business to bring to market a premium AM/FM radio listening experience through Faidr.

presented in tables, other than per share amounts, are in thousands unless otherwise noted.

Auddia is a technology company

headquartered in Boulder, CO that is reinventing how consumers engage with audio through the development of a proprietary AI platform

for audio and innovative technologies for podcasts.

Auddia is leveraging these technologies within its industry-first audio Superapp,

faidr (previously known as the Auddia App).

faidr gives consumers the

opportunity to listen to any AM/FM radio station with no commercials while personalizing the listening experience through skips and the

insertion of on-demand content, including popular and new music, news, and weather.

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 and exclusive content, branded faidrRadio, which

includes new artist discovery, curated music stations, and Music Casts.

Music Casts are unique to faidr.

Hosts and DJs can combine on-demand

talk segments with dynamic music streaming, which allows users to hear podcasts with full music track plays embedded in the episodes.

Auddia has also developed

a podcasting platform that provides a unique suite of tools that helps Podcasters create additional digital content for their podcast

episodes as well as plan their episodes, build their brand, and monetize their content with new content distribution channels.

platform also gives users the ability to go deeper into the stories through supplemental, digital content, and eventually comment and

contribute their own content to episode feeds.

Both of Auddia’s offerings

address large and rapidly growing audiences.

The Company has developed

its 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 is learning

the differences between all other content to include weather reports, traffic, news, sports, DJ conversation, etc.

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 Company is leveraging

this technology platform within its premium AM/FM radio listening experience through the faidr App.

The faidr App is intended to be downloaded

by consumers who will pay a subscription fee to listen to any streaming AM/FM radio station without commercials.

Advanced features will

allow consumers to skip any content heard on the station, request audio content on-demand, and program an audio routine.

We believe Faidr

represents a significant differentiated audio streaming product that will be the first to come to market since the emergence of popular

streaming music apps such as Pandora, Spotify, Apple Music, Amazon Music, etc.

We believe that the most significant point of differentiation

is that in addition to music, the App is intended to deliver non-music content that includes local sports, news, weather, traffic and

the discovery of new music.

Radio is the dominant audio platform for local content and new music discovery.

We launched Faidr and

through several consumer trials in 2021 to measure consumer interest and engagement with the App.

We are continuing to advance the training

of our proprietary AI technology and launching all major U.S.

radio stations in the App on February 15, 2022.

The Faidr mobile App

is available today through the iOS and Android App stores.

We also have developed

a podcasting platform called Vodacast.

Vodacast provides a unique suite of tools that helps Podcasters create additional digital content

for their podcast episodes as well as plan their episodes, build their brand around their Podcast and monetize their content with new

monetization channels.

One innovative and proprietary part of the Vodacast platform is the availability of tools to create and distribute

an interactive digital feed which supplements podcast episode audio with additional digital.

These content feeds allow podcasters to tell

deeper stories to their listeners while giving podcasters access to digital revenue for the first time.

Podcasters will be able to build

these interactive feeds using The Vodacast Hub, a content management system that also serves as a tool to plan and manage podcast episodes.

The digital feed activates a new digital ad channel that turns every audio ad into a direct-response digital ad, increasing the effectiveness

and value of their established audio ad model.

The feed also presents a richer listening experience, as any element of a podcast episode

can be supplemented with images, videos, text and web links.

This feed appears fully synchronized in the Vodacast mobile App, and it also

can be hosted and accessed independently (e.g., through any browser), making the content feed universally distributable.

Vodacast will also introduce

a unique and industry first multi-channel, highly flexible set of revenue channels that podcasters can activate in combination to allow

listeners to choose how they want to consume and pay for content.

“Flex Revenue” allows podcasters to continue to run their

standard audio ad model and complement those ads with direct response enabled digital ads in each episode content feed, increasing the

value of advertising on any podcast.

“Flex Revenue” will also activate subscriptions, on-demand fees for content (e.g., listen

without audio ads for a micro payment fee) and direct donations from listeners.

Using these channels in combination, podcasters can maximize

revenue generation and exercise higher margin monetization models, beyond basic audio advertising.

These revenue channels are expected

to be available to Podcasters in 2022.

The Vodacast mobile App

is available today through the iOS and Android App stores.

We have initiated efforts

to recruit podcast hosts to Vodacast to onboard their podcast, create digital feeds, and encourage their listening audience to download

and listen through the Vodacast App.

We expect to continue to attract podcasts and their listening audience to Vodacast through paid promotion

throughout 2022.

by consumers who will pay a subscription fee in order to listen to any streaming AM/FM radio station without commercials, podcasts and

the faidrRadio exclusive content offerings.

Advanced features will allow consumers to skip any content heard on the station, request audio

content on-demand, and program an audio routine.

We believe the faidr App represents a significant differentiated audio streaming product,

or Superapp, that will be the first to come to market since the emergence of popular streaming music apps such as Pandora, Spotify, Apple

Music, Amazon Music, etc.

We believe that the most significant point of differentiation is that in addition to ad-free AM/FM streaming,

the faidr App is intended to deliver non-music content that includes local sports, news, weather, traffic and the discovery of new music

alongside exclusive programming and podcasts.

No other radio 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,

Podcasts will be added before the end of Q1, 2023.

The Company has also developed

its podcasting platform, which leverages technologies and proven product concepts to differentiate its podcasts offering from other competitors

in the radio streaming product category.

With podcasting growing and

predicted to grow at a rapid rate, the Auddia podcast platform was conceptualized to fill a void in the emerging audio media space.

platform aims to be the preferred podcasting solution for podcasters by enabling them to deliver digital content feeds that match the

audio of their podcast episodes, and by enabling podcasters to make additional revenue from new digital advertising channels;

on-demand fees for exclusive content;

and through direct donations from their listeners.

Today, podcasters do not have a preference

as to where their listeners access their episodes, as virtually all listening options (mobile apps and web players) deliver only their

podcast audio.

By creating a platform on which they can make net new and higher margin revenue, we believe that podcasters will promote

faidr to their listeners, thus creating a powerful, organic marketing dynamic.

One innovative and proprietary

part of the podcast platform is the availability of tools to create and distribute an interactive digital feed which supplements podcast

episode audio with additional digital.

These content feeds allow podcasters to tell deeper stories to their listeners while giving podcasters

access to digital revenue for the first time.

Podcasters will be able to build these interactive feeds using The Podcast Hub, a content

management system that also serves as a tool to plan and manage podcast episodes.

The digital feed activates a new digital ad channel

that turns every audio ad into a direct-response, relevant-to-the-story, digital ad, increasing the effectiveness and value of their established

audio ad model.

The feed also presents a richer listening experience, as any element of a podcast episode can be supplemented with images,

videos, text and web links.

This feed will appear fully synchronized in the faidr mobile App, and it also can be hosted and accessed independently

(e.g., through any browser), making the content feed universally distributable.

Over time, users will be

able to comment, and podcasters will be able to grant some users publishing rights to add content directly into the feed on their behalf.

This will create another first for podcasting, a dialog between creator and fan, synchronized to the episode content.

The podcast capabilities

within faidr will also introduce a unique and industry first multi-channel, highly flexible set of revenue channels that podcasters can

activate in combination to allow listeners to choose how they want to consume and pay for content.

“Flex Revenue” allows podcasters

to continue to run their standard audio ad model and complement those ads with direct response enabled digital ads in each episode content

feed, increasing the value of advertising on any podcast.

“Flex Revenue” will also activate subscriptions, on-demand fees

for content (e.g., listen without audio ads for a micro payment fee) and direct donations from listeners.

Using these channels in combination,

podcasters can maximize revenue generation and exercise higher margin monetization models, beyond basic audio advertising.

These revenue

channels are expected to be available to Podcasters in 2022.

The faidr mobile App is available

today through the iOS and Android App stores.

We have funded our operations

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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 and Vodacast Apps;

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.

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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 may need

As a result, we will need

substantial additional funding to support our continuing operations and pursue our growth strategy.

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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.

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.

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As of December 31, 2022,

we had cash, cash equivalents and investments of $6.3 million, which we believe will fund our operating expenses and capital expenditure

requirements for at least the next 12 months.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust

our available capital resources sooner than we expect.

See “—Liquidity and capital resources.” To finance our operations

beyond that point, we will need to raise additional capital, which cannot be assured.

If we are unable to raise additional capital in

sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization

of our Apps or other research and development initiatives.

we had cash of $1.66 million, which will only be sufficient to fund our current operating plans into the second quarter of 2023.

has based these estimates, however, on assumptions that may prove to be wrong.

We will need additional funding to complete the development

of our full product line and scale products with a demonstrated market fit.

Management has plans to secure such additional funding.

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.

Components of our results of operations

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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

Historically, we had higher direct costs of services related to our legacy platform, however, since the termination of our legacy

services and platform in August 2020, these costs have been reduced.

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 Vodacast Apps.

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 will continue to incur such costs as we develop and enhance our technology related to faidr and the Vodacast platform.

Sales and marketing

Our sales and marketing

expenses consist primarily of salaries and consulting services, related to the sales, promotion and commercial trials performed during

the year related to our products.

We expect our sales and marketing expenses to increase substantially as we promote the national commercial

Our sales and marketing expenses

consist primarily of salaries and consulting services, related to the sales, promotion and commercial trials performed during the year

related to our products.

We expected our sales and marketing expenses to increase substantially as we promoted the national commercial

launch of our faidr product on February 15, 2022, and look to generate revenue for our products through customer acquisition and retention.

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

We cease capitalization of development costs once the software has been substantially completed and is available for its

intended use.

Since our inception, we have

focused significant resources on our research and development activities related to the software development of our technology.

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 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.

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 substantial research and development expenses and capitalization in the future as we continue to develop our Faidr and Vodacast

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.

General and administrative

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We expect our general and administrative expenses to continue

to increase in the future as we expand 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.

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

Our other income and

expense consist of interest income related to our cash at financial institutions, debt extinguishment related to our PPP loans, interest

expense from our line of credit, and a finance charge related to conversion of outstanding debt into shares of common stock related to

the February 2021 IPO.

We expect our other expense to decrease as we paid off our outstanding balance on our line of credit and will not

incur any additional debt conversion charges.

expense during 2021 consist of interest income related to our cash at financial institutions, debt extinguishment related to our PPP loans,

interest expense from our line of credit, and a finance charge related to conversion of outstanding debt into shares of common stock related

to the February 2021 IPO.

On November 14, 2022, the Company entered into a secured bridge note (“Note”) financing with one

accredited investor, who is a significant existing shareholder of the Company, for $2.2 million.

The interest expense for 2022 is primarily

attributed to the debt and conversion features of such Note.

Results of operations

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2022, and 2021

The following table summarizes our results

of operations:

The following table summarizes our results of

Year Ended December 31,

Operating expenses

Direct costs of service

Direct cost of service

Sales and marketing

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$ (13,478,069 )

$ (9,426,848 )

Total revenues for the

twelve months ended December 31, 2021 were $0, which was a decline of $110,924 or 100%, from $110,924 from the twelve months ended December

The decrease in revenue can be attributed to the August 2020 termination of our legacy platform which eliminated all platform

fee and advertising revenue while we continue to develop the new Faidr and Vodacast products to establish new revenue streams.

Direct Cost of Services

Total revenues for the twelve

months ended December 31, 2022, and 2021 were $0 as we continue to develop our faidr product and the Vodacast platform to establish new

revenue streams.

Direct Cost of Services

decreased $211,829 or 52.7%, from $402,016 for the year ended December 31, 2020 compared to $190,187 for the year ended December 31, 2021.

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 expenses.

We continue to incur direct cost of services expense related

to hosting and other music services related to our Faidr App and expect these costs to increase in the future.

Direct Cost of Services decreased

by $9,497 or 5%, from $190,187 for the year ended December 31, 2021, to $180,690 for the year ended December 31, 2022.

This decrease was

primarily the result of a reduction in platform hosting costs which were partially offset by an increase in other music services.

to incur direct cost of services expense related to hosting and other music services related to faidr and Vodacast and expect these costs

to increase in the future.

Sales and marketing

Sales and marketing expenses

increased by $418,283 or 129.8%, from $322,369 for the year ended December 31, 2020 to $740,652 for the year ended December 31, 2021 as

we established and hired our internal marketing team and increased our promotion expenses related to the consumer trials for Faidr and

podcaster promotion for Vodacast.

increased by $933,040 or 126%, from $740,652 for the year ended December 31, 2021, to $1,673,692 for the year ended December 31, 2022,

primarily attributed to the increased marketing and promotion costs associated with faidr and Vodacast.

Research and development

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expenses increased by $255,358 or 64%, from $399,521 for the year ended December 31, 2021, to $654,879 for the year ended December 31,

2021 primarily related to additional staffing on our development team as we continue to advance the Faidr and Vodacast Apps.

and development staffing costs were $1,835,451 and capitalized software expenses of $1,472,290 for the year ended December 31, 2021 as

compared to staffing costs of $947,318 and capitalized software expenses of $867,578 for the year ended December 31, 2020.

development time was spent on our Faidr and Vodacast Apps.

We started amortizing development expenses toward Vodacast, however, we continue

to make significant enhancements to the Vodacast App and will continue to incur capitalized costs and additional amortization on our Vodacast

We are continuing to develop and add significant capabilities to our Faidr App up through and continuing beyond our national launch

on February 15, 2022.

We anticipate amortization expense on our Faidr App to start in 2022.

2022, primarily related to additional staffing on our development team as we continue to advance the faidr Superapp.

Our research and

development staffing costs were $2,408,737 and our software amortization expenses were $956,144 for the year ended December 31, 2022,

as compared to staffing costs of $1,835,451 and software amortization expenses of $146,737 for the year ended December 31, 2021.

General and administrative

expenses increased by $2,781,449 or 215.5%, from $1,290,970 for the year ended December 31, 2020 compared to $4,072,419 for the year ended

expenses decreased by $848,899 or 21%, from $4,072,419 for the year ended December 31, 2021, compared to $3,223,520 for the year ended

December 31, 2022.

The increase resulted primarily from increased stock compensation expense related to employee stock options granted

during the year and expenses related to operating as a public company.

Stock compensation expense was $1,237,480 and $69,841 for the year

ended December 31, 2021 and 2020, respectively.

We saw an increase of approximately $918,000 in public company expenses related to legal

and other professional fees preparing to operate as a public company.

We also saw an increase of approximately $500,000 in general and

administrative expenses related to payroll expenses as we increased salaries for full time positions that were previously reduced prior

to our February 2021 IPO, in addition to hiring a full time Chief Financial Officer during the year.

Interest expense/Other

Total interest expense/other

expense increased by $6,240,263 or 374.0%, from $1,668,371 for the year ended December 31, 2020 to $7,908,634 for the year ended December

The increase was due almost entirely to a finance charge of $8,141,424 to interest expense related to the conversion of outstanding

debt into 6.8 million shares of common stock related to the February 2021 IPO.

This was offset by our extinguishment of debt related to

our PPP loans in the amount of $536,144, which was approved in full under the loan forgiveness program and reduced interest expense of

$1,361,858 related to lower outstanding line of credit and related party notes payable balances.

The decrease resulted primarily from reduced stock compensation expense related to cancelled employee stock option

Stock compensation expense was $951,106 and $1,237,480 for the year ended December 31, 2022, and 2021, respectively.

a reduction of approximately $522,000 in public company expenses related to legal and other professional fees associated with the IPO

Other expense,

Total other expense decreased

by $7,735,608 or 98%, from $7,908,634 for the year ended December 31, 2021, to $173,026 for the year ended December 31, 2022.

was due almost entirely to a finance charge of $8,141,424 to interest expense related to the conversion of outstanding debt into 6.8 million

shares of common stock related to the February 2021 IPO.

This was offset by our extinguishment of debt related to our PPP loans in 2021

in the amount of $536,144, which was approved in full under the loan forgiveness program.

Since our inception in 2012,

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.

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.

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,

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value, which is zero based on our operating history.

Going Concern

Our existing cash of

$1.66 million at December 31, 2022 will only be sufficient to fund our current operating plans into the second quarter of 2023.

has based these estimates, however, on assumptions that may prove to be wrong.

We will need additional funding to complete the development

of our full product line and scale products with a demonstrated market fit.

Management has plans to secure such additional funding.

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.

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.

Liquidity and capital

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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 Vodacast

losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our faidr app and

Vodacast platform.

As of December 31, 2022, and 2021 we had cash of $1,661,434 and $6,345,291, respectively.

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, perform commercial

trials and work on nationally launching all stations on the Faidr App.

In February 2021, we completed an IPO of 3,991,818

units, at $4.125 per unit, consisting of one share of common stock and one warrant to purchase one share of common stock at an exercise

price of $4.54 per share.

After deducting underwriters’ commissions and expenses, the Company received net proceeds of approximately

$15.2 million.

Due to the successful completion of the IPO, all the Company’s existing convertible debt, accrued interest, accrued

fees payable to related parties, and promissory notes were converted into shares of common stock.

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.

The Company and

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

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.

During the year ended December 31, 2021, we have

reduced our bank debt by $6.0 million, paid down a significant percentage of our accounts payable, and eliminated all deferred compensation

owed to a related party.

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.

We have a deficiency in working

capital in the amount of approximately $600,000 at December 31, 2022.

We anticipate that operating losses and net cash used in operating

activities will continue over the next 12 months as we continue to develop and market our products.

$2.0 Million Secured

Bridge Note Financing

On November 14, 2022,

the Company entered into a secured bridge note (“Note”) financing with one accredited investor who is a significant existing

stockholder of the Company.

The Company received $2.0 million of net proceeds in connection with the Note.

The principal amount of the

Note is $2.2 million.

The Note has a 10% interest rate and matures on May 31, 2023.

The Note is secured by a lien on substantially all

of the Company’s assets.

At maturity, the investor has the option to convert any original issue discount and accrued but unpaid

interest into shares of the Company’s Common stock at a fixed conversion price of $1.23 per share.

In connection with the Note financing,

the Company issued to the investor 300,000 common stock warrants with a five-year term and a fixed $2.10 per share exercise price.

Company has the option to extend the maturity date by six months to November 30, 2023.

In the event of an extension, the interest rate

on the Note will increase to 20% and the Company will issue to the investor an additional 300,000 warrants.

investor will not be able to receive shares upon conversion or exercise, unless prior stockholder approval is obtained, if the number

of shares to be issued to the investor, when aggregated with all other shares of common stock then owned by the investor beneficially

or deemed beneficially owned by the investor, would (i) result in the investor owning more than the Beneficial Ownership Limitation (as

defined below), as determined in accordance with Section 13 of the Securities Exchange Act of 1934 or (ii) otherwise constitute a Change

of Control within the meaning of Nasdaq Rule 5635(b).

The “Beneficial Ownership Limitation” shall be 19.99% of the number

of shares of the common stock outstanding immediately prior to the proposed issuance of shares of common stock.

foregoing description of the Note and related security agreement and warrants is qualified in its entirety by reference to the full text

of those agreements.

Equity Line Common Stock

Purchase Agreement

On November 14, 2022, the

Company entered into a Common Stock Purchase Agreement (the “White Lion Purchase Agreement”) with White Lion Capital, LLC,

a Nevada limited liability company (“White Lion”).

Pursuant to the White Lion Purchase Agreement, the Company has the right,

but not the obligation to require White Lion to purchase, from time to time, the lesser of (a) $10,000,000 and (b) the amount eligible

under Form S-3 (the “Commitment Amount”) in aggregate gross purchase price of newly issued shares of the Company’s common

Subject to the satisfaction

of certain customary conditions, the Company’s right to sell shares to White Lion will extend until the earlier of (a) December

and (b) the date that all shares are sold under the White Lion Purchase Agreement (the “Commitment Period”).

such term, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when the Company

exercises its right to sell shares (the effective date of such notice, a “Notice Date”), and shall delivery the applicable

shares of common stock to White Lion along with the purchase notice.

The number of shares sold pursuant to any such notice may not exceed

the lesser of:

(i) 30% of the average of the daily trading volume of the Company’s common stock over the five business days immediately

preceding the date of delivery of a purchase notice;

or (ii) $500,000, divided by the highest closing price of the Common Stock over the

most recent five business days immediately preceding receipt of a purchase notice;

and the maximum dollar amount of any purchase notice

cannot exceed $500,000, subject to White Lion’s wavier of such limitations.

The closing date of each sale of shares of common stock

under the White Lion Purchase Agreement occurs one business day after the end of the Valuation Period (defined below).

The purchase price to

be paid by white Lion for any such shares will equal 97% of the lowest daily volume-weighted average price of common stock during a period

of three consecutive trading days commencing on, and following, the applicable Notice Date (the “Valuation Period”).

notice shall result in White Lion beneficially owning (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934,

as amended, and Rule 13d-3 thereunder) more than 4.9% of the number of shares of the common stock outstanding immediately prior to the

issuance of shares of common stock issuable pursuant to a purchase notice.

The Company may terminate

the White Lion Purchase Agreement at any time in the event of a material breach of the Agreement by White Lion.

In addition, the White

Lion Purchase Agreement automatically terminates on the earlier of (i) the end of the Commitment Period or (ii) the date that, pursuant

to or within the meaning of any bankruptcy law, the Company commences a voluntary case or any person commences a proceeding against the

In consideration for the

commitments of White Lion, as described above, the Company issued to White Lion, 140,186 shares of common stock (the “Commitment

Any proceeds that the Company

receives under the White Lion Purchase Agreement are expected to be used for working capital and general corporate purposes.

The aggregate number of shares

of common stock that the Company can sell to White Lion under the White Lion Purchase Agreement (including the Commitment Shares) may

in no case exceed 2,501,700 shares of the common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding

immediately prior to the execution of the White Lion Purchase Agreement) (the “Exchange Cap”), unless stockholder approval

is obtained to issue purchase shares above the Exchange Cap, in which case the Exchange Cap will no longer apply.

Cash Flow Analysis

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Financing activities

(11,251,608 )

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

$ (4,683,857 )

$ (10,911,234 )

Operating Activities

Cash used in operating

activities for the year ended December 31, 2021 was $5,471,545, primarily resulting from our net loss of $13,478,069 and change in working

capital of $1,002,893 related to paying down our accounts payable balance from the prior year, partially offset by non-cash charges of

Cash used in operating activities primarily consisted of personnel-related expenditures, payments included costs of operations,

and other sales efforts, research and development and administrative costs.

Cash provided by operating

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

Cash used in operating activities

primarily consisted of personnel-related expenditures, payments included costs of operations, and other sales efforts, research and development

and administrative costs.

for the year ended December 31, 2022, was $4,752,750, primarily resulting from our net loss of $6,897,446, partially offset by non-cash

charges of $2,131,362.

Cash used in operating activities

for the year ended December 31, 2021, of $5,471,545 was primarily the result of our net loss of $13,478,069, and a change in working capital

of $1,002,893 related to paying down our accounts payable balance from the prior year.

These uses were partially offset by non-cash charges

totaling $9,009,417.

Cash used in operating activities

for both years primarily 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 year ended December 31, 2021 consisted primarily of capitalization of software development expenses of $1,472,290.

Cash flows used in investing

activities for the year ended December 31, 2020 consisted primarily of capitalization of software development expenses of $867,578.

activities for the year ended December 31, 2022, and December 31, 2021, consisted primarily of capitalization of software development

expenses of $1,927,298 and $1,472,290, respectively.

Financing Activities

Cash flows provided by

financing activities for the year ended December 31, 2021 increased by $10,561,280 from the prior year, primarily related to $20,324,293

from the issuance of common shares related to our February 2021 IPO, exercise of Series A warrants and proceeds from our PPP loans.

was partially offset by a $6,000,000 repayment on our line of credit, and repayment of deferred salary and related party notes payable

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.

Cash flows provided by financing

activities for the year ended December 31, 2022, of $2,000,000 was associated with the proceeds from the secured bridge note financing

in November 2022.

Cash flows provided by financing

activities for the year ended December 31, 2021, increased by $13,251,608 from the prior year, primarily related to $20,041,811 from the

issuance of common shares related to our February 2021 IPO.

This was partially offset by a $6,000,000 repayment on our line of credit,

and repayment of deferred salary and related party notes payable of $960,849.

Funding Requirements

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respectively.

We believe that the net proceeds from our February 2021 IPO and additional net proceeds of $4,953,552 million received from

the July 2021 Series A Warrant exercises, 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 efforts.

Our cash is comprised

primarily of demand deposit accounts and money market funds.

We believe our existing cash and cash generated from operations will be sufficient

to meet our working capital and capital expenditure needs over at least the next 12 months.

We expect our expenses to increase substantially

in connection with our ongoing activities, particularly as we continue the development of the Faidr and Vodacast Apps.

In addition, we

expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations

and other expenses.

Our existing cash of $1.66 million at December 31, 2022, will only be sufficient to fund our current operating plans into

the second quarter of 2023.

The Company has based these estimates, however, on assumptions that may prove to be wrong.We will need additional

funding to complete the development of our full product line and scale products with a demonstrated market fit.

Management has plans to

secure such additional funding.

If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce,

or eliminate our technology development and commercialization efforts

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 commercial trials and national launch related to our Faidr App and obtaining market acceptance

the ability to attract and retain podcasters to our Vodacast App and retaining listeners on the platform

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

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Represents minimum payments due for the lease of office space without consideration of renewal options

Off-balance sheet

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

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 Policies and Estimates

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condition and results of operations.

Software Development

Software Development Costs

The Company accounts for costs incurred in the

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capitalization of development costs once the software has been substantially completed and is available for its intended use.

development costs are amortized over a useful life estimated by the Company’s management of five years.

development costs are amortized over a useful life estimated by the Company’s management of three years.

Costs associated with significant

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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 from the St.

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.

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 from

Louis Federal Reserve Bank 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.

The expected life of the option was estimated

based on a mid-point method calculation.

Prior to our IPO in February

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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 7. Management’s Discussion and Analysis