What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-24 · 274 added, 280 removed, 313 unchanged (64% of the section changed)

1 unchanged sentence

Condensed Balance Sheets

September 30, 2023

December 31, 2022

Current assets:

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Preferred stock - $ 0.001 par value, 10,000,000 authorized and 0 shares issued and outstanding

Common stock - $ 0.001 par value, 100,000,000 authorized and 19,947,223 and 12,654,949 shares issued and outstanding June 30, 2023 and December 31, 2022

Common stock - $ 0.001 par value, 100,000,000 authorized and 19,947,223 and 12,654,949 shares issued and outstanding September 30, 2023 and December 31, 2022

Additional paid-in capital

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Total liabilities and shareholders' equity

The accompanying notes are an integral part of these

unaudited condensed financial statements.

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Condensed Statements of Operations (Unaudited)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

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( 1,328,291 )

( 5,461,258 )

( 5,128,901 )

Other (expense) income:

Interest expense

( 1,133,398 )

Total other expense

( 1,133,398 )

Loss before income taxes

1 unchanged sentence

( 1,330,314 )

( 6,594,656 )

( 5,133,959 )

Provision for income taxes

1 unchanged sentence

$ ( 1,330,314 )

$ ( 6,594,656 )

$ ( 5,133,959 )

Net loss per share attributable to common stockholders

2 unchanged sentences

Basic and diluted

The accompanying notes are an integral part of these

unaudited condensed financial statements.

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Condensed Statements of Changes in Shareholders’

Equity (Unaudited)

For The Three and Six Months Ended June 30, 2023

For The Three and Nine Months Ended September 30, 2023

Paid-In-Capital

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Issuance of common shares, net of costs

Exercise of Restricted Stock Units

Issuance of warrants

Share-based compensation

Reclassification of share-based compensation liability

Revaluation of share-based compensation liability

( 2,322,862 )

2 unchanged sentences

$ ( 76,214,008 )

For The Three and Six Months Ended June 30, 2022

Share-based compensation

Revaluation of share-based compensation liability

( 2,116,482 )

Balance, September 30, 2023

$ ( 78,330,490 )

For The Three and Nine Months Ended September 30, 2022

Paid-In-Capital

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$ ( 68,642,032 )

The accompanying notes are an integral part of these

unaudited condensed financial statements.

Share-based compensation

Revaluation of share-based compensation liability

( 1,330,314 )

Balance, September 30, 2022

$ ( 69,972,348 )

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Condensed Statements of Cash Flows (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

1 unchanged sentence

$ ( 5,133,959 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating

Finance charge associated with debt issuance cost

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Net settlement of share-based compensation liability

Proceeds from related party debt, net of original issue discount

Proceeds from issuance of common shares, net of issuance costs

Proceeds from related party debt

Proceeds from issuance of common shares

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net increase in cash

( 5,388,161 )

Cash, beginning of period

Cash, end of period

Cash, beginning of year

Cash and restricted cash, end of period

Supplemental disclosures of cash flow information:

3 unchanged sentences

Original issue discount and issuance of warrants on related party debt

The accompanying notes are an integral part of these

unaudited condensed financial statements.

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Notes to Condensed Financial Statements (Unaudited)

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Description of Business

Auddia Inc., formerly Clip Interactive, LLC, (the

“Company”, “Auddia”, “we”, “our”) is a technology company that is reinventing how consumers

engage with audio through the development of a proprietary AI platform for audio and innovative technologies for podcasts.

Clip Interactive,

LLC was initially formed as a Colorado limited liability company on January 14, 2012, and on November 25, 2019, changed its trade name

On February 16, 2021, the Company completed an initial

public offering (the “IPO”) of 3,991,818 units, at $4.125 per unit, consisting of one share of common stock and one Series

A warrant to purchase one share of common stock at an exercise price of $4.54 per share.

In addition, the underwriters exercised their

option to purchase 598,772 Series A warrants to cover over-allotments and were issued 319,346 in representative warrants at an exercise

price of $5.15625 per share.

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

$ 15.1 million and its common stock commenced trading on Nasdaq under the ticker symbol “AUUD”.

Concurrently with the IPO,

holders of the Company’s promissory notes, convertible notes, and related party notes, along with accrued interest, were converted

into 6,814,570 shares of the Company’s common stock.

Concurrently with the IPO the Company converted from

a Colorado limited liability company to a Delaware corporation.

Auddia Inc., (the “Company”, “Auddia”,

“we”, “our”) is a technology company that is reinventing how consumers engage with audio through the development

of a proprietary AI platform for audio and innovative technologies for podcasts.

The Company is incorporated in Delaware and headquartered

Basis of Presentation

The accompanying financial statements have been prepared

in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Unaudited interim financial information

The condensed financial statements of the

Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission

Certain information and footnote disclosures normally included in financial statements prepared in accordance

with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations.

The condensed balance sheet as of December 31, 2022 has been derived

from the financial statements included in the Company’s annual report on Form 10-K.

Accordingly, these

condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s

The accompanying financial statements have been

prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Interim Financial Information

The condensed financial statements of the Company

included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the

Certain information and footnote disclosures normally included in financial statements prepared in accordance with

GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations.

The condensed balance sheet

as of December 31, 2022 has been derived from the financial statements included in the Company’s annual report on Form 10-K.

these condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s

Annual Report on Form 10-K.

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Actual results could differ from those estimates.

The condensed financial statements include some amounts

that are based on management's best estimates and judgments.

The most significant estimates relate to valuation of capital stock, warrants

and options to purchase shares of the Company's common stock, and the estimated recoverability and amortization period for capitalized

The condensed financial statements include some

amounts that are based on management's best estimates and judgments.

The most significant estimates relate to valuation of capital stock,

warrants and options to purchase shares of the Company's common stock, and the estimated recoverability and amortization period for capitalized

software development costs.

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Going Concern

The Company had cash of $ 3,605,144

as of June 30, 2023.

We will need additional funding to complete the development of our full product line and scale products with a demonstrated

The Company had cash

of $ 2,199,678 as of September 30, 2023.

The Company will need additional funding to complete the development of the 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.

If the Company is unable to

raise capital when needed or on acceptable terms, the Company will be forced to delay, reduce, or eliminate technology development and

commercialization efforts.

As a result of the Company’s recurring losses

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The Company’s current

level of cash are not sufficient to execute our business plan.

For the foreseeable future, we will incur significant operating expenses,

capital expenditures and working capital funding that will deplete our cash on hand by November 2023.

level of cash is not sufficient to execute the business plan.

For the foreseeable future, the Company will incur significant operating

expenses, capital expenditures and working capital funding that will deplete cash on hand by February 2024.

The Company considers all highly liquid instruments

purchased with an original maturity of three months or less to be cash equivalents.

The Company had no cash equivalents as of June 30,

The Company had no cash equivalents as of September

30, 2023 or December 31, 2022.

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financial institutions, which are insured by the Federal Deposit Insurance Corporation up to $250,000.

The Company’s cash

balance may at times exceed these limits.

At June 30, 2023, the Company had approximately $ 3.4

The Company’s cash balance

may at times exceed these limits.

As of September 30, 2023, the Company had approximately $ 1.9

million in excess of federally insured limits.

As at December 31, 2022, the Company had approximately $ 1.4

As of December 31, 2022, the Company had approximately $ 1.4

million in excess of federally insured limits.

The Company continually monitors its positions with, and the credit quality

of, the financial institutions with which it invests.

The Company continually monitors its positions with, and the credit quality of,

the financial institutions with which it invests.

Software Development Costs

The Company accounts for costs incurred in the development

of computer software as software research and development costs until the preliminary project stage is completed, management has committed

to funding the project, and completion and use of the software for its intended purpose is probable.

The Company ceases capitalization of development costs

once the software has been substantially completed and is available for its intended use.

Software development costs are amortized over

a useful life estimated by the Company’s management of three years.

The Company accounts for costs incurred in the

development of computer software as software research and development costs until the preliminary project stage is completed, management

has committed to funding the project, and completion and use of the software for its intended purpose is probable.

The Company ceases capitalization of development

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

Software development costs are amortized

over a useful life estimated by the Company’s management of three years.

Costs associated with significant upgrades and enhancements

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on anticipated future revenues and changes in software technologies.

Unamortized capitalized software development

costs determined to be in excess of anticipated future net revenues are considered impaired and expensed during the period of such

determination.

We determined that no such impairments were required during the three months and six month period ended June 30,

Software development costs of $ 258,929

and $ 617,411

were capitalized for the three months ended June 30, 2023, and 2022, respectively and $ 529,503

and $ 1,278,625

were capitalized for the six months ended June 30, 2023 and 2022, respectively.

Amortization of capitalized software development

costs were $ 436,425

and $ 262,703

for the three months ended June 30, 2023, and 2022, respectively and $ 872,850

and $ 430,739

for the six months ended June 30, 2023 and 2022, respectively and are included in depreciation and amortization expense in the

Company’s condensed statement of operations.

Unamortized capitalized software development costs

determined to be in excess of anticipated future net revenues are considered impaired and expensed during the period of such determination.

We determined that no such impairments were required during the three months and nine months ended September 30, 2023.

Software development

costs of $ 213,705 and $ 394,893 were capitalized for the three months ended September 30, 2023, and 2022, respectively and $ 743,208 and

$ 1,673,517 were capitalized for the nine months ended September 30, 2023 and 2022, respectively.

Amortization of capitalized software

development costs were $ 458,973 and $ 262,703 for the three months ended September 30, 2023, and 2022, respectively and $ 1,331,823 and

$ 693,441 for the nine months ended September 30, 2023 and 2022, respectively and are included in depreciation and amortization expense

in the Company’s condensed statement of operations.

Revenue Recognition

Revenue will be measured according to Accounting

Standards Codification (“ASC”) 606, Revenue – Revenue from Contracts with Customers, and will be recognized based

on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third

We will recognize revenue when we satisfy a performance obligation by transferring control over a service or product to a

We will report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with,

a specific revenue-producing transaction between a seller and a customer in our condensed statements of operations.

Collected taxes

will be recorded within Other current liabilities until remitted to the relevant taxing authority.

Standards Codification (“ASC”) 606, Revenue – Revenue from Contracts with Customers, and will be recognized based on

consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties.

The Company will recognize revenue when a performance obligation is satisfied by transferring control over a service or product to a customer.

The Company will report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific

revenue-producing transaction between a seller and a customer in the condensed statements of operations.

Collected taxes will be recorded

within Other current liabilities until remitted to the relevant taxing authority.

Subscriber revenue will consist primarily of subscription

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There is no revenue recognized for unpaid trial subscriptions.

Customers may pay for the services in advance of the

performance obligation and therefore these prepayments are recorded as deferred revenue.

The deferred revenue will be recognized as revenue

in our statement of operations as the services are provided.

Customers may pay for the services in advance

of the performance obligation and therefore these prepayments would be recorded as deferred revenue.

The deferred revenue will be recognized

as revenue in the statement of operations as the services are provided.

Share-Based Compensation

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fair value of the awards on the date of grant in accordance with ASC 718.

Compensation expense for all share-based awards is

based on the estimated grant-date fair value and recognized in earnings over the requisite service period (generally the vesting period).

Compensation expense for all share-based awards

is based on the estimated grant-date fair value and recognized in earnings over the requisite service period (generally the vesting period).

The Company records share-based compensation expense related to non-employees over the related service periods.

Certain share-based compensation awards include a

net-share settlement feature that provides the grantee an option to withhold shares to satisfy tax withholding requirements and are classified

as a share-based compensation liability.

Cash paid to satisfy tax withholdings is classified as financing activities in the condensed

statements of cash flows.

Certain share-based compensation awards include

a net-share settlement feature that provides the grantee an option to withhold shares to satisfy tax withholding requirements and are

classified as a share-based compensation liability.

Cash paid to satisfy tax withholdings is classified as financing activities in the

condensed statements of cash flows.

Recently Adopted ASUs

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the new standard beginning January 1, 2023.

The adoption of the new standard did not have a material impact to the Company’s financial statements.

Note 2 – Property & Equipment and

Software Development Costs

Property and equipment and software development costs

consisted of the following as of:

The adoption of the new standard did not have a material impact on the Company’s financial

Note 2 – Property & Equipment

and Software Development Costs

Property and equipment and software development

costs consisted of the following as of:

Schedule of property, equipment and software development costs

September 30, 2023

December 31, 2022

Computers and equipment

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The Company recognized depreciation expense of

$ 6,193 and $ 8,302 for the three months ended June 30, 2023, and 2022, respectively related to property and equipment and

amortization expense of $ 436,425 and $ 262,703 for the three months ended June 30, 2023, and 2022, respectively related to software

development costs.

The Company recognized depreciation expense of $ 12,803

and $ 16,393 for the six

months ended June 30, 2023, and 2022, respectively related to property and equipment and amortization expense of $ 872,850

and $ 430,739

for the six months ended June 30, 2023, and 2022, respectively related to software development costs.

$ 6,193 and $ 12,136 for the three months ended September 30, 2023, and 2022, respectively related to property and equipment and amortization

expense of $ 458,973 and $ 262,703 for the three months ended September 30, 2023, and 2022, respectively related to software development

The Company recognized depreciation expense of $ 18,997 and $ 28,529 for the nine months ended September 30, 2023, and 2022, respectively

related to property and equipment and amortization expense of $ 1,331,823 and $ 693,441 for the nine months ended September 30, 2023, and

2022, respectively related to software development costs.

Note 3 – Accounts Payable and Accrued

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Schedule of accounts payable and accrued liabilities

September 30, 2023

December 31, 2022

Accounts payable and accrued liabilities

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Accrued interest

Accounts payable and accrued liabilities

Note 4 – Notes Payable to Related Party,

net of debt issuance costs

Total accounts payable and accrued liabilities

Note 4 – Notes Payable to Related

Party, net of debt issuance costs

In November 2022, the Company entered into a Secured

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were also considered indexed to the Company’s shares in accordance with ASC 815-40.

In connection with an additional financing with the

same related party during April of 2023, the Company cancelled the original 300,000 warrants issued with the Prior Note and issued 600,000

new common stock warrants with a five-year term and an exercise price of $0.61

The Company recognized the modification in accordance with ASC 815-40-35, which resulted in the recognition of additional

debt discount in the amount of $ 35,981 .

Upon issue of the new common stock warrants, 300,000 were fully vested and immediately exercisable upon issue.

The remaining 300,000

warrants were unvested.

In connection with an additional financing with

the same related party during April of 2023, the Company cancelled the original 300,000 warrants issued with the Prior Note and issued

600,000 new common stock warrants with a five-year term and an exercise price of $0.61 per share.

The Company recognized the modification

in accordance with ASC 815-40-35, which resulted in the recognition of additional debt discount in the amount of $ 35,981 .

Upon issue of

the new common stock warrants, 300,000 were fully vested and immediately exercisable upon issue.

The remaining 300,000 warrants were unvested.

During May of 2023, the Company extended the maturity

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the 300,000 outstanding unvested warrants became vested and exercisable.

As of June 30, 2023, and December 31, 2022, the

balance of the Prior Note, net of debt issuance costs, was $2,121,341

and $1,775,956,

respectively.

Interest expense related to the Prior Note for the three and six months ended June 30, 2023, was $261,861 and $567,802.

As of September 30, 2023, and December 31, 2022,

the balance of the Prior Note, net of debt issuance costs, was $2,168,639 and $1,775,956, respectively.

Interest expense related to the

Prior Note for the three and nine months ended September 30, 2023, was $157,298 and $762,112.

As noted above, the Company entered into an additional

Secured Bridge Note (“New Note”) financing with the same accredited investor and significant existing shareholder during

April of 2023.

Secured Bridge Note (“New Note”) financing with the same accredited investor and significant existing shareholder during April

In addition, the Company also amended the terms of the Prior Note.

The principal amount of the New Note is $ 825,000

including an original issue discount of $ 75,000 .

The New Note bears interest at an annual stated rate of 10%

and matures in July 2023.

The principal amount of the New Note is $ 825,000 including

an original issue discount of $ 75,000 .

The New Note bears interest at an annual stated rate of 10% with an original maturity date of July

The New Note is secured by a lien on substantially all of the Company’s assets.

At maturity the lender

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 $0.61

At maturity the lender 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 $0.61 per share.

The conversion right is available to the lender at the earlier of (i) maturity, or (ii) payback of all the principal.

In connection with the New Note financing, the Company issued 325,000

common stock warrants with a

five-year term and an exercise price of $0.61

per share and an additional 325,000

common stock warrants with a five-year term and an exercise price of $0.61

per share that are exercisable in the event that the loan term is extended.

The warrants were valued at $ 252,940 ,

which was recorded as additional debt discount.

Similar to the accounting for the Prior Note, the embedded conversion option was not

accounted for separately as, in accordance with the guidance outlined in ASC 815-40, it was considered indexed to the Company’s

In addition, the issued warrants were classified in equity as they were also considered indexed to the Company’s shares

in accordance with ASC 815-40.

As of June 30, 2023, the balance of the New Note

issued in April 2023, net of debt issuance costs, was $ 717,557 .

Interest expense related to the New Note for the three and six months ended June 30, 2023 was $ 273,204 ,

respectively.

In connection with the New Note financing, the Company issued 325,000 common stock warrants with a five-year term and an exercise price

of $0.61 per share and an additional 325,000 common stock warrants with a five-year term and an exercise price of $0.61 per share that

are exercisable in the event that the loan term is extended.

The warrants were valued at $ 252,940 , which was recorded as additional debt

Similar to the accounting for the Prior Note, the embedded conversion option was not accounted for separately as, in accordance

with the guidance outlined in ASC 815-40, it was considered indexed to the Company’s shares.

In addition, the issued warrants were

classified in equity as they were also considered indexed to the Company’s shares in accordance with ASC 815-40.

As of September 30, 2023, the balance of the New

Note issued in April 2023, net of debt issuance costs, was $ 825,000 .

Interest expense related to the New Note for the three and nine months

ended September 30, 2023 was $ 401,441 , respectively.

On July 31, 2023, the Company extended the maturity

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Operating Lease

In April 2021, the Company entered into a lease agreement

for office space in Boulder, Colorado comprising 8,639 square feet.

The lease commenced on May 15, 2021, and terminated after 12 months.

In April 2021, the Company entered into a lease

agreement for office space in Boulder, Colorado comprising 8,639 square feet.

The lease commenced on May 15, 2021, and terminated after

The Company subsequently extended the lease through November 2022.

In November 2022, the Company amended the lease, reducing the square

footage rented to 2,160 with a base rent of $4,018 per month.

In November 2022, the Company amended the lease, reducing

the square footage rented to 2,160 with a base rent of $4,018 per month.

The amended lease terminates after 13 months.

Rent expense, as part of general and administrative expenses as included in the

Condensed Statement of Operations, was $ 25,385 and

$ 21,733 for the three months ended June 30, 2023, and 2022, respectively and $ 37,438 and $ 43,182 for the six months ended June 30, 2023,

and 2022, respectively.

In the normal course of business, the Company is party

to litigation from time to time.

The Company maintains insurance to cover certain actions and believes that resolution of such litigation

will not have a material adverse effect on the Company.

There are no active litigations as of the date the financial statements were issued.

However, a pre-IPO investor has contacted the Company claiming damages caused by alleged acts and

omissions arising from a private financing by the Company.

Rent expense, as

part of general and administrative expenses as included in the Condensed Statement of Operations, was $ 12,053 and $ 39,935 for the three

months ended September 30, 2023, and 2022, respectively and $ 49,491 and $ 83,117 for the nine months ended September 30, 2023, and 2022,

respectively.

In the normal course of business, the Company

is party to litigation from time to time.

The Company maintains insurance to cover certain actions and believes that resolution of such

litigation will not have a material adverse effect on the Company.

There are no active litigations as of the date the financial statements

However, a pre-IPO investor has contacted the Company claiming damages caused by alleged

acts and omissions arising from a private financing by the Company.

No complaint has been filed by the investor.

The alleged damages asserted by

the investor are less than approximately $300,000.

The outcome of the complaint was neither probable or estimable as of the date the financial

statements were issued.

NASDAQ deficiency

On May 23, 2023, we received a letter (the “Notice”)

from the Listing Qualifications Staff of the Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, based upon the Company’s

reported stockholder’s equity of $ 2,095,247 at the end of March 31, 2023, we are not in compliance with the requirement to maintain

a minimum stockholder’s equity of $2,500,000 for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing

Rule 5550(b)(1) the “Stockholder’s Equity”).

We were provided a compliance period of 45 calendar days from the date

of the Notice, or until July 7, 2023, to submit a plan to regain compliance with the Stockholder’s Equity Requirement, pursuant

to Nasdaq Listing Rule 5810(c)(2)(A).

The alleged damages asserted

by the investor are less than approximately $300,000.

The outcome of the complaint was neither probable or estimable as of the date the

financial statements were issued.

NASDAQ Deficiencies

On May 23, 2023, we received a letter (the

“Notice”) from the Listing Qualifications Staff of the Nasdaq Stock Market, LLC (“Nasdaq”) indicating that,

based upon the Company’s reported stockholder’s equity of $ 2,095,247

at the end of March 31, 2023, we are not in compliance with the requirement to maintain a minimum stockholder’s equity of

$2,500,000 for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(1) the

“Stockholders’ Equity Requirement”).

We were provided a compliance period of 45 calendar days from the date of the Notice, or

until July 7, 2023, to submit a plan to regain compliance with the Stockholder’s Equity Requirement, pursuant to Nasdaq

Listing Rule 5810(c)(2)(A).

On July 10, 2023, the Company received a letter

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compliance with Stockholder’s Equity Requirement.

If we do not regain compliance within the allotted compliance period, Nasdaq will

provide notice that the Company’s Common Stock will be subject to delisting.

The Company would then be entitled to appeal that determination

to a Nasdaq hearings panel.

As disclosed elsewhere in the Quarterly Report,

the Company’s stockholder’s equity as of June 30, 2023 is $ 4,331,778 , which is $1,831,778 over the $2.5 million Nasdaq continued

listing requirement.

The stockholder’s equity balance as of June 30, 2023 was $ 4,331,777 ,

which is $1,831,778 over the $2.5 million Stockholders’ Equity Requirement.

On August 25,

2023, Nasdaq confirmed that the Company had regained compliance with the Stockholders’ Equity Requirement and that this matter

is now closed.

Separately, on April

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business days, Nasdaq will provide the Company with a written confirmation of compliance and the matter will be closed.

Alternatively, if the

Company fails to regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, the Company may

be eligible for an additional 180 calendar day compliance period, provided (i) it meets the continued listing requirement for market value

of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market (except for the Bid Price

Requirement) and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period

by effecting a reverse stock split, if necessary.

In the event the Company does not regain compliance with Rule 5550(a)(2) prior to the

expiration of the initial 180 calendar day period, and if it appears to the Staff that the Company will not be able to cure the deficiency,

or if the Company is not otherwise eligible, the Staff will provide the Company with written notification that its securities are subject

to delisting from The Nasdaq Capital Market.

At that time, the Company may appeal the delisting determination to a Hearings Panel.

On October 24, 2023,

the Company received a written notice from the Nasdaq staff indicating that the Company had not regained compliance with the Bid Price

Requirement and was not eligible for an additional 180 calendar day compliance period.

As a result, the staff determined to delist the

Company’s Common Stock from Nasdaq, unless the Company timely requests an appeal of the Staff’s determination to a Hearings

Panel (the “Panel”), pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series.

The Company has requested

a hearing before the Panel to appeal the October notice and to address compliance with the Bid Price Requirement.

While the appeal process

is pending, the suspension of trading of the Company’s common stock, will be stayed and the Common Stock will continue to trade

on Nasdaq until the hearing process concludes and the Panel issues a written decision.

The hearing is expected to occur in mid-January

The Company intends to

consider all options to regain compliance with all Nasdaq continued listing requirements.

consider all options to regain and maintain compliance with all Nasdaq continued listing requirements.

The Company’s receipt

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Stock Options

The following table presents the activity for stock

options outstanding:

The following table presents the activity for

stock options outstanding:

Schedule of stock option activity

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Forfeited/canceled

Outstanding - June 30, 2023

The following table presents the composition of options

outstanding and exercisable:

Options outstanding and exercisable

Outstanding - September 30, 2023

The following table presents the composition

of options outstanding and exercisable:

Schedule of options outstanding and exercisable

Options Outstanding

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Exercise Prices

Total - June 30, 2023

________________________

Total - September 30, 2023

Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

During the six months ended June 30, 2023, the Company

granted 200,200 stock options.

During the nine months ended September 30, 2023,

the Company granted 200,200 stock options.

Under the terms of the option agreements, the options are subject to certain vesting requirements.

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

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.

6 unchanged sentences

Restricted Stock Units

The following table presents the activity for restricted

stock units outstanding:

Schedule of restricted stock outstanding

The following table presents the activity for

restricted stock units outstanding:

Schedule of restricted stock units outstanding

Restricted Stock Units

3 unchanged sentences

Vested/issued

Outstanding -June 30, 2023

During the six months ended June 30, 2023, the Company

granted 37,500 restricted stock units.

Under terms of the restricted stock agreement, the restricted stock units are subject to a certain

vesting schedule.

In 2023, certain restricted stock unit holders elected

a net-share settlement for vested shares to satisfy income tax requirements.

Outstanding - September 30, 2023

During the nine months ended September 30, 2023,

the Company granted 37,500 restricted stock units.

Under terms of the restricted stock agreement, the restricted stock units are subject

to a certain vesting schedule.

In 2023, certain restricted stock unit holders

elected a net-share settlement for vested shares to satisfy income tax requirements.

The Company applied modification accounting in accordance

1 unchanged sentence

The Company recognized a share-based compensation

liability as of June 30, 2023, of $ 30,090 related to the fair value of vested shares over the service period.

The Company recognized share-based compensation expense

related to stock options and restricted stock units of $ 582,536 and $ 671,829 for the six months ended June 30, 2023, and 2022, respectively.

The remaining unvested share-based compensation expense of $ 1,664,419 is expected to be recognized over the next 93 months.

The following table presents the activity for warrants

Schedule of warrant activity

liability as of September 30, 2023, of $ 45,981 related to the fair value of vested shares over the service period.

The Company recognized share-based compensation

expense related to stock options and restricted stock units of $ 799,677 and $ 698,486 for the nine months ended September 30, 2023, and

2022, respectively.

The remaining unvested share-based compensation expense of $ 1,447,278 is expected to be recognized over the next 90

The following table presents the activity for

warrants outstanding:

Schedule of warrant outstanding

Weighted Average Exercise Price

1 unchanged sentence

Forfeited/canceled

Outstanding - June 30, 2023

5,097,099 of the outstanding warrants are currently

exercisable and have a weighted average remaining contractual life of approximately 2.94 years as of June 30, 2023.

Outstanding - September 30, 2023

of the outstanding warrants are currently exercisable and have a weighted average remaining contractual life of approximately 2.69 years

as of September 30, 2023.

Note 7 – Net Loss Per Share

Basic net loss per share is computed by dividing net

loss, which is allocated based upon the proportionate amount of weighted average shares outstanding, to each class of shareholder’s

Basic net loss per share is computed by dividing

net loss, which is allocated based upon the proportionate amount of weighted average shares outstanding, to each class of shareholder’s

stock outstanding during the period.

1 unchanged sentence

for basic net loss per share is adjusted by the effect of dilutive securities, including awards under our equity compensation plans.

As of June 30, 2023, and 2022, 8,505,540 shares and

6,325,245 shares, respectively of potentially dilutive weighted average shares were excluded from the calculation of diluted net loss

per share because their effect would have been anti-dilutive for the periods presented.

As of September 30, 2023, and 2022, 7,079,016

shares and 6,271,219 shares, respectively of potentially dilutive weighted average shares were excluded from the calculation of diluted

net loss per share because their effect would have been anti-dilutive for the periods presented.

Note 8 – Equity Financings

Equity Line Sales of Common

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”) for an equity line facility.

In April and June 2023, the

Company closed on three sales of Common Stock under the White Lion Purchase Agreement.

As a result, the Company issued an aggregate of

2,361,514 common shares and received aggregate proceeds of approximately $ 1.3 million .

Equity Line Sales

of Common Stock

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”) for an equity line facility.

In April and June 2023,

the Company closed on three sales of Common Stock under the White Lion Purchase Agreement.

As a result, the Company issued an aggregate

of 2,361,514 common shares and received aggregate proceeds of approximately $ 1.3 million .

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 shareholder approval is obtained to issue

purchase shares above the Exchange Cap, in which case the Exchange Cap will no longer apply.

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 shareholder approval is obtained

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

The Company recognized all offering costs related

3 unchanged sentences

In June 2023, the Company sold 4,735,000

shares of common stock with net proceeds of $ 2.7

Note 9 – Subsequent Events

The Company extended the maturity

date of the April 2023 note (described in note 4 to the financial statements) to November 30, 2023.

As a result of the extension, the

annual interest rate increased to 20% effective August 1 st .

Further, the 325,000 contingently exercisable warrants issued with

the loan became immediately exercisable.

Nasdaq Non-Compliance

On August 23, 2023, the Company received a notice from Nasdaq notifying

the Company that because the Company remains delinquent in filing its Form 10-Q, the Company no longer complies with Nasdaq Listing Rule

5250(c)(1), which requires companies with securities listed on Nasdaq to timely file all required periodic reports with the SEC.

The notice received from Nasdaq has no immediate effect on the listing

or trading of the Company’s securities on Nasdaq.

However, if the Company would fail to timely regain compliance with Rule 5250(c)(1),

the Company’s securities would be subject to delisting from Nasdaq.

Under the Nasdaq rules, the Company has until October 22, 2023 (60

days after Nasdaq’s notice) to submit a plan to regain compliance with the Rule 5250(c)(1).

The Company expects that with the filing

of this Form 10-Q , we have regained compliance with Rule 5250(c)(1).

shares of common stock in a registered public offering with net proceeds of $ 2.7

Note 9 – Subsequent

Replacement Equity

Line with White Lion

On November 6, 2023, the Company

entered into a new Common Stock Purchase Agreement and a related registration rights agreement with White Lion.

Pursuant to the new Common

Stock Purchase Agreement, the Company has the right, but not the obligation to require White Lion to purchase, from time to time until

December 31, 2024, up to $10,000,000 in aggregate gross purchase price of newly issued shares of the Company’s common stock, subject

to certain limitations and conditions set forth in the Common Stock Purchase Agreement.

In connection with the new Common Stock Purchase

Agreement, the parties agreed to terminate the previous Common Stock Purchase Agreement with White Lion.

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-Q

Item 1. Financial Statements