What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-24 · 275 added, 285 removed, 278 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion and analysis should be

read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report and

our audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31,

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

The following discussion and analysis should

be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report

and our audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December

31, 2022, which was filed with the SEC on March 23, 2023.

This discussion and analysis and other parts of this Quarterly Report contain forward-looking

statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding

our plans, objectives, expectations, intentions and projections.

Our actual results and the timing of selected events could differ materially

from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part II, Item

1A, “Risk Factors” and elsewhere in this Quarterly Report.

You should carefully read the “Risk Factors” section

of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2022, to gain an understanding of the important

factors that could cause actual results to differ materially from our forward-looking statements.

Please also see the section entitled

“Special Note Regarding Forward-Looking Statements.”

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

This discussion and analysis and other parts of this Quarterly Report contain

forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such

as statements regarding our plans, objectives, expectations, intentions and projections.

Our actual results and the timing of selected

events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those

set forth under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report.

You should carefully read the “Risk

Factors” section of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2022, to gain an

understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

also see the section entitled “Special Note Regarding Forward-Looking Statements.”

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.

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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.

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

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contribute their own content to episode feeds.

Both of Auddia’s offerings

address large and rapidly growing audiences.

Both of Auddia’s

offerings address large and rapidly growing audiences.

The Company has developed

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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.

stations in the US.

In February 2023, we added faidrRadio, our exclusive content offerings, to the app.

Podcasts were added to the app

for the iOS version before the end of Q1 2023 as planned, and added to the Android app in May of 2023.

Podcast functionality will

continue to be enhanced through 2023 and into 2024.

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;

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 were added to the app for the iOS version before the end of Q1 2023 as planned and added to the Android app in May

Podcast functionality will continue to be enhanced through 2023 and into 2024.

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.

The 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;

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(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.

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.

Flex Revenue and

the initial inclusion of the new revenue channels that come with it will be added to podcasting in the faidr app, and the first elements

of this new monetization capability is expected to be commercially available before the end of 2023.

The faidr mobile App is available

today through the iOS and Android App stores.

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.

Revenue and the initial inclusion of the new revenue channels that come with it will be added to podcasting in the faidr app, and the

first elements of this new monetization capability is expected to be commercially available before the end of 2023.

The faidr mobile App

is available today through the iOS and Android App stores.

We have funded our operations

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Since inception we have incurred significant operating

As of June 30, 2023, we had an accumulated deficit of $76.2 million.

Our ability to generate product revenue sufficient to achieve

profitability will depend heavily on the successful development and commercialization of one or more of our Apps.

We expect that our expenses

and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

As of September 30, 2023, we had an accumulated deficit of $78.3 million.

Our ability to generate product revenue sufficient to

achieve profitability will depend heavily on the successful development and commercialization of one or more of our Apps.

We expect that

our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

nationally launch our faidr App and as we continue training our proprietary AI technology and make product enhancements;

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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 will need

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

As a result, we will

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

Until such time as we can generate

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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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at planned levels and be forced to reduce or terminate our operations.

As of June 30, 2023, we had

cash of $3,605,144.

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

As of September 30, 2023,

we had cash of $2,199,678.

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

a demonstrated market fit.

Management has plans to secure such additional funding.

However, if we are unable to raise capital when needed or on acceptable

terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

However, if we are unable to raise capital when needed

or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

To accelerate

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Recent Developments

Nasdaq Deficiency Notice

Nasdaq Deficiency Notices

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).

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

a minimum stockholders’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 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

from Nasdaq advising that the Company had been granted an extension to file a Form 10-Q for the quarter-ended June

30, 2023 evidencing 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.

from Nasdaq advising that the Company had been granted an extension to file a Form 10-Q for the quarter-ended June 30, 2023 evidencing

compliance with Stockholder’s Equity 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

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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Direct costs of services

Direct cost of services consists

primarily of costs incurred related to our technology and development of our Apps, including hosting and other technology related expenses.

We expect our direct costs of services to increase in the future as we continue to develop and enhance our technology related to the faidr

and podcasting Apps.

Direct cost of services

consists primarily of costs incurred related to our technology and development of our Apps, including hosting and other technology related

We expect our direct costs of services to increase in the future as we continue to develop and enhance our technology related

to the faidr and podcasting Apps.

Sales and marketing

Our sales and marketing expenses

consist primarily of salaries, direct to consumer promotional spend and consulting services, all of which are related to the sales and

promotion performed during the period.

We expect our sales and marketing expenses to fluctuate period by period as we release new upgrades

and enhancements within our Apps and look to generate revenue through customer acquisition, retention, and subscription conversion.

Our sales and marketing

expenses consist primarily of salaries, direct to consumer promotional spend and consulting services, all of which are related to the

sales and promotion performed during the period.

We expect our sales and marketing expenses to fluctuate period by period as we release

new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition, retention, and subscription conversion.

Research and development

Since our inception, we have

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

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.

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.

Software development costs are amortized over a useful life estimated by our management of three years.

Costs associated

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Other income and expense

The other income and expense

category primarily consists of interest expense attributed to the debt and conversion features of the Secured Bridge Note (aka the Prior

We expect our other expense to fluctuate period by period dependent upon either the payoff of the Prior Note or an extension of

The other income and

expense category primarily consists of interest expense attributed to the debt and conversion features of the Secured Bridge Note (aka

the Prior Note).

We expect our other expense to fluctuate period by period dependent upon either the payoff of the Prior Note or an extension

Results of operations

Comparison of the three months ended June

30, 2023, and 2022

The following table summarizes our results of operations:

Comparison of the three months ended

September 30, 2023, and 2022

The following table summarizes our results of

Three Months Ended

September 30,

Operating expenses:

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$ (1,330,314 )

Net loss per share attributable to common stockholders

Basic and diluted

Weighted average common shares outstanding

Basic and diluted

Total revenues for the three

months ended June 30, 2023, and 2022 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish new revenue

Total revenues for the

three months ended September 30, 2023, and 2022 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish

new revenue streams.

Direct cost of services

Direct Cost of Services increased

$1,506 or 3.5% from $43,532 for the three months ended June 30, 2022, compared to $45,038 for the three months ended June 30, 2023.

increase was primarily the result of a slight increase in both platform hosting costs and other music services.

Direct Cost of Services

increased $10,758 or 32.9% from $32,712 for the three months ended September 30, 2022, compared to $43,470 for the three months ended

September 30, 2023.

This increase was primarily the result of a slight increase in both platform hosting costs and other music services.

Sales and marketing

Sales and marketing expenses

decreased by $516,259 or 70%, from $740,019 for the three months ended June 30, 2022, to $223,760 for the three months ended June 30,

2023, primarily attributed to reduced staffing, consulting expense, and marketing and promotions costs as compared to Q2 2022 that were

associated with the national launch of the faidr App.

We expect our sales and marketing expenses to fluctuate period by period as we release

new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition, retention, and subscription conversion.

increased by $17,373 or 5.8%, from $298,924 for the three months ended September 30, 2022, to $316,297 for the three months ended September

30, 2023, primarily attributed to increased marketing and promotions costs as compared to Q3 2022.

We expect our sales and marketing expenses

to fluctuate period by period as we release new upgrades and enhancements within our Apps and look to generate revenue through customer

acquisition, retention, and subscription conversion.

Research and development

expenses increased by $29,112 or 19%, from $151,251 for the three months ended June 30, 2022, to $180,363 for the three months ended June

30, 2023, primarily related to slightly increased staffing cost.

We are continually developing enhancements to both our faidr and podcasting

Apps and will continue capitalize software costs to the extent that such development qualifies for capitalization.

expenses increased by $45,537 or 25.1%, from $181,596 for the three months ended September 30, 2022, to $227,133 for the three months

ended September 30, 2023, primarily related to slightly increased staffing cost.

We are continually developing enhancements to both our

faidr and podcasting Apps and will continue capitalize software costs to the extent that such development qualifies for capitalization.

General and administrative

expenses increased by $49,955 or less than 1%, from $842,555 for the three months ended June 30, 2022, compared to $892,510 for the three

months ended June 30, 2023.

The increase resulted from an increase in legal fees during Q2 2023 not

directly related to debt and equity issuance costs.

expenses increased by $237,276 or 43.9%, from $540,220 for the three months ended September 30, 2022, compared to $777,496 for the three

months ended September 30, 2023.

The increase resulted from an increase in stock compensation expense compared to Q3 2022.

Depreciation and amortization

expenses increased by $171,613 or 63%, from $271,005 for the three months ended June 30, 2022, compared to $442,618 for the three months

ended June 30, 2023.

expenses increased by $190,327 or 69.3%, from $274,839 for the three months ended September 30, 2022, compared to $465,166 for the three

months ended September 30, 2023.

The increase is entirely related to the increased amortization of our faidr and podcasting Apps.

Other income (expense),

Total other expenses increased

by $536,549, from $2,023 for the three months ended June 30, 2022, to $538,572 for the three months ended June 30, 2023.

is related to actual and imputed interest expense attributed to the Secured Bridge Notes issued during November of 2022 and April 2023

(Refer to Note 4 of the condensed unaudited financial statements for additional information regarding the secured bridge notes).

Comparison of the six

months ended June 30, 2023, and 2022

Six Months Ended

Total other expenses

increased by $284,897, from $2,023 for the three months ended September 30, 2022, to $286,920 for the three months ended September 30,

The increase is related to actual and imputed interest expense attributed to the Secured Bridge Notes issued during November of

2022 and April 2023 (Refer to Note 4 of the condensed unaudited financial statements for additional information regarding the secured

bridge notes).

Comparison of the nine months ended

September 30, 2023, and 2022

Nine Months Ended

September 30,

Operating expenses:

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$ (5,133,959 )

Net loss per share attributable to common stockholders

Basic and diluted

Weighted average common shares outstanding

Basic and diluted

Total revenues for the six

months ended June 30, 2023, and 2022 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish new revenue

Total revenues for the

nine months ended September 30, 2023, and 2022 were $0 as we continue to develop and enhance our faidr and podcasting Apps to establish

new revenue streams.

Direct cost of services

Direct Cost of Services decreased

$8,754 or 9% from $96,093 for the six months ended June 30, 2022, compared to $87,339 for the six months ended June 30, 2023.

This decrease

was primarily the result of a reduction in both platform hosting costs and other music services.

Direct Cost of Services

increased $2,003 or 1.6% from $128,806 for the nine months ended September 30, 2022, compared to $130,809 for the nine months ended September

This increase was primarily the result of a slight increase in both platform hosting costs and other music services.

Sales and marketing

Sales and marketing expenses

decreased by $648,207 or 59%, from $1,097,086 for the six months ended June 30, 2022, to $448,879 for the six months ended June 30, 2023,

primarily attributed to reduced staffing, consulting expense, and marketing and promotions costs as compared to the six months ended June

30, 2022 that were associated with the national launch of the faidr App.

We expect our sales and marketing expenses to fluctuate period

by period as we release new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition, retention,

and subscription conversion.

decreased by $630,834 or 45.2%, from $1,396,010 for the nine months ended September 30, 2022, to $765,176 for the nine months ended September

30, 2023, primarily attributed to reduced staffing, consulting expense, and marketing and promotions costs as compared to the nine months

ended September 30, 2022 that were associated with the national launch of the faidr App.

We expect our sales and marketing expenses to

fluctuate period by period as we release new upgrades and enhancements within our Apps and look to generate revenue through customer acquisition,

retention, and subscription conversion.

Research and development

expenses increased by $90,474 or 30%, from $300,015 for the six months ended June 30, 2022, to $390,489 for the six months ended June

30, 2023, primarily related to increased staffing, and an associated reduction in the level of capitalized software expenses.

We are continually

developing enhancements to both our faidr and podcasting Apps and will continue capitalize software costs to the extent that such development

qualifies for capitalization.

expenses increased by $136,011 or 28.2%, from $481,611 for the nine months ended September 30, 2022, to $617,622 for the nine months ended

September 30, 2023, primarily related to increased staffing, and an associated reduction in the level of capitalized software expenses.

We are continually developing enhancements to both our faidr and podcasting Apps and will continue capitalize software costs to the extent

that such development qualifies for capitalization.

General and administrative

expenses decreased by $40,947 or 2%, from $1,860,283 for the six months ended June 30, 2022, compared to $1,819,336 for the six months

ended June 30, 2023.

The decrease resulted from reduced stock compensation expense related to forfeited employee stock option grants.

expenses increased by $196,328 or 8.2%, from $2,400,503 for the nine months ended September 30, 2022, compared to $2,596,831 for the nine

months ended September 30, 2023.

The increase resulted from an increase in stock compensation expense compared to 2022.

Depreciation and amortization

expenses increased by $438,521 or 98%, from $447,132 for the six months ended June 30, 2022, compared to $885,653 for the six months ended

June 30, 2023.

The increase is entirely related to the increased amortization of our faidr and podcasting Apps, which started amortization

during Q1 2022 and Q4 2021, respectively.

expenses increased by $628,849 or 87.1%, from $721,971 for the nine months ended September 30, 2022, compared to $1,350,820 for the nine

months ended September 30, 2023.

The increase is entirely related to the increased amortization of our faidr and podcasting Apps.

Other income (expense),

Total other expense increased

by $843,443, from $3,035 for the six months ended June 30, 2022, to $846,478 for the six months ended June 30, 2023.

The increase is related

to interest expense attributed to the Secured Bridge Notes issued during November of 2022 and April of 2023, which included the finance

charges associated with debt issuance cost.

(Refer to Note 4 of the condensed unaudited financial statements for additional information

regarding the secured bridge notes)

by $1,128,340, from $5,058 for the nine months ended September 30, 2022, to $1,133,398 for the nine months ended September 30, 2023.

increase is related to interest expense attributed to the Secured Bridge Notes issued during November of 2022 and April of 2023, which

included the finance charges associated with debt issuance cost (refer to Note 4 of the condensed unaudited financial statements for additional

information regarding the secured bridge notes).

Liquidity and capital

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

As of June 30, 2023, and December 31, 2022, we had cash of $3,605,144 and $1,661,434, respectively.

As of September 30, 2023, and December 31, 2022, we had cash of $2,199,678 and $1,661,434, respectively.

We have a deficit in working

capital in the amount of approximately $0.4 million at June 30, 2023.

capital in the amount of approximately $1.4 million at September 30, 2023.

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.

existing cash of $2.2 million at September 30, 2023 will only be sufficient to fund our current operating plans into February 2024.

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

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 had cash on hand of $2,199,678 as of September 30, 2023.

will need to raise additional funds to continue funding our technology development and commercialization efforts beyond such time.

intends to secure such 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.

Interim Bridge Financings

As previously disclosed, the Company entered into

a Secured Bridge Note (“Prior Note”) financing on November 14, 2022 with one accredited investor who is a significant existing

As previously disclosed, we entered into a Secured

Bridge Note (“Prior Note”) financing on November 14, 2022 with one of our accredited investors who is a significant existing

shareholder of the Company.

The Company received $2,000,000 of gross proceeds in connection with that financing.

On April 17, 2023, the Company

We received $2,000,000 of gross proceeds in connection with that financing.

On April 17, 2023, we

entered into an additional Secured Bridge Note (“New Note”) financing with the same accredited investor.

The Company received

We received $750,000

of gross proceeds in connection with the New Note financing.

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

The New Note has

a 10% interest rate and matures on July 31, 2023.

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 on the New Note into shares

of the Company’s common stock.

The New Note has a 10%

interest rate and matures on July 31, 2023.

The New Note is secured by a lien on substantially all of our assets.

At maturity, the lender

has the option to convert any original issue discount and accrued but unpaid interest on the New Note into shares of our common stock.

The fixed conversion price is $0.61 per share.

In connection with the

New Note financing, the Company issued to the investor 650,000 common stock warrants with a five-year term and a fixed $0.61 per share

exercise price.

New Note financing, we issued 650,000 common stock warrants to the investor with a five-year term and a fixed $0.61 per share exercise

325,000 of such warrants are exercisable immediately.

The other 325,000 of such warrants would only become exercisable

if the maturity date of the New Note is extended in accordance with the terms of the New Note.

Further, if the New Note remains outstanding

as of July 31, 2023, the Company has the option to extend the maturity date of the New Note to November 30, 2023.

Upon such extension,

the interest rate on the New Note will be increased to 20% from 10%, and the 325,000 portion of the warrants shall become exercisable.

Further, in connection with

the New Note financing, the parties agreed to make certain amendments to the Prior Note financing.

Specifically, the parties agreed to

cancel the 300,000 common stock warrants issued as part of the prior financing and, in lieu of the cancelled warrants, issued the investor

The other 325,000 of such warrants would only become exercisable if the maturity

date of the New Note is extended in accordance with the terms of the New Note.

Further, if the New Note remains outstanding as of July

31, 2023, we have the option to extend the maturity date of the New Note to November 30, 2023.

Upon such extension, the interest rate

on the New Note will be increased to 20% from 10%, and the 325,000 portion of the warrants shall become exercisable.

Further, in connection

with the New Note financing, the parties agreed to make certain amendments to the Prior Note financing.

Specifically, the parties agreed

to cancel the 300,000 common stock warrants issued as part of the prior financing and, in lieu of the cancelled warrants, issued the investor

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

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Note during May of 2023.

The investor will not be

able to receive shares upon conversion or exercise, unless prior shareholder approval is obtained, if the number of shares to be issued

The investor will not

be able to receive shares upon conversion or exercise, unless prior shareholder 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

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

Equity Line Sales of Common

As previously disclosed,

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.

Equity Line Sales

of Common Stock

On November 14, 2022,

we 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.

On April 17 and April

2023, the Company closed on two sales of Common Stock under the White Lion Purchase Agreement.

The Company issued an aggregate of 1,962,220

common shares and received aggregate proceeds of approximately $1.12 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

The Company had cash on hand of $3,605,144 as of June

The Company will need to raise additional funds to continue funding our technology development and commercialization efforts

beyond such time.

Management intends to secure such 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.

20, 2023, we closed on two sales of Common Stock under the White Lion Purchase Agreement.

We issued an aggregate of 1,962,220 common shares

and received aggregate proceeds of approximately $1.12 million.

Cash Flow Analysis

Our cash flows from operating

activities have historically been significantly impacted by our investment in sales and marketing to drive growth,

and research and development expenses.

Our ability to meet future liquidity needs will be driven by our operating performance and the

extent of continued investment in our operations.

Failure to generate sufficient revenues and related cash flows could have a material

adverse effect on our ability to meet our liquidity needs and achieve our business objectives.

activities have historically been significantly impacted by our investment in sales and marketing to drive growth, and research and development

Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment

in our operations.

Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability

to meet our liquidity needs and achieve our business objectives.

The following table summarizes

the statements of cash flows for the six months ended June 30, 2023, and 2022:

Six Months Ended June 30,

the statements of cash flows for the nine months ended September 30, 2023, and 2022:

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating activities

Cash used in operating activities

for the six months ended June 30, 2023, was ($2,214,729), primarily resulting from our net loss of ($4,478,174) and change in working

capital of $99,309 related to an increase in accounts payable and accrued liabilities, offset by non-cash charges of $2,164,136 related

to depreciation and amortization, share based compensation expense, and finance charges associated with the debt issuance costs of the

Secured Bridge Notes.

Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing and promotion

costs, and public company administrative support costs such as legal and other professional support services.

Cash used in operating

activities for the nine months ended September 30, 2023, was ($3,404,954), primarily resulting from our net loss of ($6,594,656) and change

in working capital of $188,517 related to an increase in accounts payable and accrued liabilities, offset by non-cash charges of $3,001,184

related to depreciation and amortization, share based compensation expense, and finance charges associated with the debt issuance costs

of the Secured Bridge Notes.

Cash used in operating activities for both periods consisted of personnel-related expenditures, marketing

and promotion costs, and public company administrative support costs such as legal and other professional support services.

Investing activities

Cash flows used in investing

activities for the six months ended June 30, 2023, was $529,503, consisting entirely of capitalization of software development expenses.

activities for the nine months ended September 30, 2023, was $743,208, consisting entirely of capitalization of software development expenses.

Cash flows used in investing

activities for the six months ended June 30, 2022, was $1,282,433, primarily consisting of capitalization of software development expenses

activities for the nine months ended September 30, 2022, was $1,677,326, primarily consisting of capitalization of software development

expenses of $1,673,517 and purchase of property and equipment of $3,809.

Financing activities

Cash flows generated

in financing activities for the six months ended June 30, 2023, was $4,687,941 and related primarily to cash proceeds from the issuance

in financing activities for the nine months ended September 30, 2023, was $4,686,406 and related primarily to cash proceeds from the issuance

of common shares of $4,016,521 and proceeds from related party debt of $750,000.

Cash flows used in financing

activities for the three months ended June 30, 2022, was $88,722 related to cash paid by the Company related to the net-share settlement

activities for the nine months ended September 30, 2022, was $88,723 related to cash paid by the Company related to the net-share settlement

of vested restricted stock units during the quarter.

Funding Requirements

We historically have incurred

significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $76.2 million and $71.7

million as of June 30, 2023, and December 31, 2022, respectively.

As of June 30, 2023, and December 31, 2022, we had cash of $3,605,144

and $1,661,434, respectively.

We historically have

incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $78.3 million

and $71.7 million as of September 30, 2023, and December 31, 2022, respectively.

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

cash of $2,199,678 and $1,661,434, respectively.

Our cash is comprised primarily of demand deposit accounts and money market funds.

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.

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

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:

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The following table summarizes

our contractual obligations not on our Balance Sheet as of June 30, 2023, and the effects that such obligations are expected to have on

our liquidity and cash flows in future periods:

our contractual obligations not on our Balance Sheet as of September 30, 2023, and the effects that such obligations are expected to have

on our liquidity and cash flows in future periods:

Payments due by period

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Represents premium payments due related to D&O insurance policy from February 2023 – February 2024

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.

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

Critical Accounting Estimates

Our condensed financial statements

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

The preparation of these condensed financial statements requires

us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses,

and related disclosures.

On an ongoing basis, we continually evaluate our estimates and assumptions believed to be reasonable under current

facts and circumstances.

Actual amounts and results may materially differ from these estimates made by management under different assumptions

and conditions.

Our critical accounting estimates are presented in

Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on

Form 10-K for the year ended December 31, 2022 filed with SEC on March 23, 2023.

Our condensed financial

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

The preparation of these condensed financial statements

requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and

expenses, and related disclosures.

On an ongoing basis, we continually evaluate our estimates and assumptions believed to be reasonable

under current facts and circumstances.

Actual amounts and results may materially differ from these estimates made by management under

different assumptions and conditions.

Our critical accounting estimates are presented

in Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report

on Form 10-K for the year ended December 31, 2022 filed with SEC on March 23, 2023.

There were no material changes to our critical accounting

estimates during the six months ended June 30, 2023.

estimates during the nine months ended September 30, 2023.

Emerging growth company and smaller reporting company status

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Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

We are a smaller reporting company as

defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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 2. Management’s Discussion and Analysis