AUDDIA INC. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page Auddia Inc. Annual Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 457 ) F-1 Balance Sheets as of December 31, 2024 and 2023 F-2 Statements of Operations for the Years Ended December 31, 2024 and 2023 F-3 Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2024 and 2023 F-4 Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 F-5 Notes to Financial Statements F-6 38 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Auddia, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Auddia, Inc. (the Company) as of December 31, 2024 and 2023, and the related statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a deficiency in stockholders’ equity that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Haynie & Company Salt Lake City, Utah March 5, 2025 We have served as the Company’s auditor since 2023. F- 1 Auddia, Inc. Balance Sheets December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 2,706,319 $ 804,556 Accounts receivable, net 353 494 Prepaid assets 45,667 50,608 Other current assets 10,039 7,150 Total current assets 2,762,378 862,808 Non-current assets: Property and equipment, net of accumulated depreciation 12,281 18,099 Intangible assets, net of accumulated amortization 3,416 3,947 Software development costs, net of accumulated amortization 2,308,230 3,347,935 Operating lease right of use asset 74,257 – Deferred offering costs 137,766 170,259 Total non-current assets 2,535,950 3,540,240 Total assets $ 5,298,328 $ 4,403,048 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities 507,663 $ 911,664 Notes payable to related party, net of debt issuance costs – 3,025,000 Current portion of operating lease liability 28,405 – Stock awards liability 14,852 45,964 Total current liabilities 550,920 3,982,628 Non-current operating lease liability 53,088 – Total liabilities 604,008 3,982,628 Commitments and contingencies (Note 5) – Shareholders’ equity: Series B Preferred stock - $ 0.001 par value, 2,314 and 0 shares issued and outstanding as of December 31, 2024 and 2023, respectively 2 – Common stock - $ 0.001 par value, 100,000,000 authorized and 6,761,427 and 854,162 shares issued and outstanding as of December 31, 2024 and 2023, respectively (1) 6,761 854 Additional paid-in capital 94,115,993 80,962,896 Accumulated deficit ( 89,428,436 ) ( 80,543,330 ) Total shareholders’ equity 4,694,320 420,420 Total liabilities and shareholders’ equity $ 5,298,328 $ 4,403,048 (1) The Company’s common stock outstanding as of December 31, 2023 has been retroactively restated for the effect of the 25-for-1 reverse stock split effective February 26, 2024. See Accompanying Notes to Financial Statements. F- 2 Auddia, Inc. Statements of Operations For the Year Ended December 31, 2024 2023 Revenue $ – $ – Operating expenses: Direct cost of services 202,950 181,679 Sales and marketing 860,677 1,096,106 Research and development 1,020,609 781,017 General and administrative 3,845,302 3,576,729 Depreciation and amortization 1,987,601 1,840,837 Total operating expenses 7,917,139 7,476,368 Loss from operations ( 7,917,139 ) ( 7,476,368 ) Other expense: Interest expense ( 172,512 ) ( 1,331,128 ) Change in fair value of warrants ( 632,388 ) – Total other expense ( 804,900 ) ( 1,331,128 ) Loss before income taxes ( 8,722,039 ) ( 8,807,496 ) Provision for income taxes – – Net loss $ ( 8,722,039 ) $ ( 8,807,496 ) Net loss per share attributable to common stockholders Basic and diluted $ ( 3.39 ) $ ( 12.93 ) Weighted average common shares outstanding (1) Basic and diluted 2,570,299 681,229 (1) The Company’s weighted average common shares outstanding for the year ended December 31, 2023 have been retroactively restated for the effect of the 25-for-1 reverse stock split effective February 26, 2024. See Accompanying Notes to Financial Statements. F- 3 Auddia Inc. Statements of Changes in Stockholders’ Equity For the Years Ended December 31, 2024 and 2023 Series B Preferred Stock Common Stock Number of Shares Par Value Number of Shares Par Value Additional Paid-In Capital Accumulated Deficit Total Balance, December 31, 2023 – $ – 854,162 $ 854 $ 80,962,896 $ ( 80,543,330 ) $ 420,420 Issuance of common shares, net of costs – – 5,903,049 5,903 8,715,124 – 8,721,027 Offering costs – – – – ( 257,128 ) – ( 257,128 ) Share-based compensation – – – – 736,797 – 736,797 Issuance of Series B preferred stock and warrants 2,314 2 – – 2,238,573 – 2,238,575 Conversion of debt to equity – – – – 1,543,772 – 1,543,772 Issuance of restricted stock units – – 4,216 4 12,891 1 12,896 Capitalized dividends – – – – 163,068 ( 163,068 ) – Net loss – – – – – ( 8,722,039 ) ( 8,722,039 ) Balance, December 31, 2024 2,314 $ 2 6,761,427 $ 6,761 $ 94,115,993 $ ( 89,428,436 ) $ 4,694,320 Series B Preferred Stock Common Stock Number of Shares Par Value Number of Shares Par Value Additional Paid-In Capital Accumulated Deficit Total Balance, December 31, 2022 (1) – $ – 506,198 $ 506 $ 75,585,411 $ ( 71,735,834 ) $ 3,850,083 Issuance of common shares, net of costs – – 283,861 284 3,963,601 – 3,963,885 Adjustments related to reverse stock split – – 56,310 56 ( 56 ) – – Exercise of restricted stock units – – 7,830 8 ( 8 ) – – Issuance of warrants – – – – 383,004 – 383,004 Share-based compensation – – – – 1,025,420 – 1,025,420 Revaluation of share-based compensation liability – – – – 5,524 – 5,524 Cancelled shares – – ( 37 ) – – – – Net loss – – – – – ( 8,807,496 ) ( 8,807,496 ) Balance, December 31, 2023 – $ – 854,162 $ 854 $ 80,962,896 $ ( 80,543,330 ) $ 420,420 (1) The Company’s changes in stockholders’ equity for the year ended December 31, 2023 has been retroactively restated for the effect of the 25-for-1 reverse stock split effective February 26, 2024. See Accompanying Notes to Financial Statements. F- 4 Auddia Inc. Statements of Cash Flows For the Year Ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 8,722,039 ) $ ( 8,807,496 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Finance charge associated with debt issuance cost – 882,049 Depreciation and amortization 2,050,399 1,840,837 Share-based compensation expense 736,797 1,025,420 Change in fair value of warrants 632,388 – Amortization of ROU asset 21,054 – Change in assets and liabilities: Accounts receivable 141 ( 357 ) Prepaid assets 4,941 ( 2,802 ) Other current assets ( 2,886 ) ( 7,150 ) Accounts payable and accrued liabilities 199,882 565,292 Lease liabilities ( 13,820 ) – Net cash used in operating activities ( 5,093,143 ) ( 4,504,207 ) Cash flows from investing activities: Purchase of property and equipment ( 12,198 ) ( 2,409 ) Software capitalization ( 992,147 ) ( 1,029,157 ) Net cash used in investing activities ( 1,004,345 ) ( 1,031,566 ) Cash flows from financing activities: Offering costs in connection with the issuance of preferred shares ( 192,135 ) – Net settlement of share-based compensation liability ( 31,112 ) ( 87,628 ) Proceeds from related party debt, net of original issue discount – 750,000 Repayments of related party debt ( 2,750,000 ) – Proceeds from issuance of preferred shares, net of issuance costs 2,238,575 – Net settlement related to restricted stock units 12,896 – Proceeds from issuance of common shares, net of issuance costs 8,721,027 4,016,523 Net cash provided by financing activities 7,999,251 4,678,895 Net decrease in cash 1,901,763 ( 856,878 ) Cash, beginning of year 804,556 1,661,434 Cash and restricted cash, end of period $ 2,706,319 $ 804,556 Supplemental disclosures of cash flow information: Cash paid for interest $ 1,045 $ 6,000 Cash paid for taxes $ – $ – Supplemental disclosures of non-cash activity: Reclassification of deferred offering costs $ 64,993 $ 52,637 Capitalized dividends $ 163,068 $ – Original issue discount and issuance of warrants on related party debt $ – $ 458,004 Issuance of warrants in connection with related party notes $ 911,384 $ – Right of use asset and assumption of operating lease liability $ 95,311 $ – See Accompanying Notes to Financial Statements. F- 5 Auddia Inc. Notes to Financial Statements For the Years Ended December 31, 2024 and 2023 Note 1 – Description of Business, Basis of Presentation and Summary of Significant Accounting Policies Description of Business 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 in Colorado. Basis of Presentation The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). 2024 Reverse Stock Split The Company filed an amendment to its Certificate of Incorporation with the Secretary of State in Delaware which became effective as of 5:00 P.M. Eastern Time on February 26, 2024. As a result, every twenty-five (25) issued shares of common stock were automatically combined into one share of common stock. Shares of the Company’s common stock were assigned a new CUSIP number (05072K 206) and began trading on a split-adjusted basis on February 27, 2024. The reverse stock split will not change the authorized number of shares of the Company’s common stock. No fractional shares will be issued and any fractional shares resulting from the reverse stock split will be rounded up to the nearest whole share. Therefore, stockholders with less than 25 shares will receive one share of stock. The reverse stock split will apply to the Company’s outstanding warrants, stock options and restricted stock units. The number of shares of common stock into which these outstanding securities are convertible or exercisable will be adjusted proportionately as a result of the reverse stock split. The exercise prices of any outstanding warrants or stock options will also be proportionately adjusted in accordance with the terms of those securities and the Company’s equity incentive plans. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The 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. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant. F- 6 Risks and Uncertainties The Company is subject to various risks and uncertainties frequently encountered by companies in the early stages of development. Such risks and uncertainties include, but are not limited to, its limited operating history, competition from other companies, limited access to additional funds, dependence on key personnel, and management of potential rapid growth. To address these risks, the Company must, among other things, develop its customer base; implement and successfully execute its business and marketing strategy; develop follow-on products; provide superior customer service; and attract, retain, and motivate qualified personnel. There can be no guarantee that the Company will be successful in addressing these or other such risks. Cash and Cash Equivalents The Company had cash on hand of $ 2,703,391 and $ 801,448 as of December 31, 2024 and 2023, respectively. The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company had cash equivalents of $ 2,927 and $ 3,108 as of December 31, 2024 and 2023, respectively. The Company maintains cash deposits at several 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. As of December 31, 2024 and 2023, the Company had approximately $ 2.2 million and $ 0.6 million, respectively, 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. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from two to five years . 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. Costs associated with significant upgrades and enhancements that result in additional functionality are capitalized. Capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies. Unamortized capitalized software development costs determined to be in excess of anticipated future net revenues are considered impaired and expensed during the period of such determination. Software development costs of $ 992,147 and $ 1,029,157 were capitalized for the years ended December 31, 2024 and 2023, respectively. Amortization of capitalized software development costs were $ 2,031,852 and $ 1,815,447 for the years ended December 31, 2024 and 2023, respectively, and are included in depreciation and amortization expense. Long-Lived Assets The Company reviews its tangible and limited lived intangible long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. If a potential impairment is indicated, the Company compares the carrying amount of the asset to the undiscounted future cash flows associated with the asset. In the event the future cash flows are less than their carrying value, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The Company determined long-lived assets were no t impaired at December 31, 2024 and 2023. F- 7 Income Taxes The Company accounts for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized in the future. The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a part of income tax expense. Prior to the Company’s conversion to a Delaware corporation in February 2021, the Company was a limited liability company and had elected to be treated as a pass-through entity for income tax purposes. Accordingly, taxable income and losses of the Company were reported on the income tax returns of its members, and no provision for federal income taxes have been recorded in the accompanying financial statements. Had the Company been a taxable entity, no provision for income taxes would have been recorded as the Company has sustained losses since inception. Right of Use Assets and Lease Liabilities In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under ASC 842. Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As the Company’s lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. Operating leases are included in operating lease right of use asset and operating lease liabilities, current and non-current, on the Company’s accompanying balance sheets. 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 will exclude any sales incentives and amounts collected on behalf of third parties. The Company will recognize revenue when it satisfies a performance obligation by transferring control over a service or product to a customer. To achieve this core principle, the Company applies the following five steps: ( 1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation. 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 accompanying statements of operations. Collected taxes, if applicable, will be recorded within other current liabilities until remitted to the relevant taxing authority. Subscriber revenue will consist primarily of subscription fees and other ancillary subscription-based revenues. Revenue will be recognized on a straight-line basis when the performance obligations to provide each service for the period have been satisfied, which is over time as our subscription services are continuously available and can be consumed by customers at any time. 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 will be recorded as deferred revenue. The deferred revenue will be recognized as revenue in the accompanying statements of operations as the services are provided. F- 8 Advertising Costs The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2024 and 2023 was $ 355,303 and $ 585,876 , respectively. Share-Based Compensation The Company accounts for share-based compensation arrangements with employees, directors, and consultants and recognizes the compensation expense for share-based awards based on the estimated fair value of the awards on the date of grant. 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. Net Loss per Share Basic loss per share common share is calculated based on the weighted-average number of common shares outstanding in accordance with FASB ASC Topic 260, Earnings per Share . Diluted net loss per share is calculated based on the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares. When the Company reports a net loss, the calculation of diluted net loss per share excludes potential common shares as the effect would be anti-dilutive. Potential common shares are composed of shares of common issuable upon the exercise of options and warrants. Liquidity, Capital Resources and Going Concern The Company had cash and cash equivalents of $ 2,706,319 as of December 31, 2024. The Company will need additional funding to complete the development of the full product line and scale products with a demonstrated market fit. The Company raised an additional $ 10.9 million during 2024 and paid down $ 2.75 million in Secured Bridge Notes and will only be sufficient to fund our current operating plans into the second quarter of 2025. Management has plans to secure such additional funding. 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 from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management has plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, such as the White Lion equity line of credit and additional future financing agreements. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s current 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 during the second quarter of 2025. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies. F- 9 Note 2 – Property & Equipment, Intangible Assets, and Software Development Costs Property and equipment and software development costs consisted of the following as of: Schedule of property and equipment and software development costs December 31, 2024 December 31, 2023 Computers and equipment $ 110,551 $ 102,348 Furniture 11,258 7,263 Accumulated depreciation ( 109,528 ) ( 91,512 ) Total property and equipment, net $ 12,281 $ 18,099 Domain name $ 3,947 $ 3,947 Accumulated amortization ( 531 ) – Total intangible assets, net $ 3,416 $ 3,947 Software development costs $ 8,577,815 $ 7,655,206 Accumulated amortization ( 6,269,585 ) ( 4,307,271 ) Total software development costs, net $ 2,308,230 $ 3,347,935 The Company recognized depreciation expense of $ 18,016 and $ 25,391 for the years ended December 31, 2024 and 2023, respectively, related to property and equipment, amortization expense of $ 531 and $ 0 for the years ended December 31, 2024 and 2023, respectively, related to intangible assets, and amortization expense of $ 2,031,852 and $ 1,815,447 for the years ended December 31, 2024 and 2023, respectively, related to software development costs. Note 3 – Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following: Schedule of accounts payable and accrued liabilities December 31, 2024 December 31, 2023 Accounts payable and accrued liabilities $ 495,312 $ 424,510 Credit cards payable 12,351 16,975 Accrued interest – 470,179 Total accounts payable and accrued liabilities $ 507,663 $ 911,664 F- 10 Note 4 – Notes Payable to Related Party, net of debt issuance costs During November 2022, the Company entered into a Secured Bridge Note (the “Prior Note”) financing with an accredited investor and existing shareholder of the Company. The Prior Note had a principal amount of $ 2,200,000 , including an original issue discount of $ 200,000 . The Prior Note bore interest at an annual stated interest rate of 10% with an original maturity date of May of 2023. The Prior Note is secured by a lien on substantially all of the Company’s assets. At maturity, the lender had the option to convert the original issue discount and accrued but unpaid interest into shares of the Company’s common stock at a fixed conversion price of $ 30.75 per share. The conversion option was available to the lender at the earlier of (i) maturity, or (ii) payback of all the principal. The embedded conversion option was not accounted for separately, in accordance with the guidance outlined in ASC 815-40, as it was considered indexed to the Company’s shares. The Company had the option to extend the maturity date by six months to November 2023. In the event of an extension, the Company will issue additional warrants, and the interest rate on the Note will increase to 20%. In connection with the Prior Note financing, the Company issued 12,000 common stock warrants with a five-year term at an exercise price of $ 52.50 per share. At the time of issuance, the common stock warrants were valued at $ 361,878 and recorded as a debt discount to the Prior Note. The issued common stock warrants were classified as equity as they were indexed to the Company’s shares in accordance with ASC 815-40. During April 2023, the Company entered into an additional Secured Bridge Note (the “New Note”) financing with the same accredited investor and significant existing shareholder. The New Note had a principal amount of $ 825,000 , including an original issue discount of $ 75,000 . The New Note bore interest at an annual stated interest rate of 10% with an original maturity date of July 2023. The New Note is secured by a lien on substantially all of the Company’s assets. At maturity, the lender had the option to convert the original issue discount and accrued but unpaid interest into shares of the Company’s common stock at a fixed conversion price of $ 52.50 per share. The conversion option was available to the lender at the earlier of (i) maturity, or (ii) payback of all the principal. The embedded conversion option was not accounted for separately, in accordance with the guidance outlined in ASC 815-40, as it was considered indexed to the Company’s shares. In connection with the New Note financing, the Company issued 26,000 common stock warrants with a five-year term at an exercise price of $ 52.50 per share, from which 13,000 common stock warrants were exercisable immediately and were exercisable in the event that the loan term is extended. At the time of issuance, the common stock warrants were valued at $ 252,940 , which was recorded as an additional debt discount to the New Note. The issued common stock warrants were classified as equity as they were indexed to the Company’s shares in accordance with ASC 815-40. During April 2023, the Company also modified the terms of the Prior Note and cancelled the original 12,000 common stock warrants issued with the Prior Note. The Company recognized the modification in accordance with ASC 815-40-35, which resulted in the recognition of debt discount in the amount of $ 35,981 . In lieu of the cancelled common stock warrants, the Company issued 24,000 new common stock warrants with a five-year term at an exercise price of $ 52.50 per share. From the newly issued 24,000 new common stock warrants, 12,000 common stock warrants were fully vested and immediately exercisable, while the remaining 12,000 common stock warrants remained unvested. The issued common stock warrants were classified as equity as they were indexed to the Company’s shares in accordance with ASC 815-40. In May of 2023, the Company renegotiated with the lender an extension of the maturity date of the Prior Note for six months to November 2023 with an increased annual interest rate of 20% and issued an additional 12,000 common stock warrants to the lender. The additional common stock warrants were valued at $ 94,083 and recorded as an additional debt discount. The issued common stock warrants were classified in equity as they were considered indexed to the Company’s shares in accordance with ASC 815-40. In connection with this extension, the 12,000 outstanding unvested warrants became vested and exercisable. On July 31, 2023, the Company extended the maturity date of the New Note to November 30, 2023. In connection with such extension, 13,000 outstanding unvested common stock warrants became vested and exercisable. There was no change in the application of the accounting under ASC 815-40. F- 11 As of December 31, 2024 and 2023, the balance of the Prior Note, net of debt issuance costs, was $ 0 and $ 2,200,000 , respectively. Interest expense related to the Prior Note, including interest incurred, amortization of the debt discount, and the warrant amortization for the years ended December 31, 2024 and 2023 was $ 121,000 and $ 868,084 , respectively. As of December 31, 2024 and 2023, the balance of the New Note issued in April 2023, net of debt issuance costs, was $ 0 and $ 825,000 respectively. Interest expense related to the New Note, including interest incurred, amortization of the debt discount, and the warrant amortization for the years ended December 31, 2024 and 2023 was $ 45,205 and $ 401,441 . On April 9, 2024, the Company and the investor entered into an Amendment and Waiver Agreement relating to the Bridge Notes. The Company agreed to pay $2.75 million in cash to the Investor in repayment of the principal of the Bridge Notes (exclusive of the $275,000 of original issue discount on the Bridge Notes) shortly after the closing by the Company of one or more equity financings with total gross proceeds to the Company of not less than $6,000,000. On April 26, 2024, the Company repaid $ 2.75 million of principal on its Secured Bridge Notes. Effective April 9, 2024, the Investor converted $ 911,384 (the “Rollover Amount”) which is equal to the (i) unpaid accrued interest on the Bridge Notes plus (ii) the original issue discount (“OID”) on the Bridge Notes, into equity securities of the Company (the “Rollover Securities”). The Rollover Securities consist of (i) 463,337 prefunded common stock warrants with a per share exercise price of $ 0.001 per share (the “Prefunded Warrants”) and (ii) 463,337 non-prefunded warrants (the “Non-Prefunded Warrants”) with an initial per share exercise price equal to $ 1.967 . The per share price has been adjusted to $ 0.4930 . The number of Prefunded Warrants was determined by dividing the Rollover Amount by $1.967. The number of Non-Prefunded Warrants is equal to the number of Prefunded Warrants (i.e. 100% warrant coverage). The Non-Prefunded Warrants have a price adjustment provision which will adjust the exercise price downward in the event that the Company issues equity securities in the future at an effective per share price below the then current exercise price. In order to assure compliance with applicable Nasdaq rules, the Non-Prefunded Warrants shall not be exercisable for six months following the date of issue. The Company issued to the Investor 50,000 new common stock warrants with a five-year term as a loan extension fee (“Fee Warrants”). The exercise price of these additional Fee Warrants was initially $ 1.967 . The Fee Warrants have a price adjustment provision which will adjust the exercise price downward in the event that the Company issues equity securities in the future at an effective per share price below the then current exercise price. The per share exercise price has been adjusted to $ 0.4930 . In order to assure compliance with applicable Nasdaq rules, the Fee Warrants shall not be exercisable for six months following the date of issue. The Non-Prefunded Warrants and Fee Warrants had a total valuation of $ 811,402 and the Prefunded Warrants had a valuation of $ 732,370 . As a result, the Company recorded $ 911,384 as a non-cash charge in connection with the issuance of warrants related to the Secured Bridge Notes and a change in the fair value of warrants of $ 632,388 , which is included in other expense in the accompanying statements of operations. All Warrants were classified as equity as they were indexed to the Company’s shares in accordance with ASC 815-40. The Company agreed to adjust the exercise price of the Investor’s Existing Warrants from $ 15.25 (after adjustment for the recent reverse stock) to $ 1.967 per share, and further to $ 0.4930 . The Investor will not be able to receive shares upon exercise of any of the foregoing securities, unless prior stockholder approval is obtained, if (i) the number of shares to be issued would exceed 20% of the Company’s outstanding number of shares at a discount to the applicable Nasdaq Minimum Price or (ii) the number of shares to be issued would result in in a Change of Control within the meaning of Nasdaq Rule 5635(b). F- 12 Note 5 – Commitments and Contingencies Operating Lease On March 25, 2024, the Company entered into a new 37-month operating lease commencing on April 1, 2024 with two separate two year renewal options. The monthly base rent for months two through 14 is $2,456, increasing to $3,070 for months 15 through 26, and ending at $3,684 for months 27 through 37. Rent expense, as part of general and administrative expenses in the statements of operations, was $ 85,842 and $ 61,724 for the years ended December 31, 2024 and 2023, respectively, which consisted of the new operating lease and a temporary month-to-month lease the Company entered into until a long-term space was identified. Litigation 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. 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. Note 6 - Share-based Compensation Stock Options The fair value of each option award is estimated on the date of grant using a Black Scholes option valuation model that uses the assumptions noted in the following table. Because Black Scholes option valuation models incorporate ranges of assumptions for inputs, these ranges are disclosed. Expected volatilities and based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors. The expected term of options granted is derived from the output of the valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Schedule of assumptions December 31, 2024 December 31, 2023 Per share fair value at grant date $ 0.42 - $ 88.85 $ 5.68 - $ 88.85 Risk-free interest rate 0.9 % - 272 % 0.9 % - 272 % Expected volatility 77.04 % – 10,900 % 77.04 % - 10,900 % Dividend yield 0 % 0 % Expected life in years 5.0 – 6.4 5.24 – 6.38 The following table presents the activity for stock options outstanding: Schedule of stock option activity Options Weighted Average Exercise Price Outstanding - December 31, 2022 66,527 $ 61.13 Granted 26,726 11.42 Forfeited/canceled ( 8,358 ) 37.76 Exercised – – Outstanding - December 31, 2023 84,895 47.79 Granted 500,000 0.51 Forfeited/canceled ( 1,493 ) 58.39 Exercised – – Outstanding - December 31, 2024 583,402 $ 7.24 F- 13 The following table presents the composition of options outstanding and exercisable: Schedule of options outstanding and exercisable Options Outstanding** Options Exercisable** Exercise Prices Number Price Life* Number Price* $0.51 500,000 $ 0.51 10.00 500,000 $ 0.51 $72.39 2,131 $ 72.39 2.86 2,131 $ 72.39 $106.50 6,853 $ 106.50 4.48 6,853 $ 106.50 $69.75 30,891 $ 69.75 5.97 29,041 $ 69.75 $44.75 7,250 $ 44.75 6.67 5,562 $ 44.75 $30.25 15,577 $ 30.25 7.69 15,577 $ 30.25 $9.90 2,000 $ 9.90 8.44 500 $ 9.90 $6.25 18,700 $ 6.25 8.95 2,750 $ 6.25 Total - December 31, 2024 583,402 562,414 ________________________ * Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively. ** The Company’s options summarized above have been retroactively restated for the effect of the 25-for-1 reverse stock split. Restricted Stock Units The following table presents the activity for restricted stock units outstanding: Schedule of restricted stock units outstanding Restricted Stock Units Weighted Average Grant Date Fair Value Outstanding - December 31, 2022 22,554 $ 53.61 Granted 1,500 31.00 Forfeited/canceled ( 4,734 ) 45.66 Exercised ( 7,830 ) 45.66 Outstanding - December 31, 2023 11,490 59.36 Granted – – Forfeited/canceled ( 500 ) – Exercised ( 6,245 ) 61.74 Outstanding - December 31, 2024 4,745 $ 56.52 The Company recognized share-based compensation expense related to stock options and restricted stock units of $ 736,797 and $ 1,025,420 for the years ended December 31, 2024 and 2023, respectively. The remaining unvested share-based compensation expense of $ 181,805 is expected to be recognized over the next 36 months. F- 14 Note 7 – Equity Financings 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 White Lion Common Stock Purchase Agreement prohibits the Company from issuing and selling any shares of common stock to White Lion to the extent such shares, when aggregated with all other shares of our common stock then beneficially owned by White Lion, would cause White Lion’s beneficial ownership of common stock to exceed 9.99% (the “Beneficial Ownership Cap”). The Company recognized all offering costs related to the equity line of credit as deferred offering costs in accordance with the guidance in ASC 835-30-S45. 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 Agreeme nt, 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. During the year ended December 31, 2024, the Company closed on several sales of Common Stock under the White Lion Purchase Agreement. As a result, the Company issued an aggregate of 4,815,263 common shares and received aggregate proceeds of approximately $ 8.2 million. Common Stock Purchase Agreement On November 25, 2024, the Company entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”) and a related registration rights agreement (the “White Lion RRA”) with White Lion. Pursuant to the Common Stock Purchase Agreement, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, 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. At-the-Market Sales Agreement During the year ended December 31, 2024, the Company issued 1,317,464 shares for aggregate proceeds of approximately $ 0.7 million pursuant to an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with Ascendiant Capital Markets, LLC, as sales agent (the “Agent”). Under the Sales Agreement, the Company may sell shares of its common stock having an aggregate offering price of up to $10,000,000 from time to time, through an “at the market offering” (the “ATM Offering”). The aggregate market value of shares that the Company can sell under the Sales Agreement will be subject to the limitations of General Instruction I.B.6 of Form S-3, to the extent required under such instruction. $2.3 Million Convertible Preferred Stock and Warrants Financing On April 23, 2024, the Company entered into a securities purchase agreement with accredited investors for a convertible preferred stock and warrants financing. The Company received $ 2,314,000 of gross proceeds in connection with the closing of this financing. At the closing, the Company issued 2,314 shares of Series B convertible preferred stock (“Series B Preferred Stock”) at a purchase price of $1,000 per share of Series B Preferred Stock. The Series B Preferred Stock is convertible into Common Stock at an initial conversion price (“Conversion Price”) of $1.851 per share of Common Stock. The Company also issued warrants (“Warrants”) exercisable for 1,250,137 shares of Common Stock with a five-year term and an initial exercise price of $ 1.851 per share. The current conversion and exercise price has been adjusted to $ 0.4930 . The proceeds of this financing, together with other available cash resources, were used to repay outstanding debt and for general corporate purposes. F- 15 Holders of the Series B Preferred Stock will be entitled to dividends in the amount of 10% per annum, payable quarterly. The Company has the option to pay dividends on the Series B Preferred Stock in additional shares of Common Stock. The Company also has the option to cumulate or “capitalize” the dividends, in which case the accrued dividend amount shall be added to the stated value of each share of Series B Preferred Stock. As of December 31, 2024, the Company has elected to capitalize all dividends declared. Warrants The following table presents the activity for warrants outstanding: Schedule of activity for warrants outstanding Warrants Weighted Average Exercise Price Outstanding – December 31, 2022 178,884 $ 115.50 Granted 38,000 $ 15.25 Forfeited/cancelled/restored – $ – Exercised – $ – Outstanding - December 31, 2023 216,884 $ 96.00 Granted 2,226,811 $ 1.85 Forfeited/cancelled ( 14,154 ) $ – Exercised – $ – Outstanding - December 31, 2024 2,429,541 $ 15.00 During the year ended December 31, 2024, in connection with the payoff of the New Note and Prior Note, the Company issued 2,226,811 warrants to purchase shares of common stock at the exercise price of $1.967. The per share exercise price has been adjusted to $0.4930. During the year ended December 31, 2023, in connection with the New Note financing, the Company issued 26,000 warrants to purchase shares of common stock at the exercise price of $15.25 per share. During the year ended December 31, 2023, in connection with the modification of the Prior Note, the Company cancelled the original 12,000 common stock warrants and issued 24,000 new common stock warrants at an exercise price of $15.25 per share. Note 8 – Income Taxes For the years ended December 31, 2024 and 2023, the Company recorded no income tax benefit for the net operating losses incurred during the year, due to the uncertainty of realizing a benefit from those items. The following is a reconciliation of the statutory federal income tax rate to the effective tax rate reported in the financial statements: Schedule of effective income tax rate reconciliation 2024 2023 U.S. federal statutory rate 21.0 % 21.0 % Effects of: State and local taxes, net of federal benefit 4.5 % 4.5 % Prior year true-ups ( 1.0 )% ( 1.0 )% Other ( 0.1 )% ( 0.1 )% Change in valuation allowance ( 24.4 )% ( 24.4 )% Effective rate – % – % F- 16 Significant components of the Company’s deferred tax assets as of December 31, 2024 and 2023 are summarized below. Schedule of deferred tax assets 2024 2023 Deferred tax assets: Federal net operation losses $ 4 ,716,750 $ 4,141,314 State net operation losses 1,153,016 713,407 Stock based compensation 840,860 731,311 Other assets 154,788 12,773 Total deferred tax assets 6,909,306 5,598,805 Deferred income tax liabilities: Capitalized software – ( 742,450 ) Property & equipment ( 1,270 ) ( 4,451 ) Total deferred tax liabilities ( 1,270 ) ( 746,901 ) Net deferred tax assets 6,908,036 4,851,904 Valuation allowance ( 6,908,036 ) ( 4,851,904 ) Net deferred tax asset, net of valuation allowance $ – $ – For the year ended December 31, 2024, the Company has federal and state net operating loss carryforwards of $ 22,457,710 and $ 955,911 , respectively. The federal net operating loss carryforwards do not have an expiration, however, are limited to 80% of the excess of taxable income over the total net operating loss deduction. The state net operating loss carryforwards will conform to the federal provisions. After weighing all available positive and negative evidence for the years ended December 31, 2024 and 2023, the Company has recorded a valuation allowance of $ 6,908,036 and $ 4,851,904 , respectively. The Company continuously monitors its current and prior filing positions in order to determine if any unrecognized tax positions should be recorded. The analysis involves considerable judgement and is based on the best information available. For the years ended December 31, 2024 and 2023, the Company is not aware of any positions which require an uncertain tax position liability. The Company is subject to taxation in the United States and Colorado. The statute of limitations on the initial tax return filed for 2021 tax year will expire in 2025 for federal and in 2026 for state jurisdictions. F- 17 Note 9 – 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 stockholder’s stock outstanding during the period. For the calculation of diluted net loss per share, net loss per share attributable to common stockholders for basic net loss per share is adjusted by the effect of dilutive securities, including awards under our equity compensation plans. 2024 Reverse Stock Split On February 26, 2024, the Company effected a 1-for-25 reverse stock split of its common stock. The reverse stock split applied to the Company’s outstanding warrants, stock options and restricted stock units. The number of shares of common stock into which these outstanding securities are convertible or exercisable were adjusted proportionately as a result of the reverse stock split. The exercise prices of any outstanding warrants or stock options were also proportionately adjusted in accordance with the terms of those securities and the Company’s equity incentive plans. All weighted average share amounts have been retroactively adjusted for the reverse stock split. As of December 31, 2024 and 2023, 3,018,188 and 313,269 , 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 10 – Subsequent Events Management evaluated subsequent events and transactions that occurred after the balance sheet date, up to the date that the financial statements were issued. Based upon this review, other than as set forth below, management did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. On February 19, 2025, the Company issued 1,033,706 shares for aggregate proceeds of approximately $0.5 million under the ATM financing arrangement. On February 19, 2025, 140 shares of Series B Preferred stock were converted to 283,116 shares of Common stock. Additionally, on February 19, 2025, the Series B Preferred stockholders converted their capitalized dividends into 283,116 shares of Common stock. F- 18 Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure None.