AUDDIA INC. 10-Q

Item 2. 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, 2025, which was filed with the SEC on March 5, 2025. 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, 2025, 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.” Overview Auddia (the “Company”) is an AI technology company headquartered in Boulder, CO that is reinventing how consumers engage with audio through the development of its faidr app, an industry-first audio platform, which utilizes proprietary AI technology to personalize and customize both radio and podcast listening experiences. On August 20, 2025, the Company announced that it is in the process of building its proprietary Discovr Radio platform and integrating it into the newly configured free faidr app for an anticipated launch in early 2026., The Discovr Radio platform, a web-based portal will allow artists and record labels to promote songs on radio streams, through an integration with faidr. faidr historically allowed users to listen to AM/FM radio stations without unwanted commercial breaks. The app replaces these ad breaks in real time with songs supplied by Discovr Radio, giving artists exposure on mainstream airwaves. The faidr app represents the first-time consumers can combine the local content uniquely provided by AM/FM radio with commercial-free and personalized listening many consumers demand from digital-media consumption and preference-based new music discovery. In addition to commercial-free AM/FM, faidr includes podcasts with its Forward+ ad skipping technology on iOS. The combination of AM/FM streaming and new-music distribution, with Auddia’s unique, AI technology-driven differentiators, addresses large (radio streamers) and rapidly growing (independent and emerging artists) audiences and customer bases. We have developed our AI platform on top of Google’s TensorFlow open-source library that is being “taught” to know the difference between all types of audio content on the radio. For instance, the platform recognizes the difference between a commercial and a song and DJ conversation. Not only does the technology learn the differences between the various types of audio segments, but it also identifies the beginning and end of each piece of content. The faidr app with its advanced features allow users to skip any content heard on the station and request audio content on-demand. We believe the faidr App represents a significant differentiated audio streaming product, the first to give audio streamers a more personalized middle ground between passive content like broadcast radio and fully on-demand content like Spotify. No other audio streaming app available today, including category leaders like TuneIn, iHeart, and Audacy, can compete with faidr’s full product offerings. We launched an MVP version of faidr through several consumer trials in 2021 to measure consumer interest and engagement with the App. The full app launched on February 15, 2022, and included all major U.S. radio stations in the US. In February 2023, we added faidrRadio, our exclusive content offerings, to the app. Podcasts were added to the app for the iOS version before the end of Q1 2023 and added to the Android app in May of 2023. The Company initially launched faidr with a B2C subscription model in February of 2022 and is transitioning to a B2B subscription model. 20 In August 2025, the Company announced a new B2B business model with a strategic shift to AI driven music discovery. Auddia is targeting artists and labels for SaaS subscription access to ad-free AM/FM streaming listeners on the faidr app, while faidr users will enjoy free access to AI driven ad-free AM/FM streams on all music stations. Consumer subscriptions will no longer be required to enjoy faidr’s ad-free and content personalization listening experience. New music platforms like Bandcamp and SoundCloud are integral tools for artists to connect with new fans and even monetize their content, but those platforms only cater to a subset of the total addressable market for an artist. The Company believes the largest group of potential fans for most artists remains on commercial radio, listening to music passively and not searching for new artists even though Company surveys and research indicate radio listeners are interested in hearing new music when listening to their favorite radio stations. Auddia’s new Discovr Radio platform will deliver the experience of passively listening to commercial AM/FM radio streams while passively being exposed to new music instead of radio ads. Unlike other new music discovery platforms, which allow artists to upload songs in the hopes that new listeners will find them among the other songs available, Discovr Radio delivers guaranteed plays to artists, leveraging AI to place their songs into radio feeds as part of a custom programming experience and as unique content during what would typically be an ad break. This gives artists opportunities to be heard by the many millions of streaming radio listeners worldwide. The new Discovr Radio platform will consist of a new AI Placement Engine and Artist Portal. The AI Placement Engine will aim to put the right new song in front of the right listener, on the right station, adjacent to the right artist, to optimize music discovery and the connection between artists and fans. The Artist Portal will give artists performance analytics on number of total plays, likes and dislikes, demographic data, and facilitate the connection of artists to their new fans. In addition to streaming songs on live radio streams, the Discovr Radio offering will eventually allow artists and labels to launch campaigns on streaming apps to promote new songs, albums, and tours. Auddia is evolving its business model from direct-to-consumer to business-to-business, shifting its focus from individual radio-streaming subscribers to artists and labels as subscribers. Through a modest monthly subscription, artist and label customers gain guaranteed radio plays—offering a new channel for music promotion. The faidr mobile App is available today through the iOS and Android App stores and the MVP version of the Discovr Radio platform that was released on January 20, 2026. The MVP is expected to be supported by a pilot program of participating customers. We have funded our operations with proceeds from the February 2021 IPO, Series A warrants exercised in July 2021 and common share issuance during June of 2023. We also obtained debt financing through a related party during November 2022 and April 2023, which was subsequently repaid in April 2024. In addition, we sold common shares during 2025 and 2024 pursuant to our equity line facility and issued preferred stock in our Series B and Series C issuances. Since our inception, we have incurred significant operating losses. As of March 31, 2026, we had an accumulated deficit of $99,595,218. 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: · Launch Discovr Radio to artists and labels and market our faidr App to consumers; · continue to develop and expand our technology and functionality to advance the faidr app and Discovr Radio platform; · rollout our product on a national basis, which will include increasing our sales and marketing costs related to the promotion of our products. Faidr and Discovr Radio promotion will include a combination of a) purchasing ads directly from broadcasters or b) participating broadcasters to promote without purchasing ads, but sharing a portion of subscription proceeds based on listening activity on those stations or c) leveraging all social media outlets; · continue to pursue and complete potential acquisitions of other companies; · hire additional business development, product management, operational and marketing personnel; · continue market studies of our products; and · add operational and general administrative personnel which will support our product development programs, commercialization efforts and our transition to operating as a public company. 21 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 significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization 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. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As of March 31, 2026, we had cash and cash equivalents of $1,413,387. Through the date of this report, we have secured approximately $12.9 million in additional financing in 2026. 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. Recent Developments Proposed Business Combination On August 5, 2025, the Company issued a press release announcing that it had entered into a non-binding letter of intent (“LOI”) for a proposed business combination between the Company and Thramann Holdings, LLC (“Holdings”). Holdings is a privately held holding company that controls LT350, Influence Healthcare, and Voyex, three early stage AI-native companies founded by Jeff Thramann, Auddia’s founder, CEO and Executive Chairman. The Company has established a special committee of the board of directors to evaluate the related party transaction. The special committee has engaged its own counsel and financial advisor. On February 17, 2026, Auddia, acting upon the recommendation of its special committee of independent directors, entered into a definitive merger agreement for a business combination between Auddia and Thramann Holdings. Upon closing of the proposed transaction, the Company would be renamed McCarthy Finney and would trade under its new MCFN ticker symbol. Auddia would become a wholly owned subsidiary of McCarthy Finney, and each of the three Thramann Holdings entities would also be wholly owned by McCarthy Finney. Jeff Thramann would remain as CEO of McCarthy Finney and John Mahoney would remain as CFO. Auddia’s current board members are expected to continue as members of the board of the combined company. Auddia shareholders at the time of closing are expected to own a 20% economic interest of McCarthy Finney, with an 80% economic interest of the combined company expected to be owned at closing by Jeff Thramann. Under certain circumstances, these ownership percentages may be adjusted upward or downward based on the level of Auddia’s cash at closing. The consideration to be paid to Thramann Holdings in the proposed transaction will consist of (i) shares of McCarthy Finney convertible preferred stock and (ii) $3.5 million aggregate principal amount of McCarthy Finney notes with a two year maturity date. The closing of the merger will be conditioned on Auddia having at least $12 million cash on hand at closing in order to provide cash runway to fund McCarthy Finney to key future business milestones. There can be no assurances as to Auddia’s level of cash at closing. 22 The transaction has been unanimously approved by the board of directors of both companies. In connection with the approval of the merger agreement, Houlihan Capital provided a fairness opinion to Auddia’s special committee and board of directors. The proposed transaction is expected to close in the second quarter of 2026, subject to customary closing conditions, including approvals by the Auddia stockholders, the effectiveness of the S-4 registration statement to be filed with the SEC to register the shares of McCarthy Finney stock to be issued in connection with the merger, and the continued listing of the combined company’s common stock on Nasdaq. The proposed business combination is subject to a number of known and unknown risk and uncertainties. There can be no assurances that that such business combination will be approved by stockholders or will ultimately be consummated. For more information about the business combination transaction, please see Auddia's Current Report on Form 8-K filed with the SEC on February 17, 2026. Mergers and Acquisitions Strategy We are exploring various merger and acquisition options as part of a broader strategy which aims to scale the business more rapidly; accelerate user adoption and subscriber growth; enter new markets (international); and open new pathways toward raising capital. The overall strategy focuses on three areas: (1) acquiring retained customers of the Discovr Radio platform to generate significant subscription revenue, (2) acquiring retained users of faidr to supply the audience to Discovr Radio customers (3) scaling the faidr userbase and the Discovr Radio customer base once we’ve achieved product-market fit. Nasdaq Deficiency Notices During 2022, 2023 and 2024, the Company received notices from Nasdaq indicating that the Company was not in compliance with (i) Nasdaq Listing Rule 5550(b)(1), which requires companies listed on The Nasdaq Stock Market to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing or (ii) Nasdaq Listing Rule 5550(a)(2) which requires companies listed on The Nasdaq Stock Market to maintain a minimum of a $1.00 bid price for continued listing. On May 24, 2024, we received a letter from Nasdaq indicating that we had regained compliance with the equity requirement in Listing Rule 5550(b) (1). We will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with application of Listing Rule 5815(d)(4)(B). On October 16, 2024, we received a written notice from Nasdaq indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing. The bid price notice does not result in the immediate delisting of our common stock from the Nasdaq Capital Market. The bid price notice indicated that we have 180 calendar days (or until April 14, 2025) in which to regain compliance. If at any time during this 180 calendar day period the bid price of our common stock closes at or above $1.00 per share for a minimum of ten consecutive business days, the Nasdaq staff will provide us with a written confirmation of compliance and the matter will be closed. On April 14, 2025, Nasdaq notified us that we were in compliance with the $1.00 minimum bid price requirement. Reverse Stock Splits On March 28, 2025, the Company effectuated a 1-for-17 reverse stock split. On March 31, 2026, the Company effectuated a 1-for-7.7 reverse stock split. 23 The reverse stock splits did not change the authorized number of shares of the Company’s common stock. No fractional shares were issued and any fractional shares resulting from the reverse stock splits were rounded up to the nearest whole share. The reverse stock splits 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 splits. 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. Impact of Inflation We have recently experienced higher costs across our business as a result of inflation, including higher costs related to employee compensation and outside services. We expect inflation to continue to have a negative impact throughout 2025, and it is uncertain whether we will be able to offset the impact of inflationary pressures in the near term. Components of our results of operations Operating expenses 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. Sales and marketing Our sales and marketing expenses consist primarily of salaries, direct to consumer (users for faidr and Discovr Radio) 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 subscriptions. Research and development Since our inception, we have focused significant resources on our research and development activities related to the software development of our technology. We account for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose 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 our 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 impaired and expensed during the period of such determination. We expect to continue to incur research and development expenses and capitalization in the future as we continue to develop and enhance faidr and develop the Discovr Radio platform. 24 General and administrative Our general and administrative expenses consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and professional fees related to auditing, tax, general legal services, and consulting services. We expect our general and administrative expenses to continue to increase in the future as we right-size our operating activities and prepare for commercialization of our products and support our operations as a public company, including increased expenses related to legal, accounting, insurance, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements, directors and officers liability insurance premiums and investor relations activities. Restructuring Costs Our restructuring costs consist primarily of employee severance and related benefits, contract termination fees, and other costs incurred in connection with actions taken to streamline operations and align our cost structure with current business priorities. During the three months ended March 31, 2026, we implemented a restructuring plan that included workforce reductions and the termination of certain consulting arrangements. Additionally, we incurred legal and financial related costs in connection with the proposed business combination during the three months ended March 31, 2026. Other income and expense The other income and expense category primarily consists of interest expense attributed to the debt and conversion features of the Notes payable to related party. Results of operations Comparison of the Three Months Ended March 31, 2026 and 2025 The following table summarizes our results of operations: Three Months Ended March 31, 2026 March 31, 2025 Change $ Change % Revenue $ – $ – $ – 0.0% Operating expenses: Direct cost of services 55,164 55,571 (407 ) -0.7% Sales and marketing 450,446 235,441 215,005 91.3% Research and development 284,984 396,703 (111,719 ) -28.2% General and administrative 789,075 630,891 158,184 25.1% Restructuring 472,689 – 472,689 100.0% Depreciation and amortization 236,096 432,407 (196,311 ) -45.4% Total operating expenses 2,288,454 1,751,013 537,441 30.7% Loss from operations (2,288,454 ) (1,751,013 ) (537,441 ) 30.7% Other income (expense): Interest income (expense) 6,901 (1,552 ) 8,453 544.6% Total other income (expense) 6,901 (1,552 ) 8,453 544.6% Loss before income taxes (2,281,553 ) (1,752,565 ) (528,988 ) 30.2% Provision for income taxes – – – 0.0% Net loss $ (2,281,553 ) $ (1,752,565 ) $ (528,988 ) 30.2% 25 Revenue Total revenues for the three months ended March 31, 2026 and 2025 were $0 as we continue to develop and enhance our faidr App and build out our Discovr artist portal to establish new revenue streams. Sales and marketing Sales and marketing expenses increased by $215,005 or 91.3% to $450,446 for the three months ended March 31, 2026 compared to $235,441 for the three months ended March 31, 2025. The increase in sales and marketing expenses was primarily attributed to increase in marketing and promotional activities and trade show expenses. Research and development Research and development expenses decreased by $111,719 or 28.2% to $284,984 for the three months ended March 31, 2026 from $396,703 for the three months ended March 31, 2025 primarily due to an decrease in research and development consulting fees incurred related to the launch of Discovr Radio Platform. General and administrative General and administrative expenses increased by $158,183 or 25.1% to $789,075 for the three months ended March 31, 2026 compared to $630,891 for the three months ended March 31, 2025. The increase was due to an increase related to public relations professional fees. Restructuring Restructuring expenses increased by $472,689 or 100% for the three months ended March 31, 2026 compared to $0 for the three months ended March 31, 2025. The increase is due to audit and legal expenses related to reverse merger. Depreciation and amortization Depreciation and amortization expenses decreased by $196,311 or (45.4%) to $236,096 for the three months ended March 31, 2026 compared to $432,407 for the three months ended March 31, 2025. The decrease is due to fully amortized capitalized cost and lower capitalized software costs. Other income (expense), net Total other income (expenses) increased by $8,453 or 545% to $6,901 for the three months ended March 31, 2026 compared to ($1,552) for the three months ended March 31, 2025 primarily due to increase in interest income on return on funds in money market account. Income taxes Since our inception in 2012, until the corporate conversion in February 2021, we were organized as a Colorado limited liability company for federal and state income tax purposes and treated as a partnership for U.S. income tax purposes. As such, we were not viewed as a taxpaying entity in any jurisdiction and do not require a provision for income taxes. Each member of our company was responsible for the tax liability, if any, related to its proportionate share of our taxable income. Effective on February 16, 2021, we became treated as a corporation for U.S. income tax purposes and thus became subject to U.S. federal, state and local income taxes and are be taxed at the prevailing corporate tax rates. Among other things, we may begin to generate net operating losses at the corporate level. We will account for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to its estimated realizable value, which is zero based on our operating history. 26 The Company has significant federal and state net operating loss carryforwards (“NOLs”). The proposed merger with Thramann Holdings is expected to result in an ownership change under Internal Revenue Code Section 382. An ownership change would subject the Company’s NOLs to an annual limitation based on the fair market value of the Company immediately prior to the ownership change multiplied by the applicable long-term tax-exempt rate. As a result, a substantial portion of the Company’s NOLs may not be available to offset future taxable income. Because the Company maintains a full valuation allowance against its deferred tax assets, any such limitation would not impact the Company’s financial statements. The Company will continue to evaluate the potential impact of Section 382 limitations in future periods. Going Concern Our existing cash was $1,413,387 at March 31, 2026. We secured approximately $12.9 million in additional funding in 2026 through May 12, 20 26, which will only be sufficient to fund our current operating plans into the first quarter of 2027. 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. As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern. Liquidity and capital resources Sources of liquidity We have incurred operating losses since our inception and have an accumulated deficit as a result of ongoing efforts to develop and commercialize our faidr and podcasting Apps. As of March 31, 2026, we had cash and cash equivalents of $1,413,387. We have working capital of approximately $858,095 as of March 31, 2026. 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. We secured $0.9 million of financing during the three months ended March 31, 2026, and an additional $12.0 million subsequent to March 31, 2026, which will only be sufficient to fund our current operating plans into the first quarter of 2027. We have based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts. Equity Line Common Stock Purchase Agreement On November 25, 2024, we entered into a new equity line Common Stock Purchase Agreement and a related registration rights agreement with White Lion. Pursuant to the Common Stock Purchase Agreement, we have 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 our common stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. On July 30, 2025, we amended the equity line Common Stock Purchase Agreement from $10,000,000 to $50,000,000 and extended the commitment to December 31, 2027. During the year ended December 31, 2025, the Company issued 129,221 shares of Common stock under the Equity Line Common Stock Purchase Agreement for total proceeds of $3.7 million. 27 At-the-Market Sales Agreement We have entered into 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. During the three months ended March 31, 2026, the Company sold 98,043 shares under the Sales Agreement for proceeds of $0.9 million and currently has $0.0 million of unsold availability under the ATM facility. During the year ended December 31, 2025, the Company issued 130,879 shares for aggregate proceeds of approximately $2.8 under the ATM facility. $2.3 Million Convertible Series B 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 $242.32 per share of Common Stock. The Company also issued warrants (“Warrants”) exercisable for 9,552 shares of Common Stock with a five-year term and an initial exercise price of $242.32 per share, which has been subsequently adjusted to $2.36. The proceeds of this financing, together with other available cash resources, were used to repay outstanding debt and for general corporate purposes. 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 March 31, 2026, the Company has elected to capitalize all dividends declared. On February 19, 2025, 140 shares of Series B Preferred stock and capitalized dividends were converted to 4,326 shares of Common Stock. In April 2025, 447 shares of Series B Preferred stock and capitalized dividends were converted to 11,069 shares of Common stock. On June 26, 2025, 192 shares of Series B Preferred stock and capitalized dividends were converted to 4,484 shares of Common Stock. On August 5, 2025, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with certain accredited investors to exchange 569 outstanding shares of the Company’s Series B preferred stock (including accrued dividends thereon) for 17,237 shares of common stock at an exchange price of $20.41 per common share. The issuance of the exchange common shares is intended to be exempt from registration pursuant to the exemptions under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”). As of March 31, 2026, no Series B Preferred Stock remains outstanding. 28 $750,000 Series C Preferred Stock and Warrants Financing On June 30, 2025, the Company entered into a Securities Purchase Agreement with accredited investors for a convertible preferred stock and warrants financing. The Company received $750,000 of gross proceeds in connection with the closing of this financing. At the closing, the Company issued 750 shares of Series C convertible preferred stock (“Series C Preferred Stock”) at a purchase price of $1,000 per share of Series C Preferred Stock. The Series C Preferred Stock is convertible into Common Stock at an initial conversion price (“Series C Conversion Price”) of $36.73 per share of Common Stock. The Company also issued warrants exercisable for 40,841 shares of Common Stock with a five year term and an initial exercise price of $36.73 per share, which has been subsequently adjusted to $2.36. Subsequent to March 31, 2026, on April 23, 2026, the Company entered into an exchange agreement (the “Exchange Agreement”) with the accredited investors to exchange 750 outstanding shares of the Company’s Series C preferred stock (including accrued dividends thereon) for 216,525 shares of common stock at an exchange price of $3.91 per common share. No shares of Series C preferred stock remain outstanding. As of April 24, 2026, no Series C Preferred Stock remains outstanding. The proceeds of this financing, together with other available cash resources, will be used for general corporate purposes. 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. The following table summarizes the statements of cash flows for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net cash provided by (used in): Operating activities $ (2,275,114 ) $ (1,443,166 ) Investing activities (307,517 ) (246,601 ) Financing activities 809,033 673,361 Change in cash $ (1,773,598 ) $ (1,016,406 ) Operating activities Cash used in operating activities for the three months ended March 31, 2026 was $2,275,114, primarily resulting from our net loss of ($2,281,553), change in working capital of $252,435 primarily related to an increase in accounts payable and lease liability, and non-cash charges of $236,096 related to depreciation and amortization, $7,878 amortization of ROU and $14,897 in share based compensation expense. 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 three months ended March 31, 2026 was $307,517, consisting of capitalization of software development expenses and patent expenses. 29 Financing activities Cash flows generated in financing activities for the three months ended March 31, 2026 was $809,033 primarily related to cash proceeds from the issuance of common shares partially offset by repayments to related party notes payable of $45,390 and offering costs of $37,500. Funding Requirements We historically have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $99,595,219 and $97,283,343 as of March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents of $1,413,387 and $3,186,985, respectively. Our cash is comprised primarily of demand deposit accounts and money market funds. We secured $0.9 million of financing during the three months ended March 31, 2026, and an additional $12 million of financing subsequent to March 31, 2026, which will only be sufficient to fund our current operating plans into the first quarter of 2027. We have based these estimates, however, on assumptions that may prove to be wrong. We will need additional funding to complete the development of our full product line and scale products with a demonstrated market fit. Management has plans to secure such additional funding. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development, and marketing and promotion of faidr. In addition, we expect to continue to incur additional costs associated with operating as a public company, including legal, accounting, investor relations and other expenses. Our future funding requirements will depend on many factors, including, but not limited to: · the scope, progress, results, and costs related to the market acceptance of our products; · the ability to attract podcasters and content creators to faidr and retain listeners on the platform; · the costs, timing, and ability to continue to develop our technology; · effectively addressing any competing technological and market developments; and · avoiding and defending against intellectual property infringement, misappropriation and other claims. Off-balance sheet arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Critical Accounting Estimates Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we continually evaluate our estimates and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results may materially differ from these estimates made by management under different assumptions and conditions. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position, are described below. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. 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 impaired and expensed during the period of such determination. 30 Equity-based compensation Certain of our employees and consultants have received grants of common shares in our company. These awards are accounted for in accordance with guidance prescribed for accounting for equity-based compensation. Based on this guidance and the terms of the awards, the awards are equity classified. The common shares receive distributions if any in an order of priority in accordance with our limited liability company agreement. The fair value of each award is determined using the Black-Scholes option-pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, and the risk-free interest rate over the expected life of the option. The expected volatility was determined considering comparable companies historical stock prices as a peer group for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option. The risk-free interest rate was the rate available with a term equal to the expected life of the option. The expected life of the option was estimated based on a mid-point method calculation. Emerging growth company and smaller reporting company status The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to not “opt out” of this provision and, as a result, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. We are also a “smaller reporting company” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. Item 3. 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.