AUDDIA INC. 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
Overview
We are a technology company that is reinventing how consumers engage with audio through the development of a proprietary AI platform for audio and innovative technologies for podcasts. We are leveraging these technologies to bring to market two industry first Apps, Faidr and Vodacast.
The Faidr app gives consumers the opportunity to listen to any AM/FM radio station with no commercials while personalizing the listening experience through skips, the insertion of on-demand content and the programming of audio routines to customize listening sessions such as a daily commute. The Faidr App represents the first-time consumers can access the local content uniquely provided by radio in the commercial free and personalized manner many consumers have come to demand for media consumption.
We are leveraging our legacy business to bring to market a premium AM/FM radio listening experience through Faidr. The Faidr App is intended to be downloaded by consumers who will pay a subscription fee to listen to any streaming AM/FM radio station without commercials. Advanced features will allow consumers to skip any content heard on the station, request audio content on-demand, and program an audio routine. We believe Faidr represents a significant differentiated audio streaming product that will be the first to come to market since the emergence of popular streaming music apps such as Pandora, Spotify, Apple Music, Amazon Music, etc. We believe that the most significant point of differentiation is that in addition to music, the App is intended to deliver non-music content that includes local sports, news, weather, traffic and the discovery of new music. Radio is the dominant audio platform for local content and new music discovery.
We recently launched the Faidr App to include all major
The Faidr mobile App is available today through the iOS and Android App stores.
We also have developed a podcasting platform called Vodacast. Vodacast provides a unique suite of tools that helps Podcasters create additional digital content for their podcast episodes as well as plan their episodes, build their brand around their Podcast and monetize their content with new monetization channels. One innovative and proprietary part of the Vodacast platform is the availability of tools to create and distribute an interactive digital feed which supplements podcast episode audio with additional digital. These content feeds allow podcasters to tell deeper stories to their listeners while giving podcasters access to digital revenue for the first time. Podcasters will be able to build these interactive feeds using The Vodacast Hub, a content management system that also serves as a tool to plan and manage podcast episodes. The digital feed activates a new digital ad channel that turns every audio ad into a direct-response digital ad, increasing the effectiveness and value of their established audio ad model. The feed also presents a richer listening experience, as any element of a podcast episode can be supplemented with images, videos, text and web links. This feed appears fully synchronized in the Vodacast mobile App, and it also can be hosted and accessed independently (e.g., through any browser), making the content feed universally distributable.
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Vodacast will also introduce a unique and industry first multi-channel, highly flexible set of revenue channels that podcasters can activate in combination to allow listeners to choose how they want to consume and pay for content. "Flex Revenue" allows podcasters to continue to run their standard audio ad model and complement those ads with direct response enabled digital ads in each episode content feed, increasing the value of advertising on any podcast. "Flex Revenue" will also activate subscriptions, on-demand fees for content (e.g., listen without audio ads for a micro payment fee) and direct donations from listeners. Using these channels in combination, podcasters can maximize revenue generation and exercise higher margin monetization models, beyond basic audio advertising.
The Vodacast mobile App is available today through the iOS and Android App stores.
We recently launched marketing campaigns for Vodacast to continue to grow our user base and encourage listeners to download the Vodacast App and listen to all their favorite shows. We are continuing to provide an immersive listening experience through digital feeds and additional content. We are also continuing to recruit podcast hosts to the Platform while we continue to develop and enhance monetization channels within the App.
We have funded our operations with proceeds from the
· nationally launch our Faidr App and as we continue training our proprietary
AI technology and make product enhancements;
· continue to develop and expand our technology and functionality to advance
the Faidr and Vodacast Apps;
· rollout our product on a national basis, which will include increasing our
sales and marketing costs related to the promotion of our products. Faidr
promotion will include a combination of a) direct to consumer marketing, b)
purchasing ads directly from broadcasters, and/or c) participating
broadcasters to promote without purchasing ads, but sharing a portion of
subscription proceeds based on listening activity on those stations;
· 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.
As a result, we may 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
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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. Historically, we had higher direct costs of services related
to our legacy platform, however, since the termination of our legacy services
and platform in
Sales and marketing
Our sales and marketing expenses consist primarily of salaries and consulting services, related to the sales and promotion performed during the year related to our products. We expect our sales and marketing expenses to increase substantially as we continue to promote the national commercial launch of our Faidr product and look to generate revenue for our products through customer acquisition and retention.
Research and development
Since our inception, we have focused significant resources on our research and development activities related to the software development of our technology. We account for costs incurred in the development of computer software as software research and development costs until the preliminary project stage is completed, management has committed to funding the project, and completion and use of the software for its intended purpose is probable. We cease capitalization of development costs once the software has been substantially completed and is available for its intended use. Software development costs are amortized over a useful life estimated by the Company's management of three years. Costs associated with significant upgrades and enhancements that result in additional functionality are capitalized. Capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in software technologies. 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 substantial research and development expenses and capitalization in the future as we continue to develop and enhance our Faidr and Vodacast Apps.
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 expand our operating activities and
prepare for commercialization of our products and support our operations as a
public company, including increased expenses related to legal, accounting,
insurance, regulatory and tax-related services associated with maintaining
compliance with exchange listing and
16 Other income and expense
Our other income and expense consist of interest income related to our cash at
financial institutions, debt extinguishment related to our PPP loans, interest
expense from our line of credit, and a finance charge related to conversion of
outstanding debt into shares of common stock related to the
Results of operations
Comparison of the three months ended
The following table summarizes our results of operations:
Three Months Ended March 31,
Increase/
2022 2021 (Decrease)
Revenue $ - $ - $ -
Operating expenses:
Direct costs of service 52,562 57,394 (4,832 )
Sales and marketing 357,066 123,458 233,608
Research and development 148,763 46,997 101,766
General and administrative 1,017,730 637,708 380,022
Depreciation and amortization 176,127 2,183 173,944
Total operating expense 1,752,248 867,740 884,508
Loss from operations (1,752,248 ) (867,740 ) (884,508 )
Other income (expense), net: (1,010 ) (8,428,758 ) 8,427,748
Net loss $ (1,753,258 ) $ (9,296,498 ) $ 7,543,240
Revenue
Total revenues were
17 Direct cost of services
Direct Cost of Services decreased
Sales and marketing
Sales and marketing expenses increased by
Research and development
Research and development expenses increased by
General and administrative
General and administrative expenses increased by
Depreciation and amortization
Depreciation and amortization expenses increased by
Interest expense/Other expense, net
Total interest expense/other expense decreased by
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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 Vodacast Apps. As of
In
Following the Company's IPO in
In
During the year ended
Cash Flow Analysis
Our cash flows from operating activities have historically been significantly impacted by revenues received, 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
Three Months Ended March 31,
2022 2021 % Change
Net cash provided by (used in):
Operating activities $ (1,229,996 ) $ (1,827,455 ) (32.7% )
Investing activities (665,023 ) (302,117 ) 120.1%
Financing activities (88,722 ) 10,174,305 (100.9% )
Change in cash $ (1,983,741 ) $ 8,044,733 (124.7% )
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Operating activities
Cash used in operating activities for the three months ended
Cash used in operating activities for the three months ended
Investing activities
Cash flows used in investing activities for the three months ended
Cash flows used in investing activities for the three months ended
Financing activities
Cash flows used in financing activities for the three months ended
Cash flows provided by financing activities for the three months ended
Funding Requirements
We historically have incurred significant losses and negative cash flows from
operations since our inception and had an accumulated deficit of
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We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue the development of the Faidr and Vodacast Apps. In addition, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses. Our future funding requirements will depend on many factors, including, but not limited to:
· the scope, progress, results and costs related to our national launch of
our Faidr App and obtaining market acceptance
· the ability to attract and retain podcasters to our Vodacast App and
retaining listeners on the platform
· the costs, timing and ability to continue to develop our technology
· effectively addressing any competing technological and market
developments
· avoiding and defending against intellectual property infringement,
misappropriation and other claims
Contractual Obligations
The following table summarizes our contractual obligations not on our Balance
Sheet as of
Payments due by period
Less Than 1 - 3 4 - 5 More Than
Total 1 Year Years Years 5 Years
Operating lease
commitments:
Office lease (1) $ 58,903 58,903 -0- -0- -0-
Insurance premiums
(2) 275,504 275,504 -0- -0- -0-
Total operating
lease commitments $ 334,407 334,407 -0- -0- -0-
(1) Represents minimum payments due for the lease of office space without
consideration of additional renewal options
(2) Represents premium payments due related to D&O insurance policy from February
2022 - February 2023 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
Critical Accounting Policies and Estimates
Our condensed financial statements and accompanying notes have been prepared in
accordance with
A summary of our critical accounting policies is presented in Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of our Annual Report on Form 10-K for the year ended
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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
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