Auddia Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited interim results. Auddia develops audio technology and the Faidr radio-listening app and Vodacast podcast platform.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $2.05 million | $1.00 million | $3.80 million | $1.87 million |
| Net loss | $2.05 million | $0.75 million | $3.80 million | $10.05 million |
| Net loss per share, basic and diluted | $0.16 | $0.07 | $0.30 | $1.20 |
| Operating cash used | $2.63 million | $3.13 million | ||
| Investing cash used | $1.28 million | $0.58 million |
At June 30, cash was $2.34 million, down from $6.35 million at December 31, 2021. Total assets were $6.47 million, including $4.01 million of net capitalized software development costs. Current liabilities were $326,382; the balance sheet reported no debt. The prior-year six-month net loss included an $8.14 million finance charge related to debt converted to equity in the 2021 IPO, so the year-over-year improvement does not reflect improved operating profitability.
No revenue was reported, so gross or operating margins are not meaningful. Q2 operating expenses rose about 104% year over year, led by sales and marketing, which increased to $740,019 from $139,611; depreciation and amortization rose to $271,005 as software began amortizing. The company reported 12,514,763 common shares outstanding at June 30.
Business developments and management outlook
- Faidr launched nationally in February 2022. The company offered free trials and began testing subscriptions with a subset of users late in Q2. Management said download and monthly active user metrics exceeded initial targets, but no user counts or conversion rates were provided.
- Vodacast is available in app stores, but the company paused its direct marketing while exploring incorporating podcasting and its features into Faidr.
- Management expected to begin generating initial revenue in Q3 2022 and anticipated subscription conversion beginning in 2023. These are forward-looking expectations, not reported results.
- Management estimated that June 30 cash would fund operations and capital needs through at least December 31, 2022. It was pursuing short-term funding that, if obtained, could extend cash availability through Q2 2023. Recent cost measures were expected to reduce quarterly cash burn by $500,000–$700,000 versus Q2 2022.
- The company expects continuing operating losses and cash use. It may need additional equity, debt, or other funding; failure to obtain sufficient capital could require delays, reductions, or discontinuation of development or commercialization.
Risks, contingencies, and notable disclosures
- Disclosure controls and procedures were not effective at a reasonable assurance level. Material weaknesses in financial reporting controls remained unremediated, including insufficient accounting personnel and inadequate segregation of duties. Management described ongoing remediation efforts.
- Management cited limited operating history, lack of product revenue, need for additional capital, product commercialization and adoption risks, competition, cybersecurity and privacy risks, and dependence on key personnel.
- The company reported no material changes to the risk factors in its 2021 Form 10-K and no known legal proceedings expected to have a material adverse effect. It disclosed no material subsequent events through August 12, 2022.
- Outstanding warrants totaled 4,172,099 and stock options totaled 1,798,541 at June 30, 2022; these and other potential shares may dilute shareholders. The company reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether Faidr began earning revenue as forecast, and the number of paying subscribers, trial users, and conversion rates.
- Whether proposed additional funding was secured and whether cash runway and burn-rate reductions matched management’s estimates.
- Progress in remediating the material weaknesses and establishing effective disclosure controls.
- Recoverability and useful-life assumptions for capitalized software costs; the filing’s note describes a five-year useful life, while the MD&A describes three years.
- Potential dilution from warrants, options, and other equity awards.