ORGANIZATION AND BUSINESS DESCRIPTION

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BUSINESS DESCRIPTION

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION

Corporate Information and Business Overview

Collective Audience, Inc. (the “Company”) operates primarily through its subsidiaries, DLQ INC., a Nevada corporation ( “DLQ”), DSL Digital, LLC, a Utah Limited Liability Company (“DSL”) and The Odyssey SAS (dba BeOP) (“BeOP”), a company organized under the laws of France

DLQ

DLQ is a Nevada corporation, originally incorporated in December 2019 as Origin 8, Inc. DLQ has two wholly owned subsidiaries, Tamble, Inc., a Delaware corporation, and Push Interactive, LLC, a Minnesota limited liability company, located in Minneapolis, Minnesota, USA. Tamble, Inc. is not an operating business. Its sole purpose is to hire independent contractors for DLQ’s marketing business.

On January 8, 2020, DLQ’s, then parent completed the acquisition of substantially all of the assets of Push Holdings, Inc. and the assets were transferred to Push Interactive, LLC. This acquired business operates a consumer data management platform powered by lead generation, online marketing, and multichannel reengagement strategies through its owned and operated brands. DLQ has developed a proprietary data management platform and integrated with several third-party service providers to optimize the return on its marketing efforts. DLQ focuses on consumer engagement and enrichment to maximize its return on acquisition through repeat monetization of each consumer. As part of the transaction, Logiq, Inc. issued 35,714,285 shares to Conversion Point Technologies, Inc. as consideration for the acquisition of all the assets of Push Holdings, Inc. in the amount of $14,285,714.

On March 31, 2022, DLQ and its then parent completed the acquisitions of certain customer contractual agreements of Battle Bridge Labs, LLC and Section 2383 LLC, a Tulsa, Oklahoma based digital brand marketing agency. The purchase price was $2,929,612 and consisted of the issuance of 2,912,621 shares of restricted common stock of Logiq, Inc. with a fair value of $2,679,612 and cash consideration of $250,000, of which Logiq, Inc. paid $200,000 and DLQ paid $50,000, respectively.

Battle Bridge Acquisition Co., LLC became the third wholly owned subsidiary of DLQ. Battle Bridge is a full-service branding and digital marketing agency serving both external clients and internal parts of the Company. Battle Bridge offers branding and identity development in additional to digital strategy and media busing services, as well as all of the requisite ancillary and supporting services to enable the branding and digital practices.

On September 9, 2022, DLQ and its then parent Logiq Inc. entered into a definitive merger agreement for a business combination whereby it will merge with Abri Merger Sub Inc., a wholly owned subsidiary of Abri SPAC I, Inc., a special purpose acquisition company (“SPAC”).

The business combination between the merger of Abri Merger Sub, Inc. with and into DLQ, with DLQ surviving the merger as a wholly owned subsidiary of the Company. Upon the closing of the acquisition, the Company changed its name to “Collective Audience, Inc.” Abri Merger Sub, Inc issued 11.4 million shares in exchange for all of the outstanding shares of DLQ. At $10 per Abri share, the valuation of the Company was $114 million.

The accompanying unaudited consolidated financial statements represent the financial position and result of operations of the Company, with its subsidiary BeOp and DSL as the source of operations.

DSL

On June 28, 2024 the Company acquired DSL Digital LLC, a Utah limited liability company (“DSL”). DSL is a global marketing platform with proprietary artificial intelligence technology that enables it to triple the performance of its competitors (for Fortune 500 companies such as SAP and Accenture). DSL’s fast-growing Business-to-Business (B2B) and Direct-to-Consumer (DTC) advertising channels are now able to create unique, never-before-seen programs for brands and publishers using the BeOp platform, forming the basis for the launch of Collective Audience, Inc’s “Audience Service” offering and its expansion into B2B advertising and media.

BeOp

On August 1, 2024, the Company entered into a Share Exchange Agreement (the “Purchase Agreement”) by and among the Company, BeOp, and all shareholders of BeOp (the “Sellers” and each a “Seller”), pursuant to which the Company purchased one hundred percent (100%) of the outstanding equity interests in BeOp, resulting in BeOp becoming a wholly-owned subsidiary of the Company (the “BeOp Business Combination”). The BeOp Business Combination closed concurrently on August 1, 2024. BeOp brings to Collective Audience an AI-driven, RevShare- and SaaS-based performance advertising and consumer data platform. Recognized as the first independent conversational ecosystem for media and brands, it sets new industry standards for effective reach, engagement, click-through rates and transactions. 

The transaction executed through the issuance of 3,006,667 shares of common stock, priced at $0.45 per share, resulting in a total purchase consideration of $1,353,000. The acquisition was finalized on August 1, 2024, in accordance with ASC 805 (Business Combinations). As part of the transaction, no separately identifiable tangible or intangible assets were recognized. The entire purchase price was allocated to Goodwill, amounting to $2,783,511, reflecting the anticipated future economic benefits derived from BeOp’s operations, market position, and strategic synergies with Collective Audience. Additionally, BeOp’s financial position at the acquisition date included $1,430,511 in liabilities, which were assumed as part of the transaction. The acquisition aligns with Collective Audience’s strategic initiatives to strengthen its market presence and enhance operational efficiencies. As required under ASC 350, the recorded Goodwill will be subject to annual impairment testing. Furthermore, no immediate impact on earnings is expected, as goodwill is not amortizable but subject to impairment assessment. Management remains committed to ensuring transparency and compliance in financial reporting, and all necessary disclosures have been incorporated in accordance with ASC 805 requirements.

In consideration for the Acquisition, the Company issued a total of 3,006,667 shares of restricted Company common stock (the “Exchange Consideration”), however, the Company retained 666,667 shares of the Exchange Consideration to be held for a period of twelve (12) months following the Closing Date, to the extent not reduced by any indemnification claims as defined in the Purchase Agreement. (the “Holdback Shares”).

As further consideration for the Purchase Agreement, at the end of December 31, 2025, and upon BeOp reaching its currently forecasted gross revenue and EBITDA for 2024 and 2025, taking into account and including the Company’s sales under the Interim License Agreement, as set forth on Exhibit F in the Purchase Agreement, the Company shall pay to Sellers, in accordance with the pro rata allocations designated in Exhibit A, an amount equal to €200,000 worth of Company common stock based on as 20-Day VWAP as of December 31, 2025. (the “Earnout Payment”).

As previously disclosed, the closing of the Acquisition was conditioned, in part on BeOp’s debt restructuring proceedings with the Commercial Court of Paris, France (the “Restructured Debt”). As part of the Binding LOI, the Company had contributed to an escrow account (at the direction of the Commercial Court of Paris) €350,000 (the “Debt Escrow”). As of the Closing Date, the Debt Escrow, at the direction of the Commercial Court of Paris, was released to the Company. As part of the debt restructuring by the Commercial Court, Collective Audience obtained the outstanding expense liabilities of $1,430,511 to be distributed over ten (10) years of the course of the business. The outstanding liabilities with the shares distributed assigned $2,783,511 of Goodwill. Furthermore, as of the Closing Date, the Sellers and BeOp (within the limits of their respective powers and positions in BeOp prior to the Closing), will continue their role in managing the insolvency procedure before the commercial Court of Paris until its completion to facilitate the orderly completion of such proceedings, at no additional cost to Company. BeOp and the Sellers agree to cooperate in good faith following the closing of the Purchase Agreement to effectuate the completion of said court proceedings before the commercial Court of Paris. The Interim License Agreement was terminated as of the Closing Date.

The Purchase Agreement contains standard representations, warranties, covenants, indemnification and other terms customary in similar transactions.

The Business Combination

As previously announced, on September 9, 2022, Abri SPAC I, Inc., a Delaware corporation (“Abri”), Abri Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Abri (“Merger Sub”), Logiq, Inc., a Delaware corporation (“Logiq or “DLQ Parent”) whose common stock is quoted on OTCQX Market under the ticker symbol “LGIQ” and, DLQ, Inc., a Nevada corporation and wholly owned subsidiary of DLQ Parent (“DLQ”) entered into a Merger Agreement (the “Merger Agreement”).

On November 2, 2023 (the “Closing Date”), the Business Combination, among other transactions contemplated by the Merger Agreement, was completed (the “Closing”). On the Closing Date, 11,400,000 shares of Company Common Stock and were issued to DLQ Parent as Merger Consideration. After giving effect to the issuances in connection with the Closing, 13,220,063 shares of Company Common Stock were outstanding. On October 23, 2023 stockholders holding 619,963 of the Abri’s public shares exercised their right to redeem such shares, after giving effect to certain redemption elections prior to Closing, for a pro rata portion of the funds in Abri’s trust account (the “Trust Account”). As a result, $ 6,651,963 (approximately $10.72 per share) was removed from the Trust Account to pay such holders. Following redemptions, the Company had 62,185 public shares of common stock outstanding.

On November 3, 2023, the Company’s Common Stock began trading on the Nasdaq Global Market under the symbol “CAUD.” The units previously trading under the symbol “ASPAU” were separated into their separate components and ceased to trade.

The settlement of the Abri convertible note, related party, in the amount of $1,931,250 and promissory note, related party, in the amount of $1,671,784, warrants for $250,000 and $114,893 for a total of $3,967,927.

The Merger Consideration and Treatment of Securities

At Closing, pursuant to the terms of the Merger Agreement and after giving effect to the redemptions of shares of Abri Common Stock:

• The total consideration paid at Closing (the “Merger Consideration”) by Abri to DLQ security holders was 11,400,000 shares of the Company common stock valued at $114 million (the “Consideration Shares”);

• Each share of DLQ Common Stock, if any, that was owned by Abri, Merger Sub, DLQ or any other affiliate of Abri immediately prior to the effective time of the Merger (the “Effective Time”) was automatically cancelled and retired without any conversion or consideration;

• each share of Merger Sub common stock, par value $0.0001 per share (“Merger Sub Common Stock”), issued and outstanding immediately prior to the Effective Time was converted into one newly issued share of Common Stock of the Surviving Corporation.

Concurrent with Closing, upon issuance of the Consideration Shares, DLQ Parent declared a share dividend of 3,762,000 Consideration Shares (representing 33% of the total Consideration Shares) to the DLQ Parent stockholders (the “Logiq Dividend”) of record as of October 24, 2023 (the “Dividend Record Date”). Certain DLQ Parent stockholders which are entitled to 1,500,000 of such Logiq Dividend shares agreed to become subject to an Escrow Agreement (the “Reset Shares”). The Reset Shares may be released to certain institutional investors to cover any reset in the amount of Consideration Shares to cover a $5 million investment in DLQ (the “DLQ Investment”) in the form of convertible promissory notes issued by DLQ (the “DLQ Notes”). Additionally, an aggregate of $5,000,000 of DLQ Notes converted into shares of common stock of DLQ representing an aggregate of 14% of the outstanding capital stock of DLQ and were exchanged for an aggregate of 1,600,000 Consideration Shares. The remaining 53% of Consideration Shares were issued to DLQ Parent, are subject to an 11-month lock-up, and will be deposited into a separate escrow account, and such escrow which will be released once the DLQ Investors recoup their original investment amounts.

The Company has authorized 200,000,000 shares of common stock, and an additional 100,000,000 shares of preferred stock, par value $0.0001 per share. The outstanding shares of the Company’s common stock are fully paid and non-assessable. As of the Closing Date, there were 13,220,263 shares of Common Stock outstanding, no shares of preferred stock outstanding, and warrants to purchase 6,028,518 shares of Common Stock. Company stockholders who hold their shares in electronic format in U.S. brokerage accounts are not deemed to be separate stockholders, as such shares are held of record by CEDE and Co., which is counted by our transfer agent as a single stockholder of record. Such holder numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names.

The settlement of the Abri convertible note, related party, in the amount of $1,931,250 and promissory note, related party, in the amount of $1,671,784, warrants for $250,000 and $114,893 for a total of $3,967,927. 

On December 19, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a private placement (the “Offering”) (i) 465,118 shares (the “Shares”) of common stock of the Company, $0.0001 par value (the “Common Stock”) for a purchase price of $1.29 per share of Common Stock, which was equal to the “Minimum Price” under Nasdaq rules, and (ii) warrants to purchase up to 697,678 shares of Common Stock (the “Warrants” and together with the shares underlying the Warrants, the “Warrant Shares,” and the Shares, the “Securities”) for a total aggregate gross proceeds of approximately $600,000. The Offering closed on December 19, 2023

The following table reconciles the elements of the Business Combination to the consolidated statement of changes in stockholders’ deficit for the year ended December 31, 2023:

Cash - Trust and Escrow	$	5,667,221
Less: Transaction Expenses Paid		5,557,206
Net proceeds from the Business Combination		110,015
Less: Recognition of SPAC closing balance sheet		(3,603,034	)
Reverse capitalization, net	$	(3,493,019	)

The number of shares of Common Stock issued immediately following the consummation of the Business Combination are as follows:

Abri common stock outstanding prior to Business Combination	5,733,920
Less: Redemption of Abri common stock	(5,671,735	)
Common stock of Abri	62,185
Abri private units outstanding	294,598
Abri founder shares outstanding	1,433,480
Other	29,800
Business Combination shares	1,820,063
CAUD common stock	11,400,000
Common stock immediately following Business Combination	13,220,063
Brownstone investment	232,559
Timothy Wong (Brownstone)	232,559
Other shares issued during FY23	41,629
Weighted-average common shares outstanding – Basic and Diluted	13,726,810